Saturday, 9 June 2018

Netlink NBN Trust- From Boring Stable Counter to Jaw Dropping 8% price drop since IPO


Netlink Trust-the Fibre of a Smart Nation- dropped to a 52 week low of S$0.745 per unit on 8 June 2018 (Friday) during its mid-day trading, before recovering to close off at S$0.780 per unit. During 2018, most analysts were all setting price target of over S$0.915 per unit, but instead it dropped from the S$0.810 to S$0.745. Taking into account Netlink's IPO price of S$0.810, the Business Trust would have dropped 8% at its lowest point since the announcement of its year end results. What happened to this counter which investors used to praise for its relative stable business outlook and thus stable unit prices that was expected?  


The other mind blogging aspect is that Netlink Trust's net profit that was announced was higher than expected and so was the dividends distribution. (Please see my previous post on "Netlink NBN Trust- Boring but Stable".)

Are there changes in business fundamentals since the last announcement by Netlink?
A quick search on SGX announcement and Netlink Trust official website did not reveal any profit warning or negative business developments. However, overall market interest rates is expected to go up in the upcoming months due to better than expected US job data. Market is expecting another 2 rounds of interest rate hikes this year by the US Federal Reserve due to the better economic outlook.   

The interest rate hikes is a factor for consideration but the price decline seems to be overly done with the dividend yield expected for FY2019 to be over 6% based on the last closing price. In view of no news of worsening business fundamentals, absence of any known significant earnings deterioration and also the cost of equity should not deviate too much, the current sell down by existing shareholders seems to be overly done. With the increasing use of fibre broadband services for day to day activities, Netlink Trust is one of the few businesses that has a resilient business model with recurring earnings. For those holding on to Netlink NBN Trust, what are your thoughts on the recent dip? 
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7 comments:

  1. My Investment Machine9 June 2018 at 21:02

    I am wondering what caused the drop too. I have no intention on holding this for long term. Had wanted to sell before next XD. Now I may hold it unless it goes back up to 0.83

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  2. Cory10 June 2018 at 08:27

    5G needs much more bandwidth. Who paying for the additional cables ? How the ROI with that happening ? Can they charge more ?

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  3. Financial Horse10 June 2018 at 09:23

    I have a feeling this is instituional money doing tactical reallocation to move money back to US, and Netlink got caught in the crossfire.

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  4. Henry10 June 2018 at 12:03

    The yield is not attractive at all. It is high concentration in a single product. Any tech disruption will sink this company. Dont be so hungry for yield, look at the risk side. Just my opinion.

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  5. Blade Knight10 June 2018 at 20:41

    Ok Folks...maybe let's wait for announcement of Q1 2019 results in August 2018. Possibility of institutional investors reallocation of their portfolio as suggested by Financial Horse. Also, Henry right to point out that fibre technology maybe disrupted in future....but guess should have adequate lead time to adjust while keeping a look out for such technological change wave.

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  6. RayNg11 June 2018 at 11:49

    NetLink is holding a Pre-AGM meeting with SIAS on 9-Jul-2018. NetLink CEO is the speaker.

    Normally when SIAS is involve, it means something is wrong with the company.
    May be the sell down is insider work, which they know and act ahead of retail investors.

    Not vested, yet.

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  7. Blade Knight12 June 2018 at 20:24

    OMG?! Is it this? https://www.sias.org.sg/edm/2018/NetLink/Jul/
    Unlike institutional investors who have access to private company briefings, retail investors have fewer opportunities to engage with the senior management and the Board. The Singapore Corporate Governance Code encourages companies to organise “Investor Day” briefings to solicit feedback from retail shareholders. SIAS has been organising pre-AGM meetings for SIAS members at their requests with companies in which they hold shares. Companies engage these shareholders, SIAS members, ahead of the AGM on critical issues, answering their questions.

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