Hence Netlink trust's distribution in the first 5 quarters of operation is more than its net profit. How many quarters more can the distribution amount remain above net profit?
One observation is that the cash available for distribution (CAFD) includes proceeds from loan facility. This formula for distribution will consistently increase debt level in the financial position. Maybe it's a way for Netlink trust to convert equity to debt in its capital structure, and to take advantage of debt leverage.
A comparison of the statement of financial position for FY19Q2 vs FY18Q4 shows the fall in net asset value. The NAV per unit consequently also fell in this period. These observations probably confirm the thesis of capital-to-loan conversion in the recent CAFD.
The gearing ratio (debt/asset) is 28.7% very low at this point. For comparison, REIT has an upper regulatory gearing limit of 45%. Most REIT hovers around 35-40% gearing. By this comparison I can see there is a lot of room for Netlink trust to convert capital-to-loan and increase its gearing.
There'd be another 12.5 cents available for capital-to-loan conversion before the gearing will hit 40%. If we assume the capital-to-loan conversion to take place at 2.5 cents per year, then the CAFD can continue at this level for another five years!
However, after five years, CAFD should revert to same level as net profit as it'd be prudent to maintain lower gearing ratio.
