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8 Highlights from NetLink NBN Trust’s Full-Year Earnings

NetLink NBN Trust (SGX: CJLU), or Netlink for short, is the foundation of Singapore’s Next Generation Nationwide (NBN) Broadband Network. The group designs, builds, owns and operates the passive fibre network infrastructure (comprising ducts, manholes, fibre cables and central offices) of Singapore’s next generation NBN.

The Trust reported its full-year 2019 (FY 2019) earnings yesterday. Here are eight highlights from Netlink’s earnings and plans for FY 2020.

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1. Revenue for FY 2019 exceeded forecasts by 3.3%, clocking in at S$353.6 million versus a projection of S$342.2 million. This was mainly driven by higher residential connections revenue, diversion revenue, and ducts and manholes service revenue, but was partially offset by lower-than-projected installation-related revenue.

2. Earnings before interest, tax, depreciation, and amortisation (EBITDA) for the Trust for FY 2019 was S$247.9 million, 3.2% higher than projected. Expenses had increased by 0.2% higher than projected, attributed to higher operation and maintenance costs and diversion expenses.

3. Profit after tax ended at S$77.4 million, which was 17.8% higher than projected.

4. The Trust achieved 1,327,732 residential connections in FY 2019, which was 3.9% higher than projected and was also 11.3% higher on a year-on-year basis compared to the 1,192,493 connections in FY 2018. For non-residential connections, the Trust ended the year with 46,207 connections, which was 5.4% higher year-on-year.

5. Netlink reported net cash from operating activities of S$229.6 million, which was sufficient to support the FY 2019 total distribution of S$190.2 million. Note that the Trust’s distribution policy is to distribute 100% of its cash available for distribution.

6. A distribution per unit (DPU) of 2.44 Singapore cents was declared for the period 1 October 2018 to 31 March 2019 (H2 FY 2019). For FY 2019, the total DPU was 4.88 Singapore cents. At the last traded price of S$0.83, this represents a historical distribution yield of 5.9%.

7. Non-building address point (NBAP) connections have increased by 8.5% to 1,587 connections since 31 December 2018. With Singapore’s plan to embrace technology and artificial intelligence for increased connectivity, Netlink expects the number of NBAP to steadily increase over the years.

8. For FY 2020, the Trust expects revenue from key connection services to be higher than that of FY 2019 due to a higher volume of residential connections and also installation-related revenues. Netlink will continue to invest to expand its network and capital expenditure is expected to be higher in this fiscal year, compared to the previous fiscal year.

Netlink has reported a stable performance and its results were very much in line with expectations. The Trust will work with requesting licensees (i.e. the telecommunication companies) to anticipate higher future demand for non-residential and NBAP connections. With more land being cleared and zoned for residential developments, Netlink’s long-term growth in residential connections also seems assured.

The development of the 5G network in Singapore could present further opportunities for Netlink to work with the government and the telecommunication companies for enhanced connectivity, leveraging on its existing fibre network.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in NetLink NBN Trust.