NetLink NBN Trust’s (NLT NBN) 3QFY20 results were broadly in-line. Revenue grew 2.9% YoY to S$91.6m, accounting for 24.8% of our full-year forecast.

Growth was on the back of higher residential connections, though partially offset by lower installation-related revenue (migration of coaxial cable subscribers to fibre by StarHub ended on 30 Sep 2019), diversion revenue and ducts and manholes service revenue.

Excluding the impact of SFRS(I) 16, EBITDA margin for 3QFY20 would have been 72.8%, or 2.2 ppts higher YoY due to greater revenue contribution from residential connection services which carry higher EBITDA margins. All-in, PAT grew 9.6% to S$21.5m, which is 24.8% of our fullyear forecast.

We continue to believe that Singapore’s 5G rollout should be a growth driver for NLT NBN’s Non-Building Address Points connections, as it goes beyond its existing trials with M1 and TPG Telecom.

Pending an analyst briefing, we maintain our BUY rating, but place our FV of S$1.03 under review.

Source: OCBC Research - 11 Feb 2020