Thursday, 7 November 2013

Higher throughput volume to propel Integrax earnings

Posted on October 31, 2013, Thursday
KUCHING: Port operator Integrax Bhd’s (Integrax) earnings is expected to grow by seven per cent in financial year 2014 due to more throughput handling capacity from both Lekir Bulk Terminal (LBT) and Lumut Maritime Terminal (LMT).

RHB Research Sdn Bhd (RHB Research) said the company’s net profit is on an upward trajectory as a result of improved margins given its economies of scale.

The research firm projected for the company to register double-digit earnings growth from 2015 to 2018, driven by surge in volume from LBT following the commencement of Tenaga Nasional Bhd’s (TNB) new power plants, M4, on March 31, 2015 and M5, on October 1, 2017.

The research firm added that each power plants will assist the company to boost annual volume of coal imports by an additional 3 million tonnes.

It noted that from 2012 to 2018, Integrax’s earnings could register a compound annual growth rate (CAGR) of 12.5 per cent.

Besides that, RHB Research observed that Integrax is also going to gain from stable throughput volume for TNB’s power plants’ feedstock, potential trans-shipment hub for dry bulk shipping and increasing client base.

It noted that Integrax has been in ongoing discussion with several parties.

The research firm pointed out that there are interests from other parties especially from industries such as fertilisers, bio mass pellets and ship-to-ship transfers to utilise the facilities of Integrax’s port.

Apart from that, RHB Research revealed that negotiations are being held with other parties to secure new customers for LBT and LMT, with some notable industries to boost volume are the minerals, limestone, palm oil and palm fibre industries.

Citing a case, the research firm said rising steel production in limestone-deficient India is spurring demand for imported limestone, which is used as feedstock in blast furnace-based steel production.

The company observed that limestone from Perak and Kelantan may be well-positioned to meet the huge steel demand on India’s east coast.

Therefore, RHB Research believed that those potential new clients could boost Integrax’s earnings as throughput handling volume increases.

Financially, for the second quarter of financial year 2013, Integrax’s bottom line suffered a dip of 12 per cent to RM9.66 million year-on-year from RM10.98 million in the second quarter of 2012 due to higher operating cost, lower profits from associate company, Lumut Maritime Terminal Sdn Bhd and lower land sales.

Nonetheless, the company’s turnover rose 6.2 per cent to RM23.65 million in the second quarter of 2013 compared with RM22.28 million in the same corresponding period last year.

Moreover, RHB Research noted that Integrax remains cash-rich with RM118 million in cash as at June 2013.

With a steady business and strong clientele, RHB Research estimated that Integrax’s cash pile is expected to soar to RM353 million by 2018.

Using a discounted cashflow valuation, the research firm believes that the company’s share price is worth RM2.32 per share.

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