GDEX’s earnings accretion from ventures yet to be meaningful
KUALA LUMPUR: GD Express Carrier Bhd’s (GDEX) earnings accretion from the group’s ventures have yet to be meaningful, analysts opine in a second quarter of financial year 2019 (2QFY19) results review.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), GDEX’s healthy balance sheet has supported the group’s various expansion plan.
“This includes acquisition of a 44.5 per cent stake in SAP Express, an Indonesian courier company and on-going effort to secure a partnership in Vietnam by the end of current year 2019 (CY19) facilitated by Webbytes through its cloud-based pointof-sale platform.
“Nonetheless, we view that earnings accretion from these ventures has yet to be meaningful as it has yet to undergone its gestation period,” MIDF Research said.
On valuation, the research arm noted that it remains stretched at this juncture as compared to the average industry of approximately 17-fold.
All factors considered, MIDF Research maintained its ‘neutral’ stance at this juncture.
“In the long term, rerating catalysts for GDEX would be slowdown in growth for last mile delivery start-up companies and stronger customer-to-customer (C2C) business demand.”
Meanwhile, on earnings forecasts for the group, MIDF Research’s has revised upwards its FY19 and FY20 projections.
“As earnings came above expectations, we are prompted to revise our FY19 and FY20 earnings forecasts upwards to RM29.1 million and RM33.9 million respectively.
“This is after inputting higher average revenue growth rate assumption of 12.5 per cent from 11 per cent as we believe growth in the industry remains robust.”
The research arm noted that GDEX’s first half of FY19 (1HFY19) normalised net profit, which increased by 18.5 per cent year on year (y-o-y) to RM17.2 million, came in better than its expectations, representing a variance of more than five percent as compared to its 1HFY19 earnings estimates.