GD EXPRESS CARRIER BHD

Rating: Neutral (maintained)

Target price: 30 sen

GD Express Carrier Bhd’s (Gdex) expansion to Vietnam via the acquisition of Noi Bai Express and Trading Joint Stock (Netco) is deemed a strategic way for the group to utilise its cash pile.

Post-acquisition, Gdex will still remain in a net cash position of above Rm200mil after it acquires 50% of Netco’s enlarged share capital for a total of Rm13.85mil.

Netco is currently profit making albeit at an immaterial level to Gdex’s earnings and may go though a gestation period before delivering meaningful earnings.

MIDF believes Gdex will implement the same modus operandi applied to its 44.5%owned PT SAP Express in Indonesia, which is by providing business advisory and knowledge transfer to Netco.

Netco’s four hubs, 45 branches and 47 points of delivery will serve as a good starting point for Gdex to assimilate with the market dynamics of Vietnam’s logistics industry.

Gdex’s 32.7%-owned associate Web Bytes which has entered Vietnam, can also tap on Netco’s network to provide new retail solutions of mobile point-of-sale and self-service kiosks and vice versa.

MIDF retains its neutral rating on Gdex for its healthy balance sheet that supported the group’s various expansion plans.

The target price is maintained at 30 sen per share, valued using a two-stage discounted cash flow method which assumes a WACC of 12% to reflect the risk from the ongoing intense competition driven by the growth in the South-east Asian ecommerce industry which is expected to be worth Us$102bil (Rm427.76bil) by 2025.