Brokers' take

NetLink NBN Trust | Buy Target price: S$0.970 Feb 6 close: S$0.82 DBS Group Research, Feb 6

We believe the market is concerned that rising interest rates may lead to a search for higher yield. NLT has hedged its interest rates till March 2021 and growth in distributions (4.6 per cent compound annual growth rate over FY18-20 forecast) should translate into higher distribution yields. One unique advantage of NLT over Reits and Business Trusts is that any potential rise in the cost of capital might lead to higher regulated returns from 2022 onwards, translating into higher distributions.

Potential catalysts: (1) Newsflow on TPG Telecom's backhaul rollout leveraging on NLT's infrastructure in early 2018, (2) Widened scope of Smart Nation initiatives as NLT could use its debt headroom to invest in those initiatives, leading to a healthy growth in distributions in the long term, and (3) More clarity on 5G rollout and if NLT could be involved in the 5G rollout.