• NetLink Trust’s 1QFY3/21 results in line; revenue/net profit both came in at 25% of our FY22F forecast. All three fibre connection segments continued to see growth.
• Management does not expect major surprises from the 2022F ICO pricing review; we also expect stable dividend yields of ~5.4% to be sustained.
• Leveraging on its strong balance sheet, NetLink Trust continues to be on a lookout for M&A opportunities. We reiterate ADD, with a DDM-based target price of S$1.10.

NetLink's 1QFY22 Results in Line With Expectations

• NetLink Trust (SGX:CJLU)’s 1QFY22 (April 2021 to June 2021) revenue/net profit rose 5.0%/5.3% y-o-y to S$93.4m/S$24.8m, in line, at ~25% of our FY22F forecast. Topline growth was boosted by installation-related revenue (+132% y-o-y, from a low base due to the circuit breaker in Singapore last year); fibre connections revenue grew 2.8% y-o-y to S$70.3m in 1QFY22.
• NetLink Trust achieved an EBITDA margin of 74.4% in 1QFY22, 2.9% points lower y-o-y due to lower government grants, without which, EBITDA margin would have been largely stable y-o-y. Net profit growth was driven by lower finance charges (-32.5% y-o-y) in 1QFY22.

Resilient Growth in Fibre Connections

• NetLink Trust continued to see growth in all three types of fibre growth in fibre connections in FY22F as underlying trends continue.

Interconnection Offer Pricing Review Kickstarted With IMDA

• NetLink Trust has started negotiations with Infocomm Media seek for M&A opportunities within the telecom infrastructure space.

Reiterate ADD, With a Target Price of S$1.10

• We reiterate ADD rating on NetLink Trust and our DDM-based target price of S$1.10.

• Potential re-rating catalysts include earnings-accretive acquisitions and stronger-than-expected growth in NBAP connections, as NetLink Trust benefits from telcos’ 5G rollout.
• Downside risks include lower-than-expected interconnection offer (ICO) pricing in the upcoming review.

Source: CGS-CIMB Research - 24 Aug 2021