PAT in Line; Maintain BUY

• NetLink Trust (SGX:CJLU)'s 1QFY22 PAT of S$24.8m (+5.3% y-o-y) met MKE/street estimates due to higher EBITDA and lower finance cost.
• Our forecasts are unchanged. Maintain BUY and DDM-based target price (COE: 6.3%, LTG: 1.5%) of S$1.13.
• We continue to like NetLink Trust as its 5.6% FY22E yield offers dividend visibility given its business nature. Changes to its regulated returns (7% pre-tax WACC) are key risks.

Normalising Installation Activities

• Revenue rose 5% y-o-y to S$93.4m due to higher installation-related revenue (+130.8% y-o-y), residential connections (+0.9% y-o-y), (Non- Residential Address Point (NBAP) & segment connections (+49.3% y-o-y) and diversion segment (+30.6% y-o-y). Installation-related revenue contributed the most to the increase on the back of normalised level of manpower as compared to last year, which was affected by the COVID-19 Circuit Breaker.
• As a result of higher revenue, EBITDA ticked up 1.1% y-o-y to S$69.5m. This is partially offset by higher installation cost and lower level of government grants. The rise in PAT was a result of higher EBITDA and lower finance cost.

Sustained Growth Momentum From NBAP

• For the NBAP segment, connections have jumped to 2,101 points segment is unlikely to move any needles as it contributes only 3% of total revenue.

M&A Plan in Still in Its Early Stage

• NetLink Trust previously mentioned it plans no deals are likely to be announced soon.

• Overall, we continue to like NetLink Trust for its dividend visibility as 93% of its revenue is backed by recurring cashflow.

Source: Maybank Kim Eng Research - 25 Aug 2021