SINGAPORE (Aug 7): OCBC Investment Research is maintaining its “buy” call on Netlink NBN Trust (Netlink Trust) with 90 cents fair value.
OCBC notes Netlink Trust’s trustee-manager is focusing on supporting Smart Nation initiatives as required by requesting licensees, government agencies and various end-users.
“We remain positive on Netlink Trust’s defensive attributes, as about 91% of its 1Q19 revenue is regulated, and about 90% of revenue is based on long-term contracts or customers with a stable profile,” says analyst Joseph Ng in a Tuesday report.
TPG – Singapore’s fourth telco – is on track to meet its outdoor requirements after speeding up its rollout activities compared to last year.
While this is a positive for Netlink Trust, Ng says the category associated with such revenue -- NBAP and Segment Fibre connections -- forms only 2% of 1Q19 revenue.
Netlink Trust is maintaining its FY19 forecast distribution yield of 5.73% but Ng says DPU could surprise on the upside if the run-rate could be maintained.
Ng has a forecast of $179.9 million of distributions to unitholders in FY19, implying a yield of 5.9% based on Monday’s price.
“While this is similar to the FTSE Straits Times REIT Index’s 6.1% forward yield, we believe Netlink Trust offers a more defensive business model with a lower level of leverage,” says Ng.
To recap, Netlink announced 1Q19 earnings of $19 million, 26.9% higher than the $15 million projected in its IPO prospectus.
See: NetLink NBN Trust exceeds projected 1Q19 earnings by 26.9% at $19 mil
Revenue also exceeded forecasts by 2.8% at $86.1 million, thanks to higher than projected diversion revenue and ducts & manholes service revenue.
As at 3.08pm, units in NLT NBN are down 0.5 cent at 77.5 cents.
