Broker's take: Daiwa issues 'buy' call on NetLink NBN Trust

A "BUY" call has been placed on NetLink NBN Trust with a target price of S$0.970 by Daiwa Capital Markets. The stock fell half a Singapore cent, or 0.62 per cent, to an intraday price of S$0.805 on Thursday.

In an analyst report on Thursday, Daiwa said that the primary appeal for investors in the fibre network firm lies in the diversification benefits that it brings to a portfolio, due to its unique attributes: good quality assets with strong competitive advantages; a predictable return regime; and attractive risk-adjusted distributions relative to other "defensive" stocks.

"Its underlying assets appear competitively well positioned for the delivery of fibre broadband services due to their extensive network reach, including a monopoly in some areas. As such, we expect NetLink to gain market share in both residential and corporate markets by capitalising on two trends: customer migration from legacy to fibre broadband and the entry of a new service provider, TPG Telecom."

TPG is Singapore's fourth telco.

Daiwa added that it thinks that NetLink NBN Trust is a better option for yield investors over Singapore-listed telecom stocks, whose outlook is "likely to be impacted negatively by the entry of TPG Telecom".

NetLink NBN Trust, which made its debut on the Singapore Exchange on Wednesday, opened flat at its inital public offering (IPO) price of S$0.81 on Thursday.