NETLINK NBN TRUST (SGX:CJLU)
NetLink NBN Trust - Mutual Discharge Of Contract With Vendor
- Expect to write-off S$15.4m of capitalised project costs.
- No material impact on distribution in FY20F.
- Continue to like NetLink Trust for earnings visibility and decent yield.
- Maintain BUY, Target Price S$1.05.
Expect to write-off S$15.4m of capitalised project costs, no material impact on distribution in FY20F.
- NetLink Trust (SGX:CJLU) has mutually discharged a project contract with its vendor, due to differences between the two parties. This contract is in relation to the design and implementation of a new generation business support systems and operation support systems. See NetLink Trust Announcements.
- NetLink Trust expects S$15.4m of capitalised project costs (S$6.1m internal staff cost and S$9.3m third-party costs) to be written off. According to management, NetLink Trust will seek a replacement vendor at a similar or lower cost structure. As the capitalised project costs are non-cash, there is no material impact expected on NetLink Trust’s FY20F distributions.
Maintain BUY, Target Price of S$1.05; continue to like NLT for earnings visibility and decent yield.
- We continue to like NetLink Trust for its decent yield of c.5.1%, which is higher than large-cap industrial REITs’ average yield of c.4.3%.
- We argue that NetLink Trust should trade at a lower yield than S-REITs as
- NetLink Trust’s asset life is much longer than S-REITs’ as it incurs annual capex of > S$55-60m to replenish its regulated asset base (RAB);
- NetLink Trust’s gearing is less than half of S-REITs’ with ample debt headroom to fund future growth; and
- NetLink Trust’s distributions are largely independent of the economic cycle due to the regulated nature of its business.
- See NetLink Trust Share Price; NetLink Trust Target Price; NetLink Trust Analyst Reports; NetLink Trust Dividend History; NetLink Trust Announcements; NetLink Trust Latest News.
Sachin MITTAL
DBS Group Research
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Rui Wen LIM
DBS Research
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https://www.dbsvickers.com/
2020-02-28
SGX Stock
Analyst Report
1.050
SAME
1.050
