The possible reason for the lenghtened timeframe could be due to the company finding it a bit tough to find suitable investors with the current investment outlook.
GDex’s head of strategic planning and investment Jerry Lee tells StarBizWeek that the private placement is still ongoing but the company has not firmed up these investors yet.
“The private placement is expiring on Feb 5, 2016 but there is nothing conclusive at the moment. We had to extend it then because the investment situation was not favourable then,” he says.
“We hope to secure strategic investors who understands our underlying business and growth potential. The fund raised via private placement will be used mainly for expansion projects, which include regional expansion,” Lee adds.
He also says that should these plans not materialise, the company may consider using the external funds route to fund its regional expansion.
“We have the flexibility in capital structure with the net cash position,” Lee says.
Even prior to obtaining these funds, the company already seems to be serious in its regional expansion plans to continue its growth story.
GDex had said in its 2015 annual report that it had reviewed and scaled up its manpower and operational requirements in preparation for regional expansion.
“Much attention was given to the management team to improve its mindset, workplace skills and knowledge,” the company says.
Trading at trailing valuations of 60.3 times earnings, a forward valuation of 49 times earnings and a market capitalisation that has grown to RM1.82bil; the company clearly enjoys the confidence of investors.
Sustaining its performance moving forward will also be one of the key factors to look at, but the company has thus far managed to deliver on the market’s expectations.
Even though it does not get to assume the full benefits of lower petrol prices unlike its global similar peers due to earlier currency swings in the ringgit, GDex continues to chart an impressive growth path.
In the first quarter ended Sept 30, GDex continues to sustain its impressive growth path.
The quarter had seen its net profits jump by 26.23% year-on-year (y-o-y) to RM6.29mil from RM4.98mil a year ago on the back of revenues also rising y-o-y by 17.66% to RM51.47mil.
Stronger performance
Commenting on the company’s performance, Lee says GDex’s management should be able to sustain its present growth trajectory. “We believe that the overall courier market is growing positively, from both the conventional and the e-commerce segments. Although the competition is intense, management is committed to maintain the growth momentum,” he says.
GDex managing director and group chief executive officer Teong Teck Lean (pic) says in its annual report 2015 that it is capable of delivering even stronger performance in the years ahead after a respectable average growth rate of 10%-18% over the past 10 years.
“This should be the new normal of growth pattern for the company, given the rapid proliferation of the e-Commerce worldwide which will lead to robust growth in express delivery services in the Asean region,” Teong says.
Teong also notes that following 14 years of continuous growth, the company may be at risk of being complacent and it has to make a stronger effort to break out of this comfort zone.
Lee says the company hopes to deliver a healthy set of results in the coming quarters and is focused on its core business with an aim to improve its service quality to gain greater trust from customers.
GDex is still in the growth stage, Lee says and it may need to use cash for expansion while also aiming to continue creating value for shareholders.
He notes that although there is no official dividend policy in place, the company still pays dividends in the past few years.
At present prices, GDex’s gross yields at at 0.57% but dividends have grown from five years ago with an average dividend growth rate of 27.54% over the past five years.
For the financial year 2016 (FY16), the company is allocating RM16mil to RM20mil for capital expenditure (capex) plans.
“Our capex for FY16 will be focused on improving information technology infrastructure, expanding capacity and upgrading our operational facilities. It will mainly be funded with internally generated funds,” Lee says.
In spite of the intense competition in the segment, the company aims to continue improving its operational efficiency and also eyes a further expansion of its margins.
Competitive pressures will remain however, in the fragmented and unregulated industry.
“We are competing with international as well as domestic players. Because of this, we also have to continually invest more in human capital, technology, and infrastructure to remain competitive.
“Nonetheless, management is committed to focus on top and bottom line growth,” Lee says.
While organic growth may be strong now, Lee also says that GDex is open to value creating inorganic opportunities through mergers and acquisitions.
GDEX (0078) - GDex looks for funding to go on regional expansion
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