NetLink NBN Trust Q4 net profit below IPO forecast, at S$15.3 million

FIBRE network provider NetLink NBN Trust's earnings came in below forecast in its fourth quarter, according to its first set of full-year results, out on Monday.

Net profit stood at S$15.29 million for the three months to March 31, or 6.4 per cent below projections, while revenue was 4.4 per cent lower at S$80.72 million, the manager said.

The weakness came from lower-than-expected revenue, especially in installation-related activities, according to financial statements. Turnover from this segment was S$4.59 million, or less than half the forecast S$9.42 million.

But the trust group noted that central office revenue came in higher than expected on the back of an increase in service charges, while recurring residential, non-residential and segment fibre connection revenue was up with more connections.

Full-year earnings was ahead of forecasts by 10.8 per cent at S$49.95 million, on lower operating and finance costs, even though the full-year revenue of S$228.6 million was 1.8 per cent under forecast - again owing to the poorer installation-related turnover.

Tong Yew Heng, chief executive of the manager, asserted in a media statement that the 12-month "better-than-forecast earnings reflects the resilience of our business model".

Distributions are scheduled on a twice-yearly basis, with the trust's maiden payout of 3.24 Singapore cents a unit due on June 8 for an annualised yield of 5.7 per cent, based on the offer price.

NetLink NBN Trust made its multibillion-dollar initial public offering in July 2017 at S$0.81 a unit, after telecoms giant Singtel was ordered to divest its majority ownership to maintain healthy market competition in the state-led Next Generation Nationwide Broadband Network project. Singtel retains a 24.99 per cent stake.

The manager said in its outlook statement that it expects to deliver the distribution forecast for FY2019 made in its prospectus, with an anticipated yield of 5.73 per cent. The prospectus forecast a net profit of S$65.69 million in that period, on a revenue of S$341.9 million.

But the trust group added that "overall revenues may be affected by lower installation-related revenue".

It also noted that the proportion of orders that met the quality of service timeframe in FY2018 still fell short of regulatory standards, despite an upward trend, but said that it "has started to pre-lay fibre infrastructure to selected non-residential buildings to speed up service provisioning".

The manager also said it "is monitoring the development of 5G network in Singapore and will explore opportunities associated with the new technology" and is working to anticipate future demand in the non-residential and non-building address points segments.

"With its extensive nationwide fibre network, the trust group is well-positioned to support Smart Nation initiatives, the developments in the Punggol Digital District and the Jurong Innovation District, and the fourth mobile telecommunication operator in its mobile network deployment," it added.

The counter closed flat at S$0.815, before the results announcement.