SINGAPORE (Nikkei Markets) - Despite strong demand for its initial public offering, shares of NetLink NBN Trust made a tepid debut on the Singapore Exchange Wednesday, reinforcing views that the counter offered a fairly attractive dividend but little in terms of growth.
Units of the trust, which is the monopoly owner of Singapore's high-speed residential fiber network, closed at 81 Singapore cents (59.2 US cents), the price at which they were offered in the IPO, after trading in a narrow range of S$0.805 to S$0.815. By comparison, the benchmark Straits Times Index ended 0.6% higher. NetLink's performance was also in contrast to IPOs earlier this year, which managed to end higher on their first day of trading.
NetLink's subdued debut did not surprise analysts, who had described the IPO as a yield play and warned clients not to expect any meaningful price appreciation.
Although the stock debuted late afternoon and was traded for just two hours, shares worth S$149 million changed hands, making it the day's most actively traded counter.
NetLink's IPO saw considerable investor demand with applications totalling some S$4.7 billion, roughly double the value of the 2.9 billion units on offer. The IPO raised S$2.35 billion, the most in Singapore since March 2011 when Hutchison Port Holdings Trust raised US$5.5 billion.
According to NetLink officials, the IPO is the second largest in Asia so far this year, after South Korea's Netmarble Games Corp,
Structured as a business trust, NetLink falls in the category of stocks that include Real Estate Investment Trusts and account for a chunk of listings on SGX.
NetLink's entry has catalyzed interest in SGX, which has struggled to attract large IPOs even as some companies delisted due to mergers and acquisitions or as major shareholders decided to take them private.
"With a market capitalization of nearly S$3.2 billion, NetLink NBN Trust's listing will boost SGX's REITs and Business Trust cluster to a total of 50 listings, and bring the combined market capitalization close to S$100 billion," said SGX CEO Loh Boon Chye.
Joel Ng, an analyst at KGI Securities in Singapore, said he recommends NetLink for its stable dividends. He added that the risk of technological obsolescence is low in the near term, given the boom in demand for data.
"Wireless cannot handle that much data, so there's definitely a place for NetLink's infrastructure, at least in the next five years," he said.
Based on the offer price of S$0.81 per unit, the trust is expected to pay a distribution yield of 5.43% for the financial year ending March 2018 and 5.73% in the following year.
Singapore Telecommunications now owns 24.99% of NetLink upon completion of the IPO, in line with the mandated April 2018 deadline set by the Info-communications Media Development Authority, the industry regulator.
Asked if Singtel would consider paying shareholders a special dividend from the proceeds from the NetLink IPO, CEO Chua Sock Koong said the company would look at various capital management initiatives.
Fitch Ratings last month described the NetLink IPO as timely, as the money raised would help Singtel fund the heavy capital expenditure needed to drive its mobile and info-communications businesses as well as pay for new spectrum in Singapore and Australia.