This article first appeared in The Edge Malaysia Weekly, on December 28, 2015 - January 3, 2016.

XOX Bhd was in the limelight even before its shares were floated on Bursa Malaysia in early June 2011.  Days before it made its debut on the bourse, the mobile virtual network operator (MVNO) announced a loss of RM1.67 million for the three-month period ended March 31. That raised eyebrows and sparked a hot debate on whether XOX was fit for an initial public offering. The stock has been on a downhill slide since its maiden trading day.

Fast forward to today, and XOX (fundamental: 1.55; valuation: 0.20) is in the spotlight again because its share price went on a roller-coaster ride.

The MVNO’s share price jumped from 18 sen in early October to a multi-year high of 68.5 sen on Nov 19, the day before the release of its first-quarter earnings numbers. The quantum leap made it a star performer given the current dampened sentiment.

XOX returned to the black with a net profit of RM633,000, or 0.19 sen per share, in the first quarter ended Sept 30, 2015 (1QFY2016), versus a net loss of RM336,000 or 0.1 sen per share a year earlier. Revenue more than doubled to RM35.95 million from RM17.25 million a year ago.

Surprisingly, the improved financial figures did not help sustain XOX’s share price rally. Instead, the share price fell like a rock the day after to 21.5 sen last Tuesday.

The volatile share price movement may have got many retail investors’ fingers burnt. Nonetheless, others like Lee Chong Hoon, the elder brother of national shuttler Datuk Lee Chong Wei, have made a killing.

According to a filing with Bursa Malaysia, the 41-year-old Chong Hoon bought 20 million shares, or a 5.62% stake in XOX,  on Nov 19 through a restricted share issue exercise at 10 sen each. He disposed of 15.7 million shares, or a 4.41% stake, on the open market on Dec 2.

The block of 20 million shares would have cost him RM2 million. It is not known at what price Chong Hoon sold his shares. Assuming he sold the shares at 23.5 sen on Dec 2, he should have made a handsome profit of RM2.7 million, more than double his investment cost of RM2 million.

It is worth noting that XOX, being the official technology sponsor for the Badminton Association of Malaysia, has been working closely with Chong Wei. The badminton icon has been making some celebrity appearances at XOX’s events.

NZA Power Services Sdn Bhd, a privately owned dormant company, also subscribed for XOX’s restricted issue. It bought 25 million shares, or a 7.02% stake. Similarly, it did not hold on to the investment for long. It ceased to be a substantial shareholder after the sale of 3.4 million shares on Dec 2, followed by 20.6 million shares on Dec 7.

NZA’s return from the short-term investment in XOX was lucrative, although it sold the shares after the stock had lost some ground. Assuming NZA sold its shares at the closing price on Dec 2 and Dec 7 (20.5 sen), it would have pocketed RM5.02 million, a return of 100% or RM2.5 million in less than three weeks.

A quick check on the Companies Commission of Malaysia’s website reveals that NZA is 89%-owned by Aimi Aizal Nasharuddin. The 48-year-old is the chairman and co-founder of Skali Group, a web integration and application development company that manages more than 150 government websites and portals in Malaysia.

Interestingly, Aimi Aizal is also non-executive director of Anzo Holdings Bhd (fundamental: 1.20; valuation: 0.30), in which XOX managing director Datuk Eddie Chai holds a 20.83% stake. Aimi Aizal’s appointment took place in May.

The name Anzo Holdings Bhd may not ring a bell. The company was formerly known as Harvest Court Industries Bhd — another company whose share price had swung years ago.

Chai, the son of Sabah timber tycoon Tan Sri Chai Kin Kong, took over the reins at XOX in January last year. However, his name does not surface on the shareholder list. He also sits on the board of Astral Supreme Bhd (fundamental: 0.75; valuation: 0) as an executive director.

Chai was appointed an independent non-executive director of XOX on Sept 30, 2013. He resigned the following month but was appointed director for all the subsidiaries of XOX.

The MVNO’s shareholding is rather fragmented, according to its 2015 annual report. As at Oct 29, Mara Incorporated Sdn Bhd, the investment arm of Majlis Amanah Rakyat (Mara), was the single largest shareholder in XOX with a 6.96% stake.

XOX CEO Ng Kok Heng owns a 5.26% stake. Other substantial shareholders are two individuals named Kong Goon Khing and Wong Ah Yong, with a 6.38% and 5.4% stake respectively.

For the financial year ended June 30, 2015 (FY2015), XOX saw its revenue grow 60% to RM91.02 million from a year ago. The big jump in revenue was due to a 179% increase in revenue-generating subscribers, as the company was able to add about 420,000 subscribers during the financial year.

As a result, XOX’s earnings before interest, taxes, depreciation and amortisation more than doubled to RM6.19 million in FY2015, from RM2.79 million a year earlier, thanks to the higher marketing expenditure that helped generate earnings.

The company managed to turn around with a profit after tax of RM1.17 million or 0.24 sen per share in FY2015, against a net loss of RM1.58 million a year before. This is the first profit XOX has achieved since it was listed in 2009.

It is learnt that XOX has 800,000 pre-paid subscribers, while the company has also pre-launched post-paid products recently to target the premium customers.

While XOX’s shareholders should cheer about its turnaround, the wild swings of the share price do not paint a decent picture of the stock.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

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