Wednesday, 12 July 2017

NetLink NBN Trust: Conflicting opinions from financial bloggers

If you are a currently investing in Singapore's market, it is likely that you are aware of the S$2.3b mega IPO, which is NetLink NBN Trust, that's happening. Singtel is to divest their 100% stake in NetLink to less than 25% as agreed with IMDA.

Offer price: $0.81
Opening date and time for the public offer: 10 July 2017, 7pm
Closing date and time for the public offer: 17 July 2017, 12noon
Commencement of trading of units on SGX: 19 July 2017, 3pm

Before the prospectus was lodged, my gut feel was that this IPO is one that I'll definitely ballot for. Mainly because there're some traits that I really like in a business that it possesses such as it being a monopoly and having recurring income. From the article by Straits Times, it mentioned that:
NetLink NBN is not a monopoly by regulation. Rather, it enjoys a monopoly status owing to high entry barriers. As part of a nationwide masterplan, Netlink NBN was given a $732 million government grant and began building Singapore's Next Generation Nationwide Broadband Network in 2009 It would be difficult for a newcomer to build a fibre network with the same extent of coverage today. 

However, it seemed that the entire picture wasn't that rosy. The IPO is priced at the lower end of the spectrum which actually could go both ways. On the one hand, a lower pricing could mean that demand for this IPO is not as encouraging as expected. This could be a result of it being an IPO of such immense scale. (One will need to go back to HPH trust in 2011 before a similar sized IPO was available)  Added with the cautious mood in the current market rendering equities with high capital expenditure somewhat riskier, dampening demand for NetLink Trust.

I had not read the prospectus but with this being such a major IPO, many financial bloggers had already done us the service and I do like to express my thanks to them for putting in effort to highlight the positives and the negatives and also forming their personal opinions.

I'm pretty sure I want to own this shares, but the question is do I ballot for this via IPO or do I wait for it to list before buying from the open market? Let's see what the popular financial bloggers have to say:

Mr IPO - One chili rating 
If you are happy with a 5.43% yield that is growing to 5.73% , then this stock should form part of your retirement portfolio for the long term. However, given the huge float and lacklustre demand at book-building, my view is that the debut will be muted and i don't expect much fireworks as most demand should be fulfilled. 
3F - I think it's a yes for me on this one
The only thing shareholders will have to be patience is to ride this out for a few years because the next year results won't be good and if we add that to a big bear market, we might see investors cashing out in panic mode.
Investment Moat  - Losing out on this may not be the end of the world
Certainly, it might be better to give it at least 1 or 2 quarter to see whether some of the doubts I mention can be cleared up by management or financial results.
TUB Investing - This is the first time I tried applying for placement shares
If this was a week earlier, you will hear me saying that I will not be applying for this IPO. However, this IPO seems like it will be "very hot" and I believe the share price will shoot up on its debut.
Sg Budget Babe - I will sit on the sidelines for now and wait for a better chance to buy in
NetLink has a highly appealing business model which is resilient through economic cycles and poised to ride on Singapore's Smart Nation initiative in the coming years. With a yield of 5+%, this is a good stock to hold for the long term for stable income payouts (as long as they don't cut or withhold dividends completely).
Seems like there's conflicting opinions even among Financial Bloggers. My strategy for this IPO is to ballot a small amount, maybe 10,000 shares. No matter if I'm allocated shares or not, if the price drop on the first day of trading, will probably monitor and purchase more after price stabilise further. If the price increase after the first day, will still monitor and purchase more only after price stabilise further. Either way, it is a buy for long term hold for me.

1 comment:

  1. As i am new to blogging i hadn't know much about it. it relives me a great deal to read this article. i have to say i learned a thing or two. thank you for updating.