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?