NETLINK TRUST STABILISATION PURCHASES

I had previously written about stabilisation purchases for HRnetGroup, which artificially supported the share price for some time post IPO. The stabilising manager constantly bought shares, which provided support for the share price. After the stabilisation purchase limit had lapsed, its share price trended lower to around $0.82 before rebounding. 

Currently, I observe a similar pattern for NetLink Trust, where the share price has been trading within a tight range of $0.80 to $0.815. This is mainly due to the stabilisation purchases made by the stabilising manager, which supports the share price. Tomorrow would be the last day of stabilising transactions, as it has been 30 days since the IPO. When the stabilising purchases ceases, I expect the share price to be under pressure.



Therefore, I have offloaded my shares at a price of $0.805, resulting in a small loss. I would be looking to accumulate shares again if the share price falls significantly.


I would admit that I had expected to make a quick profit through this IPO. It was priced at the lower end of the indicative range, I i hoped to have made a gain of a few percent. Unfortunately, it did not perform well, probably due to the large number of shares issued. Perhaps, as some fellow investors had pointed out, the comparison to Hutchinson Port Holdings Trust's first day performance was appropriate, given that both were large capitalisation stocks.


I still believe that NetLink Trust's fundamentals are robust, given its monopoly in the residential broadband segment, which contributes to approximately 60% of its revenue. Growth for this business segment would be from population growth, which we can certainly expect to materialise as the number of residential fibre broadband subscription rises. This would provide a significant portion of stable recurring income.

However, NetLink Trust is not a monopoly for the commercial broadband segment, with competitors including SingTel, StarHub and M1. The non building access point (NBAP) segment, while predicted to have the strongest growth of 86.2% annually over the next five years, is also open to competition. Thus the risk of under performing projected earnings arises. The fact that the pricing for the fibre broadband and NBAP subscription is regulated by IMDA provides some assurance to investors that earnings would not be too far off from projections.  


Given the near term pressures, I'll be watching closely and I'd be interested again if the share price gives a dividend yield in excess of 6%.

No comments:

Post a Comment