• GDEX's 2QFY26 results came in below expectations, with CNP of RM0.3m (-35.4% QoQ) bringing 6MFY26 CNP to RM0.7m, accounting for only 7% of our FY26 full-year forecast, mainly due to continued underperformance at the Technology segment amid delayed project awards, coupled with a slower-than-expected turnaround at NETCO.
• Near-term earnings are expected to remain pressured by softer logistics demand and delayed digitalisation spending amid ongoing geopolitical uncertainty, although continued cost rationalisation at NETCO and the eventual scaling of the GD Xchange ecosystem should support longer-term growth.
• We downgrade to HOLD from BUY, with a lower TP of RM0.13 (from RM0.20 previously), based on an unchanged 30.0x multiple applied to a lower FY27F EPS of 0.4 sen (previously 0.7 sen).
Below expectations, with earnings significantly lagging our forecasts. Excluding exceptional items, namely the net remeasurement of receivables allowance (-RM0.16m) and FX gain (- RM0.02m), GDEX reported a 2QFY26 CNP of RM0.3m (-35.4% QoQ, versus a core net loss of RM1.0m in 2QFY25). This brought 6MFY26 CNP to just RM0.7m, representing a mere 7% of our FY26 full-year forecast and signalling a significant earnings shortfall. The weak performance was mainly attributable to the continued underperformance of the Technology segment, amid delayed project awards and sub-optimal cost structures.
QoQ. Revenue fell 4.6% to RM100.5m, mainly due to lower demand for logistic services, with Logistics segment revenue declining on softer volumes in Malaysia. CNP fell 35.4% to RM0.3m as continued cost optimisation gains at the Logistics segment was outweighed by a wider loss at the Technology segment, dragged by delayed project awards and sub-optimal cost structures.
YoY. Revenue grew 2.3% to RM100.5m, driven by higher volumes in Malaysia which offset continued softness at its Vietnam-based NETCO associate, still in the midst of restructuring its customer base towards higher-yielding accounts. GDEX swung to a CNP of RM0.3m from a core net loss of RM1.0m in 2QFY25, as the Logistics segment turned around on higher revenue and tighter cost optimisation measures, more than offsetting a wider loss at the Technology segment amid delayed project awards and sub-optimal cost structures, as customers held back on digitalisation spending amid heightened geopolitical uncertainty.
YTD. 6MFY26 revenue was broadly flat at RM205.8m (+1.0% YoY), as higher volumes in Malaysia were largely offset by continued softness at NETCO. 6MFY26 CNP swung to RM0.7m from a core net loss of RM1.5m in 6MFY25, supported by a turnaround at the Logistics segment on tighter cost optimisation measures, although this was partly weighed down by a wider loss at the Technology segment as customers held back on digitalisation spending amid heightened geopolitical uncertainty, alongside delays in project awards.
Outlook. Looking ahead, we expect the Group's near-term performance to remain weighed down by the ongoing US-Iran conflict, with demand in the Logistics segment likely to soften amid cautious consumer spending. Businesses may also defer investments in digital solutions amid heightened geopolitical uncertainty, coupled with delays in project awards, which could constrain earnings growth in the Technology segment. Meanwhile, the turnaround at its Vietnam-based NETCO associate is likely to take longer than previously expected as the unit continues restructuring its customer base towards higher-yielding accounts. Over the longer term, however, we remain positive on the Group's growth trajectory as it expands B2B sales in its Logistics division, with a particular focus on premium sectors that require specialised handling. In addition, its GD Xchange platform is well-positioned to support long-term revenue growth and margin expansion in 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 as well as change of analyst, we cut our FY26-28F CNP forecasts by 81%/33%/35% to RM2.0m/RM24.1m/RM28.6m, as we impute a slowerthan-expected turnaround at NETCO amid ongoing restructuring of its customer base, alongside a cut to our Technology segment estimates as customers hold back on digitalisation investments amid geopolitical uncertainty.
Valuation and Recommendation. We downgrade the stock to HOLD from BUY, with a lower TP of RM0.13 (from RM0.20), based on an unchanged 30.0x multiple applied to a lower FY27F EPS of 0.4 sen (previously 0.7 sen).
Risks. Key risks include a slower-than-expected turnaround at NETCO, continued softness in Technology segment earnings amid delayed project awards, and margin pressure at the core Logistics segment from intensifying competition.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.032092 | 4.058429 |
| EUR | 4.727705 | 4.730319 |
| CNY | 0.601817 | 0.602165 |
| HKD | 0.514265 | 0.517647 |
| SGD | 3.175026 | 3.196037 |