In addition, NetLink has strong recurring cashflow from non-fibre and residential connections, with the residential segment representing some 62.5% of FY20 revenue. Chan expects this segment to provide earnings stability for NetLink, driven by high residential broadband penetration rate of 94% and annual new household formation of 25,000 units or a 10-year CAGR of 1.7% through 2029. Meanwhile, non-fibre segments (18.5% of FY20 revenue) are expected to remain stable due to long-term contracts.
Maybank Kim Eng has reinitiated coverage of NetLink NBN Trust with a “buy” call and a target price of $1.08.
Analyst Kareen Chan says this is because NetLink’s business is less volatile than other yield plays such as certain REITs and telcos, amid risks of distribution per unit (DPU) cuts and competition. In addition, NetLink, being the sole nationwide provider of passive fibre network infrastructure in Singapore, is a domestic-yield play amid Covid-19 re-opening uncertainties.
