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

NETLINK NBN TRUST (SGX:CJLU)

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 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.

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’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.

We reiterate our ADD call with a potential FY21F dividend yield of 5.5%. Our DDM-based target price remains unchanged at S$1.10.
See NetLink Trust Share Price; NetLink Trust Target Price; NetLink Trust Analyst Reports; NetLink Trust Dividend History; NetLink Trust Announcements; NetLink Trust Latest News.
Potential re-rating catalysts include stronger-than-expected growth in NBAP connections benefiting from telcos’ 5G infrastructure rollout, or earnings-accretive M&As.
Downside risks include lower-than-expected interconnection pricing in the 2022F review.

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