GDEX a major beneficiary of booming e-commerce scene
KUCHING: GD Express Carrier Bhd (GDEX) has a solid earnings growth story with three- year compounded annual growth rate (CAGR) of 22.3 per cent, riding on the booming e-commerce scene, with utilisation overload the only obstacle to overcome before achieving exponential growth.
This was highlighted by the research arm of Kenanga Investment Bank Bhd (Kenanga Research) in its initiation coverage of the stock.
It also believed that GDEX’s regional expansions through acquisitions are very likely and will serve as another major rerating catalyst to the stock.
“Riding the growing domestic trend of e-commerce, we project its B2C delivery to grow 50 to 70 per cent in the next three years, surpassing B2B delivery revenue by the financial year 2019 (FY19).
“The company saw 70 per cent to as high as 500 per cent growth in B2C delivery in the past three years, with a CAGR of 246 per cent,” it said.
It also expected GDEX’s B2B delivery business to remain resilient at a three to five per cent growth rate, leveraging on its strong-standing relationships with its client base.
Meanwhile, Kenanga Research noted that over-utilisation of its sorting hub capacity remains one of the only stumbling blocks for GDEX to unlock its full potential towards exponential volume growth.
However, it pointed out that GDEX recently restructured its sorting hub work- flow, which effectively increased its sorting capacity by 28 per cent, from an average of 78,000 to circa 100,000 pieces per day, which should be fully reflected in FY17.
“With the express delivery revenue projection growth of 15 to 19 per cent, we reckon this temporary fix will only last one to two years before reaching full capacity again.
“Management is currently on the hunt for an additional sorting hub to run concurrently to remove the existing growth constraint,” the research firm said.
As for GDEX’s expansion plans, Kenanga Research viewed its regional expansion as a re-rating catalyst.
“Earlier in the year, GDEX underwent a private placement, with Yamato emerging as its second largest shareholder with 22.84 per cent stake, raising RM209 million cash for GDEX - a sizeable war chest for inorganic growth which GDEX has already tapped into to make a few early moves.
“Furthermore, we believe GDEX does not need to raise fresh fund to finance any capital expenditure (capex) for existing business as its current strong cash flows generating ability is more than sufficient. With the entire war chest solely for inorganic growth, we believe GDEX would end up with multiple acquisitions, with Indonesia the most likely target country,” it said.
Overall, the research team pegged an ‘outperform’ call on the stock.