In addition, Lim and Li believe investor interest in NetLink could increase as it was re-included on the Straits Times Index (STI) reserve list in March.
“With the launch of the $5 billion MAS Equity Market Development Fund, we believe non-index, liquid stocks with stable DPU profiles could be appealing to investors. NetLink’s 6% dividend yield in FY2025 is on par with S-REITs’ average yield of 6.2%,” they add.
Residential connections made up 60% of NetLink’s revenue for 9MFY2025 ended Dec 31, 2024. As the sole provider of residential fibre networks in Singapore, NetLink had some 1.52 million residential connections as of 3QFY2025, 0.7% higher compared to end-FY2024.
In the past three years, NetLink has seen residential connections growing at 1.5% p.a. According to the Housing Development Board (HDB), public housing stock could increase by 1.8% (or approximately 20,000 units) each year from 2021 to 2027.
See also: NetLink NBN Trust replaces ComfortDelGro in STI reserve list
“We believe NetLink’s residential connections will follow the uptrend in housing numbers and it will continue to see stable revenue growth,” say the CGSI analysts.
NetLink also engages in the diversion, installation and leasing of co-location and central offices to telcos, which are often required in construction, infrastructure and township projects.
According to the Building and Construction Authority (BCA), total construction demand from 2026 to 2029 could reach an average of $39 billion to $46 billion p.a., supported by developments like MRT projects and public housing.
“We believe this bodes well for NetLink as it grows its non-regulated asset base (non-RAB) revenue through incremental projects and network coverage expansion,” say the CGSI analysts.
According to Lim and Li, NetLink’s gearing is likely to hover around 30.6%, with 72% of the debt fixed and cost of debt at 2.72% as of end-2024. NetLink’s management will refinance some of its existing hedges in FY2026.
As at 3.51pm, units in NetLink are trading flat at 89 cents.
