NETLINK NBN TRUST (SGX:CJLU)
NetLink NBN Trust - Some Growth Returning
- NetLink Trust (SGX:CJLU)'s 1H22 revenue and EBITDA were within expectations, at 50%/48% of our FY22e forecasts. DPU was raised a modest 1.2% y-o-y to 2.56 cents.
- 1H22 residential fibre connections rose only 3.9k. The run rate is below our 25k net connections expected in FY22e. Delays in the construction of new homes is the bottleneck.
- FY22e revenue estimate is nudged up for higher installation and diversion revenue. FY22e EBITDA forecast is reduced by 5% to account for the one-off non-cash finance lease receivable remeasurement of S$12.4mil.
- NetLink Trust's 5.1% dividend yield is expected to be stable, backed by monthly recurring revenue from more than 2mil fibre connections in homes and businesses.
The Positives
Normalised EBITDA expanded 3% y-o-y.
- Excluding the lease receivable remeasurement loss of S$12mil and grants and rebates last year of S$5.4mil, EBITDA is 1H22 would have risen 3.1% y-o-y to S$138mil (1H21: S$134.3mil). EBITDA growth came from the 38% revenue growth in diversion and co-location revenue to S$14mil. A rebound from last years circuit breaker disruption.
Lower interest expense.
- Finance cost was down 45% y-o-y to S$5.3mil. Borrowing cost has been lowered from 2.4% to 1.1% following the refinancing in June. Some of the hedges in the prior period has started to run off.
The Negatives
Residential connections are still soft.
- New residential connections in 1H22 were only 3,946. A steep drop from 9,915 in 1H21. Our forecast for FY22e is lowered from 25,000 to 10,000 new connections.
Outlook
- FY22e is a recovery from the circuit breaker disruption. Installation revenue from NBAP and diversion work rebounded from a low base last year. There is still a lingering impact from the pandemic due to delay in home construction, impacting residential connections. The increase in capital expenditure will depress dividends in the near term, but will build up the regulated asset base and yield returns in the next regulatory review
Our ACCUMULATE recommendation maintained on unchanged target price of S$1.03
- Our DCF target price of S$1.03 (WACC 5.9%) and ACCUMULATE recommendation for NetLink Trust is unchanged.
- NetLink Trust’s dividend is stable with support from monthly recurring connection revenue and capital expenditure flexibility.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-11-08
SGX Stock
Analyst Report
1.030
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