NETLINK NBN TRUST

NETLINK NBN TRUST | BUY

NOV 7 CLOSE: S$0.79

FAIR VALUE: S$0.90

OCBC Investment Research, Nov 7

Netlink NBN Trust's Q2 FY19 results exceeded its IPO expectations.

Revenue of $90.6 million was 6.7 per cent higher than its initial forecast, owing to higher diversion revenue, as well as ducts and manholes service revenue.

The increase in diversion revenue of $6.3 million was due to the recognition of revenue from completed projects primarily for government agencies.

All things considered, Ebitda (earnings before interest, tax, depreciation and amortisation) of $61.2 million came in 3 per cent higher than its initial forecast.

Operationally, NLT NBN increased its residential and non-residential fibre connections by 2 per cent and 1.6 per cent q-o-q respectively.

As reported in the media last week, StarHub will be ceasing its cable services after June 30, 2019.

Leaving aside potential upfront benefits from additional residential terminal points required as a result of this exercise, NLT NBN should be able to collect additional monthly recurring charges arising from greater fibre connections.

We maintain our fair value estimate of S$0.90.

NLT NBN has declared a H1 FY19 DPU of 2.44 Singapore cents.

On an annualised basis of 4.88 Singapore cents, that would be a 5.2 per cent increase over the projected DPU of 4.64 Singapore cents.

Considering its defensive attributes and stable cash flows, the counter trades at an attractive FY19F yield of 5.9 per cent, based on its Nov 5 closing price of $0.78.

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