Integrax’s  9M13  earnings  came  within  our  estimates,  accounting  for 71%  of  our  full-year  forecast.  We  note  that  its  Lekir  Bulk  Terminal (LBT)’s  EBITDA  margins  suffered  a  bit  on  higher  operational  costs incurred,  while  its  other  port,  Lumut  Maritime  Terminal  (LMT),  saw margins  and earnings  scaling  higher.  Maintain  BUY,  with  MYR2.32  FV unchanged, which gives an upside of 10%.

• Within  expectations.  Integrax’s  9M13  earnings  accounted  for  71%  of our and consensus  FY13 forecasts.  Its MYR30.2m net profit  was higher 4.1% YTD, attributed to a solid 2.5% YTD increase in revenue  on LBT’s higher  throughput,  ie  5.67m  tonnes  (+9.4%  YTD).  In  3Q13,  on a  y-o-y basis, earnings, revenue and throughput at LBT were higher by 14.3%, 4% and 20.6% respectively. We note that that  the latter’s 3Q13  margins inched lower on higher operational costs incurred.
• LMT  sees  higher  margins.  Integrax’s  associate  earnings  came  in higher than anticipated,  as another land sale of 3.6 acres was booked in 3Q13.  Furthermore,  despite  the  marginally  lower  throughputs  recorded at LMT (-0.1% YTD; -0.5% q-o-q),  we see that its share of earnings has improved over 9M13, up 29%  YTD, which we reckon  will be due to costcutting  efforts.  This  will  bode  well  for  Integrax,  as  it  will  likely  receive higher dividends from LMT.
• Forecasts and outlook. We maintain our earnings estimates. Integrax’s FY14 earnings are expected to grow 7% on the back of higher volume contributions from both LBT and LMT.  It is only expected to post doubledigit  earnings  growth  in  FY15  and  FY18,  driven  by  a  surge  in  volume from LBT following the commencement of Tenaga  (TNB MK, BUY, FV: MYR10.68)’s new power plants  –  M4 on 31  March 2015 and M5 on 1 Oct 2017. Each will boost annual volume of coal imports by an additional 3m tonnes.
• Maintain BUY. We maintain our BUY recommendation and DCF derived FV of MYR2.32,  based on a 10% discount to its free cash flow to equity value  –  implying  a  reasonable  FY14  P/E  of  15.5x.  Since  initiation  the stock  is  up  14%,  and  there  is  further  upside  to  earnings  as  Integrax expands its client base. 

Financial Exhibits

SWOT Analysis

Company Profile
Integrax is a port operator based in Lumut, Perak. The Lekir Bulk Terminal, one of its ports, is a deepwater port that handle s the coal imports for Tenaga's power plants.

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Source: RHB