NetLink NBN Trust - UOB Kay Hian 2022-05-18: 4QFY22 Above Expectation; Network Expansion Lifts Fibre Connections

NETLINK NBN TRUST (SGX:CJLU)

NetLink NBN Trust - 4QFY22 Above Expectation; Network Expansion Lifts Fibre Connections

NetLink Trust’s 4QFY22 core earnings came in at S$25.5m (-22% y-o-y, -1% q-o-q) mainly on higher finance cost. Top-line growth remains robust at 4% y-o-y thanks to higher non-business access point connections. FY22 core earnings of S$103.7m are above house’s and street’s estimates.

NetLink Trust declared S$0.0257 DPU, translating to a 5% yield for FY22. The next regulatory review is expected for 2023. Maintain HOLD with a target price of S$1.05.

NetLink Trust (SGX:CJLU) reported a 4QFY22 core net profit of S$25.5m (-22% y-o-y, -1% q-o-q), mainly due to higher finance cost (+24% q-o-q). Revenue, however, grew 4% y-o-y and 3% q-o-q on continuous growth in the overall fibre connections. This brings FY22 core net profits to S$103.7m (+1.4% y-o-y), accounting for 106% and 110% of our and consensus full-year forecasts respectively – above estimates. The discrepancy from our end stems from better cost discipline.
5% dividend yield. 2HFY22 DPU was declared at S$0.0257, bringing full-year DPU to S$0.0513 – in line with our expectations. This would translate to a 5% dividend yield.
Resilient top-line on continuous fibre connections growth. NetLink Trust continued to grow its fibre connections (residential, non-residential and Non-Building Address Point (NBAP)) at 1% y-o-y and q-o-q to 1.519m. NBAP connections rose 20% y-o-y and 5% q-o-q due to higher demand for point-to-point connections to support mobile network rollout, including 5G network in Singapore. This resulted in NBAP revenue rising 67% y-o-y and 11% q-o-q in 4QFY22. In addition, diversion income also rose 69% y-o-y and 76% q-o-q, attributable to more projects completed, in line with the reopening of more economic activities.

NetLink Trust expects the next regulatory review to be carried curve and debt premium.

Management remains cognisant of the company's profile as a high-yielding, safe or consortium outfit in its acquisition strategy.

We project an annual DPU of S$0.052 from NetLink Trust of overseas/domestic acquisitions.
See
Key catalysts include:
1. being a 5G beneficiary – more opportunities arising from mobile operators’ fibre network densification demand,
2. growth in demand for NBAP connections with the rollout of 5G/Smart Nation initiatives,
3. investors seeking defensive yield from NetLink Trust’s resilient, predictable, transparent and regulated cash flow, and
4. earnings-accretive M&As.

Chong Lee Len UOB Kay Hian Research | Chloe Tan Jie Ying UOB Kay Hian | https://research.uobkayhian.com/ 2022-05-18

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.050 SAME 1.050