Netlink hits four-year low on heavy trading ahead of 2024 fee cut

UNITS of Netlink NBN Trust fell as much as 1.2 per cent in heavy trading in the first half of the trading session on Monday (Nov 27), following its announcement that key service fees it charges would be lowered from April next year.

With 4.1 million shares changing hands as at 11.42 am, the counter hit S$0.81. The last time it closed at this level was in March 2019.

As at the midday market break on Monday, units of Netlink had recovered some ground, trading down 0.6 per cent at S$0.815. With 4.2 million units traded, it was the 24th most traded counter by volume on the Singapore Exchange.

The stock ended the day at S$0.815, down 0.6 per cent or S$0.005, with about 6.3 million shares changing hands.

Netlink NBN Management, the trustee-manager of Netlink NBN Trust, announced before Monday’s trading that the Infocomm Media Development Authority (IMDA) had completed its review of the wholesale prices, terms and conditions of the Netlink Trust interconnection offer.

From Apr 1, 2024, the monthly recurring charge of residential end-user connections will go down to S$13.50 from S$13.80. The price for non-building address point connection service will be lowered to S$70.50 from S$73.80.

The fee for non-residential connections will be kept unchanged at S$55.

The company said its continued investment in the fibre network has supported the growth across all fibre-connection segments,

CGS-CIMB has reiterated its “add” call on the counter, with an unchanged S$0.95 target price.

with residential connections growing from 1.2 million in FY2018 to 1.5 million in FY2023.

IMDA holds a review of pricing terms every five years, or at any such time as it considers appropriate, Netlink noted.

It will set aside a capex reserve of S$40 million for the new pricing period.

The trustee manager said: “Netlink Trust may propose to conduct a midterm price adjustment in the third year, in the event of any significant changes to cost or demand forecasts due to unforeseen circumstances.”

It added that the pricing revision will not have a material impact on its distribution per unit and net tangible asset per unit for the financial year ending Mar 31, 2024.

In a note on Monday, CGS-CIMB analyst Ong Khang Chuen said Netlink’s revised interconnection offer pricing was “slightly ahead” of the brokerage’s expectations.

He believed Netlink’s “strong operating cash flow generation” could continue to support a stable growth in its dividend per unit (DPU) of 2 per cent yearly until FY2030, without any meaningful impact on its debt profile.

He is forecasting a FY2023/24 DPU of S$0.053, which translates to a 6.5 per cent dividend yield.

CGS-CIMB has reiterated its “add” call on the counter, with an unchanged target price of S$0.95.

“We think the latest development removes a key overhang on Netlink’s share price for the past year, and we think it strengthens our investment thesis (of) Netlink as a defensive (play) amid macro uncertainties, given strong DPU visibility,” said Ong.

However, he warned that the stock’s downside risks include margin pressure from higher operating expenses.