UOB Kay Hian Research analysts Chong Lee Len and Chloe Tan have maintained their “buy” call on NetLink NBN Trust (Netlink Trust) with a target price of $1.08.
Chong and Tan see Netlink Trust as a safe haven stock, with an attractive 5.3% dividend yield. “We continue to see the stock as a good shelter amid market volatility given its strong earnings visibility, healthy balance sheet and cautious approach in terms of overseas/domestic acquisition approach,” they note in a June 18 research note.
To sustain dividends and spur growth, Netlink Trust is evaluating potential new investments in telco assets which may include fibre networks, telco towers and distribution antennas.
In that respect, Chong and Tan view that Netlink Trust will have sufficient headroom to drive its acquisition ambitions without compromising on cash flow and dividends, given its gross debt to EBITDA ratio of 2.5 times as of March 31.
See also: Analysts optimistic on Netlink as it posts 'resilient' FY21 results
The analysts are projecting an annual distribution per unit (DPU) of 5.1 cents for FY2022-FY2024 ending March.
They view Netlink Trust as a beneficiary of on-going digitalisation, pointing out that it grew non-building access point (NBAP) connections by 18% y-o-y to 1,996 connections in FY2021. “The division will continue to benefit from the ongoing Smart Nation initiatives as the government continues to encourage higher productivity through digitalisation,” the analysts add.
Netlink trust is also expected to benefit from the roll-out of the 5G network and services. “We expect the 5G nationwide licensees like StarHub and the M1 consortium and localised licensee TPG to work closely with Netlink to provide comprehensive fibre infrastructure to minimise total 5G capex, “Chong and Tan explain.
Factoring all these, Chong and Tan see a stable FY2022 outlook with “Netlink reiterating that its business remains resilient amid market volatility”.
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They reiterate their ‘buy’ call, recommending investors to buy the counter in view of the current share price weakness. “At our target price, the stock trades at 17 times FY2021 EV/EBITDA, one standard deviation SD above its three-year mean EV/EBITDA of 15.3 times,” they note.
“We expect the stock to further outperform as investors seek shelter in high dividend yielding stocks amid external volatility,” Chong and Tan add.
As at 2.31pm, shares in Netlink Trust are trading flat at 95.5 cents.
