NetLink NBN Trust’s Latest Earnings: What Investors Should Know

Yesterday, NetLink NBN Trust (SGX: CJLU) released it maiden earnings report since coming public on 19 July 2017. The earnings report was for the period between 19 June 2017 and 30 September 2017.

The business trust owns a network of about 76,000 kilometres (km) of fibre cable, 16,200 km of ducts, and 62,000 manholes, as of 31 March 2017. If you would like to learn more about the trust, head here .

Financial highlights

Here is a quick summary of the financials:

1. NetLink NBN Trust recorded $64.8 million in sales.

2. Profit for the period was almost $13 million.

3. Earnings per unit was 0.33 cents.

4. Cash flow from operations was $43 million, and capital expenditure was $127.7 million. The trust generated a negative free cash flow of $84.7 million.

5. As of 30 September 2017, NetLink NBN Trust had $70.6 million in cash and bank deposits, and $507.3 million in borrowings.

6. The trust had a net asset value per unit of $0.80.

Prior to the earnings, NetLink NBN had forecasted sales to be $65.5 million and profit after tax to be $12.4 million. Based on the results, the trust fell short on its sales forecast, but topped its profit guidance. The business trust also reported negative free cash flow, and had a net debt position of $436.7 million.  

There will no distributions for the reporting period. NetLink NBN Trust’s first distribution will be for the period between 19 June 2017 and 31 March 2018.

Operational highlights

According to the trust, the rate of non-fibre subscribers was slower than expected, leading to lower installation revenue. The breakdown of its sales is shown in the slide below:

Source: NetLink NBN Trust’s earnings presentation

NetLink NBN Trust said that it had a debt-to-EBITDA ratio  (earnings before interest, taxes, depreciation and amortization) of 2.1, and interest cover of 6.9 based on EBITDA.     

Chief executive officer for the trustee-manager, Tong Yew Heng, summarised the quarter:

“We are pleased to report a good set of numbers for our maiden reporting period, with EBITDA and Profit after Tax outperforming forecast.

We are on track to deliver our operating performance and distributions to Unitholders in line with the projections in the Prospectus, backed by resilient earnings generated by our nationwide network that delivers ultra-high-speed internet throughout mainland Singapore and its connected islands.”

For the residential segment, NetLink NBN Trust had passed 1.46 million homes, reached 1.32 million homes, and had 1.14 million end-users at the end of the reporting period. Meanwhile, the business trust has reached almost 31,000 buildings and over 42,000 end-users.

For reference:

a) “Pass” refers to the network that is connected to the floor distribution point, gatepost or nearest manhole of a landed building.

b) “Reach” refers to the network that is connected to the first termination point in the residential premises.

Looking ahead, NetLink NBN Trust said that it is on-track to hit its forecasted number of end-user connections for both residential and non-residential segments.

The business trust also has its eye on growing its non-residential and NBAP (non-building access point) segment, and is engaging with requesting licensees for future demand. NetLink NBN Trust believes that it is well-positioned for Singapore’s Smart Nation initiative, and the fourth mobile telecommunication company’s needs.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.