SINGAPORE (Nov 23): UOB KayHian is maintaining a “buy” on what it says is the most defensive stock listed on the Singapore Exchange: NetLink NBN Trust.

UOB likes NetLink for its low volatility but high liquidity; stable revenue streams; high barriers to entry and blue-chip customer base.

In addition, Singtel’s and StarHub’s decision to retire their legacy copper wire and cable networks would accelerate growth in NetLink’s residential fibre connection,

StarHub has decided to migrate its customers of both residential broadband and pay-TV to an all-fibre network by June next year.

This follows Singtel closure of its copper-based ADSL connections for broadband, TV and digital voice in 1H18.

As of end Sept, StarHub had 473,000 residential broadband customers, of which 403,000 were fibre connections. Singtel has 624,000 fixed broadband customers, of which 616,000 are on fibre.

In a Wednesday report, analyst Jonathan Koh says the moves by the telcos will accelerate the migration to fibre connections.

“We estimate the number of fibre connections at NetLink NBN Trust (NetLink) would increase 9% in FY19 and 6.2% in FY20,” says Koh.

Meanwhile, management is closely monitoring developments on the roll-out of 5G networks in Singapore.

According to Koh, NetLink is in discussions with all mobile operators to deploy their 5G networks via fibre and is open to invest in network sharing technology.

NetLink also has low gearing with gross debt/EBITDA at 2.6x and has sufficient debt headroom to finance further expansion although management intends to keep gross debt/EBITDA at below 4x.

Year to date, units in NetLink are down 8.3% to 77 cents.