Stocks With Momentum: Diversified Gateway Solutions

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Diversified Gateway Solutions Bhd (+ve)
DIVERSIFIED Gateway Solutions (Fundamental: 1.4/3, Valuation: 0/3) is a services provider of integrated business solutions. The stock is trading near a four year high, after it jumped 30% or 3 sen to 13 sen after the holidays, with 105.5 million shares changing hands yesterday. 

It is unclear what is driving the rally, as the stock’s valuations are high. The stock currently trades at 3.3 times book with a 12-month trailing P/E ratio of 54.08 times.

Its 3QFY March 2015 results are due soon. Although loss making from FY2011 and FY2012, the company managed to report a small net profit of RM0.9 million in FY2013 and RM1.7 million in FY2014, with a net margin of 1-2%. Its revenue was around RM76 million in the last two years.  

DGSB’s return on equity stands at 4.3% as of FY2014. The company is in a net cash position of RM 3.2 million, and has not historically paid out dividends.

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This article first appeared in The Edge Financial Daily, on February 24, 2015.