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NetLink Q1 profit up by 10% to S$20.9 million as cable switch drives revenue growth

FIBRE network operator NetLink NBN Trust saw earnings jump in its first quarter, according to results out on Monday, with revenue growth fuelled by StarHub’s cable customer migration.

Net profit was up by 10 per cent year on year to S$20.9 million, for the three months to June 30, as the increase in expenses came slower than the boost to the top line.

Turnover rose by 6.9 per cent to S$92 million, on more residential connections and installation-related revenue in the core fibre business, which more than covered the decline in contributions from ducts and manholes service and diversion.

The group had 1.38 million residential connections as at end-June, up by 4.1 per cent since March 31, with NetLink attributing the revenue increase in this segment to installation-related revenue and service activation fees, as StarHub migrated its co-axial cable subscribers to fibre.

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Mainboard-listed telco StarHub, which said in November 2018 that it would pull the plug on its cable products and services, recently extended the deadline from June 30 to Sept 30.

Meanwhile, the number of non-residential connections ticked up by 0.6 per cent to 46,550, but non-building address point (NBAP) connections were down by 5.2 per cent to 1,505, as NetLink said that a scheme to roll out connected devices islandwide has been put under review.

Earnings per unit stood at 0.54 Singapore cent, up from 0.49 Singapore cent before.

NetLink said in its outlook statement that revenue from key connection services is expected to be higher in the coming fiscal year, largely on residential connections and revenues.

In the non-residential segment, the group has targeted the requesting licensees that provide fibre services to retail service providers, alongside government agencies and small businesses.

As for the NBAP business and segment connections, NetLink is aiming for a denser network and new product offerings, even as it gears up to support 5G infrastructure.

Still, capital expenditure is also expected to rise, as the group will keep investing and expanding its network to improve capability and resiliency, it noted.

NetLink had S$634.8 million in unsecured borrowings as at June 30, with a gross debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) ratio of 2.5 times - which it told investors has left it with the debt headroom to fund future capex.

No distribution was recommended, as the group makes pay-outs on a half-yearly basis.

Citi analyst Hussaini Saifee wrote in a note on Sunday that NetLink’s growth is “better than domestic telco plays”, which have posted falls in turnover.

Mr Saifee added that demand for NetLink’s offerings, which has been supported by StarHub’s ongoing cable-to-fibre migration for broadband and television, could also come to be driven by a national 5G roll-out as home broadband growth tapers off.

NetLink has proposed that Singapore adopt a “neutral host” model for its upcoming 5G network next year, according to an industry consultation that closed in July. It is eyeing a wholesale model for 5G spectrum, and has touted its experience with a similar model for the fibre network.

“The group is monitoring the development of the 5G network in Singapore and will explore opportunities associated with the new market development,” it said in its outlook statement.

Tong Yew Heng, chief executive of the manager, added: “Our extensive fibre network puts us in good stead to support not only the connections in the residential and non-residential segments but also Singapore’s Smart Nation initiatives and applications by providing the fibre backbone.”

NetLink NBN Trust units closed lower on Monday by half a Singapore cent, or 0.57 per cent, at S$0.88, before the results were released.