Source of the report is credited at the end of article whenever reference is made. MAS’ move to call on banks to cap their FY20E dividends caused banks’ average FY20E yield to fall to 4%. Singapore Share Investors | SGX Stock Analysis | Analyst Research Reports | Singapore Investment Blogs | Singapore Stock Market News | SGX Stock Picks | SGX Share Price | SGX Stock Forum | Singapore Stock Recommendation | SGX Stock Recommendation
Are the Dividends Sustainable? NetLink NBN Trust has outperformed the STI by 9% ytd and we expect further outperformance as investors seek shelter in high dividend yielding stocks amid external volatility.
Regulatory depreciation of NetLink Trust assets are over its useful life-time:Besides depreciation, other major expenses are Staff Cost, Installation and Diversion Cost and Operational and Maintenance Cost.Capital expenditure (CAPEX) for 1H-FY2020 clocked $43.9mil, much higher than any of the other hard expenses. About NetLink NBN Trust. However, this does not mean that it is in any immediate danger as simply taking two and a half years of financials is still too early to predict any severe impact on the trust. For 1H-FY2020, the DPU declared was 2.52c, therefore on an annualised basis, this would amount to 5.04c or about 3.3% increase – effectively continuing to pay more than its free cash flow.Based on our assessment above, we think that the DPU increase next year is unlikely to be significant and management is more likely to maintain payouts with slight increases.Based on the data for FY2018, FY2019 and the partial data for 1H-FY2020, NetLink Trust shows early signs of unsustainable dividends. Buy on: good earnings visibility, and; attractive dividend yields. As FY2018 was a partial year, the 3.24c DPU would be 4.15c if annualised to a full year. We don't want you to miss out. As a business trust, Netlink Trust distributes dividends based on its surplus cashflow. NetLink NBN Trust - UOB Kay Hian 2020-01-30: A Safe Haven, Stock Offers Sustainable Dividend Yield Of 5.1%. It includes in-depth analysis on equities, IPO's & REITs. This does not in anyway imply that it is in any imminent danger. At a gearing of just 14.9% and backed back SingTel as its biggest shareholder, Netlink Trust could easily just obtain financing in today’s low interest rate environment to continue to finance its capital expenditure.We think that at this juncture, the management is likely to be taking advantage of the low interest rate environment to leverage up to fund its capital expenditure. You will need to make your own independent judgment regarding the analysis. This is likely owing to increased number of fibre connections that is has taken up.Both residential as well as non-residential fibre connections have been growing. As such, we would be looking at its cash flow instead of earnings to determine if Netlink Trust can sustain its payouts.
As NetLink Trust is solely dependent on the Singapore market and with fibre broadband installations becoming increasingly common among households, this revenue stream will show slower and slower growth in the years to come.In addition to this, NetLink Trust business and ability to charge clients are regulated and subjected to review. Divs; Anns; Trans; Notes; Dividend Yield(TTM) = 5.18% If you find any of the dividend record is wrong or duplicated, please contact me. The difference between its free cash flow and distributions declared is not significant at about ~$30mil in FY2019 and ~$16mil in FY2020 which it could easily afford to support in the years to come.Our view is that this observation is a risk that all investors in Net Link Trust should be aware of and should monitor annually, but certainly not an immediate concern at this stage.In our next article on NetLink Trust, we will be looking at how the upcoming 5G may impact NetLink Trust’s business – boon or bane?If you have enjoyed this article and would love to learn more about ready and understanding financial statements of listed companies, head over to some of our popular education series:Tam Ging Wien has been an avid equities and real estate investor for over 10 years. I took advantage of the recent dip in prices ex-dividend to open a position in Netlink Trust. But I have to tell you it is not sustainable.Taking the free cash flow of $156.8m divided by the number of shares, I get 4.023cts of dividends. Its cash flow is also very steady & predictable. Our DDM-based Target Price (COE: 6.3%, LTG: 1.5%) is … OCBC is keeping its “buy” rating on NetLink Trust, but is placing its fair value estimate of $1.03 under review pending an analyst briefing.
I believe NetLink will have to spend the necessary capex to support the future deployment of this technology.The company’s net asset per unit is 75.7cts while the last traded price was 87.5cts. Free cash flow is obtained by taking cash flow from operations minus purchase of property, plant and equipment. NetLink Trust (SGX:CJLU) delivered 4QFY20 revenue of S$92.4m (+5% y-o-y, +1% q-o-q) and core net profit of S$27.9m (+39% y-o-y, +30% q-o-q). Stock analysis research and articles on this site are for the purpose of information sharing and do not serve as recommendation of any transactions. Therefore, we forecasted the figures for FY2020 by multiplying by 2. Support us and give our facebook page a 'like' or 'share' if you like the articles here! As for the remaining non-RAB revenue, NetLink has flexibility to dictate the pricing.A business needs to have pricing power.
That should be a red flag that dividend cuts are coming.Shareholders of NetLink NBN, you may want to take this into consideration! We forecast DPU of 5.1 S cents for FY20 and FY21, with distribution yields of 5.1% respectively.
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