Netlink NBN Trust: A Defensive 6% Dividend Play to Own

CGS International Research Report | April 3, 2025

Steady Earnings and Attractive Dividend Yield Make Netlink a Compelling Investment

Netlink NBN Trust (NLT) is a non-index, liquid play with a steady earnings profile, making it an attractive defensive investment option. CGS International reiterates its “Add” rating on NLT and raises the target price to S$1.0 as it rolls forward valuations to FY26F.

Defensive 6% Dividend Yield Backed by Stable Cashflow

NLT’s projected 6% dividend yield for FY3/26F is on par with the average S-REIT yield of 6.2%, underpinned by the trust’s stable operating cashflow from residential and commercial connections. The company’s return to the STI reserve list status could also attract increased investor interest.

Residential Fibre Network Underpins Income Resilience

Residential connections make up 60% of NLT’s revenue, as the sole provider of residential fibre networks in Singapore. The trust has seen steady growth in residential connections, which are expected to continue tracking the uptrend in housing numbers. NLT also generates revenue from non-residential and non-building address connections, as well as the leasing of ducts, manholes, and co-location services.

Incremental Growth from Nationwide Expansion

NLT 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. With total construction demand projected to remain strong from 2026-2029, NLT is well-positioned to capture growth from its non-regulated asset base (non-RAB) revenue streams.

Measured Risks for Attractive 6% Yield

CGS International expects NLT’s capex to taper off from FY26F onwards, with the completion of the Seletar Central Office project. The trust’s gearing is expected to hover around 30.6%, with 72% of the debt fixed and a cost of debt at 2.72% as of Dec 2024. Key downside risks include unfavourable regulatory pricing and disruption to construction works.

Valuation and Recommendation

CGS International values NLT using a dividend discount model (DDM) and derives a target price of S$1.00, representing an upside of 13.6% from the current price. The trust’s forward dividend yield of 6.2% is close to +1 standard deviation from its historical average, making it an attractive defensive play in the current market environment.