Its net profit is down 8.3% at S$48.5 million, amid lower Ebitda and higher depreciation and amortisation

 

FIBRE network infrastructure provider NetLink NBN Trust : CJLU +1.1% on Monday (Nov 4) reported a distribution per unit of S$0.0268 for the half year ended Sep 30, up 1.1 per cent from the S$0.0265 declared in the corresponding period a year ago.

 

The trustee-manager said the distribution will be paid out to unitholders on Nov 29.

 

NetLink&rsquo s net profit was down 8.3 per cent at S$48.5 million for the first six months of its 2025 fiscal year, compared to the same period last year.

 

The lower net profit was mainly the result of lower Ebitda (earnings before interest, taxes, depreciation and amortisation) and higher depreciation and amortisation, partially offset by higher income tax credit, said NetLink.

 

Revenue was down by S$0.5 million or 0.2 per cent at S$204.8 million for H1 FY2025 compared to H1 FY2024, primarily due to lower revenue from ancillary projects (non-regulated asset base revenue) as more government projects were completed in the prior corresponding period.

 

This was partially offset by higher installation-related and other revenue, co-location revenue and central office revenue, NetLink added.

 

Ebita for H1 FY2025 stood at S$143.5 million, 3.8 per cent lower than in H1 FY2024.

 

The company said this was attributed to higher operating expenses during the period, and the absence of the one-off gain on the disposal of assets in H1 FY2024 (non-operating income).

 

Earnings per unit stood at S$0.0124 for H1 FY2025, down from S$0.0136 in the year-ago period.

 

NetLink noted that there were 1.52 million residential connections as at end-September, up from 1.49 million in the year-ago period.

 

There was a slight increase in non-residential connections to 53,182 in this first half, from 52,568 in H1 FY2024.

 

The trustee-manager added that it has been investing in its network assets to cater to the growing end-user demand across residential, non-residential, non-building address points and segment connections &ndash a move it believes will increase its regulated asset base.

 

NetLink said the global political and economic outlook remains uncertain. The company will continue to monitor the evolving macro environment and respond with appropriate measures.

 

It describes its business model as &ldquo resilient and well-supported by predictable revenue streams&rdquo .

 

&ldquo The group&rsquo s balance sheet and liquidity remain strong, underpinned by stable cash flows and access to financial resources to support ongoing and future capital expenditure,&rdquo it added.

FIBRE-OPTIC owner NetLink NBN Trust : CJLU 0% posted a decline in its profit after tax by 9.1 per cent to S$25.7 million for the first quarter ended Jun 30, down from S$28.2 million in the same period last year.

 

In a bourse filing on Friday (Aug 2), NetLink&rsquo s trustee-manager said this was mainly due to lower earnings before taxes, interest, depreciation and amortisation (Ebitda) and higher depreciation from a higher asset base.

 

Revenue for the quarter was lower by 2.9 per cent at S$100.9 million, when compared with the corresponding period a year ago. The fall of about S$3 million was due to lower non-regulated asset base (non-RAB) revenue from the trust&rsquo s ancillary projects.

 

The manager added that RAB revenue remained stable during the quarter as higher connection numbers offset the impact of lower prices for key services, which took effect from Apr 1 this year.

 

For the Ebitda, NetLink&rsquo s bottom line was down 2.4 per cent at S$73.4 million, mainly due to lower non-operating income and higher operating expenses. In Q1 of the last financial year, there was also a S$1.1 million one-off gain on disposal of assets included in the non-operating income, it said.

 

As at Jun 30, there were 1.52 million residential connections, up from 1.49 million from the corresponding period a year ago. NetLink said the growth was in part due to new connections from end-users switching to higher-speed broadband plans but had yet to terminate their existing connections for lower-speed plans.

 

The number of non-residential connections grew from 52,522 to 53,382, year on year.

Why is fibre most environmentally friendly.?

On May 23, NetLink NBN Management executive director and CEO, Tong Yew Heng, acquired 100,000 units of NetLink NBN Trust : CJLU 0% at S$0.865 per unit. This increased his direct interest in the business trust from 850,000 units to 950,000 units.

 

His preceding acquisition was in February, with 100,000 units acquired at S$0.845 per unit.   

On Feb 16, NetLink NBN Management executive director and CEO, Tong Yew Heng, acquired 100,000 units of NetLink NBN Trust : CJLU -1.18% at S$0.845 per unit. This increased his direct interest in the business trust from 750,000 units to 850,000 units. His preceding acquisition was in December 2023 at S$0.835 per unit, and prior to that at S$0.97 per unit, back in October 2020. The price-to-book ratio of NetLink NBN Trust was around the 1.3 times level at the time of all three acquisitions.

