NetLink Trust's 1QFY26 earnings declined 9% y-o-y and is trending at 23% of MIBG and street full-year expectations.
Slight NPAT miss.
While revenues rose 2% y-o-y, this was mainly due to low margin ancillary project revenues while high-margin connection revenues dipped slightly due to a one-off subs clean-up exercise by its Requesting Licensees (RLs).
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Operating metrics – Slight subs clean-up is one-off.
Residential broadband connections dipped 10k, or -0.7%, primarily due to Requesting Licensees (RLs) deactivating dormant lines as part of ongoing housekeeping. Management noted that based on its discussion with key RLs, the clean-up is mostly done, and, at the same time, gross addition trajectory remains intact. Non-Residential connections also fell 0.7%, on end-user migration between RLs.
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Maintain BUY.
Despite a slight EBITDA decline, management noted that it is minimalistic and one-off in nature and, as such, unlikely to impact its dividend trajectory.
We see NetLink Trust as a bigger beneficiary as the interest rate cycle turns. NetLink Trust's share price has 71% negative correlation to the 10-year US bond yield while its 6% dividend yield remains highly visible and stable.
Dividend trajectory remains intact.
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
