GDEX still a newbie in online retail — Analyst
KUCHING: GD Express Sdn Bhd’s (GDEX) exposure in the growing online retail industry is still at an early stage and could bear more fruit ahead as its capex outlay relative to its strong operating cash flow churn is minimal.
RHB Research Institute Sdn Bhd ( RHB Research) noted that while 40 per cent of GDEX volume comprises household products, only 10 per cent of its total volume handled is from business-to- consumer ( B2C) customers like Lazada, Zalora and Go Shop, Astro’s Home TV shopping arm.
“As online retail continues to grow, we believe GDEX is poised to be on a growing earnings trajectory ahead. Astro, which kicked off Go Shop in November 2014, is becoming one of its fastest-growing customers and could become a Top 5 customer if its home-shopping business does well going forward.
“In view of GDEX’s aggressive expansion ahead, we lift our volume projections which, coupled with the expectation of further improvement in its operating efficiency and lower petrol pump
As online retail continues to grow, we believe GDEX is poised to be on a growing earnings trajectory ahead. Astro, which kicked off Go Shop in November 2014, is becoming one of its fastest-growing customers and could become a Top 5 customer if its homeshopping business does well going forward.
RHB Research
prices, have led us to increase our earnings projections,” it said.
“We expect GDEX’s outlook to be rosy ahead with very minimal capex outlay relative to its strong operating cash flow churn.”
RHB Research said that as the company could be embarking on an exponential growth trajectory, dividends could be minimal for now but as the courier industry matures eventually without needing any major capex, GDEX’s payout ratio could potentially increase from 35 per cent currently.
GDEX’s share price has defied all price relative valuation metrics. Its average trailing price earnings ratio since 2005 has hovered around 61.4 times. Given its expected earnings growth, superior return on equities and strong free cash flow growth trajectory, RHB Research deem as reasonable.
The research house pegged a target price of RMR2.05 per share.