CFA Society Singapore
SINGAPORE (Feb 8): UOB Kay Hian is maintaining its “buy” call on NetLink NBN Trust considering its dominant market share of 90% and 34% for residential and non-residential fibre connections, respectively, where growth is projected at a three-year CAGR of 6.2%-8.5% for FY18-21.
In a Friday report, analyst Jonathan Koh highlights NetLink’s current relationship with TPG Telecom as the latter’s provider of non-building address point (NBAP) connections for backhaul transmission.
“TPG is expected to require NBAP connection’s for 3,000 base stations over the next three years,” says Koh, who sees growth in demand for NBAP connections as a catalyst should the government decide to accelerate the roll-out of Smart National initiatives in the near-term.
As such, NetLink is among UOB’s February alpha “buy” picks alongside telco incumbent Singapore Telecommunications (Singtel), gateway services provider SATS, high-precision injection mold manufacturer and supplier Fu Yu Corporation, Oversea-Chinese Banking Corporation and systems integrator CSE Global.
Singtel has been rated “buy” with a target price of $3.58. Similarly, SATS, Fu Yu Corp, OCBC and CSE Global have been given a “buy” rating each with the respective target prices of $5.60, 27 cents, $13.82 and 59 cents.
“Most of our picks notched up gains in January, except OCBC. Our portfolio gained 5.7% m-o-m, vs the FSSTI’s +4.0% for the month. The most notable outperformer within our picks was CSE Global which gained 13.2% mom as it secured infrastructure projects worth $84.8 million in 4Q18, bumping up its full-year order wins to $150.5 million (+43.6% y-o-y),” says the research house.
“Fundamentals remain intact and we see further upside to the target prices for our stocks,” it adds.
As at 3:57pm, shares in NetLink are trading 0.64% lower at 78 cents or 23.3 times FY19F book value.
Singtel, SATS, Fu Yu, OCBC and CSE Global are trading at $3.05, $4.85, $11.47 and 46 cents, respectively.