With IMDA price review complete, analysts cheer 'long-award closure' for 'very attractive' Netlink NBN Trust

Jovi Ho2023-11-28

CGS-CIMB forecasts DPU of 5.3 cents for FY2024 ending March 2024, which represents a 6.5% dividend yield. The Infocomm Media Development Authority (IMDA) announced on Nov 27 the results of its review ...

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The Infocomm Media Development Authority (IMDA) announced on Nov 27 the results of its review ...</p>\n\n<a href=\"https://www.theedgesingapore.com/capital/brokers-calls/imda-price-review-complete-analysts-cheer-long-award-closure-very-attractive?utm_source=Blog&utm_medium=RSS&utm_campaign=Tiger_Brokers_app_RSS\">Source Link</a>\n\n</div>\n","source":"edge_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>With IMDA price review complete, analysts cheer 'long-award closure' for 'very attractive' Netlink NBN Trust</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWith IMDA price review complete, analysts cheer 'long-award closure' for 'very attractive' Netlink NBN Trust\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-28 06:52 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.theedgesingapore.com/capital/brokers-calls/imda-price-review-complete-analysts-cheer-long-award-closure-very-attractive?utm_source=Blog&utm_medium=RSS&utm_campaign=Tiger_Brokers_app_RSS><strong>Jovi Ho</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>CGS-CIMB forecasts DPU of 5.3 cents for FY2024 ending March 2024, which represents a 6.5% dividend yield. The Infocomm Media Development Authority (IMDA) announced on Nov 27 the results of its review ...</p>\n\n<a href=\"https://www.theedgesingapore.com/capital/brokers-calls/imda-price-review-complete-analysts-cheer-long-award-closure-very-attractive?utm_source=Blog&utm_medium=RSS&utm_campaign=Tiger_Brokers_app_RSS\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SG9999003826.SGD","symbol_name":"日兴资管新加坡股息基金 SGD","start_time":0,"source_url":"https://www.theedgesingapore.com/capital/brokers-calls/imda-price-review-complete-analysts-cheer-long-award-closure-very-attractive?utm_source=Blog&utm_medium=RSS&utm_campaign=Tiger_Brokers_app_RSS","article_id":"2387105120","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2387105120","pubTimestamp":1701125564,"sourceInfo":{"source_id":"edge_highlight","name":"Edge"},"weMediaInfo":null,"summary":"CGS-CIMB forecasts DPU of 5.3 cents for FY2024 ending March 2024, which represents a 6.5% dividend yield. ","collect":0,"end_time":0,"defaultTopTitle":"theedgesingapore.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SG9999003826.SGD":"日兴资管新加坡股息基金 SGD","BK6112":"综合性银行","LU0873338254.USD":"FULLERTON LUX FUNDS - ASIA GROWTH & INCOME EQUITIE \"I\" (USD) INC","LU0577902611.USD":"FULLERTON LUX FUNDS - ASIA GROWTH & INCOME EQUITIE \"A\" (USD) ACC","CJLU.SI":"网联宽频信托","SGXZ58947870.SGD":"LIONGLOBAL SINGAPORE DIVIDEND EQUITY (SGDHDG) INC","LU0630378429.USD":"HSBC GIF ASIA PACIFIC EX JAPAN EQ HD \"AM2\" (USD) INC","LU0577902371.SGD":"FULLERTON LUX FUNDS - ASIA GROWTH & INCOME EQUITIE \"I\" (SGD) ACC","SG9999002620.SGD":"LionGlobal South East Asia SGD","LU0557290698.USD":"施罗德环球可持续增长基金","LU0577902298.EUR":"FULLERTON LUX FUNDS - ASIA GROWTH & INCOME EQUITIE \"I\" (EUR) ACC","BK6516":"银行与投资服务概念","SG9999013460.SGD":"LionGlobal Singapore Dividend Equity Fund SGD","WACC":"WestAmerica Corp.","LU0831093199.SGD":"HSBC GIF MANAGED SOLUTIONS ASIA FOCUSED INCOME \"AM3\" (SGDHDG) INC","NBN":"东北银行","BK6523":"ESG概念","SG9999000343.SGD":"Schroder Singapore Trust A Dis SGD","SG9999013478.USD":"利安新加坡股息基金","SG9999006266.SGD":"MANULIFE SINGAPORE EQUITY \"A\" (SGD) ACC","SG9999008742.SGD":"Eastspring Investments Unit Trusts - Singapore ASEAN Equity SGD","LU0577902538.SGD":"Fullerton Lux Funds - Asia Growth and Income Equities A Acc SGD","LU0577902454.USD":"FULLERTON LUX FUNDS - ASIA GROWTH & INCOME EQUITIE \"I\" (USD) ACC","SG9999002562.SGD":"LionGlobal