KUALA LUMPUR (Nov 6): DPS Resources Bhd jumped as much as 13.4% after Edge Research featured the furniture component manufacturer as a stock with momentum.
DPS rose as much as two sen to 17 sen at 9.16am. At 10.45am, DPS was up one sen or 6.67% at 16 sen, giving it a market capitalisation of RM43.56 million.
The company is involved in manufacturing of rubber wood furniture components, as well as kiln drying services.
Edge Research said in a report published in The Edge Financial Daily today that despite DPS registering profit in the first quarter ended June 30, 2015 (1QFY15), there was yet concrete evidence of a turnaround.
This is because DPS had posted annual losses in recent years although the losses had narrowed.
Net loss for financial year ended March 31, 2014 (FY14) stood at RM333,966 compared with a net loss of RM31 million in FY13.
“Investors should note that although the company was profitable for the first three quarters of FY14, losses in 4QFY14 wiped out all these profits and tipped the company back to being loss-making,” Edge Research said.
Edge Research gave DPS a valuation factor of 1.2 and fundamental factor of 0.35.
A score of 3 is the best to have while 0 is the worst.
DPS is traded at 0.5 time its book value of 31 sen with an annualised price-earnings ratio (PER) of 23.3 times. The PER is based on its 1QFY15 profit, Edge Research said.
Bloomberg data showed that DPS' annualised PER compared with a sector average of 43 times.
DPS' planned diversification will be closely watched. Group Executive Chairman Datuk Dr Sow Chin Chuan said in the firm's annual report that DPS acknowledged that the furniture and wood industries continued to be challenging.
Hence, DPS' rights issue exercise will include diversification into property development, according to Sow.