The Edge Malaysia - GDEX benefits from internal controls
Jul 02, 2007
( Joyce Goh )
The cooking of books in Transmile Group Bhd has generally cast a shadow on companies dealing with cargo, especially on internal controls and their effectiveness in preventing leakages.
But GD Express Carrier Bhd (GDex) understood early on the importance of having internal controls in place. Its CEO Teong Teck Lean says that was one of the first areas he sought to improve when he bought about 70% of the company from its major shareholders in 2000.
One of the things he got straight into was introducing risk management measures on all of GDex's critical processes, an exercise that has sapped up some RM10 million in the past seven years. "On top of that, we have strong internal audit on our processes. We also do a thirdparty risk management audit to audit our processes. This is to ensure accountability," he adds.
"Without all these in place, not many multinational companies (MNCs) and institutions will trust us enough to use our service. All the processes have enabled us to have stronger support from our clients, especially the bigger clients. A lot of them look at the risk management of our deliveries to ensure there are controls," Teong explains.
"Over the past five years, we have invested aggressively in our operations. So over the next two to three years, we are going to consolidate our assets and try to have a higher asset utilisation rate. Build the business rather than add assets," he tells The Edge.
He adds that from this year, GDex's priority is to see improvements in its bottom line. "We have been operating for 10 years and growing double digits in terms of revenue for the past seven years. However, our bottom line is still small. Now that our foundation is built, we are looking to build our bottom line," he says.
GDex is building its reserves for future expansion, according to Teong. With the majority of its business derived locally, Teong foresees contribution from overseas will play a bigger role in future as GDex continues to explore expansion in the Asean region.
"A lot of countries [in Asean] in terms of express delivery service are far behind Malaysia. For example, Thailand... the country doesn't have a national courier. There is a huge demand. However, all these countries have differing restrictions and policies," he notes.
That is why he plans to expand into Asean via tie-ups with other courier service providers. "We will start with that and once the business in certain countries grows in size, then we will do what we are doing in Singapore," he says.
In April, GDex established an office in Singapore, where there is huge demand, according to Teong. The Singapore outfit has the fastest growing base currently compared to its other branches, he adds.
GDex has 49 branches nationwide — 40 in the peninsula and nine in Sabah and Sarawak as well as 41 agents nationwide.
The company is also looking to build its local network, in which it already has a strong foundation. Teong reckons the company's success locally steams from the extensive network and infrastructure that has been put in place. "By having a very high standard in smaller towns, the big boys will pass the shipment to us. We have the infrastructure in place," Teong notes. Its clients include FedEx and DiGi.com. The local courier company is also focused on its East Malaysia expansion. "We are looking at maybe having a strategic tie-up with a very large freight company so that connectivity between the peninsula and Sabah and Sarawak will improve," Teong says.
In fact, GDex is one of the first local courier companies to have completed its line haul, or a line to collect couriers along a road, in East Malaysia. "It's just the beginning of an extensive line haul. We have two lanes now. As the volume start to grow, we will build more lines," he explains, adding that in terms of tonnage for express, it is easily between 40 and 50 tonnes a day.
Teong claims GDex is the fastest growing local courier company in terms of growth. "In terms of size, we are behind Pos, Citilink and Nationwide. That is because most of the companies have been here for 20 to 30 years. We have been around for only 10 years," he says.
When he bought into the company in 2000, it was loss making and many did not give his plans a chance. "Some gave me three to six months to collapse. I don't blame them as I had not run a business before," says Teong, an engineer by training. However, he managed to turn it around after two years and GDex was listed on Mesdaq in May 2005.
For its third quarter ended March 31, 2007, the company registered 26% growth in its year-to-date revenue to RM42.01 million while profits jumped 97% to RM1.46 million. The stock hit its 52-week of RM1.20 high on May 9 and hit its 52-week low of 58.5 sen on Nov 8, 2006. It closed at RM1.05 last Wednesday.
The courier business, just like the cargo business, is simple yet there is ample room for leakages. Investors of Transmile had to learn the bare facts the hard way. Perhaps high flyers like Transmile can learn a thing or two on internal controls from small players such as GDex.