Netlink Trust

[BlackCat]

Need some help here. Anyone know what is the Beta of NLT ?
What is your reference to get the Beta value ?

If you mean its stock price volatility compared to STI, you could try https://www.investopedia.com/ask/answers...-excel.asp
Downloading the data from yahoo:
  https://finance.yahoo.com/quote/CJLU.SI/...?p=CJLU.SI
  https://finance.yahoo.com/quote/%255ESTI...I/history/

I'm pretty sure its < 1

[corydorus]

Need some help here. Anyone know what is the Beta of NLT ?
What is your reference to get the Beta value ?

If you mean its stock price volatility compared to STI, you could try https://www.investopedia.com/ask/answers...-excel.asp
Downloading the data from yahoo:
  https://finance.yahoo.com/quote/CJLU.SI/...?p=CJLU.SI
  https://finance.yahoo.com/quote/%255ESTI...I/history/

I'm pretty sure its < 1

Yes is low and nowhere near 7%. Question is who should compared it to ? Secondly the formula looks like is after WACC there is Depreciation and Capex need to be included.

[BlackCat]

Need some help here. Anyone know what is the Beta of NLT ?
What is your reference to get the Beta value ?

Using the past 5 years of yahoo closing price data, I get that NLT has a beta of 0.33 compared to STI.
In other words, NLT's stock price was 67% less volatile than the STI. There are many days when NLT's stock price closes unchanged from the previous day.

  calculate beta (csv).txt (Size: 47.73 KB / Downloads: 2)

[BlackCat]

It is entirely possible that cost of equity is 10%.

The following study estimated a COE (for healthcare infrastructure) of between 12 and 15% (see box 5 on pg 22) for a number of developing markets, not counting a illiquidity premium. No doubt, Singapore is a better bet, but 10% is within the ballpark.
https://ppiaf.org/documents/5838/download

Thanks tanjm.  Looking at the study, in box 5, they:

1) Estimate that country's market's equity risk premium (EMPR).
  They get 8.55-9.75% for these countries.
  The estimate because emerging markets do not have a long price history.  Normally we would use the price history (historical risk premium approach).

  Googling for Singapore Equity Risk Premium I get:
    4.72% from NYU, Jan 2021
    5.7% (Bank of Portugal Economic Bulletin) average from 1995 to 2008
  These numbers are a lot lower than the study.
  If anyone has the Singapore Equity Risk Premium a good source like Bloomberg, I'd appreciate it.

2) Calculate the project's beta.  They do a lot of work to find comparable sectors, deliver them, and de-lever therm, re-lever them.  Giving "Adjusted Beta".  All their values are more than 1.
    I calculated NLT's beta (compared to STI) at 0.33, based on 5 years' closing prices.

3) Calculate the cost of equity.  Can't see exactly how they did it, but its usually "Market Risk Premium" times "stocks beta", with the risk free rate thrown in.
My market risk premium and beta are so much lower than theirs, the cost of equity would be drastically lower.  I can easily get 5% or below.

Summary for WACC:
They might decrease it because:

• Lower interest rates, NLT's low share price volatility and STI's low market risk premium.
  
• More popular to lower everyone's phone bills than to maintain dividends.
  
• Relief to squeezed telcos.
  

Why they might maintain or limit the decrease:

• An tanjm said: "it makes no sense that the net WACC would gyrate so violently. It scares off investors".
  
• No election coming up. Save ammo to use it later.
  

We don't know what IMDA will do, but either could be justified. I think they lower it a bit to see how much they can get away with.

[¯|_(ツ)_/¯]

Netlink Trust@95.5

AGM held by way of electronic means on Monday, 19 July 2021 at 2.00 p.m.
https://links.sgx.com/1.0.0/corporate-an...be502e3846


Stay home and stay safe, everyone.

[weijian]

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.

[CY09]

Is there a company that followed this trajectory? Yes. Asia Pay TV Trust

What happened to APTT in the end? The trust cut its dividends and used "OCF- Maintenance CAPEX- distribution" to pay down loans. History rhymes.

Whats good for Netlink? Low leverage ratio at 20+%. The saving grace is that it has hedged much of its debts and its pegged to SORA. Year on year, the EIR is growing and that is due to its old hedges expiring. EIR will continue to climb. So finance expenses.

Netlink: Will Dividends be Cut? In my view, likely so, finance expenses is growing much faster than OCF growth. Taking on more debt at SORA rates will just keep pushing EIR up. End state it could be where "OCF+Lease - Net CAPEX= Distributions". While leverage is sound at 23.1%, the march up to 30% leverage ratio could be where it stops.

[weijian]

So end of the day when you grow your business, your Regulator cuts your unit pricing. So there is really not much advantage in terms of economies of scale. But the flipside is, you are on a "cost+ model" since the Regulator also looks at WACC.

NetLink NBN Trust (“NetLink”) AGM held on 23 July 2024 at 2.00 p.m

Throughout the IMDA price review process, NetLink had very in-depth discussions with the IMDA on all aspects under the price review framework and on the rates to be set. The outcome of the review, which balanced the interest of NetLink and the end-users, took into account the much larger end-user base of more than 1.5 million end-users today compared to a much smaller base more than five years ago.

With a larger end-user base, the total regulated revenue generated would not be materiality affected in the new regulatory period as compared to the previous one even though for example the monthly recurring charge for residential connection declined by $0.30 from $13.80 to $13.50.

AGM MoM:
https://links.sgx.com/FileOpen/NetLink_N...eID=815661