NetLink NBN Trust’s (NLT NBN) 1QFY20 results were within our expectations. Revenue grew 6.9% YoY to S$92.0m, on the back of higher residential connections and installation-related revenue partially offset by lower ducts and manholes service and diversion revenue. We note that the higher installation-related revenue was mainly due to StarHub migrating its coaxial cable subscribers to fibre.

EBITDA rose 9.1% YoY to S$66.5m, which comprises 26.6% of our full-year forecast. Excluding the impact of SFRS (I) 16, the group’s EBITDA margin would have been 71.5%, compared to 70.8% in 1QFY19, which we believe is a consequence of a drop in diversion revenue which typically carries lower margins.

PAT came in at S$20.9m, or 24.6% of our full-year forecast. We note that the group saw NBAP connections drop 5.2% QoQ to 1,505 connections, due to the government’s review of the Smart Nation Sensor Platform programme.

We maintain our BUY rating but place our FV under review..

Source: OCBC Research - 6 Aug 2019