Before I start on the WACC discussion, I'd like to say that I really think the main risk at the moment is the risk that Netlink trust management will decide on a ill advised investment. I would rather they return capital steadily (and gradually increase their leverage ratio) by simply including a small return of capital in their dividends.
To address the WACC issue....
It is entirely possible that cost of equity is 10%.
The following study estimated a COE (for healthcare infrastructure) of between 12 and 15% (see box 5 on pg 22) for a number of developing markets, not counting a illiquidity premium. No doubt, Singapore is a better bet, but 10% is within the ballpark.
https://ppiaf.org/documents/5838/download
A number of factors go into a COE factor for an investor, but consider this. When you (Joe Public) invest in Netlink, would you say you have an expectation that you get a 7% (for example) total return, otherwise you might go somewhere? Then what if I told you there is no way to exit the investment within 10 years? Then what if you had a choice of investments, not just in the stock market, but in private equity or commercial real estate? Lastly, what if the issuer wants to attract you for the long term to keep investing and has a vested interest in the infrastructure entity's success?
Second, I can reverse engineer the likely COE used originally. If I assume a typical 50/50 debt/equity split, and interest rates of 4%, voila, the only way I get a WACC of 7% is if I put in a COE of 10% (simple math, with a 50/50 split, (10+4)/2 = 7)
For the regulator of a RAB model, it makes no sense that the net WACC would gyrate so violently. It scares off investors. Recall that a RAB model is supposed to strike a balance between sufficient return to investors (for a low volatility asset) and keeping the price low for consumers. The key word is "Balance".
Anyway, as I said, if I plug in a interest rate drop of 70bp, I get a modest decrease in WACC - implying at most a modest drop in revenue, offset by decreased interest rate costs on debt. The whole point of the RAB model is to give investors a steady platform to incentivize them to invest for lower volatility in real terms.
Honestly, I think the DBS analyst "estimate" of 5.4% WACC is pulled out of thin air. You should ask why no analyst bothers to show their detailed assumptions and calculations. You will notice that in public analyst reports in general, they very rarely go out on a limb and say something is deeply discounted and put a high target price. They'd rather put a small premium over the current market price and then reverse engineer their justification.