3 Key Takeaways from Netlink NBN Trust’s Earnings Report

May 21, 2024

Netlink NBN Trust (SGX: CJLU), or NLT in short, continues to solidify its reputation as a high-yielding, safe haven investment, underpinned by predictable revenue streams. Investors who are seeking stable and reliable returns will find NLT to be an appealing investment option. Here are 3 key takeaways from its recent earnings in FY2024.

1. Sustained Dividend Despite Profitability Challenges

NLT maintained its dividend payout with a slight increase of 1.1% year-over-year, declaring a final DPS (Dividend Per Share) of 5.3 Singapore cents for FY2024. This resilience in dividend distribution comes despite a 3% decline in core net profit, driven by increased operational expenses. The consistent dividend payout underscores NLT’s commitment to shareholder returns, especially noteworthy amidst a challenging profitability environment. This translates into an attractive yield of around 6%.

2. Growth in Fibre Connections

NLT reported robust growth in its fibre connections during the fiscal year, demonstrating strong market demand and operational growth. The company saw increases across all segments: residential connections grew by 1.5%, non-residential connections by 2.7%, and non-building address point and segment connections by a substantial 18%. This growth highlights NLT’s expanding market presence and could be a bellwether for future revenue increases, reinforcing its strategic investments in infrastructure.

3. Stable Outlook Despite New Pricing Regime

Starting April 2024, NLT has implemented new interconnection offer (ICO) pricing, which adjusts the cost that other service providers pay to use NLT’s network. Despite a decrease in residential connection pricing by 2% and a 4% drop in non-building address point connection pricing, NLT’s management has assured stakeholders of stable dividend payouts in the upcoming fiscal year. This confidence is supported by NLT’s robust cash generation and a sound debt profile, projecting a strong defensive posture against the backdrop of changing pricing dynamics.

Stable dividend play for income-seeking investors

Netlink NBN Trust appears to be navigating its operational and market challenges effectively, maintaining strong dividend payouts and showing robust growth in its core business areas. Investors looking for a defensive play with clear visibility on dividends might find NLT an appealing option, particularly given its strategic initiatives aligning with Singapore’s technological infrastructure goals. Potential investors should consider the company’s ability to sustain its dividend in light of the new ICO pricing and keep an eye on further developments that might impact its profitability and market position. For those already invested, it could be prudent to hold and monitor the company’s performance as it adapts to the evolving competitive landscape.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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