The Sun – GDEx Defers Plan to Expand To Laos

Teong says more SMEs are using air express companies like GDex to deliver their products.

Air express carrier waits for change in policy that would allow foreign company to take controlling stake in JV.

PETALING JAYA: Local air express firm GD Express Carrier Bhd (GDex) has put plans to expand its express delivery business to Laos on the back burner until the government there relaxes rules to allow foreign companies to take a controlling stake in their companies.

The company had in January 2009 signed a memorandum of understanding (MoU) with Laos National Postal Co, or Entreprise Des Postes Lao (EPL), to set up a joint venture to develop international and domestic express delivery services under shared brands for the Laos market.

“We are not abandoning our plan to expand to Laos, but we will not aggressively pursue it. It has been put on hold until there is a change in their policy in terms of making it easier for foreign businesses to operate there,” GDex executive deputy chairman Teong Teck Lean told SunBiz in an interview.

“While it is true that opportunities abound in Laos, we have to ask whether it is worthwhile to spend the time, effort and capital there right now,” he added.

GDex had hoped to gain a first-mover advantage in the Laos express delivery industry by pairing with EPL, which holds a monopoly. Laos would have been the company’s second international foray after Singapore in 2007.

Teong said nevertheless, the setback in its plans to expand to Laos will have no impact on the company’s results. He expects GDex to continue to set record revenue and profit for the current financial year ending June 30, 2011, driven by especially strong domestic demand.

“We expect to perform better than the last financial year, although percentage wise it will be difficult to repeat the last financial year’s net profit growth as we are still expanding the capacity at our Petaling Jaya hub,” he said.

GDex’s net profit rose 180% to RM5.8 million in the financial year ended June 30, 2010, from RM2.1 million a year ago. Revenue in the period rose 9% to RM81.8 million from RM75.1 million.

“We should be able to continue to set new record profits and revenue over the next few years,” he added.

Teong pointed out that a growing number of companies, particularly in the SME sector, are looking for alternative distribution channels for their products, as the Internet makes it easy for them to sell their products directly to customers via their website.

“Such changes have resulted in more SMEs using air express companies like GDex to deliver their products as they do not need to have a warehouse, which in turn lowers their operation costs.”

Teong also sees GDex benefiting from the entry of new global express players such as Japan’s Yamato Holdings Co Ltd into the local market.

“By tying up with these global players, we are able to extend our reach into their markets and vice versa. In addition, our customers can export their products and samples further into the world market via the infrastructure that we built,” he said.

Meanwhile, the company has allocated some RM32 million in capital expenditure (capex) for the current financial year, a large part of which would be used for acquisition of an adjacent building and warehouse in Petaling Jaya and the relocation of its project warehouse from its current site to a new site opposite, which is targeted to be completed by year-end. It will fund the capex out of bank borrowings and internal cashflow.

“In the next financial year, we plan to double our handling capacity at our Petaling Jaya hub to 100,000 consignments per day from the present 50,000,” Teong said.