+ Compensated for the loss in revenue. Netlink was compensated for the lockdown. EBITDA grew 3.4% YoY due to the contribution of S$2mn from JSS and another net $1mn property tax rebate. The grants will remain into the following quarters but at lower amounts.
– All activity reliant revenue suffered. Lockdown delayed activity in multiple business segments. Lack of workers meant reduced installation for residential and non-residential installations. A slowdown in property and infrastructure construction activity meant less diversion revenue.
The weaker financials was due to the lockdown. The availability of workers is now back to normal capacity. We expect any loss in revenue this quarter to recover in the following months. Only diversion revenue (~4% FY19 revenue) could face a long delay. It is dependent on major construction projects which will require more time to restart. Conversely, the pandemic has resulted in more activities to be conducted at homes. This will help to accelerate the adoption of fibre with households. Capex might be lower than last year as it is tied to installation activity.
Maintain ACCUMULATE with unchanged TP of S$1.03.
We find NetLink dividend yields attractive and sustainable. Recurrent revenues from the monthly subscription of residential connections provide a stable base of cash-flows to maintain dividends. Furthermore, regulated returns from capital expenditure will provide additional growth in future years.