Period  1Q14

Actual vs. Expectations INTEGRA’s 1Q14 results came in within expectations with net profit of RM9.4m, which made up 21.6% and 21.2% of our full-year forecast and market consensus estimates, respectively.

Dividends  It declared an interim dividend of 5.0 sen/share, which is slightly higher than expected. This translates into a yield of 2.3%.

Key Result Highlights Core net profit declined 15.0% QoQ, mainly due to a drop in both Lumut Maritime Terminal (LMT) through-put resulting in lower associate earnings’ contribution to INTEGRA. In addition, 4Q is typically the strongest quarter during the year due to stronger throughput.

 The 1Q14 core net profit dropped 8.1% YoY attributed to lower throughput for LMT (-3.7% YoY) and lower revenue/MT for Lekir Bulk Terminal (LBT).

Outlook  Next deal with TENAGA still in negotiation. INTEGRA is still negotiating the terms and conditions of TNBM5 project with TENAGA. We believe that they will secure the deal given their excellent track record in dealing with TENAGA for 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. This could propel INTEGRA to become one of the main bulk transhipment hubs in the region in the future.

Change to Forecasts We maintain our forecasts for FY14E but cut FY15E earnings by 22.0% to RM49.2m to factor in the drop in revenue due to expiration of fixed facility payment arrangement as agreed in the (JTUA-1) contract.

 We have revised our revenue/MT assumption downwards from RM12.60 to RM10.00.

Rating Downgraded to MARKET PERFORM

Valuation  We decided to add back the net cash of RM0.49/share this round as previously we wanted our valuations to be more conservative.

 With the earnings adjustment from FY15 and beyond, together with the net cash position, our new target price is now RM2.32/DCF share from RM2.44/DCF share previously.

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

Source: Kenanga