Analysts from Maybank Kim Eng, UOB Kay Hian and CGS-CIMB Research have all maintained a “buy” call and their target prices on Netlink NBN Trust (NLT), citing its stable performance. 

Target prices from Maybank KE, UOB KH and CGS-CIMB stand at $1.11, $1.08 and $1.10 respectively.

Netlink reported a 9MFY2021 EBITDA and PAT of $209.9 million and $69.5 million, compared to the 9MFY2020 figure of $202.6 million and $65.6 million.
 
The Trust revealed revenue for 9MFY2021 decreased marginally by S$1.5 million as compared to 9MFY2020, mainly due to lower installation-related revenue, but this was offset by higher residential, Non-Building Address Point (NBAP) and segment connections revenue. 


SEE:Netlink reports slight fall in revenue for 9M21, but higher profits and EBITDA


CGS CIMB analyst Ong Kang Chuen said this was “in line with expectations”, and that it continued to see growth in all three types of fibre connections in 3QFY2021. 

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Ong elaborated that its residential segment reached 1.44 million connections in 3QFY2021, which is up 0.4% q-o-q, and 1.5% y-o-y as NLT reached more new homes and added connections to low-income households via initiatives such as IMDA’s Home Access programme. 

Non-residential connections grew to 48,000, 0.8% higher q-o-q, 1.2% y-o-y, as NLT partnered with more telco companies to increase adoption of fibre broadband among SMEs through special promotions. 

He highlighted that the non-building address point (NBAP) segment remained the fastest growth, rising 16% y-o-y, as NLT supplemented local telcos’ rollout of 5G infrastructure. 

As such, he expects resilient growth in fibre connections in 2021 as underlying trends continue. 

UOB Kay Hian’s Chong Lee Len and Chloe Tan said the resilient performance suggests strong underlying demand for fibre services amid rising data consumption. “All in all, recurring revenue was higher, accounting for 83% of 3QFY21’s revenue.” they add. 

Ong noted that NLT’s balance sheet remains robust, with gross debt/EBITDA at 2.5x and EBITDA interest cover at 14.2x in 3Q21. 

He thinks that there remains significant debt headroom for NLT to fund future capex or acquisitions, and highlighted that “management continues to be on the lookout for M&A opportunities within the telecom infrastructure space, but said that it will proceed cautiously to prevent a significant change in risk profile of the company.”


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Separately, Maybank Kim Eng’s Kareen Chan also agreed with the observations of NLT’s strong balance sheet, but she also said that it is keen to explore acquisitions in the telco- infrastructure sector of companies with utilities-like business models. 

Chan added NetLink is comfortable to gear up to $1 billion for such acquisitions/ strategic investments, citing Singtel’s Optus towers as an example. However, “no specific target or country has been identified yet as NetLink is still in the initial stage of searching.” she says

She also noted NetLink’s workforce has returned to pre-Covid levels since Aug 2020, and that Its diversion and installation divisions would resume with the pickup in construction activities in Singapore. 

This should also spur residential connections as NetLink continues to expand into new estate areas such as Tengah and Punggol. 

As at 4.11pm, shares in Netlink are trading at 95 .5cents, with a price to book ratio of 1.3 and a FY2021 dividend yield of 5.4% forecast by Maybank KE.