According to DBS, the market is now on a search for high yield with the Fed turning more dovish. This contrasts with previous concerns on higher than expected 10-year bond yields.
Netlink NBN Trust
is currently trading at approximately 6.3 percent FY20F yield compared
to the average yield of 6.0 percent offered by large-cap industrial
S-REITs. DBS notes that given the regulated nature of its business and
no lack of debt headroom to fund acquisitions, Netlink NBN Trust should
be trading at a lower yield. This means that there is room for Netlink
NBN Trust’s share price to take off.
Moreover, one unique advantage of the
over REITs and Business Trusts is that a potential rise in the cost of
capital might lead to higher regulated returns from 2022 onwards,
translating into higher distributions.
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