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NetLink NBN Trust’s IPO: 2 High Growth Areas Investors Should Not Miss

Singapore Telecommunication Limited ’s (SGX: Z74) associate, NetLink Trust, has filed its preliminary prospectus to list on the Singapore stock exchange as NetLink NBN Trust.

NetLink Trust has a history stretching back almost a decade in Singapore. From there, we have looked at how the trust has built a wide network of fibre cable that reaches 1.1 million residential homes in Singapore. We have also picked up on how it turns this valuable network into a source of cash. That set the stage for the next topic: the growth expectations for its most important business segment, residential connections.

While the residential connection revenue is the most important business for NetLink Trust, there are two other areas that could exhibit higher growth. Let’s take a look.

1. Non-residential connections – click here

2. Non-building access points (NBAP) 

In my previous article, I talked about the projected growth in the non-residential connection segment.

As a brief recap, non-residential fibre subscriptions, which uses NetLink Trust’s network, is expected to grow at a compound annual growth rate (CAGR) of 9.9% between 2016 and 2021. This growth rate is faster than the residential connection business segment that is expected to expand at a CAGR of 6.5% over the same period.

However, there is one segment that is expected to grow even faster than the two business segments above.

That would be the non-building address point connection (NBAP) business. The graph below, prepared by Media Partners Asia (MPA – commissioned by NetLink Trust) shows the projected growth of the NBAP segment.

Source: NetLink Trust’s IPO prospectus

According to MPA, the NBAP segment is expected to show a CAGR of over 86% between 2016 and 2021. That’s impressive.

But let’s take a closer look at the NBAP. In its IPO prospectus, NetLink Trust said:

“The addressable market today includes NBAP connections at traffic lights, ERP gantries, for surveillance cameras in and around public areas such as MRT stations and Aggregation Gateway Boxes (“AG Boxes”).”

NetLink Trust believes that demand for NBAP is poised to increase on the back of the Singapore’s Smart Nation initiative:

“Future Smart Nation initiatives are expected in the coming years, and may include the deployment of a network of sensors and monitoring equipment at potential locations across the island to support applications such as autonomous vehicles, high-definition surveillance cameras, parking space management and weather data collection, according to MPA.”

Unlike residential households, which contributes over 61% of NetLink Trust’s sales, its NBAP segment is still tiny in the grand scheme of things. For the financial year ended 31 March 2017, it accounted for just 0.2% of total trust sales.

The long-term potential in the NBAP business is interesting, though, as it is not limited to the number of residential households or office buildings. NBAP can be implemented at street lamp posts, bridges, flyovers, car parks, HDB estates and connectivity boxes.

And in a world of the internet of things, there are many “things” left to be connected.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.