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Investment verdict of NetLink NBN Trust

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It was supposed to be an opportunity for NetLink NBN Trust to make a statement about its investment merits to Singapore investors. But unfortunately, NetLink NBN Trust messed it up by delivering a subpar revenue performance for FP2018 that was much lower than original forecast. To add to its woes, NetLink was also slapped with $500,000 fine by IMDA for not meeting service standard for fibre service activation.

And investors did not take the above too kindly. Upon the release of the financial results, unit price of NetLink NBN Trust tumbled from $0.81 in May to $0.74 in July. The price correction led to dividend yield at an attractive level of 5.65%.

Against the current backdrop, is NetLink NBN Trust a value trap or dividend yield play? In this article, I will examine the competitive advantages and handicaps of NetLink NBN Trust.

Missed opportunity

Time really flies. It had been one year when NetLink NBN Trust debut in Singapore Exchange and I do think that it is timely for an update on this business trust. Dubbed as the biggest IPO since 2011, many investors have great expectation of NetLink NBN Trust. And rightly so. After all, it is the sole provider of residential fibre network in Singapore. Given such status, it is rightful to assume that NetLink NBN Trust enjoys an unassailable monopoly in the fibre network sector locally.

So it is indeed very surprising that FP2018 revenue was $228.6 million, 1.8% lower than forecast; while Q4FY2018 revenue was $80 million, 4.4% lower than forecast. To set the record straight, the overall financial results was pretty decent, but apparently not good enough to meet investors’ expectation. That was probably the basis for the minor correction in unit price of NetLink NBN Trust.

NetLink NBN

Knee-jerk reaction?

To be fair to NetLink NBN, net profit was $50 million, better than [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: July 18, 2018 — 9:02 am

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