NetLink NBN Trust continues to offer high yields, safety: analysts

UOB Kay Hian and CGS maintained a “buy” rating.

Analysts at UOB Kay Hian and CGS International continued to see NetLink NBN Trust generating high returns while providing stability for investors in the near term.

In a note, UOB Kay Hian billed the business trust as a “high-yielding, safe-haven stock” with its predictable revenue streams and operating cash flow. The trust also has plenty of debt headroom for future acquisitions to avoid hurting cash flow and dividends.

“We continue to see the stock as a good shelter amid market volatility given its strong earnings visibility, healthy balance sheet and cautious approach in terms of overseas/domestic acquisitions,” it said.

It added that a strong digital economy, widespread 5G rollout, connectivity in data centres as well as Singapore’s smart initiatives provide opportunities for Netlink to grow further.

CGS said they still see NetLink NBN Trust as a defensive stock with its strong DPU visibility for FY2024 to 2026. Earnings-accretive acquisitions as well as stronger NBAP connections growth from the smart nation rollout provide upside potential to the stock, it said.

CGS said its dividend yield also remained attractive at 6.13% last quarter. It forecasts dividend yield to range from 6.23% to 6.45% in the next three years.

“Downside risks include margin pressure from higher operating expenses, and higher-than-expected interest costs impacting its profitability,” it added.

UOB Kay Hian maintained a “buy” on the stock but lowered its estimates for PATMI for FY2025 to 2026 due to lower margin assumptions. CGS also kept an “add” rating on the trust.

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