We see GDEX’s acquisition of MBE Malaysia for RM5.5m as an attempt to step into the C2C delivery business, while also strengthening its current B2B and B2C delivery business. We maintain our FY18-19E earnings, seeing this to be a longer-term positive, with no overly significant impact towards its balance-sheet given its current rich netcash position. Maintain UNDERPERFORM due to demanding valuations, with unchanged TP of RM0.45.

Acquisition of MBE Malaysia. GDEX announced its full acquisition of MBE Malaysia (consisting of two companies – MBE Business Corporation Sdn Bhd, and MBE Business Holdings Sdn Bhd) for a total purchase consideration of RM5.5m. MBE Malaysia is principally engaged in the courier franchising industry, providing services such as mailbox services, packaging and shipping. It operates 92 outlets in Malaysia, primarily located in business districts and shopping malls.

Foray into C2C delivery. We believe GDEX’s acquisition of MBE Malaysia is an attempt by the company to foray into the customer-tocustomer (C2C) delivery business, and also to further strengthen its existing footing in business-to-business (B2B) and business-tocustomer (B2C) deliveries. Likewise, the acquisition also follows the company’s launch of GDEX Signature in Jan 2018 – a signature outlet store located in Avenue K Shopping Mall, representing one of the company’s first attempts in capturing the C2C market.

Longer-term positive impact. We are positive on the acquisition’s impact to be earnings accretive in the longer-term, and as such, have opted to maintain our FY18-19E earnings. The acquisition should also not have any significant impact towards its balance sheet, given GDEX’s rich net-cash position of RM316.4m as at end-2Q18, as most of its private placement funds still remain intact.

Maintain UNDERPERFORM, with unchanged DCF-derived TP of RM0.45, based on assumptions of 7.8% discount rate and 5% TG. While we like the company for its good management and expansion growth story, we believe foreseeable positives to have already been priced-in at current PER level of 104x. Risk to our call includes: (i) exponential courier volume growth beyond our forecasts, and (ii) sooner-than-expected significant earnings materialisation from potential business expansions.

Source: Kenanga Research - 2 Mar 2018