Netlink NBN Trust: A Smart Choice for Sustainable DPU Growth?

November 28, 2023

If you are searching for an investment that combines the allure of steady Dividend Per Unit (DPU) growth with the solidity of a well-rooted company, Netlink NBN Trust (SGX: CJLU), a leading telecommunication (telco) infrastructure player on the Singapore Exchange (SGX), might be the key to your portfolio’s success.

In a recent insightful webinar, I spoke with Netlink NBN Trust’s CEO, Mr. Tong Yew Heng, and CFO, Ms. Diane Chen, about their 1H 2024 financial results and forward-looking strategies.

Their insights convinced me that Netlink NBN Trust offers a distinctive investment opportunity, marked by its consistent performance and dependable dividend growth.

Here are some of the key reasons to invest in the Netlink NBN Trust.

1. Robust business model

Known previously as OpenNet, Netlink NBN Trust is a pivotal figure in Singapore’s telco sector. Operating the foundational fibre network infrastructure of the Next Generation Nationwide Broadband Network, it reaches over 1.49 million residential homes and numerous business users. Its strong, essential network services and the high barrier to entry into this market give it a competitive edge.

2. Favorable regulatory review

The Infocomm Media Development Authority (IMDA) of Singapore, renowned for its clarity and efficiency, has completed a review of Netlink NBN Trust’s interconnection offer (ICO) for the next five years. This review sets favourable wholesale prices and terms, enhancing Netlink NBN Trust’s operational effectiveness and investment appeal.

3. Steady DPU growth

Netlink NBN Trust has demonstrated a commendable and steady trajectory in Dividend Per Unit (DPU) growth, a testament to its operational robustness and adept financial stewardship. This upward trend in DPU is clear: beginning at 5.05 cents in FY2020, it rose to 5.24 cents by FY2023. Moreover, for the first half of 2024, the trust has proposed a DPU of 2.65 cents, marking a 1.1% increase year-on-year, further solidifying its reputation for consistent financial performance and reliability.

Source: Netlink NBN Trust

4. Financial strength

The company’s financial health is evident, with a revenue increase of 2.9% to S$205 million and a 2.4% rise in EBITDA during H1 2024. Though there’s been a slight dip in profit after tax, this is attributed to understandable factors like increased depreciation and finance costs, common in expanding businesses.

Source: Netlink NBN Trust

5. Growth and diversification

Netlink NBN Trust is actively engaged in network densification and aligning with Singapore’s broadband network upgrades to 10 Gbps. It’s also exploring international investments focusing on stable cash flows, indicating a cautious yet forward-thinking expansion strategy. Given the low gearing position of Netlink Netlink NBN Trust, this puts the company in a strong position to capitalise on growth.

A compelling investment option

Netlink NBN Trust stands out as an attractive choice for investors seeking a blend of stability and consistent returns. At its current level, the trust is trading at an attractive level with a forward dividend yield of around 6.3%. Its moderate growth potential, low-risk profile, and strategic position in Singapore’s mature market make it an appealing option for those aiming for low-risk investment avenues.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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