SINGAPORE (June 30): RHB Research is keeping its “neutral” rating on Singtel with an unchanged target price of $3.90 despite an expected boost from the potential listing of Netlink NBN Trust (NLT).
“The impending listing of NLT would unlock and crystallise the value of the owner and developer of fiber assets for Singtel,” says RHB’s Singapore Research team in a Friday report.
However, RHB says it “remain[s] concerned over the heightened competitive risks in Singapore and Australia with the entry of TPG Telecom.”
Netlink on Tuesday lodged a preliminary prospectus with the Monetary Authority of Singapore (MAS) for its initial public offering (IPO) and listing on the Singapore Exchange (SGX).
It is reportedly offering 2.9 billion units in an indicative range of 80 cents to 93 cents each, putting the total deal at up to $2.7 billion.
(See: NetLink NBN Trust lodges prelim prospectus with MAS for $2.7 bil IPO)
The move will see Netlink, which designs, builds, owns and operates the passive fiber network infrastructure of Singapore’s next generation national broadband network (NGNBN), become only the second business trust to be listed on SGX, after Hutchison Port Holdings Trust ((HPHT) in 2011.
“Based on the recent draft prospectus lodged with MAS, NLT’s go-to-market valuation of $3.4-3.6 billion implies a 16.7x FY18F EV/EBITDA, which is supported by its resilient and captive business model,” says RHB. “Based on the offer price range, NLT’s prospective DPU yield range from 5-5.8%, which we consider as decent based on a 100% cash distribution.”
In addition, RHB says there is a possibility that Singtel may return additional cash from the selldown of NLT by way of a special dividend.
“Our current DPS forecast assumes 18 cents per share for FY18, which implies a payout of 70% and dividend yield of 4.7%. This could rise to close to 8% in the event of a special dividend,” RHB says.
As at 3.13pm, shares of Singtel are trading 2 cents higher at $3.90.
