Stock With Momentum: Dominant Enterprise

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This article first appeared in The Edge Financial Daily, on January 8, 2016.


Dominant Enterprise Bhd (-ve)

WOOD products distributor and manufacturer Dominant (Fundamental: 0.6/3, Valuation: 2.4/3) rose 2.6% to RM1.20 on heavy volume yesterday. To recap, its shares surged to a five-year high of RM1.53 in last August after it proposed a bonus issue, before falling to the current levels of RM1.10-RM1.30.

Based in Johor, the company supplies wood products, such as wood panels, fibreboard mouldings and furniture components, mainly to the local building industry and furniture manufacturers.

For 1HFYMar16, revenue edged up 2.5% y-o-y to RM269.8 million, thanks to the introduction of new products and market share expansion. Net profit, however, dipped 2.7% to RM8.5 million, due to higher interest expenses, costs of distributed products and operating costs.

Notably, net gearing ratio increased to 66.4% from 33.8% six months ago, largely driven by a RM38.4 million increase in short-term borrowings. The stock trades at a trailing P/E of 8.7 times with a yield of 3.9%.