Asia Pacific SGD","SG9999002604.SGD":"LionGlobal Singapore/Malaysia SGD","SG9999002679.SGD":"LionGlobal Singapore Balanced SGD","SG9999011175.SGD":"Nikko AM Global Dividend Equity Dis SGD-H","SG9999005177.SGD":"Legg Mason Martin Currie - Southeast Asia Trust A Acc SGD","D05.SI":"星展集团控股","SG9999001846.SGD":"Schroder Asian Equity Yield A Dis SGD","BK6513":"电信服务股","SG9999014302.SGD":"RHB Singapore Income Fund SGD","BK6017":"非传统电信运营商","SG9999000475.SGD":"Aberdeen Standard Singapore Equity SGD","SG9999001135.SGD":"United ASEAN Fund SGD","LU0128522157.USD":"TEMPLETON ASIAN GROWTH \"A\" ACC","LU0251143029.SGD":"Fidelity ASEAN A-SGD","LU0048573645.USD":"富达东盟基金","SG9999014492.USD":"NIKKO AM ASEAN EQUITY \"A\" (USD) ACC","LU0084288322.USD":"Natixis Asia Equity RD USD","LU0384037296.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AT\" (USD) ACC","LU0488056044.USD":"Allianz Asian Multi Income Plus Cl AM DIS USD","LU0210637038.USD":"HSBC GIF THAI EQUITY \"AD\" INC","SG9999000459.SGD":"Aberdeen Standard Pacific Equity SGD","SG9999004220.SGD":"Nikko AM Shenton Asia Dividend Equity Fund  SGD","SG9999014484.SGD":"Nikko AM ASEAN Equity Fund A SGD","SG9999016042.SGD":"Schroder Singapore Trust A Acc SGD","LU0532188223.SGD":"JPMorgan Funds - ASEAN Equity A (acc) SGD","LU0831103253.SGD":"JPMorgan Funds - Asia Pacific Income A (mth) SGD","LU0029875118.USD":"TEMPLETON ASIAN GROWTH \"A\" INC"},"translate_title":"随着IMDA价格审查的完成，分析师为“非常有吸引力”的Netlink NBN Trust“长期合同关闭”欢呼","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WACC":1,"NBN":1,"CJLU.SI":1,"D05.SI":0.67},"content_text":"CGS-CIMB forecasts DPU of 5.3 cents for FY2024 ending March 2024, which represents a 6.5% dividend yield. The Infocomm Media Development Authority (IMDA) announced on Nov 27 the results of its review of the wholesale prices, terms and conditions of Netlink NBN Trust’s interconnection offer (ICO) for the next five years. This has removed a months-long overhang on the fibre network infrastructure operator, and analysts are relieved at the “long-award closure”.\nRevised prices, which will take effect from April 1, 2024, are lower for residential and non-building address point (NBAP) connections, down 2% to $13.50 and 4% to $70.50 respectively. Non-residential end-user connection prices, meanwhile, will remain unchanged at $55.00 per month.\nPricing terms are regulated using the Regulated Asset Base (RAB) framework, which allows Netlink to recover return of capital deployed, return on capital employed and operating expenditure. The weighted average cost of capital (WACC) determined by IMDA for this review period is held stable at 7%. Both IMDA and Netlink may propose to conduct a mid-term price adjustment in the third year, in the event of any significant changes to cost or demand forecasts due to unforeseen circumstances. \nOutcome 'slightly better than expected'\nCGS-CIMB Research analyst Ong Khang Chuen thinks the review outcome is “slightly better than expected”. He had assumed a 2% reduction in Netlink’s residential ICO pricing and a 5% reduction for non-residential and NBAP connection pricing, given a higher number of active fibre connections.\nIn a Nov 27 note, Ong maintains his “add” call on Netlink with an unchanged target price of 95 cents. “We think the latest development removes a key overhang on NLT’s share price for the past year, and we think it strengthens our investment thesis of NLT as a defensive amid macro uncertainties, given strong distribution per unit (DPU) visibility.”\nOng likes Netlink’s strong operating cash flow generation, which should continue to support “stable” DPU growth of 2% per annum through to FY2030 “without meaningfully impacting its debt profile”. He forecasts DPU of 5.3 cents for FY2024 ending March 2024, which represents a 6.5% dividend yield. \nNetlink pays distributions semi-annually. For FY2023, Netlink paid distribution per unit (DPU) of 5.24 cents, marking another increase since its IPO in 2017. In FY2018, FY2019, FY2020, FY2021 and FY2022; Netlink’s DPU was 3.24 cents, 4.88 cents, 5.05 cents, 5.08 cents and 5.13 cents respectively.