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

NetLink NBN Trust (SGX: CJLU) designs, builds, owns and operates the passive fibre network infrastructure (consisting of ducts, manholes, fibre cables and central offices) for Singapore’s Next Generation Nationwide Broadband Network. This network is used to deliver ultra-high-speed internet access throughout Singapore.

Yesterday, the trust announced its financial results for the financial period from 19 June 2017 to 31 March 2018. NetLink NBN Trust went public on 19 July 2017.

Here are 10 things investors should know from the earnings announcement:

1. Revenue for the period came in at S$228.6 million, down 1.8% from its initial public offering (IPO) forecast. This was mainly due to lower installation-related revenue, which was partially offset by higher-than-forecast revenues from residential, non-residential, segment fibre connection, ducts and manholes, central office and diversion.

2. EBITDA (earnings before interest, taxes, depreciation and amortisation) margin for the period was 73.2% as compared to the IPO forecast of 69.3%.

3. Profit after tax was higher than IPO forecast by 10.8% at S$50.0 million. The better showing was due largely to lower operation and maintenance costs, staff costs and other operating expenses.

4. S$126.3 million will be distributed in all to unitholders, which translates to a distribution per unit (DPU) of 3.24 Singapore cents. The DPU gives an annualised distribution yield of around 5.7%, based on the IPO price of S$0.81. The distribution of S$126.3 million is 5% higher than IPO forecast.

5. Cash flow from operations stood at S$158.5 million and S$212.2 million was spent on capital expenditure.

6. As at 31 March 2018, NetLink NBN Trust had S$166.4 million in cash and bank deposits, and $588.7 million in borrowings. The debt-to-EBITDA ratio was 2.5 times while the net asset value per unit was S$0.815. NetLink NBN Trust reported an EBITDA interest cover of 9.8 times.

7. For the residential segment, NetLink NBN Trust’s fibre connections had passed 1.48 million homes, reached 1.35 million homes, and had 1.19 million end-users at the end of the reporting period. Meanwhile, for the non-residential segment, the business trust had reached slightly more than 31,570 buildings and over 43,800 end-users.

8. Residential connections exceeded IPO forecast by 0.8% while non-residential connections exceeded forecast by 2.4%.

9. Chief executive of NetLink NBN Trust’s trustee-manager, Tong Yew Heng, summarised the latest performance by the trust as follows:

“Our better-than-forecast earnings reflects the resilience of our business model. The growth in the number of connections for residential, non-residential and segment fibre for the relevant financial period was higher than the forecast. With the better performance, we are pleased to announce a higher distribution. The DPU is 3.24 Singapore cents, which is 5% higher than the forecast at IPO.”

10. Going forward, the business trust said that it expects to deliver the distribution forecast as stated in the IPO prospectus for the financial year 2019. It also believes revenues from key connection services to meet the forecast for the year. However, overall revenues may be hampered by lower installation-related revenues.

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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 Sudhan P owns units in NetLink NBN Trust.