Diversified Gateway Solutions remains optimistic despite net losses

  • Revenue rose 25% while net loss widened by 22%
  • Company remains cautiously optimistic on remaining quarters’ performance
 diversified gateway solutions

DIVERSIFIED Gateway Solutions Bhd (DGS), a networking systems integrator and service provider of integrated business solutions in the SAP environment, registered a widening net loss in the first quarter, partly due to lower margins for its digital and infrastructure services.
For the first quarter ended June 30, 2014, DGS’s revenue rose by 25% to RM17.44 million compared to RM13.88 million same quarter a year ago. The revenue growth is driven by the two of its three core business segments – Business Performance Services and Digital & Infrastructure Services.
[RM1 = US$0.32]

“The increase in revenue in Business Performance Services segment was mainly due to higher billings contributed from a subsidiary in Thailand,” said DGS in its filing to stock market regulator Bursa Malaysia yesterday (Aug 18).
“For the Digital & Infrastructure Services segment, the increase in revenue was mainly due to a sizeable purchase order secured from a new customer,” it added, without providing details on the new customer.
While its topline showed encouraging numbers, the company's bottom line numbers were slightly subdued. During the quarter, net loss widened to RM951,000 compared to the RM779,000 net loss recorded in the same quarter last year.
The net loss is mainly driven by the decrease in profits from its Digital & Infrastructure Services segment, which registered a pretax profit of RM558,000, versus the RM1.56 million pretax profit in the same quarter last year.
“The Digital & Infrastructure Services segment recorded a decrease in profits mainly due to the lower gross profit margin recorded as well as inventories written off amounting to RM260,000.
“However, the Business Performance Services segment’s pretax loss was reduced by RM770,000 and is mainly attributable to the increase in revenue and improved gross profit margins,” said the company.
Nevertheless, DGS, which is 60% owned by Malaysian publicly-listed IT services provider Formis Resources Bhd, believes its fortunes can improve in the remaining period of the financial year.
“The board of director is cautiously optimistic that the group’s performance will improve through the remaining quarters of the current financial year,” said the company.
While the company did not register a growth in earnings during the first quarter, investors appeared to be confident in the company’s outlook. 
Year to date, the company’s shares on Bursa Malaysia have risen by more than 30% to 8.5 sen. They were traded at 6.5 sen early this year.
Since July 22, buying interest on the company’s stock has risen substantially, where daily trading volume is at 9.4 million shares. In contrast, between Jan 1 and July 21, average trading volume was under one million shares.
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