GDEX’s 1QFY26 results came in below expectations, with CNP of RM0.4m (-87.3% QoQ) representing only 2% of our full-year forecast, mainly due to slower-than-expected volume recovery at NETCO and delays in project awards within its technology segment.
Near-term earnings are expected to remain pressured by softer logistics demand and higher freight costs amid the ongoing US-Iran conflict, although continued cost rationalisation at NETCO and stronger expected earnings contributions from the GD Xchange segment should support longer-term growth.
Maintain BUY recommendation with an unchanged TP of RM0.20, based on assigned 30.0x P/E multiple to its FY27F EPS of 0.7 sen, along with a three-star ESG rating.
Results below expectations. Excluding the net remeasurement of receivables allowance of RM0.4m and FX loss of RM0.01m, GDEX reported a 1QFY26 CNP of RM0.4m (-87.3% QoQ), accounting for only 2% of our full-year forecast. The weak performance was mainly due to slower-than-expected volume recovery at NETCO coupled with delays in project awards within its technology segment.
YoY. GDEX swung to a CNP of RM0.4m from a core net loss of RM0.5m, supported by an improvement in its logistics segment, which turned around from an LBT of RM0.4m to a PBT of RM0.5m. Nevertheless, group PBT declined 78.6% YoY, dragged by weaker earnings from its technology segment, which swung from a PBT of RM1.2m to an LBT of RM0.4m due to costs incurred ahead of project awards despite a 2.7% increase in revenue. Despite the lower group PBT, the higher CNP was attributable to higher share of minority interest losses from NETCO and the technology segment.
QoQ. CNP fell 87.3% due to weaker PBT contributions from both its logistics and technology segments. The logistics segment continued to be affected by losses at NETCO amid slower-than-expected volume recovery. Meanwhile, earnings from the technology segment weakened due to delays in project awards, coupled with a 9% decline in revenue.
Outlook. Looking ahead, we expect the Group’s near-term performance to remain weighed by the ongoing US-Iran conflict, with demand within the logistics segment expected to soften as consumers remain highly price-sensitive despite continued e-commerce activity, resulting in lower purchases of non-promotional and higher-ticket items. Meanwhile, the Group has begun imposing additional surcharges for international as well as Sabah and Sarawak deliveries to partially offset higher air freight costs, which have risen by as much as 30% following fuel surcharges passed on by airlines, although these additional costs cannot be fully passed on to customers. While margins are expected to come under pressure, fuel costs for ground deliveries continue to be subsidised under the government’s fleet card programme, helping to mitigate the impact of higher diesel prices. Over the longer term, we remain positive on the Group’s growth trajectory, driven by the ongoing restructuring of its NETCO operations which could bring further cost savings. In addition, its GD Xchange platform remains well-positioned to support long-term revenue growth and margin expansion within the technology segment through cross-selling and bundled solutions, while continued adoption of AI, cloud and digitalisation initiatives is expected to drive further partnership opportunities.
Earnings Revision. Following the earnings miss, we cut our FY26-28F CNP forecasts by 46%/2%/6% to reflect softer logistics demand amid the ongoing US-Iran conflict and rising operating costs.
Valuation and Recommendation. We maintain our BUY recommendation with an unchanged TP of RM0.20, based on 30.0x FY27F EPS of 0.7 sen and supported by a three-star ESG rating. Despite near-term headwinds, we remain positive on the Group’s long-term outlook, driven by (i) continued cost rationalisation at NETCO and (ii)stronger expected earnings contributions from the GD Xchange segment.
Risks. Intensifying competition and margin pressure in the core express delivery segment, execution risks in IT diversification and scaling the GD Xchange ecosystem, and continued underperformance of its NETCO associate in Vietnam.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.952620 | 3.984418 |
| EUR | 4.602737 | 4.607520 |
| CNY | 0.583458 | 0.584086 |
| HKD | 0.504699 | 0.508269 |
| SGD | 3.089871 | 3.111658 |