GDEX’s profits to increase at three-year compound annual growth rate of 16 per cent
KUCHING: GD Express Carrier Bhd’s (GDEX) profits have been forecasted to increase at a threeyear compound annual growth rate (CAGR) of 16 per cent.
According to analysis from the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), GDEX ranked second in terms of domestic express delivery market share holding an 18 per cent share.
GDEX has outpaced the overall industry which expanded at a CAGR of 10 per cent between 2012 and 2015, increasing the group’s market share by 0.4 percentage point (ppt) per year.
MIDF Research has thus forecasted a three-year financial year 2017-2019 (FY17-FY19) profit CAGR of 16 per cent.
The research noted that this was contributed by fast growing e- commerce industry which is entering the growth phase of the industry life cycle, with CAGR estimated at 20.8 per cent between 2015 and 2020.
“As an express delivery partner appointed by key e- commerce platforms, GDEX is poised to benefit from increasing parcel volumes,” it said.
The forecast was also contributed by expansion in sorting capacity.
MIDF Research estimated that GDEX will expand the group’s sorting capacity by 28 per cent/30 per cent/15 per cent in FY17/FY18/ FY19.
“The company is undergoing several initiatives to increase its sorting capacity at reasonable capital outlay, including reorganising the layout of its 67,000 square feet (sq ft).
“HQ/sorting hub and investing in new semiautomated sorting lines,” the research arm said in an initiation coverage.
The last contribution was by merger and acquisition (M&A) opportunities, with MIDF Research noting that GDEX has RM282 million in dry powder and is prepared to deploy the group’s net cash into value enhancing and synergistic assets.
The research arm further noted that GDEX has already invested RM5.5 million for a 30 per cent stake in Web Bytes Sdn Bhd (Web Bytes) to enhance the group’s technological offering to fend off new tech- based delivery startups.
All in, MIDF Research initiated coverage on GDEX with a ‘buy’ recommendation and target price of RM2.06 per share.
The research arm valued the company using the discounted cash flow method (DCF).
MIDF Research observed that GDEX has consistently achieved profit before tax (PBT) margins of 15 to 16 per cent which are on average 10ppts higher compared to the group’s peers.
While the research arm’s target price implied a forward price-toearnings (PER) of 70-fold FY17 core earnings, MIDF Research believed it was justified as GDEX is a beneficiary of the high growth e-commerce sector.