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 (Next Gen NBN). This network is used to deliver ultra-high-speed internet access throughout mainland Singapore and its connected islands. NetLink Trust was listed in July 2017.

On Friday, the trust announced its financial results for the first quarter ended 30 June 2018. Here’s a quick rundown of the financial figures from the latest quarter:

1. Revenue came in at S$86.1 million, up 2.8% as compared to the initial public offering (IPO) projection.

2. EBITDA (earnings before interest, taxes, depreciation and amortisation) was S$61 million, 4.5% higher than the projection.

3. Consequently, EBITDA margin was 70.8% versus the projection of 69.6%.

4. Profit after tax stood at S$19 million, 26.9% above the projection.

5. As at 30 June 2018, NetLink Trust had S$68.9 million in cash and bank deposits, and $588.9 million in borrowings. In comparison, at the end of March 2018, it had S$166.4 million in cash hoard and S$588.7 million in debt. The fall in the cash balance was largely due to S$126.3 million that was distributed to unitholders for the previous quarter.

6. Net asset value at the end of the latest quarter stood at 78.8 cents, down from 81.5 cents, as at 31 March 2018.

7. NetLink  Trust generated S$46.1 million in cash flow from operations and spent S$17.3 million in capital expenditure. This translates to a free cash flow of S$28.8 million.

The increase in revenue was primarily due to higher diversion revenue, and ducts and manholes service revenue. Lower than projected installation-related revenue partially offset the higher revenues.

There were 1.22 million residential end-user connections and 44,784 non-residential end-user connections as at 30 June 2018. This marked an increase of 2.1% in both segments compared to the end of the previous quarter. Non-building address points (NBAP) connections increased by 35.2% to 1,129 compared to the end of the preceding quarter.

Tong Yew Heng, chief executive officer of the NetLink Trust’s trustee-manager, commented on the latest results:

“We have continued to witness a steady growth in the number of connections across the residential, non-residential and NBAP segments. This has enabled us to deliver on our forecast distribution and is a reflection of the resilience of our business model.”

Looking ahead, NetLink Trust said that with its extensive nationwide fibre network, it is well-positioned to support Singapore’s Smart Nation initiatives, developments in Punggol Digital District and Jurong Innovation District, and the fourth mobile telecommunication operator, TPG Telecom, in its mobile network deployment. The trust added that it expects to deliver the 2019 full-year projected distribution that was stated its IPO prospectus.

NetLink NBN Trust closed at S$0.775 on Friday. This translates to a price-to-book ratio of 0.98 and a distribution yield of 5.99% (based on the projected distribution).

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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.