Friday, October 23

GDEX’s earnings accretion from ventures yet to be meaningful

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In the long term, rerating catalysts for GDEX would be slowdown in growth for last mile delivery start-up companies and stronger consumer-to-consumer (C2C) business demand.

KUCHING: GD Express Carrier Bhd’s (GDEX) earnings accretion from ventures especially in Vietnam has yet to be meaningful, analysts project, as it will undergo a gestation period.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), GDEX’s healthy balance sheet has supported the group’s various expansion plans.

“This includes acquisition of a 44.5 per cent stake in PT SAP Express, and efforts to secure a stake in a Vietnamese company before the end of current year 2019 (CY19),” MIDF Research said.

“Nonetheless, we view that the earnings accretion from ventures especially in Vietnam has yet to be meaningful as it will undergo a gestation period in addition to the intense competition within the industry.

“Meanwhile, valuation remains stretched at a 12-month trailing price-to-earnings ratio of 50.2-fold compared to the average industry of approximately between 15-fold to 20-fold.”

All factors considered, MIDF Research maintained its ‘neutral’ stance on the stock at this juncture.

“In the long term, rerating catalysts for GDEX would be slowdown in growth for last mile delivery start-up companies and stronger consumer-to-consumer (C2C) business demand.”

However, MIDF Research revised its earnings estimates for financial year 2020 (FY20) and FY21 to RM25.3 million and RM28.8 million from RM33 million and RM35.1 million respectively.

“This is to take into account of the higher operating expenses incurred from its regional plans and IT enhancement which we believe to persist throughout the year.”

The research arm also revised its target price to RM0.27 per share, from RM0.30 per share previously, based on discounted cash flow (DCF) valuation as it rolled forward its valuation base forward to FY21 and adjusted its earnings downwards due to aforementioned reasons.