Period  4Q13/FY13

Actual vs. Expectations INTEGRA recorded its 4Q13 core net profit of RM11.0m (+7.2% QoQ, 5.4% YoY), bringing its FY13 NP to RM41.2m (8.2% YoY). This came in 9% below our estimates and 6% below the market consensus. The key reasons for the weaker-than-expected were mainly due to lower than expected revenue per tonne handled in

Dividends  No dividends are declared in this quarter. However, for the full year of FY13, INTEGRA paid a total dividend of 4.5 sen a share, which indicates a yield of 2.0%.

Key Result Highlights YoY, the FY13 revenue saw a marginal improvement of 2.4%, underpinned by stronger volume growth (+9.1%YoY) in Lekir Bulk Terminal (“LBT”) albeit being offset by lower revenue per tonne of LBT (FY13: RM12.1/MT vs FY12: RM12.9/MT.) Core net profit nudged 8.2% higher YoY due to lower effective tax rate (16.8% vs. 19.2%).

 QoQ, core earnings registered strong growth of 7.2% mainly driven by a much lower tax expense as compared to the previous quarter. On the other hand, revenue improved 1.4% QoQ due to slightly higher volume of cargo handled by both Lumut Maritime Terminal (“LMT”) and LBT in 4Q13.

Outlook  Next deal with TENAGA still in negotiation. INTEGRA is still negotiating the terms and conditions with TENAGA. We are confident that they will secure the deal given their excellent track record in dealing with TNB in the past 10 years.

 Still sourcing for new clients. INTEGRA is still in talks with Vale on their level of participation in its project to set up 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 be one of the main bulk transhipment hubs in the region in the future.

Change to Forecasts We have trimmed our earnings assumption for FY14 by 8.8% on the back of lower revenue/MT assumption for FY14 (RM12.0/MT vs. RM14.9/MT) and we have introduced our FY15 numbers.

Rating Downgrade to MARKET PERFORM from OUTPERFORM

Valuation  Post earnings revision, our DCF-based TP is now RM2.44 from RM2.50 previously based on the same risk factors (Beta: 1.2, risk-free rate: 4.0% & cost of equity: 11.08%). The downgrade in rating is merely due to the limited upside as the share price has risen 14% since our initiation 3 months ago.

Risks to our Call (i) Delay in M4 Power Plant project; and (ii) Higher than expected operating cost of LBT and LMT.

Source: Kenanga