Highlights

• Strong clientele base. GDEX has a diversified clientele base from financial industries to manufacturing industries, which have been increasingly outsourcing delivery services  (lower cost structures).

• Leveraged to the booming online commerce in Malaysia in recent years. GDEX managed to secure business from renowned online portal Groupon, Lazada, Zalora and Astro Home Shopping, by providing total solutions –  warehousing, logistics and last-mile deliveries.

• Strong partnerships with international and foreign courier players. The emergence of Yamato and Singpost as major shareholders further validates GDEX’s service levels. SingPost (proxy to Alibaba) and Yamato (proxy to Rakuten) are expected to boost GDEX business volumes, given the feed-in business from these partners and expanded connectivity and solutions for local clients.

• Growth opportunity within ASEAN. GDEX foresees opportunity within ASEAN region, given the booming ecommerce (greater than Malaysia), especially post implementation of AEC (ASEAN Economic Community) and TPA (Transpacific Partnership Agreement).

Forecasts

• We have projected FY16-18 earnings growth at +21-30%, in view of the strong volume growths and expanding margins. We have not factored in upside from recent strategic alliances and potential regional expansions.

Catalysts

• Continued strong earnings growth.

• Booming online commerce.

• New partnerships with international and foreign players.

• Expansion into regional markets.

Risks

• Delays in strategic expansion domestically and regionally.

• Increasing competition from regional and global players entering the domestic express delivery & logistics markets.

Rating

• Not Rated

Valuation

• We believe that GDEX is fairly priced at RM1.70 based on combination of 1.2x PEG (given the strong growth  potentials of its business model with further upside from regional expansion) and net cash of RM280m.