Highlights

• 1HFY27 revenue moderated by 2% yoy but good cost discipline and lower O&M help shore up EBITDA of S$145m (EBITDA margin 71%). That said, net profit fell 7% yoy, dragged by higher depreciation and came in below expectations. 
   
• The discrepancy on our end is due to higher-than-expected depreciation charges, leading us to cut FY27-28 earnings estimates by 10-15%. Netlink declared an interim dividend of 2.74 S cents/share (1HFY26: 2.71 S cents/share). This implies an annualised dividend yield of 6.2%.
   
• Maintain HOLD with a DCF-based target price of S$1.01.
   

Analysis

• 1HFY27: Earnings below expectations. NetLink NBN Trust (Netlink) reported a weaker 1HFY27 revenue (-2% yoy), but managed to deliver stable EBITDA (+1% yoy) with healthy margin expansion (+2.1 ppt) from lower operations and maintenance (O&M) expenses. 1HFY27 net profit, however, fell 10% yoy due to elevated depreciation from the Nationwide Broadband Network (NBN) upgrade and internal IT system upgrades. Accounting for 40% of our full-year forecasts, we deem the results to be below expectations.
   
• For 2QFY27, revenue was flat qoq, but fell 2% yoy given lower ancillary project revenue (-32% qoq, -37% yoy) as projects were delayed. This was cushioned by a sequential pickup in installation (+17% qoq) and co-location segment (+7% qoq) revenue contribution. 2QFY27 net profit improved to RM22.1m (+24% qoq, +11% yoy), driven by healthy EBITDA growth (+9% qoq, +6% yoy) from lower PPE write-off and easing lease expenses, coupled with a higher income tax credit during the quarter.