1HFY15 earnings came in line with our estimates. Maintain BUY with theDCF-derived TP adjusted down to MYR1.82 (from MYR2.42, 13% upside) post bonus exercise. The negative bottomline growth was distorted by tax credits last year but, on a PBT basis, earnings grew by 16.7% YTD, which is commendable. We like GDEX’s growth story  –  riding on the ecommerce theme as the logistics provider for B2C deliveries.

Results  within  expectations.  GD  Express  Courier  (GDEX)  posted  a core net profit of MYR7.2m in 2QFY15 (Jun) (-18.6% YoY) on the back of  MYR50.1m  revenue  (+24.3%  YoY).  The  lower  core  net  profit  wasdistorted  by  the  higher  earnings  base  in  2QFY14,  when  it  incurred  a MYR2.2m tax credit. On a PBT basis  (a  more meaningful comparison), the  growth  remained  commendable  at  22%  YoY  and  42.4%  QoQ. We deem  the  results  to  be  in  line  with  our  estimate,  as  1HFY15  had accounted for 44% of our full-year forecast.

Margins improve. GDEX’s EBITDA margins (albeit weaker vis-à-vis last year  on  higher  upfront  costs  incurred  for  staffing  expansion)  –  in anticipation  of  stronger  volume  ahead  –  are  showing  signs  of improvement  QoQ. This  suggests,  as volume grows, greater  economies of scale on operating efficiency moving forward.

Outlook  ahead.  GDEX  has  seen  increasing  contribution  from  its  ecommerce  clients,  where  it  provides  business-to-customer  (B2C) deliveries.  This  will  continue  to  be  the  key  driver  to  earnings. Its latest client,  Astro  TV’s shopping  channel  Go  Shop,  is seeing  strong  volume despite  being  launched  in  Nov  2014.  This  channel  is  expanding aggressively  by  offering  more  products,  online  shopping  services  and new channels in other languages to serve a bigger customer base. Astro TV targets to grow its revenue  to MYR500m in 3-5 years. Plans are also underway  to  increase  its  capacity  to  100,000  parcels  handled  per  day from its 70,000-80,000 parcels/day capacity. GDEX is also looking at the possibility of expanding into new hubs in other regions in the country,  egNorth  Malaysia.  On  the  regional  expansion  front,  its  impending MYR200m private placement will be used to fund potential acquisitions in its bid to expand into Indonesia and Thailand.

Still a BUY.  We continue to like GDEX’s growth story riding on the  ecommerce  theme  as  the  logistics  provider  for  B2C  deliveries.  This ensures  that  it  will  likely  continue  to  see  double-digit  growth  ahead. Maintain  BUY,  with  our  DCF-derived  (WACC :  6.6%,  TG:  3.7%)  TP adjusted down to MYR1.82 to reflect the recent bonus exercise.

Source: RHB