NetLink NBN Trust - Maybank Kim Eng 2021-05-13: Defensive Results


NetLink NBN Trust - Defensive Results

FY21 net profit met expectations; maintain BUY

  • NetLink Trust (SGX:CJLU)'s FY21 net profit of S$94.8m was in line with MKE/ consensus estimates. Results were driven by higher EBITDA margin of 73.3% due to increased government grants and a favourable sales mix (more connectivity revenue). DPU of S$0.0255 was declared, bringing FY21 DPU to S$0.0508, meeting MKE/street estimates. With this, we raised our FY22- FY24E core profit by 11% to account for lower finance cost. As a result, our DDM-based (COE 6.3%, long-term growth 1.5%) target price is raised to S$1.13 as we roll forward valuations to FY22E.
  • Maintain BUY.
  • Negative revisions to its regulatory regime are the key risk to our call.

Results in line

  • NetLink Trust's revenue dipped 0.5% to S$368.5m as growth in residential (+2.5% to S$238m) and the (Non-Building Address Point (NBAP) & segment (+22.5% to S$8.9m) was offset by lower installation-relation revenue (-19% to S$16.6m) and diversion (-23.2% to S$8.5m) due to fewer orders amid COVID-19, as well as lower availability of contractors from Apr to Aug last year.
  • That said, EBITDA margin expanded to 73.3% (+3.5ppt) due to higher government grants arising from Job Support Schemes and property taxes, as well as favourable shift in its sales mix towards higher-margin connectivity services.
  • 2HFY21 DPU of S$0.0255 was declared, which brings NetLink Trust's FY21 DPU to S$0.0508, meeting MKE/street estimates and translates to a FY21 DPU yield of 5.2%.

Acquisitions more in focus for FY22E

  • Moving into FY22E, NetLink Trust's virtual monopoly in residential connections will continue to help it expand its residential network in new housing estates such as Tengah and Punggol. In terms of non-residential connections, the group will also continue to work proactively with telco players to acquire new non-residential and NBAP customers to support digitalisation projects and 5G rollout plan.
  • NetLink Trust will also be exploring opportunities to invest in telecom infrastructure business overseas to generate stable cashflow. No target has been identified yet and NetLink Trust is making preliminary assessments of potential deals.

No shortage of foreign workers

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-13
SGX Stock Analyst Report BUY MAINTAIN BUY 1.130 UP 1.110