Integrax’s  1Q14  net  profit  of  MYR9.4m  missed  our  estimate  by  5%, mostly  due  to  associate  earnings  that  suffered  from  a  contraction  in volume  and  yields.  By  assuming  higher  throughput  ahead  from  the shortage of gas, we believe that its earnings shortfall in 1Q14 could be covered  over  the  remaining  quarters  of  the  year.  Maintain  NEUTRAL, with an unchanged FV of MYR2.32.

• Banking  on  better  quarters  ahead.  Integrax’s  1Q14  net  profit  of MYR9.4m (-15%  q-o-q,  -8%  y-o-y) missed our estimate by 5%, mostly due  to lower associate earnings  (-7%  q-o-q,  -13%  y-o-y),  as the Lumut Maritime  Terminal  (LMT)  suffered  from  3.7%  and  10.4%  y-o-y contractions  in  volume  and  yields  respectively.   Its  topline  slipped  a marginal 0.1% y-o-y due to lower yields, even though throughput volume grew  by  0.7%  y-o-y.  By  assuming  higher  throughput  ahead  due  to increasing  coal shipments that would arise  from the shortage of gas, we believe  that  the  company’s  1Q14  earnings  shortfall  could  be  covered over  the  remaining  quarters  of  the  year.  As  such,  we  maintain  our earnings forecasts.
• Outlook.  Its  FY14  earnings  are  expected  to  grow  9%  on  the  back  of higher  volume  contribution  from  both  Lekir  Bulk  Terminal  (LBT)  and LMT. Integrax  is  only expected to post double-digit earnings growth in FY15 and FY18, driven by a n expected  surge in volume from LBT   following   the  commencement  of  Tenaga   Nasional   (TNB   MK, BUY, FV: MYR13.75)’s new power plants, ie M4 in March 2015 and  M5 in  Oct  2017.  Each  power  plant  will  boost  the  annual  volume  of  coal imports  by  3m  tonnes.  To  facilitate  the  volume  increase  in  FY15, Integrax  recently  completed  the  construction  of  a  new  grab  ship unloader, which is currently undergoing test runs.
• Maintain NEUTRAL.  We maintain our NEUTRAL  call, and keep our  FV of  MYR2.32  unchanged.  Note  that  we  will  continue  to  factor  in  a  10% discount to our DCF-derived FV  until the company secures  new  clients, which  would  be  a  key  catalyst  to  an  earnings  upgrade  and  offer  an upside to its FV. Currently, Integrax only has  one  client  at LBT, which is Tenaga  Nasional.  In  the  meantime,  its  discussions  with  potential  new clients are still ongoing.

Source: RHB