NetLink NBN Trust

[winston]

not vested

NetLink NBN Trust: Resilience shines through

NetLink NBN Trust’s (NLT NBN) 4QFY20 results miss was largely due to the S$15.4m one-time IT system project write-off.

Excluding which, EBITDA would have seen an increase of 13.3% YoY (instead of -11.2%) to S$71.2m instead.

NLT NBN has declared a final DPS of 2.53 S-cents, bringing the full-year DPS to 5.05 S-cents (+3.5% YoY), or a yield of 5.1% (as of 8 May close).

Management noted that capex in FY21 will be similar to that of FY20 (~S$75m), though definitive guidance has not been given as construction activities are dependent on the developments relating to the ongoing circuit breaker in Singapore.

On 5G, management highlighted their role in supporting operators’ network rollout, and the opportunities arising from other players looking to tap on the higher frequency band.

Separately, NLT NBN is also looking at improving its presence at major Data Centres (DC) by negotiating directly with the DC operators such that customers are able to pick up fibre connections in DCs more quickly.

We continue to favour NLT NBN for its resilient business model, potential upside from the 5G rollout, as well as its conservative gearing ratio (D/A) of ~15.8% (as of 31 Mar’20).

We maintain our FV of S$1.10 as we roll-forward our valuations. Maintain BUY.

Source: OCBC

[winston]

not vested

Netlink NBN Trust (NETLINK SP)

Share Price: SGD0.97
Target Price: SGD1.08
Recommendation: Buy

Underground shelter to dividend downside; initiate BUY

Reinitiate coverage of NetLink NBN Trust with BUY and DDM-based (6.3% COE, 1.5% LTG) TP of SGD1.08.

NetLink is the sole nationwide provider of passive fibre network infrastructure in Singapore. Its business is less volatile than other yield plays such as REITs and telcos amid risks of DPU cut and competition.

NetLink offers domestic-yield play amid COVID-19 re-opening uncertainties.

Changes to its regulated returns (based on 7% pre-tax WACC) is the key risk to our outlook.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/1 ... 3b4461.pdf

[winston]

not vested

Fibre-optic cable owner NetLink NBN Trust posted a 12.4 per cent increase in profit after tax (PAT) to S$23.5 million for Q1 FY2021 ended June, even as its top line shrank amid restricted manpower and access amid the Covid-19 pandemic.

The mainboard-listed trust's Q1 revenue dipped 3.3 per cent to S$89 million, on the back of decreases in activity-based installation and diversion revenues.

This was partly cushioned by a S$2.9 million rise in revenue from fibre connections, given a 3.3 per cent increase in residential connections.

Source: Phillips

[winston]

NetLink NBN Trust (NETLINK SP)
1QFY21: In Line, Domestic Connections Grew 3% yoy

Netlink reported resilient 1QFY21 core net profit of S$23.5m (+12% yoy).

The COVID19 impact is seen as sequential drop of 16% is due to lower installations and
diversion income.

We expect the company to play catch up from 2QFY21 onwards as activities and workforce have recovered to pre-COVID-19 levels at the beginning of Aug 20.

The stock offers sustainable dividend yield of 5%.

BUY on share price weakness with a DCF-based target price of S$1.08.

Source: UOBKH

https://research.uobkayhian.com/content ... a260a703a4

[winston]

not vested

NetLink NBN Trust (NETLINK SP) - Looking past temporary operational issues

NetLink NBN Trust’s (NLT NBN) 1QFY21 revenue decreased 3.3% YoY to S$89.0m, which was mainly due to lower activity-based installation and diversion revenue as a result of Covid-19.

EBITDA margin rose 5 ppts higher YoY to 77.3% due largely to the higher proportion of revenue from residential connections and from Government relief grants received.

Consequently, PATMI rose 12.4% YoY to S$23.5m, constituting 24.6% of our full-year forecast.

We are encouraged to note that the full complement of workforce for service provisioning work is now available from the beginning of Aug.

However, capacity to conduct outdoor-related work is still below 50% at this point due to foreign worker constraints.