 

Tong has been the CEO of the trustee-manager since January 2016 and is responsible for the overall leadership and performance of the trust. Prior to joining NetLink Trust as CEO in 2016, he was the executive vice-president, corporate & market development, for Singapore Technologies Electronics. Before that, Tong was the CEO of CitySpring Infrastructure Trust, now known as Keppel Infrastructure Trust.

 

With a market capitalisation of S$3.3 billion, NetLink NBN Trust has ranked among the 50 most traded Singapore stocks this year and just outside the 50 Singapore stocks that booked the highest net institutional inflow this year.

 

The business trust also presently maintains a 6.2 per cent dividend yield at a unit price of S$0.844, while the Refinitiv consensus estimate target price is S$0.978 as at Feb 21. Refinitiv consensus estimates represent the average of individual estimates provided by analysts covering the stock and estimates typically represent an analyst&rsquo s opinion of the company performance over the next 18 months. On Feb 6, the trustee-manager provided a business update for its 9MFY24 (ended Dec 31), highlighting that its revenue increased by 3.2 per cent, compared to its 9MFY23. This was mainly attributed to higher connection revenue across all segments and higher installation-related revenue.

 

The business trust maintains a multipronged strategic focus. This first includes improving network reach, densification, and capability in support of NetLink&rsquo s fibre-to-anywhere (FTTX). In line with the FTTX strategy, the trustee-manager noted last year that NetLink NBN Trust&rsquo s next phase of growth also requires it to efficiently support the deployment of IoT and other devices fitted on street furniture such as traffic lights, lamp posts and bus stops. The second port of call in the strategic focus involves the improving competitiveness of NetLink&rsquo s fibre in the enterprise and government segments. Other areas of focus include providing expertise and infrastructure to support the upgrade of the Nationwide Broadband Network, exploring opportunities to invest in telecoms infrastructure businesses overseas which are likely to generate a stable cashflow, and create brand affinity with end-users.

 

Analysts at CGS-CIMB Research, UOB Kay Hian and DBS Group Research have maintained their &ldquo add&rdquo and &ldquo buy&rdquo calls on Netlink NBN Trust following the trust&rsquo s 3QFY2024 ended December announcement of results that are within their expectations.

 

CGS-CIMB analyst Ong Khang Chuen highlights that Netlink saw further growth across all its fibre segment connections. Notably,residential fibre, which accounts for 60% of the revenue contribution, added 9,000 connections during the quarter, surpassing 1HFY2024&rsquo s 7,000 new connections. 

 

Armed with predictable revenue streams, Netlink remains cognisant of the company' s profile as a high-yielding, safe haven stock, UOBKH analysts Chong Lee Len and Llelleythan Tan notes. As such, key criteria of any potential new investment in the near horizon would have to include country risk premium and a preferably stable cash flow via an asset sale and leaseback model. 

 

&ldquo Importantly, Netlink has sufficient debt headroom (24.3% net gearing) to drive its acquisition ambition without compromising on cash flow and dividends. There is, however, no fixed timeline in terms of mergers and acquisition activities and management may even consider a joint venture or consortium outfit in its acquisition strategy,&rdquo they point out.

 

NLT&rsquo s revised interconnection offer pricing for the next five years will take effect from 1 Apr 2024. However, the analysts note that the revised prices would not have a material impact on Netlink&rsquo s FY2024 DPU as well as FY2025-FY2026 DPU and earnings. 

 

Meanwhile, DBS analysts say Netlink&rsquo s yield spread of 331 basis points is still attractive compared to its 3-year average 324 basis points. The Singapore government&rsquo s 10-year bond yield of 3% implies a yield spread of 331 basis points, higher than the last 3-year average of 324 basis points. 

The analysts expect Netlink&rsquo s DPU to rise by 2% annually over the next few years and for the yield spread to narrow towards 250 basis points to reflect the resilient nature of its distributions.

 

CGS-CIMB, UOBKH and DBS are keeping their target prices at 95 cents, $1.01 and 98 cents respectively. 

 

Netlink NBN Trust has delivered 4% higher profit after tax for its 9MFY2024 ended December at $85.1 million, compared to $81.8 million recorded in the previous corresponding period.

 

Revenue for the period increased by 3.2% to $309.4 million, mainly due to higher connection revenue across all segments and higher installation-related revenue. This was partially offset by higher operating costs.

 

Ebitda for 9MFY2024 stood at $228.5 million, 3.9% higher y-o-y due to higher revenue and one-off reversal of operating costs following a resolution of disputed power charges.

 

As at December 2023, the trust&rsquo s gearing stood at 24.3% and a weighted average debt maturity of 2.7 years.

 

Moving forward, the company&rsquo s strategic focus includes exploring opportunities to invest in telecoms infrastructure businesses overseas, which are likely to generate a stable cash flow.