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The Edge Malaysia - GDEx To Build Cash Reserve During Tougher Times Ahead

Dec 09, 2008


KUALA LUMPUR: Mesdaq Market-listed GD Express Carrier Bhd (GDEX),which is engaged in express delivery services, is strengthening its cash position to tide over the next few years in view of the worsening economy, said its executive director and chief executive officer Leong Chee Tong.

"We foresee some slowdown in the business. For us, we have to be very focused on a few things. We have to make sure we have excellent cash flow. We have to maintain cash flow at a more-than-comfortable level," he told The Edge Financial Daily recently.

As at the end of its first quarter ended Sept 30, 2008 GDEX's cash reserve stood at RM7.7 million, up 26% from RM6.1 million as at end-FY08.

"We are in a reasonably comfortable (cash) level. We have a good cash buffer. But we want to build this up to weather the more extreme times that may come.

"We feel that things would only pick up around 2011, which is best-case scenario. We are prepared for a tough time for the next few years. We have a detailed plan that outlines our targets," Leong said.

He said one of the ways to build a stronger cash position was to reduce its borrowings. As at end of 1QFY09, its total borrowings stood at RM8.9 million, which was 5% lower from RM9.4 million in FY08.

It would also build on its high-value customers. "These are the big customers who are very good paymasters. So, if we improve on our services, they would definitely give us more business," he said. As for its low-value customers, it would encourage them to use its online services, which requires less management.

The company has also outlined a debt recovery procedure and introduced a prompt payment rebate for payment made within 60 days. "We hope we can generate better cash flow through these measures to sustain us," he said.

In 1QFY09, GDEX's net profit rose 15.7% year-on-year to RM900,000 on the back of 26.2% rise in revenue to RM20 million. Its net profit for FY08 soared 42.6% to RM2.98 million from the previous year, while revenue rose 18.7% to RM68 million.

On the company's outlook, Leong said there was still room for growth as its market share was small.

"There may be slower growth in the industry but it won't collapse. So business, for us, will not drop to zero. Our market share is still very small, less than 5%, so there is definitely still room for growth. We can still maintain a reasonable performance in the coming quarters," he said.

Leong also said it would make use of the global economic crisis to build up its strength and look at ways to expand into the Asean region. GDEX currently has operations in Malaysia and Singapore.

"It is still under a feasibility study. We are looking at some other countries but the regional condition at the moment is very uncertain, politically and economically. But now is a good time to do some exploration work to look for opportunities," he said.