This article first appeared in The Edge Malaysia Weekly on December 21, 2020 - December 27, 2020

TOTAL logistics solution provider Tasco Bhd was on the lookout for a partner in the last-mile logistics market and found it in GD Express Carrier Bhd (GDEX). Together, they will now look for ways to share resources and jointly bid for projects that will tap the capabilities of both companies, says Tasco deputy group CEO Tan Kim Yong.

He notes that Tasco has no intention at the moment to enter the last-mile logistics market, given the competitive landscape. “We have been clear that we think working with existing [express delivery] players such as GDEX would be the best way,” Tan tells The Edge. The Malaysian Communications and Multimedia Commission recently announced a two-year freeze on the issuance of new courier service licences in an already-crowded market with more than 110 players.

On Dec 8, Tasco and GDEX had entered into a non-binding memorandum of understanding (MoU) to lay the groundwork for more comprehensive cooperation ahead. Under the MoU, Tasco will be given priority to leverage GDEX’s last-mile fulfilment capabilities, while GDEX can tap Tasco’s international logistics network as well as its local cold supply chain infrastructure and convenience retail logistics network. Tasco is a 55.38%-owned subsidiary of Japan’s Yusen Logistics Co Ltd, while Japan-based express delivery giant Yamato Holdings Co Ltd holds a 22.83% stake in GDEX.

Tan sees potential integration between Tasco’s fulfilment solutions ­offering, ­e-Tower, and GDEX’s online shipping platform, myGDEX, which will enable Tasco to focus on the inventory, warehousing and packaging for customers while GDEX will handle the last-mile delivery of goods to the end user.

Still, as the two companies are still exploring potential areas of cooperation, Tan says it is still premature to estimate any earnings contribution from this collaboration.

“For us, it is based on opportunities. Thus, it is a bit difficult to determine its contribution right now. We are looking [at this collaboration] as a bonus/add-on to our existing business,” he says, adding that Tasco and GDEX will be equal partners.

GDEX managing director and group CEO Teong Teck Lean concurs, describing the collaboration as a “win-win” from a synergy standpoint. “The collaboration will drive higher utilisation of assets for both companies without investing extra.”

Teong also sees potential collaboration with Tasco in the area of transporting Covid-19 vaccines to distribution centres across the country. “On our part, we can offer over 10 years of experience in delivering time-sensitive medical test products for clinics and laboratories.”

GDEX is allocating about RM30 million to capital expenditure in the current financial year ending June 30, 2021 (FY2021), to buy new vehicles in addition to its current 1,300, as well as on digital initiatives to remain relevant.

“We are looking to speed up adoption of digital technologies to make our platform much more seamless and increase its speed as more volume comes in. We also plan to set up an R&D centre to look into big data analytics in order to improve our systems,” Teong says, adding that the group’s digital efforts are not only confined to Malaysia but Asean as well.

“We want to connect our systems with that of our affiliates and subsidiaries in other countries such as Vietnam and Singapore. As such, we have to relook at our ecosystem — how we can grow faster and create more products to help companies sell their products through social media.”

GDEX started its new financial year on a positive footing, with net profit up 51.5% to RM7.19 million in 1QFY2021 compared with RM4.76 million in 1QFY2020. Revenue rose 30.8% year on year (y-o-y) to RM108.61 million.

While 2QFY2021 has been challenging operationally due to the Conditional Movement Control Order, which has led to some workers being quarantined once they travel to high-risk areas, Teong says the group is “still doing okay”.

In FY2021, he sees earnings contributions coming from the Malaysia and Vietnam markets. “We are looking to expand our regional footprint to the Philippines and Thailand, but things have slowed down somewhat due to the pandemic, although it won’t stop us. That’s because a lot of this requires interactions, seeing the place and spending time with existing and potential partners.”

Meanwhile, Tan says Tasco, which is spending RM400 million over the next five years to support its long-term logistics capacity needs, is ready to support the local distribution of the Covid-19 vaccines.

“We have the expertise in this area as we are one of the leading cold-chain logistics players in Malaysia.  Within the Yusen group, we also have some existing members whom we can call upon to give their expertise, like our Yusen counterparts in the UK and Europe. Already, Yusen is transporting pharmaceutical products and vaccines by air freight from the UK to other countries including Malaysia for AstraZeneca. In Malaysia, we are handling the air freight clearance and local delivery to the designated warehouse for AstraZeneca.

“Also, healthcare logistics is one of the industry verticals that we are targeting and we have secured some new healthcare clients this year,” he adds.

Tasco, which has seen profits slide in the past four financial years, expects to resume its growth trajectory in the financial year ending March 31, 2021 (FY2021), as investments made three years ago start to bear fruit. In 1HFY2021, net profit jumped 2.5 times to RM13.34 million from RM5.39 million a year ago, while revenue rose 10% y-o-y to RM408.02 million.

“Despite the challenges posed by the pandemic and also partly due to the pandemic, certain parts of our business grew while certain parts didn’t grow as much but overall, our revenue and profits grew substantially compared with the previous year. Going into FY2021, we will continue [our initiatives] and climb new mountains. We are quite bullish about the prospects going forward,” says Tan.

Tasco’s share price has risen 133% year to date to close at RM2.80 last Thursday (Dec 17), giving the company a market capitalisation of RM560 million. GDEX shares, meanwhile, have surged 50% in the same period to settle at 40.5 sen, valuing the company at RM2.28 billion.

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