Investment Highlights

• Stock idea. GDEX was established in 1997. In 2000, Teong Teck Lean emerged as the major shareholder and turned the company into profitability. GDEX was listed on the ACE Market in 2005 and subsequently upgraded to the Main Market of Bursa Malaysia in 2013.

• The company is one of the market leaders in the last-mile delivery industry in Malaysia. It also has operations in Vietnam (via a 50% stake in Netco), Indonesia (44.5% stake in PT SAP Express) and Singapore (small operation). As of 30 Sep 2021, GDEX has 1,420 vehicles and 4,330 employees supporting its operations.

• 2022 will be an expansion year. We gather that GDEX should complete its sorting capacity expansion in 2022, doubling the current capacity to 350,000 parcels per day (currently: 150,000 per day). We believe that this will lower the operating cost for GDEX in the long run. The cost for the sorting capacity is RM20mil–RM25mil.

• GDEX’s 3QCY21 earnings surged 48% QoQ and 32% YoY to RM9.5mil. This is due to EBIT margin expansion at 9.1% in 5QFY21 vs. 4QFY21’s 7.8%. This is attributable to better cost control in the express delivery segment which has more than offset the 4% decline in revenue QoQ.

• Net cash position strengthened by 3% to RM281mil in 3QCY21. GDEX’s focus on generating positive cash flow despite stiff competition has resulted in higher cash position. We believe that GDEX is ready to engage in M&A. Note that it has changed the company name to GD Express Carrier to GDEX Bhd on 22 Dec 2020. This could be a strategy as it prepares to expand into other businesses besides the laspt-mile industry.

• Risks to GDEX’s business include stronger-thanexpected competition and higher-than-expected staff costs. Another risk is lower-than-expected growth in ecommerce demand.

• GDEX has embarked on its Go Green initiative by introducing all-electric motorcycle into its fleet. This is aimed at reducing the company’s greenhouse gas emissions in the long run.

Source: AmInvest Research - 31 Dec 2021