\n‘Very attractive’ yield\nSimilarly, DBS Group Research had projected much more aggressive cuts. “Given that risk-free rate has risen to 3.0% compared to 2.1% seen at the time of its IPO in 2017, we had expected a 20-30 basis points (bps) rise in the regulatory return… [However,] Netlink has been allowed a regulatory return of 7%, same as last term, for a five-year period from April 2024.”\nDBS is maintaining “buy” on Netlink with an unchanged target price of 98 cents, slightly higher than that of CGS-CIMB’s Ong. “We don’t see any impact on its FY2024/2025 distributions, which might rise by 1%-3% annually and can be sustained in the long-term.”\nNetlink is trading at 6.5% yield at 350 bps spread over Singapore’s risk-free rate, which is “very attractive”, says DBS. “Netlink’s 6.5% yield is also higher than 5.8% average offered by industrial REITS despite Netlink’s much longer asset life, as Netlink incurs capex each year to maintain/enhance its regulated asset base.”\n‘Near-term share price weakness’\nWhile Netlink has a long runway, UOB Kay Hian Research analysts Chong Lee Len and Llelleythan Tan expect near-term share price weakness “as total returns in the near term are adversely affected by the review [compared to] expectations of higher returns to compensate for elevated interest rates environment and expected higher cost base from inflationary pressures”.\nNetlink may propose to conduct a mid-term price adjustment in the third year of the pricing period, or FY2027, note Chong and Tan. “Management noted that upcoming expected interest rate cuts in the short term alone would not trigger a mid-term adjustment and the group would look at other factors, such as opex/capex plans, before triggering a review.”\nThey expect the fall in prices for residential and NBAP connections to have an “insignificant” impact on FY2025-2026 earnings. “The $0.30 price reduction for residential connection implies a loss of around $5 million in annual revenue and would reduce our current FY2025-2026 PATMI estimates by only 1%-2%.”\nThey add: “Furthermore, given that Netlink has been adding roughly 20,000 new residential connections per year, we expect new revenue contributions of roughly $2 million to partially offset the $5 million drop in revenue loss before returning to pre-price reduction levels by 1HFY2026.”\nDividends will remain unaffected, say Chong and Tan. “Armed with strong annual operating cash flows of around $300 million, management noted that the group expects distributions to stay stable despite lower revenue contributions from the residential connections segment. Also, despite higher capex commitments in FY2024-2025, the group noted that additional capex net from its surplus cash after distribution would be borrowed, backed by the group's strong balance sheet, with low 21.5% net gearing.”\nHence, Chong and Tan maintain “buy” on Netlink with an unchanged target price of $1.01. \nCiti’s target price leap\nFinally, Citi Research analysts Luis Hilado and Arthur Pineda had anticipated much worse cuts of 8% for the review. Now, they have revised up their revenue and profit forecasts for FY2024/2025 by 4%/6% and 6%/13%, respectively. \nIn a Nov 27 note, the Citi analysts maintain “buy” on Netlink with a higher target price of $1.06, from 99 cents previously. This is the highest target price among the four research houses mentioned here. \n“We have conservatively not assumed a rate increase within the next five-year window,” write Hilado and Pineda. “Even without such assumption, our revised target price provides healthy returns with at least five years of sustainable yield of over 6%.”\nAs at 2.50pm, units in Netlink NBN Trust are trading 0.5 cents higher, or 0.61% up, at 82 cents.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2387105120"}