This article first appeared in The Edge Financial Daily on December 8, 2017

GD Express Carrier Bhd 
(Dec 7, 59.5 sen)
Maintain neutral with an unchanged target price of 59 sen: We attended GD Express Carrier Bhd’s (GDEX) first financial quarter 2018 (1QFY18) analyst briefing centred on GDEX’s first quarter performance which saw its core net profit declining slightly by -3% year-on-year (y-o-y) while highlighting some synergistic benefits from its strategic associates.

The company emphasised that the +21% y-o-y increase in operating expenditure was mainly due to: i) increase in staff costs which had its headcount growing by 80 to 3,593 coupled with a revision on incentives; ii) establishment of six new branches to its domestic network and iii) warehouse space expansion to 144,576 sq ft. 

As a result, the overall earnings before interest and tax margin and profit after tax margin declined by -3.1 percentage points (ppts) y-o-y and -2.5ppts y-o-y respectively. Nonetheless, we believe the increase in operational assets is necessary in order to remain operationally competitive due to the rising demand in e-commerce activities.

With efficient operational planning, GDEX’s average sorting capacity has increased to approximately 100,000 parcels per day in 1QFY18 (from 96,000 parcels in FY17) with a maximum capacity of 120,000 to 130,000 parcels per day, translating into a utilisation rate of 80%. This is in tandem with its newly established multi-sorting hub in Kuching, in addition to its three other hubs located in Petaling Jaya, Penang and Johor.

GDEX leveraged in its strategic associate, Web Bytes Sdn Bhd, to develop an in-house mobile application for its couriers which went operational in July. The mobile application enables its couriers to track pick-up and delivery of parcels on a real-time basis, improving operational efficiency.

Its business-to-business segment remains dominant, contributing near 70% to its revenue. Its business-to-consumer segment contributes some 30% with tight margins. Henceforth, GDEX is planning to develop further application with Web Bytes to aid its entrance into the consumer-to-consumer segment. — MIDF Research, Dec 7