NetLink NBN Trust (H1 FY26) Financial Results Analysis

NetLink NBN Trust (“NetLink Group”) has released its unaudited financial results for the half year ended 30 September 2025 (H1 FY26). This analysis provides a concise review of the key financial metrics, dividend developments, performance trends, and the outlook for investors based strictly on the reported data.

Key Financial Metrics and Performance Comparison

Historical Performance Trends

• Revenue Growth: Revenue grew by 1.1% YoY to \$207.1 million, driven primarily by higher ancillary project and co-location revenues. However, connections revenue saw a slight decline due to cleanup terminations and timing differences in GPON to XGSPON migrations.
• EBITDA Margins: Margins remain robust (69.3%) but declined slightly from the prior year due to higher operating expenses, including property tax and IT costs.
• PAT and EPS: Profit after tax fell 10.2% YoY, mainly due to increased depreciation and amortization following the capitalisation of Seletar CO, despite some offset from higher income tax credits.
• Distributions: Distribution per unit increased marginally to 2.71 Singapore cents, reflecting a stable payout policy even as PAT declined.

Dividends and Distribution

• H1 FY26 Distribution: \$105.6 million (2.71 cents per unit) declared, payable on 28 Nov 2025.
• H1 FY25 Distribution: \$104.4 million (2.68 cents per unit), previously paid on 29 Nov 2024.
• Dividend Policy: 100% of cash available for distribution is paid out semi-annually, in line with the stated policy.

Balance Sheet and Capital Management

• Total Assets: Increased to \$3,901.8 million, up \$39.9 million from 31 March 2025, mainly due to higher cash and deposits following notes issuance and RCF repayment.
• Total Liabilities: Rose to \$1,577.2 million from \$1,468.4 million, mainly from higher loans and the new \$300 million 10-year notes.
• Net Asset Value (NAV): NAV per unit stands at 59.7 cents, down from 61.4 cents at 31 March 2025, reflecting distribution payments and lower hedging reserve gains.
• Gearing/Refinancing: The Group actively refinanced debt by issuing \$300 million notes at 2.65% and arranging a new \$120 million 3-year sustainability-linked revolving credit facility, demonstrating proactive liquidity management.

Exceptional Items and Related Party Transactions

• Exceptional Items: No significant exceptional earnings or expenses were reported. Increased depreciation was highlighted as the main reason for lower PAT.
• Related Party Transactions: Management fees of \$450,000 and expense reimbursements of \$90,000 were paid to the Trustee-Manager. Additional service transactions with substantial unitholders and their subsidiaries are disclosed but are consistent with prior periods and not flagged as problematic.

Macroeconomic and Regulatory Environment

• Management notes that the global economic environment remains volatile, but Singapore’s inflation and interest rates are easing. The Group’s revenues are underpinned by regulated price certainty through the Interconnection Offer (ICO) framework.
• Investments in network upgrades and expansion continue, with the Capex Reserve Fund supporting regulatory requirements and future readiness.
• Operating cost pressures remain, and these may impact EBITDA margin.

Chairman’s Statement and Tone

“While the NetLink Group is focused on improving processes and exercising cost discipline, operating cost pressures remain and may have some impact on EBITDA margin. Higher depreciation, arising from Seletar CO and ongoing investments to expand and enhance our fibre network infrastructure, has impacted PAT. However, these capital investments form part of our Regulated Asset Base (RAB) and are eligible for regulatory recovery. The NetLink Group continues to invest strategically to meet growing demand across residential, non-residential, Non-Building Address Point (NBAP), and Segment connections. These efforts contribute to strengthening the network’s resilience and ensuring future readiness…Looking ahead, the NetLink Group remains focused on cost management while delivering operational excellence, supporting Singapore’s digital ambitions, and maintaining sustainable distribution to Unitholders. The NetLink Group’s commitment to robust governance, prudent financial management, and long-term sustainability positions it well to navigate the evolving landscape and capture future opportunities.”

Tone: The statement is cautiously optimistic. While acknowledging margin and profit pressures, it emphasizes the Group’s stability, regulatory recovery mechanisms, and strategic investments for long-term sustainability.

Outlook and Risks

• NetLink’s regulated, utility-like business model provides revenue and cash flow stability.
• Operating cost increases and higher depreciation are expected to persist but are mitigated by the RAB recovery mechanism.
• The Group is actively managing refinancing risk and has adequate liquidity through new facilities and long-term notes.
• Management continues to explore new investments in infrastructure-related businesses, in line with its risk appetite.

Conclusion and Investor Recommendations

Overall Assessment: NetLink NBN Trust’s financial performance remains stable, with modest revenue growth and a marginal increase in distributions, despite a drop in profit caused primarily by higher non-cash depreciation. The balance sheet remains robust, and proactive refinancing measures have reduced funding risk. The business outlook remains solid, supported by regulatory frameworks and Singapore’s ongoing digitalization needs. However, investors should note the persistent cost pressures and the slight squeeze on margins.

• If you currently hold NetLink NBN Trust: Hold – The Trust provides stable, predictable distributions and maintains a strong balance sheet. Unless your investment thesis has changed, there is no compelling reason to reduce exposure, especially if yield and capital preservation are your priorities.
• If you are not currently holding NetLink NBN Trust: Consider accumulating on dips – NetLink offers yield stability and defensive qualities, making it suitable for income-oriented portfolios. However, be aware of limited capital upside and ongoing margin pressures; entry is best considered on weakness or for yield-focused strategies.

Disclaimer: This analysis and recommendation are based solely on the information reported in NetLink NBN Trust’s H1 FY26 financial statements. It does not constitute personalized investment advice. Investors should consider their own objectives and risk tolerance before making any investment decisions.

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