(15-08-2019, 12:44 PM)weijian Wrote: [ -> ]A couple of interesting things about NLT AGM as summarized by the folks at Fifth Person. Point 7 (threat of 5G over fibre broadband) was also extensively discussed on VB.com and it falls very similarly to what some folks like tanjm/Sampling have mentioned.
In addition on Point 8 (dividend funded by FCF + loan), generally we know that the returns from NLT is a combination of return on capital and return of capital. But there is also a substantial amount of "return of (loaned) capital" - dividends funded by loans (Starhub/APTT comes to mind). For a "leasehold type of business", no matter how the CFO likes to phrase it (better capital efficiency), it is simply paying money currently out of future money.
10 things I learned from the 2019 Netlink Trust AGM
Netlink NBN Trust is the sole owner of Singapore’s passive fibre network infrastructure, which provides nationwide coverage of fibre broadband services. It is also responsible for the maintenance and operation of any infrastructure related to the fibre network, including ducts, manholes, fibre cables, and central offices.
As a business trust, Netlink distributes 100% of its cash flows after company expenses such as management costs and interest payments. This enabled the company to pay shareholders a healthy distribution per share of 4.88 cents over the past year. This translates into an attractive yield of 5.55% based on its closing price of S$0.88 on 8 August 2019.
While the dividend yield is enticing, it is important to find out whether the dividend can be maintained (or increased) going forward. In light of this, I attended Netlink Trust’s 2019 AGM for more business insights.
https://fifthperson.com/2019-netlink-trust-agm/
In the last 5 years, NLT has been efficient with its capital management I suppose.
OCF+lease net CAPEX Distribution Deficit
FY24 285,286 127,630 205,371 -47,715
FY23 282,447 96,733 202,253 -16,539
FY22 254,874 73,865 199,135 -18,126
FY21 260,264 60,246 197,186 2,832
FY20 259,504 75,531 193,290 -9,317
Sum
-88,865
CAPEX has largely been funded by a combination of OCF and debt. In the 1st 5 years, net debt has largely increased ~89mil (or ~3.6% of net asset value), while its own net asset value reduces at an annual rate of ~4% as a result of distributions.
The new pricing that kicked in in FY25 (1st April 2024) is ~2% cheaper and does have some impact but should probably be negated by the increase of connection points.
In the absence of a big reduction in interest rates ditto FY21, at some point in the future, NLT has to be reducing its dividend payout as debt continues to pile up while net asset value reduces.
