Integrax - agreement for Manjung 5 from Tenaga

A port operator will benefit from Tenaga’s 1000MW Manjung 4 power plant in Manjung, Perak, commencing operations in Aug 2014. Another catalyst will be the possibility of Integrax inking an agreement for the Manjung 5 power plant, which is slated for completion in Oct 2017.

While the terms for the supply of coal to Manjung 4 was concluded in July 2012 and will last until March 2040, Integarx is now said to be finalizing the details of the supply agreement with Tenaga for Manjung 5. Considering Tenaga is a 22.1% stake of Integrax.

Integarx should get the supply agreement for Manjung 5….

The new plant Manjung 4 should translate into better earnings for Integarx, considering that the feedstock for the Manjung power plants is coal.

Integarx handles the offloading of Tenaga’s coal shipments.

However while the earnings from Manjung 4 will positively impact the port operator’s bottom line, it will only buffer the loss of earnings from the expiration of a fixed facility payment arrangement, as per the Jetty Terminal Usage Agreement 1 signed in 1999 with Tenaga.

The real growth for Integrax will only kick in after Manjung 5.

As at March 2014 the port operator had cash and bank balances of rm179 million. It had short term debt amounting to rm18.1 million and long term borrowings of rm4.1 million.

Other than Tenaga, substantial shareholders are Amin Halim Rasip with a 21.4% stake and Perak Corp Bhd largely controlled by Perbadanan Kemajuan Negeri Perak with 15.7% stake.

Another shareholder is Lim Kheng Yew has close to 4% stake.

The top 12 or so shareholders have about 80% of the company’s 300 million share base …

For one, Integrax has only one major client … Tenaga.

While Integrax has held talks with mining giant Vale for the latter to use its port facilities, the negotiations seem to have made little headway. Vale is building an iron ore distribution hub in Teluk Rubiah, Perak right next door to Integrax’s 80% owned Lekir Bukl Terminal Sdn Bhd.

However, up unitl now Vale has not come with any plans to use Integrax’s facilities, opting instead to use a specific purpose jetty on its own land.

Integrax is also torn between catering to Tenaga’s whims and fancies, and the Perak state’s aspirations.

The Perak state government wants Integrax to be more than just a coal terminal for Tenaga while Tenaga wants Integrax to merely serve Tenaga as coal terminal.

Integrax may be benefitted from Tenaga's expansion

Port operator finds itself in a sweet spot as it is likely to benefit from Tenaga’s expansion of its coal fired power plant in Manjung, Perak.

Tenaga is tipped to emerge as the winner of the 1000MW coal fired power plant. This new power plant is expected to be act as an extension to Tenaga’s existing facility in Manjung. If that happens, it will be a boon for Integrax as it will see an increase in coal throughput as its nearby deep water 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 Tenaga.

Integrax sealed a deal with Tenaga in 2012 for the handling of coal and provision of infra for the Manjung 4 power plant, an extension to the latter’s existing power plant located on the man made Lekir island.

With Manjung 4 in the pipeline and the potential win of another 1000MW plant by Tenaga, which could add another three million tones in terms of coal requirement, Integrax could potentially be looking at doubling the coal throughput at LBT.

Integrax had stated that the company 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 (July 2013) in discussions with Vale to determine Integrax’s level of participation in its projects.

News reports that the company is still keen on pursuing a tie up with the Brazilian mining giant for the provision of trnas-shipment services after an unnecessary 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 conventional cargo and project cargoes.

Tenaga is the single largest shareholder with a 22.12% stake in Integrax.

Integrax has a strong balance sheet with a cash pile of rm130 million. Its total borrowings stood at rm4.5 million as at March 31 2013.

Perak Corp/Integrax/MajuPerak/Gunung (Perak-based) 2012

There could be several material developments in Perak-based companies listed. Sources say that there could be changes as the helm of some of these companies and a shift in their strategic assets before the general election is called.

It is all linked to politics and the upcoming general election.

PKNP (The state’s development corporation) has almost 53% equity interest in PErak Corp, whose main asset is its wholly owned Taipan Merit Sdn Bhd. Taipan Merit has 50% plus one share in Lumut Maritim Terminal Sdn Bhd (LMT), while the remaining equity is held by port operator Interagx Bhd.

The state via PKNP, has an indirect 15.45% stake in Integrax via Taipan Merit and Perak Equity Sdn Bhd. Apart from LMT, Integrax also has an 8-% stake in deepwater port Lekir Bulk Lumut Sdn Bhd.

LMT operates Lekir Bulk Terminal. LMT and the Lekir Bulk Terminal collectively form Lumut Port.

Perak Corp is under appreciated by market, so a shifting of assets could be deemed as extracting value by taking some assets out. As as end Dec 2011, Perak Corp’s net assets per share stood at rm4.31.

It is worth nothing that the concession for LMT expires in 2015 and what will happen after this is anyone’s guess.

Many other assets held by Perak Corp have not been revalued since 1997. For instance, Perak Corp is sitting on a 189.62 acre of freehold tract of agricultural land, which was approved for mixed development and valued at rm23.24 million as at end 1997.

There is also 72.54 acre used as a yard, which is part of the Lumut Port with a book value of rm82.74 million as at April 1997.

In addition, Perak Corp has a 12.88 acre freehold parcel in Kinta district valued at rm14.17 million in 2010.

Apart from Perak Corp and Integrax, the Perak government has considerable equity is in MajuPerak Holdings Bhd.

PKNP has slightly more than 52% equity interest in MajuPerak. Other substantial shareholders include KUB with 10.99% stake.

Its book value of the land as at Dec 2011 was around rm1.78 million. A few of MajuPerak’s properties have not been revalued since the 1980s and 1990s.

Another Perak related company is Gunung Capital Bhd.

As at end Dec 2011, Gunung Capital had cash and bank balances amounting to rm15.51 million. Its short term borrowings stood at rm3.94 million and its long term debt stood at rm45.07 million.

Gunung Capital completed a private placement of 10 million shares at 40 sen per share in Feb 2012.

Among those sitting on the board of Gunung Capital is well connected Datuk Ahmad who is independent non executive director. He is the president of Malaysia Haulers, and the chairman of Mexter Technology Bhd.

Other political wings in Gunung Capital include chairman and executive director Datuk Syed Abu Hussin, the former deputy head of the Bukit Gantang UMNO division.

In Jan 2012, Low Bok Tek, who has been with Gunung Capital since 1996 stepped down. Low’s other investment is in Latexx. He still owns 16.55% stake in Gunung Capital.

While there has yet to be any real shifting of assets or key management positions, will the talk of changes become a reality?