The analyst further sees opportunities for the group to grow on Singapore’s Smart Nation initiative, which he says would have a positive impact on demand for the group’s non-building address point (NBAP) connections.
“Independent industry consultant Media Partners Asia (MPA) estimated the penetration for legacy asymmetric digital subscriber line (ASDL) and hybrid fibre-coaxial (HFC) based connections at 17.9% as of Mar 17. MPA expects all ADSL subscribers to migrate to fibre connections by Dec 19, and HFC-based services to cease by Dec 21. As such, residential fibre broadband subscribers are projected to increase at a 5-year CAGR of 7.2% in 2016-21,” notes Koh.
He also expects SMEs and cloud-based applications, among others, to drive the growth of NetLink’s non-residential segment, for which MPA projects subscribers to grow at a 5-year CAGR of 10.1% in 2016-21.
The stock is currently trading at book value.
“To date, NetLink has received aggregate grants of $732 million for the construction of passive fibre infrastructure. Without similar support from the government, it would be almost impossible for any potential competitor to provide a viable alternative or meet current regulated wholesale pricing,” says Koh.
As at 10.33am, shares in NetLink are flat at 82 cents.
