SINGAPORE (Oct 11): With macro concerns ratcheting up and the Straits Times Index hitting 20-month lows, investors should take another look at defensive stocks like Netlink NBN Trust (NLT NBN), says OCBC Investment Research.

Over the course of the last three months, NLT NBN has achieved a total return of 6.1%, relative to the -1.1% and -2.8% registered by the FSTREI Index and STI Index, respectively.

While OCBC does acknowledge the inherent concerns with NLT NBN’s regulated business structure such as regulatory review risks and a regulated asset base, these are unaffected by the ongoing trade tensions.

“We continue to stay constructive on NLT,” says OCBC analyst Joseph Ng in a Thursday report and is retaining its fair value estimate of 90 cents with a 12-month dividend forecast of 4.6 cents.

Year to date, units in NLT NBN are down 6.6% to 77.5 cents or 38.5 times FY20F consolidated EPS of 2.0 cents.

Last week, a digital platform named Codex (Core Operations, Development Environment, and eXchange) was designated the sixth strategic national project that the Smart Nation and Digital Government Group (SNDGG) has embarked on.

One of the main features of Codex involves a government data architecture for common data standards and formats that would facilitate seamless data sharing between agencies.

Instead of building government ICT systems independently which limits economies of scale and interoperability, Codex would pivot away from this silo approach, and makes it easier for SNDGG to hasten the implementation of the Smart Nation programme.

“This would be beneficial for NLT NBN, as an expedited schedule would present quicker additional opportunities for NLT NBN to leverage its nationwide fibre network,” says Ng.

Meanwhile, Ng says fourth telco TPG’s entry, while a headwind for incumbents, is actually a positive for NLT NBN.

In TPG Telecom’s FY18 earnings call last month, the Australian group says it remains on track to achieve the required outdoor service milestone of coverage by end-2018 in Singapore, with its production network already covering in excess of 90% of outdoor areas. It was also mentioned that trial service would be conducted before the end of the year.

“TPG would need to tap on NLT NBN’s fibre network infrastructure to connect a substantial portion of its base stations, potentially contributing to NLT NBN’s non-residential and NBAP revenue,” says Ng.