NetLink Trust IPO to fetch S$2.3b to S$2.7b

Singapore

IN THE biggest IPO (initial public offering) on the Singapore Exchange since 2011, Singtel-owned NetLink Trust will issue around 2.9 billion units with an offer price between 80 Singapore cents and 93 Singapore cents to raise between S$2.3 billion and S$2.7 billion.

The public offer will open after 5 pm on July 10 and will close at noon on July 17. Trading will commence from 3 pm on July 19.

The IPO represents around 75 per cent of NetLink Trust's total shareholding and thus values the Trust at between S$3.06 billion and S$3.6 billion depending on the final IPO price. Singtel, which will pocket the proceeds from the IPO, will hold less than 25 per cent of the Trust after this exercise.

Market sources noted that in case there is good demand, the over-subscription option would be used in full and this would raise an additional S$100 million through the allotment of new units.

According to the prospectus, which was lodged on Tuesday, the expected DPU (distribution per unit) for 2018 is expected between 4.73 per cent on the lower range and 5.50 per cent in the upper range. For 2019, the lower range DPU is forecast at 4.99 per cent with the upper range at 5.8 per cent (see amendment note).

The 2018 forecast for the amount of money available for distribution to unitholders was S$113.33 million and for 2019, S$179.35 million.

The Trust's revenue for 2017 was S$300 million, up 16.3 per cent from 2016 revenue of S$258 million. In 2017, the Trust's Opex (operating expense) was S$80 million.

Under the Telecommunications Act, any entity or person who owns either in one go, or over a series of transactions, 5-12 per cent of the units would have to inform the telco regulator, Infocomm Media Development Authority (IMDA) of Singapore.

Entities wanting to own 12-30 per cent of the units would have to get prior written permission from IMDA.

The prospectus was lodged by NetLink NBN Management Pte Ltd in its capacity as trustee-manager of NetLink NBN Trust which incorporates the erstwhile NetLink Trust.

NetLink NBN Trust was established early this year primarily for the purpose of owning all of the units of NetLink Trust.

Market sources noted that for IPO publicity purposes, the NetLink NBN Trust was in a unique situation given its economic ownership by Singtel which led to many investors looking to do their homework based only on public information.

This created several logistical challenges for the Trust in signing up cornerstone investors.

However, the same sources told The Business Times that there has been a strong indication of interest for the IPO.

NetLink Trust's precursor was OpenNet which Singtel bought out for S$126 million via NetLink Trust with the stipulation that it would dilute its stake in the latter by April 2018 to 25 per cent or below. The IPO is pursuant to that stipulation.

NetLink NBN Trust designs, builds, owns and operates the passive infrastructure (comprising ducts, manholes, fibre cables and Central Offices) for Singapore's Next Generation Nationwide Broadband Network (NextGen NBN).

The NextGen NBN network is the foundation over which ultra-high-speed Internet access is delivered to residential homes and non-residential premises throughout mainland Singapore and its connected islands.

The Trust has a built-out network of 76,000 km of fibre optic cables with 16,200 km of ducts and 62,000 manholes. It has, as of March this year 1.09 million end-user connections. Around 61.3 per cent of its total revenue comes from residential connections.

NetLink NBN Trust sells wholesale dark fibre services to companies such as Nucleus Connect, a StarHub subsidiary, Singtel, M1, MyRepublic and ViewQwest (see amendment note).

DBS, Morgan Stanley and UBS are the joint issue managers and joint global coordinators for the IPO.

Amendment note: An earlier version of this article gave a lower range to the projected DPU yield and left out the names of all the customers of NetLink NBN Trust customers.