By Michelle Anne P. Soliman
CONVERGE ICT Solutions, Inc. debuted in a wobbly footing as investors found its price too expensive, making it the most actively traded issue last week.
A total of 509.98 million shares worth P7.69 billion were traded from Oct. 26 to 30, data from the Philippine Stock Exchange (PSE) showed.
The Dennis Anthony H. Uy-led company finished at P14.78 apiece on Friday, slipped 2.9% from its P15.22 finish last Monday. From its P16.80 initial public offering (IPO) price, it declined 12%. Converge was the top traded stock last week.
“For its first week in the secondary market, Converge’s share price plunged 12.02% week-on-week to P14.78 due to its expensive valuation,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in an e-mail.
The fiber internet service provider raised P29.08 billion (around $600 million) from its IPO on Oct. 16 after it offered 1.51 billion common shares at P16.80 apiece. It started trading at the local bourse on Oct. 26 under the ticker symbol “CNVRG.”
In peso terms, Converge was the largest IPO to date. In US dollar terms, it’s next to Robinsons Retail Holding, Inc.’s P26.79 billion or $627 million offering in 2013.
Converge is backed by US-based private equity firm Warburg Pincus. The company plans to use funds raised from its listing to expand in the Visayas and Mindanao.
It is only the second company to go public so far this year, following MerryMart Consumer Corp.’s June listing.
“Based on our 2020 projection, [it] gives a price to earnings (P/E) ratio of 48.64 times. With this, the share is relatively overvalued. Thus, investors sought the share at a lower price in the secondary market,” Mr. Tantiangco added.
Likewise, Mercantile Securities, Inc. Analyst Jeff Radley C. See said that the company slipped on its market debut as investors found the IPO price was still expensive compared with its peers.
“Converge is really priced at an expensive P/E as compared to peers. This is not a short term play, but more of a long term one. Investors wanted to see how Converge can execute all its plans to gain market share,” Mr. See said.
“If we are going to look at the weekly performance of Globe Telecom, Inc. and PLDT, Inc., there isn’t much change. Globe closed the week up by just 0.50% week on week to P2,030. PLDT, meanwhile, inched down 0.67% week on week to P1,328. Meanwhile, CNVRG’s share price changed significantly, declining 12.02% in a week,” Mr. Tantiangco said.
Last Monday, the company announced it would spend P29 billion over the next 18 months to expand its network across the country, which could help it meet its target of reaching out to about 55% households nationwide by 2025.
In a press release last Oct. 30, Converge reported consolidated revenues increasing 71% to P4.19 billion during the third quarter, bringing its nine months to September topline to P10.68 billion, up by 67%.
However, it did not disclose its net income for the third quarter and the January-to-September period.
“For 2020, we project Converge’s net income growth around its three-year compounded annual growth rate of 49.1%. If the 49.1% growth rate is met, its net income for 2020 would be P2.84 billion,” Mr. Tantiangco said.
“Prospect-wise, the company’s expansion into the Visayas and Mindanao area opens more room for growth and opportunities. Add the ongoing shift of the economy to the digital space which is expected to raise demand for data services which, in turn, would be beneficial for firms like Converge,” he added.
For this week, Mr. See offers a projection that the stock might move in a range between P14.40 and P15.40, while Mr. Tantiangco sees sideways trading with support at P14.50 and a resistance at P15.20.