As demonstrated by the recent trading update, XPD continues to grow rapidly by acquisition and also organically (+46% year-on-year in 2017). We anticipate further strong growth during the course of our estimates, driven by a combination of: exposure to faster GDP growth than the UK (CEE & the Baltic states); the relatively newer areas, such as Eshopwedrop and Pall-Ex; new offices, warehouses and services; and, not least, further acquisitions. Our valuation methodology suggests today’s market capitalisation currently undervalued the business by at least 50%, with further corporate activity likely ahead.
Well-established position with the CEE region and the Baltic states and therefore a competitive advantage over late entrants to the region. The CEE region and Baltic states are growing much faster in GDP terms than either the UK or the remainder of the EU. This positioning, should help the Group benefit from continued re-shoring of manufacturing from the Far East.
Eshopwedrop and Pall-Ex Romania are still in their relative infancies, growth-wise, in our opinion. We anticipate Eshopwedrop, which is now profitable, will grow strongly in both existing markets and by new / forthcoming franchise agreements in Georgia, Albania, Greece, Bulgaria, Ukraine and the USA. The strong growth of Eshopwedrop is expected to result in a crossselling of warehousing and distribution services. Further upgrading of Pall-Ex in Romania to handle goods requiring temperature control and larger trailers. Affinity is in the process of targeting small and medium sized hauliers and offering new products such as truck leasing and to widen its insurance offering.
In addition, Xpediator is looking to open new office locations within the freight forwarding division in the UK. Within the transport & logistics division, management is seeking to open strategically located warehouse facilities (UK Midlands), driven by e-commerce and introduce new services in both existing and new markets.
Management has significant contacts and knowledge of the freight management industry, which is ripe for consolidation. We expect any acquisitions to both provide complementary services, such as e-fulfilment and fill in gaps in the Group’s service, for example rail, air and sea freight, where the Group is arguably underrepresented currently.
Since management own 68% of the company, their interests are fully aligned with external shareholders and they are fully focused on value creation.