Highlight Integrax in sweet spot with Tenaga’s power plant expansion

Highlight Integrax in sweet spot with Tenaga’s power plant expansion
Business & Markets 2013
Written by Esther Lee of theedgemalaysia.com
Monday, 22 July 2013 16:35

Port operator INTEGRAX BHD [] finds itself in a sweet spot as it is likely to benefit from TENAGA NASIONAL BHD []’s expansion of its coal-fired power plant in Manjung, Perak.

The national power utility company is tipped to emerge as the winner of the 1,000 mw coal-fired power-plant tender expected to be announced at the end of the month.

The new power plant is expected to act as an extension to Tenaga’s existing facility in Lekir, Manjung. If that happens, it will be a boon for Integrax as it will see an increase in coal throughput at its nearby deep-water terminal — Lekir Bulk Terminal (LBT) — serving Tenaga’s bigger appetite for coal.

Tenaga’s success in winning the power plant tender will be the icing on the cake for Integrax, which is an associated company of the national power company.

Integrax sealed a deal with Tenaga a year ago for the handling of coal and provision of infrastructure for the Manjung 4 power plant, an extension to the latter’s existing power plant located on the man-made Lekir Island.

The new Manjung 4 coal-powered plant is expected to be operational in 2015. In its 2012 annual report, Integrax says this will likely increase the coal throughput at LBT by an additional three million tonnes.

With Manjung 4 in the pipeline and the potential win of another 1,000 mw plant by Tenaga, which could add another three million tonnes in terms of coal requirement, Integrax could potentially be looking at doubling the coal throughput at LBT. As of 2012, it recorded a coal throughput of seven million tonnes at LBT.

In Integrax’s notes accompanying its first-quarter results, the company says it is expecting the Lumut-Manjung corridor to benefit from the Manjung 4 power plant as well as Vale International SA’s iron ore trans-shipment hub and pelletizing plant in Teluk Rubiah, Lumut.

“Integrax is currently in discussions with Vale to determine Integrax’s level of participation in its projects,” it adds.

News reports have said that the company is still keen on pursuing a tie-up with the Brazilian mining giant for the provision of trans-shipment services after an unsuccessful attempt in 2009.

A successful tie-up with Vale could boost Integrax’s earnings potential at its Lumut port, where it has a 50% stake less one share. The port is used for the handling of dry bulk, liquid bulk, containers and all conventional cargo and project cargoes.

Intergrax’s share price has gained about 20% year-to-date to close at RM1.68 last Thursday, giving it a market capitalisation of RM505.4 million. The stock hit a five-year high of RM1.80 on July 9.

Tenaga is the single largest shareholder of Integrax with a 22.12% equity interest. Perbadanan Kemajuan Negeri Perak is the second largest shareholder with 15.74% while Golden Initiative Sdn Bhd, a company connected to Amin Halim Rasip, holds 13.6%.

How Tenaga came to be a substantial shareholder in Integrax is an interesting tale of its own.

The power utility company acquired the 22% stake in Integrax from the port operator’s former CEO Harun Halim Rasip in 2011. This came after disagreements, and subsequently a split, between Harun and his younger brother Amin over how the firm should capitalise on Vale’s iron ore project in Teluk Rubiah.

Amin, who shared the CEO role with Harun at the time, was keen on expanding Integrax’s capacity to facilitate the handling of iron ore to meet Vale’s requirements. However, Harun had disagreed noting that it would require massive capital. This led to the termination of a trans-shipment agreement signed between Vale and Integrax. Subsequently, Vale was given the nod to build its own jetty in Teluk Rubiah by the Perak state government.

Not long after, Harun sold his stake to Tenaga and exited Integrax. Amin was re-designated as the company’s non-independent non-executive deputy chairman after a boardroom reshuffling last year.

Relations between Integrax and Tenaga became tense after Harun’s exit. In May 2011, the latter filed a writ of summons and statement of claim on Integrax over the outcome of an extraordinary general meeting (EGM) that resulted in major changes to its board, where a Tenaga representative was also removed. Tenaga sought to declare the EGM invalid.

Nevertheless, both parties have mended fences in the past year. The national utility withdrew the suit against Integrax in 2012, stating in an announcement that “all past disagreements between Integrax’s major shareholders have been fully settled”.

Integrax’s net profit for the first quarter ended March 31, 2013 advanced 13.4% from a year ago to RM10.22 million despite a 2.4% decline in revenue to RM22.49 million. For FY2012, its net profit dropped 4.8% to RM41.7 million while revenue increased by 3.2% to RM90.7 million.

Integrax has a strong balance sheet with a cash pile of RM130 million. Its total borrowings stood at only RM4.5 million as at March 31, 2013.

The company has also paid out dividends over the last three years, albeit at varying amounts. It recently distributed its first interim dividend of 4.5 sen per share for FY2013. This is above the total gross dividend distributed in 2012 of 4.1 sen per share.


This article first appeared in The Edge Malaysia Weekly, on July 15, 2013.