GD Express Carrier Bhd (GDEX) is expected to reap the benefit of tax exemption savings from the Malaysian Investment Development Authority’s (MIDA) second round of tax incentive.
While details on what entails within the tax incentive are still pending disclosures, MIDF Research is upbeat on the impact of the tax incentive to GDEX’s earnings.
“We have taken the liberty to assess the tax savings within certain parameters such as timing,” noted the research house.
“Based on our preliminary deductions, pending further management disclosures, we estimate that the savings from the tax exemption could translate to between RM2 mil and RM3.5 mil for FY2022-FY2026.”
Yesterday, GDEX announced that its wholly-owned subsidiary company GD Express Sdn Bhd (GDSB) has received an approval letter from MIDA for the second round of tax incentive.
According to the announcement, GDSB through the tax scheme will be eligible for income tax exemption of up to 70% on its statutory income via a “pioneer status” programme for every year of its tax assessment for a period of five years.
This is to enable the company to carry out its integrated logistics services (ILS) activities as an expansion project as well as its e-commerce/e-fulfilment diversity project.
The tax incentive is one of the initiatives introduced by the Government to enhance the capabilities of logistics services providers in line with the logistics and trade facilitation masterplan introduced by Transport Ministry back in 2015.
According to MIDF Research, the tax exemption impact is significant in comparison to its previous GDEX’s earnings forecast for FY2022F/FY2023F of RM30.3 mil/RM32.8 mil a it translates to a +10.9% and +9.7% increase.
“However, this estimate remains subjected to further disclosure from the management,” stressed the research house.
“Hence, we are revising our earnings per share forecast for FY2022F/FY2023F to 0.54/0.58 sen from our previous forecast of 0.48/0.53 sen.”
Key risk to MIDF Research’s estimates is lower than expected earnings impact from the tax incentive as it awaits more clarification from GDEX’s management on the salient details.
All-in, MIDF Research maintained its “neutral” rating on GDEX premised on its recent price surge that the research house deemed has accounted for the tax scheme.
Nevertheless, MIDF Research raised the company’s target price to 40 sen (from 34 sen previously) following a discounted cash flow-derived price revision.
In the long term, MIDF Research expects GDEX’s re-rating catalysts as (i) slowdown in growth for last mile delivery start-up companies; (ii) increased adaption of offline businesses to GDEX’s online platforms; and (iii) permanent enforcement of social distancing measures which will limit footfall at brick and mortar businesses.
At 11.15am, GDEX was up 3.5 sen or 8.14% to 46.5 sen with 91.85 million shares traded, thus valuing the company at RM2.62 bil. – Nov 11, 2020
