NetLink NBN Trust - CGS-CIMB Research 2021-02-25: Stable Performance


NetLink NBN Trust - Stable Performance

  • NetLink Trust’s 3QFY21 results were broadly in line; 9M21 revenue/core net profit came in at 74.3%/77.7% of our FY21F forecasts.
  • NetLink Trust continued to see connection growth across all three segments of fibre connections; activity-reliant revenue also saw sequential recovery in 3Q.
  • We reiterate our ADD call with a DDM-based target price of S$1.10.

NetLink Trust's 9MFY21 results in line with expectations

  • NetLink NBN Trust (SGX:CJLU)'s revenue/net profit rose 3.5%/14.8% y-o-y respectively in 3QFY21 (Oct 2020 to Dec 2020), thanks to continued growth in fibre connections as well as improvement in activity-reliant revenue as construction sector resumed work since late-Aug 2020.
  • We deem the set of results as in line with expectations, with 9MFY21 core net profit coming in at 77.7% of our full-year expectations.

Resilient growth in fibre connections

  • NetLink Trust continued to see growth in all three types of fibre connections in 3Q21.
  • Its residential segment reached 1.44m connections in 3Q21 (+0.4% q-o-q, +1.5% y-o-y) as NetLink Trust reached more new homes and added connections to low-income households via initiatives such as IMDA’s Home Access programme.
  • Non-residential connections grew to 48.0k (+0.8% q-o-q, +1.2% q-o-q) as NetLink Trust partnered with more telco companies to increase adoption of fibre broadband among SMEs through special promotions.
  • The non-building address point (NBAP) segment remained the fastest growth to 1,884 connections (+2.0% q-o-q, +16.0% y-o-y) as NetLink Trust supplemented local telcos’ rollout of 5G infrastructure.
  • We expect resilient growth in fibre connections in CY21F as underlying trends continue.

NetLink Trust remains well-capitalised with a strong balance sheet

  • NetLink Trust’s balance sheet remains robust, with gross debt/EBITDA at 2.5x and EBITDA interest cover at 14.2x in 3Q21. There remains significant debt headroom for NetLink Trust to fund future capex or acquisitions.
  • Management continues to be on the lookout for M&A opportunities within the telecom infrastructure space, but said that it will proceed cautiously to prevent a significant change in risk profile of the company.

Reiterate ADD on NetLink Trust with a target price of S$1.10

FOONG Choong Chen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-25
SGX Stock Analyst Report ADD MAINTAIN ADD 1.100 SAME 1.100