Broker: Maybank Research Pte Ltd
Date of Report: July 7, 2025

Netlink NBN Trust: Stable 6% Yield, Defensive Play in Singapore’s Fibre Network Market

Overview: Netlink NBN Trust’s Dividend Appeal and Defensive Profile

Netlink NBN Trust stands out in Singapore’s telecommunications sector as a reliable, yield-focused investment. At a recent InvestASEAN conference, CEO Mr. Tong Yew Heng underscored the company’s core strengths: stable cash flows, robust dividend sustainability, and defensive growth prospects. Despite muted growth expectations, Netlink’s ability to deliver a consistent 6% dividend yield makes it attractive, especially as interest rates are expected to decline, further widening the yield spread against government bonds.

• Dividend yield: 6%, driven by clear and predictable cash flows.
• Growth outlook: Low single digits, supported by new housing units (~25,000 per year) and growth in Non-Building Access Points (NBAP) and point-to-point connections.
• Investment rating: BUY, with a 12-month price target of SGD 1.00 (13% upside from SGD 0.89).

Key Investor Concerns: Fibre Substitution Risk Addressed

Investors have questioned the risk of fibre broadband being substituted by emerging satellite technologies, notably Starlink. Netlink’s management addressed these concerns by emphasizing several factors:

• Nationwide fibre coverage: Singapore already enjoys near-universal fibre penetration.
• Cost advantage: Fibre is estimated to be 3–4 times cheaper than Starlink in Singapore.
• Speed superiority: Fibre offers speeds 10–20 times faster than satellite alternatives.
• Urban density challenge: High-rise living makes satellite dish installation impractical for most households.
• Fixed broadband demand: The average Singaporean household now has 10–20 connected devices, underscoring the ongoing need for stable, high-capacity WiFi.

Financial Health: Strong Balance Sheet Underpins Dividends

Netlink NBN Trust’s conservative financial management is a hallmark of its stability:

• Net debt-to-EBITDA: 2.4x (FY24A), well below comparable international peers such as Chorus Ltd. in New Zealand, which operates at 5x but maintains an investment-grade rating.
• Leverage comfort zone: Management is comfortable with leverage levels up to 3x, supporting long-term dividend growth and sustainability.

Comprehensive Financial Performance and Forecasts

Below is a detailed look at Netlink NBN Trust’s financial results and projections (all figures in SGD millions unless otherwise stated):

• 12-month price target: SGD 1.00 (13% upside from current share price of SGD 0.89)
• Market capitalization: SGD 3.4 billion (USD 2.7 billion)
• Shares issued: 3,897 million
• Major shareholders: Singapore Telecommunications Ltd. (24.8%), M&G Investment Management Ltd. (2.8%), The Vanguard Group, Inc. (1.9%)

Key Performance Ratios and Operational Highlights

• EBITDA margin: Remains high at ~69% across the forecast period
• Payout ratio: Exceeds 200%, indicative of a yield-focused payout structure
• Capex: Ranging from 15.6% to 33.1% of revenue, with free cash flow yield between 3.6% and 6.3%
• Net interest cover: Between 4.7x and 5.2x, reflecting healthy debt service capability
• Debt/EBITDA: Expected to remain at 3.0x–3.1x

Growth Drivers and Outlook

While Netlink’s revenue growth is forecast in the low single digits, several drivers provide steady support:

• Singapore’s steady pace of new home construction (~25,000 units annually)
• Expansion in NBAP and point-to-point connections
• Proliferation of connected home devices, reinforcing demand for robust, high-capacity broadband

Competitive Landscape: Chorus Ltd. and Starlink

• Chorus Ltd. (CNU NZ): Operating under a similar Regulated Asset Base (RAB) model in New Zealand, Chorus is cited as a benchmark for prudent leverage and investment-grade credit ratings, despite higher net debt-to-EBITDA ratios (5x).
• Starlink: While technologically advanced, Starlink’s cost and practicality barriers limit its threat to fixed fibre in Singapore’s high-density, high-rise environment.

Share Price Performance and Historical Recommendations

• Share price range (52 weeks): SGD 0.83 to SGD 0.94
• Recent price trends show resilience, with the stock tracking above the Straits Times Index in several periods.
• Historical broker stance consistently favors a BUY recommendation with a target price of SGD 1.00.

Conclusion: Defensive Yield and Predictable Upside

Netlink NBN Trust remains a prime candidate for investors seeking reliable yield and capital stability. Its defensive business, robust balance sheet, and government-regulated asset base provide high visibility on cash flows and dividends. With Singapore’s broadband market structurally favoring fibre and limited substitution risk from satellite or mobile alternatives, Netlink’s 6% yield is a compelling proposition, especially in a potential rate-cut environment.

Appendix: Key Contact Information

• Brokerage: Maybank Research Pte Ltd
• Contact: Hussaini Saifee, Analyst ([email protected], +65 6231 5837)

Disclaimer

Professional investors should review full disclaimers and disclosures from Maybank Research Pte Ltd before making investment decisions. The information provided is for general informational purposes only and is not a solicitation to buy or sell securities.