Period  3Q13/9M13

Actual vs. Expectations Integrax Bhd (INTEGRA)’s 3Q13 core net profit of RM10.3m brought the 9M13 net profit to RM30.2m which accounted for 67% of our full-year FY13 estimates and 69% of market consensus. We deemed this to be within expectations as the 4Q is traditionally the strongest quarter for the financial year.

Dividends  No dividend was declared for the quarter.

Key Results Highlights Despite revenue dipping 1.8%, 3Q13 core net profit was higher by 6.6% QoQ due to slightly lower administration and depreciation expenses, which also helped PBT to improve 6.5% QoQ. The revenue for port operation segment softened 1.8% QoQ due to lower throughput in LBT while LMT’s throughput dropped 6.4% QoQ.

 The 3Q13 core net profit rose by 14.3% YoY due to higher cargo throughput in LBT (+20.6% YoY) and higher contribution from its associate LMTSB (+51.0% YoY). On the other hand, LMT’s cargo throughput dropped marginally by 0.5% but the sale of industrial land by LMTSB (PBT contribution: RM0.9m) helped to offset the drop in volume.

 YTD, the 9M13 core net profit improved 4.1% YoY due to higher revenue from LBT, which was on the back of a 9.4% improvement in cargo throughput spurred by higher demand for coal by TENAGA and 2.5% improvement in revenue. PBT for industrial property segment, however, dropped 32.5% YoY due to lesser acreage of land sold. (9M13: 5.2 acres vs 9M12: 10.6 acres).

Outlook  LBT the main driver. On 27 July 2012, LBT entered into a new Jetty Terminal Usage Agreement with TENAGA for the provision of handling services for the import of coal for TENAGA’s new 1,010 MW Manjung 4 Power Plant (M4 Power Plant) located at Pulau Lekir 1, Telok Rubiah, Perak. The new agreement is expected to contribute 3m tonnes of throughput per annum for LBT once the power plant comes on stream possibly in 2015. Everything is on track as the contractors to build the required new grab ship unloader (SUL3) have been identified and confirmed and scheduled to be delivered in early 2014.

 Next deal with TENAGA still in negotiation. TENAGA has already secured the project for the new 1000MW power plant (M5 Power Plant) which is expected to come on stream in 2017 and at the moment INTEGRA is still negotiating the terms and conditions with TENAGA. However, we think that it will be similar to the agreement for the M4 Power Plant due to the similar nature of cargo handled.

 Sourcing for new clients. INTEGRA is still discussing with Vale on their level of participation in a project to set up a transhipment hub and pelletization plant in Teluk Rubiah. They are also talking to several potential clients to diversify their client portfolio. This could propel INTEGRA to become one of the main bulk transhipment hubs in the region in the future. However, we have not imputed any assumptions to factor in the potential earnings pending finalisation of the discussions.

Source: Kenanga