Diversified Gateway plans capital reduction

PETALING JAYA: Diversified Gateway Solutions Bhd (DGSB) has proposed a capital reduction exercise, which will give rise to a credit of RM100 million to set off its accumulated losses of RM102.77 million at the company level as at June 30.
The group said in a filing with the stock exchange that the capital reduction will result in the reduction of its share capital from RM160.05 million to RM60.05 million.
DGSB also plans to consolidate every two existing shares into one share.
Explaining rationale behind the capital reduction, it said it will enable the group to rationalise its financial position and reflect more accurately the value of the underlying assets.
“Further, the elimination of the accumulated losses from the statement of financial position of the company would ease the company to declare dividends from its future available profits and provide a better financial platform for the group’s future growth moving forward.”
On the share consolidation, DGSB said it will improve its capital structure with a reduction in the number of shares available in the market.
“As the company has a large share base and a relatively low trading price range, the board noted that a small movement in the share price may result in a high percentage of movement in the share trading price. The proposed share consolidation is expected to bring about a corresponding upward adjustment in the trading price of the shares.”
It added that this will encourage investors to view the consolidated shares as a long-term investment rather than a “penny stock” prone to speculative pressures.
DGSB shares gained 9.1% to close at 6 sen today with 8.89 million shares changing hands.