NetLink NBN Trust - Steady Ship
- NetLink NBN Trust (SGX:CJLU)’s 1QFY23 (1 Apr 2022 to 30 Jun 2022) net profit of S$27.6m (+11.3% y-o-y) was in line with expectations, at 26%/27% of our/Bloomberg consensus FY23F estimates. Topline grew 4.8% y-o-y to S$97.9m, driven by higher ancillary project revenue and connections revenue, though partially offset by lower central office revenue.
- Boosted by recovery in construction activities, ancillary project revenue surged 136% y-o-y to S$4.4m and was the key driver for NetLink Trust’s 1QFY23 revenue growth. Meanwhile, NetLink Trust continued to see healthy growth across all fibre connection segments during the quarter.
- NetLink Trust's net gearing stood at 20.8% as of end-Jun, providing good debt headroom for inorganic growth opportunities; NetLink Trust continues to explore opportunities to invest in telecoms infrastructure businesses overseas that are likely to generate stable cashflows.
- Reiterate ADD recommendation on NetLink Trust as we retain our view that NetLink Trust is a defensive play amid the current backdrop of rising inflation and a potential economic slowdown given its strong earnings visibility and stability.
- We keep our earnings forecasts unchanged but our DDM-based target price for NetLink Trust is lowered slightly to S$1.04 as we factor in a higher risk-free rate given the higher interest rate environment.
- Potential re-rating catalysts include earnings-accretive acquisitions and stronger-than-expected growth in NBAP connections as NetLink Trust benefits from telcos’ 5G rollout.
- Downside risks include lower-than-expected ICO (Interconnection Offer) pricing in the upcoming review.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-08-16 2022-08-16
Read also CGS-CIMB's most recent report:
2022-11-03 NetLink NBN Trust - Built For The Tough Times.