Worth noting:

  • The Company has a new management team since August 2016 that plans to expand its client base through Southeast Asian expansion and further develop its product offerings
  • The Company is worth as high as P0.08 to as low as P4.27
  • The Company appears to be properly valued at 2.04

The story behind:

Xeleb Technologies Inc. (formerly Fluxion, Inc.),1 founded on September 2001 primarily engages in designing, selling, and managing enterprise IT systems and platforms for large corporate clients with a particular focus on the mobile industry.2 Xeleb derives its revenue from four various service lines as illustrated below.

On August 22, 2016, the Company’s founders who were previous executive officers of the Company, Rolando P. Facundo, Suzette C. Facundo, and Hubert O. Ang divested their aggregate shares of 1,607,800 to Xurpas for P45.0 million.3 Since then, the Company has been a wholly-owned subsidiary of Xurpas. On the same date, the Company acquired Xeleb Inc., from: Xurpas who originally owned 67%; and from Anne O. Curtis-Smith, Alejandro I. Atienza, Isabelle D. Daza, and Erwan Jean A. Heussaff, for the remaining 33%. With this, the Company gained full control of Xeleb Inc. on August 31, 2016 prior to the subscription of Selajo Inc., Joseliemm Holdings Inc., Rainy Day Future Entertainment Inc., and Conrev Inc.

This corporate restructuring may affect the management operations of the Company moving forward since there were changes in its management team.

Along with this, on August 24, 2016, the Company implemented a restructuring of its operations in order to maximize its growth potential. On November 21, 2016, Philippine SEC approved the Company’s restructuring and correspondingly amended its articles of incorporation which reflects significant changes on:4

(1) corporate name from “Fluxion, Inc.” to “Xeleb Technologies, Inc.;
(2) increase in authorized capital stock from P5.00 million to P100.00 million; and
(3) change in par value of its shares from P1.00 to P0.025 per share.

Meanwhile, according to the Company’s prospectus, the following are Xeleb’s major shareholders:5

Selajo Inc., is beneficially owned by Ms. Anne O. Curtis-Smith; Joseliemm Holdings Inc. is beneficially owned by Mr. Alejandro I. Atienza; Rainy Day Future Entertainment Inc. is beneficially owned by Ms. Isabelle D. Daza; and Conrev Inc. (doing business under the name and style of The Fat Kid Inside) is beneficially owned by Mr. Erwan Jean A. Heussaff.6

Xeleb’s primary source of revenue is through celebrity-branded mobile games offering. These mobile games may be highly influenced by the popularity of the featured personality, and poses a risk that these mobile games will have a short life span. With that, there is no guarantee that the Company will profit from the mobile game during the term agreed upon in the contract and that it will be able to secure contracts with other top ranking personalities. This lack or decrease of subscriptions to the mobile games and Content of the Company could have a material adverse effect to its business, operations and financial condition.

According to a country report by Groupe Speciale Mobile Association (GSMA), a Filipino user spends for mobile games for an average of US3.50 per month, marking the Philippines as a relatively low mobile games spending.7 This may mean low monetization for the Company. Also, the Company’s business as well as Xurpas’ subsidiaries provide mobile platform solutions for its corporate clients and develop mobile games that poses competition for bidding against its affiliates, and contribute to a reduced revenue.

The Company’s BOD and senior management is set out below: 8

Raymond is a co-founder, President, and Chief Operating Officer of Xurpas since 2005 who holds a Bachelor Degree in Computer Science, Major in Information Technology where he had been part of the team that built the first Wireless Application Protocol (WAP) site in the Philippines. Nico is currently the CEO of Xurpas and a member of Draper Network which gives him a pulse on the latest innovations in global technology. 

Valuation:

In my perspective, the value of WAV lies on the expected asset to be infused to the Company. Using the conservative assumption, we can arrive at an estimated book value of P0.08.

Using relative valuation, we could have price to book value (P/BV) range between 0.94 P/BV multiple of EG to 53.33 P/BV multiple of WEB or a valuation of P4.27 to as low as P0.08.

Business development to watch for:

The Company intends to expand its business and operations in Southeast Asia, particularly in Indonesia, Thailand and Vietnam in order to maximize its growth opportunities.9 Also, since the company is a technology company, it has plans to expand its research and development teams to continuously access pool of talents that will innovate and improve its platform and technology. The Company recognizes that its continued success depends on its leverage to collaborate with popular Philippine personalities and will continue collaborating and exploring additional partnerships with other celebrities.

Disclosure: All that we say is not a recommendation to BUY or SELL but treat our blog as a tool to aid you in your investment decision making.

Position: I do not own any shares mentioned above but consider to invest in the shares in the mobile gaming industry, since technology is the present and the future.

Sources:

  1. Fluxion, Inc., in the process of amending its name to Xeleb Technologies, Inc., https://goo.gl/ZMGFCn, https://goo.gl/VpTghE
  1. Xeleb Preliminary Prospectus Dated March 14, 2017, Business, p.81
  2. Xeleb Preliminary Prospectus Dated March 14, 2017, Corporate Restructuring, p.83
  3. SEC17-A, Audited 2015 Financial Statements of Xeleb, p.34
  4. Xeleb Preliminary Prospectus Dated March 14, 2017, Principal Shareholders, p.113
  5. Xeleb Preliminary Prospectus Dated March 14, 2017, Business, p.81
  6. Philippines: Low ARPU vs high mobile engagement, https://goo.gl/HtrN5G
  7. Xeleb Preliminary Prospectus Dated March 14, 2017, Board of Directors and Senior Management, p.108-109
  8. Xeleb Preliminary Prospectus Dated March 14, 2017, Risk Factors, p.30

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