Management shared that they are open to considering acquisitions of infrastructure assets with a similar cashflow-generative profile as their existing fibre network, and clarified that they are not looking to move into the competitive space where their customers reside in.

All-in, despite the effects of Covid-19, we believe that NLT NBN still remains a relatively resilient play in comparison to some of its other yield peers.

Moreover, on the assumption that there is no further escalation of the Covid-19 situation, we believe that a more normalised level of workforce and construction activity should bode well for NLT NBN.

We maintain our estimates and FV of S$1.10 for now. Maintain BUY.

Source: OCBC

[winston]

not vested

Shelter to wait out the storm

Reiterate BUY with TP of SGD1.07.

MAS’ move to call on banks to cap their DPS caused banks’ average FY20E yield to fall to 4%.

NetLink’s FY21E DPU of 5% offers a good switch from banks for higher dividend sustainability, given its strong cashflow is backed by fixed regulatory pricing till end-2022.

It also offers a domestic-yield play amid COVID-19 re-opening uncertainties.

Changes to its regulated returns (7% pre-tax WACC) is the key risk to our outlook but we do not expect this till end-22.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/1 ... 3d38bb.pdf

[winston]

not vested

NetLink NBN Trust (NETLINK SP)
2QFY21: Within Expectations; Resilient Fibre Connectivity Demand

NetLink reported a 2QFY21 net profit of S$21.3m (-8% yoy) on higher tax expenses for the quarter vs tax credits in 2QFY20.

Positively, PBT came in strong at S$24.4 (+10% yoy) on the back of resilient residential revenue, higher EBITDA margin of 77%, and government grants.

The group declared a 1HFY21 DPU of 2.53 S cents, in line with expectations.

The stock offers sustainable dividend yield of 5.3% for FY21.

Maintain BUY on share price weakness with unchanged DCF-based target price of S$1.08.

Source: UOBKH

https://research.uobkayhian.com/content ... a1708214ef

[winston]

not vested

Netlink NBN Trust - DPU immune to COVID-19 (NETLINK SP, CP SGD0.98, BUY, TP SGD1.11, Telcos)

1HFY21 earnings were slightly below, at 47% of MKE/consensus FY21E profit.

Interim DPU was 0.4% above MKE’s estimate, despite the tough environment.

We trimmed our FY21E PAT by 3.5% to reflect change in operational forecast and one-off under provision tax expense.

But we raised FY21E DPU by 3.3% to reflect better operating cashflow.

This lifts our DDM-based TP (COE: 6.3%, LTG: 1.5%) to SGD1.11. Maintain BUY as 5.2% FY21E yield is sustainable.

Source: Maybank

https://www.kelive.com/KimEng/servlet/P ... &rid=53440

[winston]

not vested

NETLINK NBN TRUST (NETLINK SP)
Recommendation : BUY
Fair Value : SGD 1.10

GETTING BACK INTO THE GROOVE

Healthy 1HFY21 DPU of 2.53 S-cents (+0.4% YoY)

Moving past 1Q operational issues associated with Covid-19

Maintain FV of S$1.10


NetLink NBN Trust (NLT NBN) designs, builds, owns and operates the passive fibre network infrastructure of Singapore’s Next Gen NBN.

With the increasing usage of fibre broadband services for day-to-day activities driven by growing demand for connectivity and rapid broad-based growth in data consumption, we believe NLT NBN has a resilient business model, and hence able to weather through various economic cycles given the defensive nature of its income streams.

Furthermore, we expect NLT NBN to be a key participant of growth in other connected services within the non-residential and NBAP space, especially with Singapore’s push to transform into a digital economy.

Source: OCBC

[winston]

not vested

Our Views

Netlink offers decent 5.2% yield but upside potential is limited.

Currently, NLT offers 5.2% yield vs. 4.2% average yield offered by large-cap industrial Singapore Real Estate Investment Trusts (S-REITs), which is relatively attractive given NLT’s lower gearing and longer asset life.

Source: DBS

https://www.dbs.com.sg/treasures/aics/s ... INK_SP.xml