Semk, the owner of local brand B.Duck, has filed its initial public offering application to the Hong Kong stock exchange.
Peter Lee Ka-kit, co-chairman of Henderson Land Development (0012), holds a 2.66 percent stake in Semk.
Semk founder Hui Ha-lam, who has a 84.46 percent interest in the company as of April 26, created the signature character B.Duck in 2005.
In an interview with local media, Hui, the former designer, said the inspiration for B.Duck came from the rubber ducks falling off a cargo ship that tumbled into the Pacific 29 years ago.
B.Duck family characters are for those aged between 15 and 34 years old who are brand conscious and possess qualities such as trendiness, high purchasing power, tech-savviness and affinity with social media in Asia, Semk says in the prospectus.
But if Semk fails to list on the mainboard with a minimum valuation before April 14 next year, Lee can ask Semk to buy back the relevant shares.
Semk was the second largest domestic character intellectual property company in China in terms of character licensing revenue in 2020 with a market share of 2.3 percent, according to the Frost & Sullivan Report, and has a library of 26 self-created characters.
Revenue increased by 21 percent year-on-year to HK$243.05 million in 2019, but fell by 3.92 percent to HK$233.52 million in 2020, due to the downsizing of offline sales operations and the drop in consumer spending amid the pandemic, and the adoption of a more reserved merchandize purchase policy.
Mainland and Hong Kong customers contributed to 99.1 percent of total revenue in 2020.
Revenue from character licensing business accounted for 42 percent of total revenue in 2020, and e-commerce and other business the remaining 58 percent.
Of the revenue from the character licensing business segment, revenues attributable to B.Duck accounted for over 75.0 percent over the past three years.
Semk licenses the B.Duck family characters and brands to its licensees, provide them with product design application services and allow them to use the same in their products and services offering. Semk had a licensing network of more than 250 licensees and seven licensing agents over the past three years.
Licensing period ranges from one month to 12 years, and Semk charges design fee and royalty. Design fee is a fixed amount at a lump sum on a per service basis. Royalty is fixed percentages typically ranging from 4 percent to 12 percent of the gross wholesale prices, retail prices or premium costs of each product depending on the category of licensed products.
The e-commerce and other business mainly involve the sale of B.Duck family character-featured products on e-commerce platforms of third parties and through offline sales channels.
Net profit surged by 144.39 percent year-on-year to HK$24.10 million in 2019, and further soared by 126.32 percent to HK$54.55 million last year, due to lower costs of inventory sold, employee benefit expenses, promotion costs, online platform use fee, and other expenses.
China Everbright Capital acts as sole sponsor.
Semk plans to use the proceeds for enhancing brand image and awareness of its IP characters, establishing "fans ecosystem,'' strengthening new economy online sales channel, enhancing in-house design capabilities, repaying existing debt, and for general working capital.
