INVESTMENT HIGHLIGHTS

• GDEX forms partnership with RedCargo where GDEX is a direct logistics partner

• The partnership enables GDEX to leverage on RedCargo’s vast network

• GDEX in return will provide last mile services to RedCargo

• Bodes well for the growth in international parcel traffic

• Earnings forecasts unchanged

• Maintain NEUTRAL with a revised TP of RM0.34 per share

Spreading its wings with RedCargo. GD Express Carrier Berhad’s (GDEX) inked a strategic partnership with RedCargo Logistics Sdn Bhd (RedCargo), the cargo and logistics arm of AirAsia Group Berhad (AAGB) which begins on 1 April 2019. GDEX is not the first to form a partnership with RedCargo as Tasco Berhad was appointed as the first direct logistics partner of RedCargo in January this year.

Both parties to mutually gain from partnership. The partnership enables GDEX to provide its customers with greater access by utilising AAGB’s network whereby goods are able to be transported efficiently on more than 5,000 weekly flights across Asia Pacific. GDEX in return would provide RedCargo with its last mile services.

Riding on the growth of international parcel traffic. With already two logistics companies including GDEX forming a partnership with RedCargo, we view that there is ample network capacity available to be booked by logistics partners. This bodes well for the growth in international parcel traffic which has been growing for the past three years. Apart from that, we do not discount the possibility of special rates being offered by AAGB to GDEX in order to attract more volume being channelled to the belly space of AAGB’s aircrafts. This in turn would incentivise GDEX to expand its services to a wider network.

RedCargo is still in its early days. RedCargo was incorporated in March last year as the exclusive provider of cargo capacity for AAGB. Therefore, we opine that that the impact towards GDEX earnings to be minimal at this juncture as it has yet to undergo its gestation period. As such we maintain our earnings estimates for FY19 and FY20.

Source: MIDF Research - 1 Apr 2019