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Business Times - Teong to stay in control of GDEX

Jul 17, 2006

( Kang Siew Li )


GD EXPRESS Carrier Bhd (GDEX) executive deputy chairman and chief executive officer Teong Teck Lean said he has no intention of relinquishing his 57.47 per cent controlling stake in the local courier firm.

He said he intends to remain GDEX's controlling shareholder.

"There has been persistent market speculation that I plan to sell off my stake in GDEX, but that is definitely not on the cards. (Even if I were to sell a stake in the company), it will not be a controlling one because I want to maintain some level of management control," he told Business Times in an interview.

Teong said he had been approached by two big organisations with offers to buy his entire holding in GDEX, but had turned down the deal.

"For me, that is not what I want. I believe the company at this stage still requires a lot of attention and should not sway from its original plan to build up its (physical and information technology) infrastructure," he added.

However, Teong hopes to convince investors to invest in the Mesdaq-listed company by subscribing to its shares through the private placement route.

In December last year, the company received regulatory approval to proceed with raising private placement funding for some RM18.9 million, representing about 10 per cent of the company.

It has until December 8 2006 to implement the private placement, which is being managed by Commerce International Merchant Bankers Bhd.

Of the total proceeds from the private placement, RM6.5 million will be used to purchase and improve its current 60,000 sq ft hub cum warehouse in Petaling Jaya, RM6 million for business expansion in Thailand and RM2 million for business expansion in Singapore.

The remaining proceeds will be used for market development in the South-East Asian markets and to fund working capital.

"Assuming that nobody takes up the 10 per cent private placement offering, then the growth of the company will be slowed down by two years. So whether we will be more aggressive or less aggressive (in our expansion plans) will depend on the funds," said Teong.

"But we won't overstretch ourselves beyond our means to put the company at risk," he added.

GDEX is expected to turn a smaller net profit for the current fiscal year ended June 30 2006 due to rising fuel costs and increased expenditure as it seeks to expand infrastructure and enter new markets.

It posted a net profit of RM743,000 on revenue of RM33.4 million for the first nine months ended March 31 2006.

Nonetheless, Teong said he was satisfied with the growth of the company, which has enjoyed an annual average revenue growth rate of 25-30 per cent.

"Given that fuel price has increased four times in the last two years and staff costs have increased, we are still able to sustain our growth. Not to mention that our business continues to grow faster than most of our competitors," he said.

As such, Teong believes that the company would have enough money to continue with its expansion plans with or without the private placement, thanks to its strong cashflow which currently stands at some RM10 million to RM11 million.

"Of the proceeds from our listing exercise last year totalling RM10.5 million, we have utilised some 70 per cent on our expansion plans. In addition, our internal cashflow (revenue) has been strong," he added.

GDEX is expected to maintain its earnings momentum over the next two financial years, after which the pace of growth will accelerate as its network and facility will be fully in place.

"If the company can continue to grow at this pace over the next three to five years, we will be able to take the pole position in the local courier market," said Teong.

Meanwhile, GDEX is banking on its customised solutions offerings to grow its business. Customised solutions now accounts for 25 per cent of the company's revenue.

"We hope that eventually customised solutions will contribute 70 per cent to the company's revenue and the remaining 30 per cent will come from the conventional courier business. At the same time, the conventional courier business will continue to grow by double-digit."

"We believe that when more institutions or corporations take a relook at their whole concept of delivery system within their organisation and start to use customised solutions, this will be a faster growth sector," said Teong.

"Our main challenge now is how can we customised our solutions fast enough so that the customers want to use us," he added.

GDEX currently has 41 stations and works with 44 agents and affiliates in the country. For overseas deliveries, it uses the services of international air express companies.

Teong is satisfied with the growth of the courier company.