Singtel

In a step towards unlocking value for its shareholders, Singtel has reportedly hired three banks, namely DBS, Morgan Stanley and UBS to manage the IPO of its broadband arm, NetLink Trust (NLT).

The IPO is estimated to raise >$2b and is likely to take place in 2Q or 3Q next year.

NLT owns broadband infrastructure and provides services to residential and enterprise customers in Singapore. With the IPO, market watchers are expecting Singtel to pare its stake from 100% to <25%, unlocking >$1.5b in the process.

Earlier this year, a foreign broker estimated the value of NLT to be around $3b, with enterprise value of $4-4.5b. In FY15, NLT contributed $23m (FY14: $14m), or 0.6% to Singtel's bottom line of $3.78b (FY14: $3.65b).

Should NLT be able to fetch similar valuations in the IPO next year, the broker believes that special dividends of up to $0.14 could be dished, translating to a total FY18E DPS of ~$0.314, or a yield of 8.6% based on the current price.

However, Maybank KE last reiterated its Hold rating for Singtel (TP $3.68) on the back of increased competition within the domestic mobile segment due to the incoming fourth telecom provider.