+ Rebound in construction and installation activity. Residential connections are normalising post-pandemic. In the past two quarters, net connections were 11,842, triple the 3,946 a year ago. The rebound in construction and installation post-pandemic increased diversion revenue by S$1.8mn or 136% YoY. Customers in diversion include HDB and LTA.
– Central office revenue sliding. Major customer Singtel is renting less space as less telecommunication equipment is housed in Netlink’s seven central offices. Netlink will look to alternate users for their central office space.
On the regulatory review, we expect a mild decline in the fibre price for residential connections. It is unlikely to impact dividend payout. Higher borrowings or lower capital expenditure can tide through any near-term shortfall, in our opinion.
Our NEUTRAL recommendation is maintained with an unchanged TP of S$0.96
The modest growth in DPU reduces the attractiveness of NetLink as an income-yielding investment. NetLink’s dividend spread over bond yields and other interest-yielding assets has not widened since interest rates started to climb this year.