SINGAPORE (Mar 20): OCBC Investment Research is maintaining its “buy” call on Netlink NBN Trust (NLT NBN) with an unchanged fair value estimate of 90 cents.
In a Wednesday report, analyst Joseph Ng says, “There were a number of topics from the recent Committee of Supply (COS) debate in Parliament that, in our opinion, serve to reiterate the longer term growth opportunities for NLT NBN.”
During the debate, Minister Lawrence Wong mentioned about Paya Lebar’s future, which will see about 800 hectares of land freed up for public and private housing, following the relocation of the existing airbase.
The Greater Southern Waterfront is also expected to undergo future redevelopment.
The analyst reckons that these developments would provide longer term opportunities for the trust to grow residential fibre connections.
Meanwhile, Minister S Iswaran also touched on the topic of 5G network being slated to roll out by 2020.
“While we note the possible pushback from telcos in our recent sector report, the introduction of 5G would undeniably have to come at some point,” says Ng.
According to StarHub, the analyst notes that with 5G, three to four more base stations would be needed for every existing one. These base stations will likely require a fibre backhaul connection, increasing the demand for NLT NBN’s fibre network infrastructure.
In addition, there has been speculations that Singtel might be paring down or divesting its stake in NLT NBN. This speculation has been further fuelled by the US$525 million cash outlay Singtel is slated to make a part of its participation in Bharti Airtel’s rights issuance, in line with its 15% direct stake.
But management did note that the cash outlay should be funded through existing cash and debt, so there is no immediate reason to divest off any non-core assets.
Singtel has also said that it views its SingPost and NLT NBN stakes as its (more sizeable) non-core assets, and would explore divesting if a good opportunity arises.
“Conceivably, a divestment of NLT could put some pressure on the share price, but we would take it as an opportunity to accumulate, barring any other extraneous factors,” says Ng.
As at 12.30pm, units in NLT NBN are trading at 80 cents or 45.8 times FY19 earnings with a DPU yield of 5.8%.
