Special effects maker plans Hong Kong IPO for China unit

Taipei • Movie and television (TV) post-production house VHQ Media Holdings Ltd plans to spin off its China operations and list the unit in Hong Kong to help fuel ambitious growth targets in the booming Chinese movie industry.

The Taipei-listed visual effects company expects to be ready for an initial public offering (IPO) in the next 12 to 18 months, VHQ chairman Low Kok Wah said in an interview in Taipei in June. Details, including planned size and underwriters, have yet to be determined.

VHQ sees a share sale in Hong Kong as a way to boost its presence in China, the world’s second-largest movie market, as well as offering a better valuation, Low says.

“Our future growth in China will be funded in great part by Hong Kong,” he said. A unit traded in the city will help bring prominent investors and “add fire power”.

Low said he has talked with what he called the “big boys” about bringing them in as cornerstone investors in the last stage before the Hong Kong IPO, without identifying any of the companies. Alibaba Group Holding Ltd and Dalian Wanda Group Co Ltd are among the companies VHQ has previously worked with.

VHQ shares rose as much as 9.7% as of 12:40pm local time yesterday, the company’s biggest intraday gain since April 30.

China is challenging North America as the world’s biggest movie market. Last year, China’s box office grew almost 30% to US$8.6 billion (RM34.74 billion), while North America’s slid 2.7% to US$11.1 billion, according to analysis by Bloomberg Intelligence. Chinese movie-theatre receipts overtook North America in the first quarter of this year (1Q18), driven by strong releases during the key Chinese New Year (CNY) holiday season, including Forever Young, starring Zhang Ziyi.

VHQ is also seeking to expand through the acquisitions of content producers, Low said, targeting a fivefold increase in sales in China over the next five years, driven by growing revenue from TV and Internet content. The nation currently contributes 65% to 70% of the company’s revenue.

VHQ controls less than 2% of the Chinese market for post-production and visual effects, according to Low. The company aims to increase its number of staff to 1,000 in China in the next two to three years from the current 400. — Bloomberg