POS Turnaround? Sure or Not?

A few years back, courier business especially last-mile delivery was identified as a sunrise business with explosive growth potential due to e-commerce boom.

Now, we realize that the competition in courier business is ferocious and bloody, and its earning growth potential seems to be not that attractive anymore.

Like many other investors, I did consider to invest in courier stocks before. 

GDex is perhaps the best listed courier company but its PE ratio was, and is still extremely high.

POS is the largest courier company in the country but it has a sunset mail business which will drag down its courier profit. 

Nationwide looks hopeless and I have nothing much to say about it.

CJ Century was my only hope as it just started its courier service business in early 2018. However, after 3 years it's still suffering in loss and seems difficult to turnaround anytime soon.

GDEX: Still Got Upside?

If you buy & keep GDEX since early 2013, its share price has appreciated about 3x in less than 2 years with a bonus issue in between.

With rapid increasing popularity of online business & shopping in Malaysia, I am quite sure that in the near future GDEX's revenue only has one direction, which is up.

Furthermore, it is linked with Singapore Post and Alibaba!

For its FY14 which ends in Jun14, GDEX posts a record PATAMI of RM23.9mil. It is a superb 76% improvement YoY.

Its share price is currently trading at around RM2.09. With total paid-up shares of 840.7mil, EPS is at 2.8sen.

So current PE ratio of GDEX is 75x!

It still has 92.5mil warrants which are going to expire in Feb16.

RHB has just started coverage on GDEX today. It gives it a target price of RM2.42 which is DCF-derived (discounted cash flow). This represents a whopping PE of 81x base on FY15 earning forecast!

RHB's FY17 EPS forecast for GDEX is only at 5sen per share...

       RHB coverage on GDEX

I wish that one of the stocks in my portfolio can be given such high PE ratio base on whatever valuation methods. Probably I'll be very rich by then.

There is no doubt that GDEX is a well-managed company in a right industry at the moment. It has great potential for growth and its future is bright.

It plans to expand its business to ASEAN region and this may boost its profit significantly if successful.

Would it be easy to penetrate into other countries?

Personally I think courier service is not a business with high barrier of entry. Competition will be intense.

Anyway, I don't do detail research GDEX, as its relatively high PE ratio since last year has prohibited me from studying it further.

It has proven that I was wrong as GDEX's share price keeps on advancing to higher and higher PE level.

Besides, I have also missed quite a few opportunities by giving higher PE stocks a miss.

Perhaps sometimes PE ratio is not that important in stock selection?