Diversified Gateway gains 35%, hits new high since Oct 2009

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KUALA LUMPUR (Feb 23): Shares of diversified Gateway Solutions Bhd (DGSB) continued their climb today to hit a high not seen since October 2009, adding as much as 3.5 sen or 35% from the previous close as investors returned after a long Lunar New Year weekend break.

DGSB (fundamental: 1.4; valuation: 0), an ACE Market-listed services provider of integrated business solutions, reported a turnaround on higher sales of its digital and infrastructure services, and expected the remainder of its financial year ending March 31, 2015 (FY15) to perform positively.

At 2:59pm, DGSB’s stock was traded three sen higher at 13 sen with 76.35 million shares changing hands.

The counter has seen renewed interest with a sudden increase in turnover since the start of the year.

The counter also hit a new high since Oct 16, 2009, when it was traded at a high of 16 sen.

DGSB made a net profit of RM2.73 million, or 0.2 sen per share for the six months ended Sept 30, 2014 (1HFY15), up 41.9% from RM1.91 million or 0.14 sen a share a year ago. Revenue rose 31.6% year-on-year to RM45.91 million from RM34.9 million.

In 2QFY15 alone, DGSB’s net profit was higher at RM3.68 million, as it incurred losses in the preceding quarter. The previous year, it netted RM2.69 million.

Notes accompanying the quarter’s financials showed sales of digital infrastructure services’ revenue almost doubled to RM20.3 million as it delivered order made by a new customer.

The segment, which provides solutions for telecommunications, data, and networks, was the biggest contributor to both the company’s revenue and pre-tax profit, at RM3.3 million.

Meanwhile, DGSB’s business performance services segment’s pre-tax profit grew by around 122% to RM1.74 million in 2QFY15 despite a marginal dip in sales.

The company said it was “cautiously optimistic” that it could maintain a positive performance for the remainder of FY15.

However, with a 12-month trailing earnings per share of 0.19 sen, DGSB’s stock had a price-earnings ratio of 68.42 times as at its last traded price of 13 sen, which seemed overly high. Annualising its 1HFY15 earnings per share to 0.4 sen would also result in a price-earnings ratio of 32.5 times.

(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.)