YGL Convergence Bhd
YGL is a business solution provider based in Penang. Its share price has more than doubled to 26 sen in the last two months on the back of rising volume. We believe the stock is beneficiary of the play on the imminent implementation of goods and services tax (GST) in the country. The company is likely seen as one of the potential gainers from the billion-ringgit GST-compliant software market.

Nevertheless, we prefer other software solution providers as an exposure to this lucrative sector. For starters, YGL’s underlying fundamentals is on the decline. The company has been loss-making in five of the past six years. It reported a net loss of RM0.5 million in 1H2014.

Edge Research (refer to www.theedgemarkets.com) rates YGL’s underlying fundamental a score of 0.95 out of 3.0 and valuation score of 0.3 out of 3.0. The company has not paid any dividend since September 2007.

This article first appeared in The Edge Financial Daily, on October 24, 2014.