INVESTORS snapped up shares in Converge ICT Solutions, Inc. last week after the Department of Information and Communications Technology (DICT) greenlit the internet provider’s expansion of free Wi-Fi services in Northern Luzon.
According to Philippine Stock Exchange data, a total of 45.65 million Converge shares worth P397.23 million were exchanged on the market from Sept. 11 to 15, making it the 19th most actively traded stock last week.
The Dennis Anthony H. Uy-led internet provider closed at P9 last Friday, up by 9.2% from P8.24 per share on Sept. 8. Year to date, the price has dropped by 43.3%.
Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said news on Converge’s partnership with the DICT boosted the company’s shares last week.
“The partnership with the DICT is a significant development for Converge, as it will expand the company’s reach to a new and growing market,” Mr. Arce said via e-mail on Friday.
The DICT, under its program “Free Wi-Fi for All,” has allowed Converge to expand its coverage to the provinces of Ilocos Sur, La Union, and the second district of Ilocos Norte. The program has opened more than 4,000 public Wi-Fi stations in 75 provinces across 17 regions in the country.
Meanwhile, Adrian Alexander N. Yu, an analyst at COL Financial Group, Inc., said the significant pickup in Converge’s share price could be traced to “bottom fishing.”
Bottom fishing is a short-term price action where the investor buys a stock that has seen a sharp fall in prices over a short period of time, with or without any big fundamental change in a company’s prospects.
“[Converge] is already down 43% year to date and is prime for a rally once the selling pressure eases. Note that foreigners have already sold [about] P2 billion since January,” Mr. Yu said in an e-mail interview.
He added that fundamentally, Converge is already attractive from a valuation perspective.
“[Converge] is trading at just 3.5x forward EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization ratio), much cheaper than Globe Telecom, Inc. (6.2x) and PLDT Inc. (4.7x). Moreover, from a technical perspective, the stock is prone for a mean reversion rally to its next resistances,” Mr. Yu said.
In the second quarter, Converge’s consolidated revenues inched up by 4.9% to P8.72 billion from P8.31 billion in the same period last year.
Its profit attributable to owners of the parent company rose by 6.6% to P2.11 billion in the second quarter from P1.98 billion a year ago.
In the first semester, its revenues increased by 8.2% to P17.36 billion from P16.05 billion previously, boosting its attributable net income by 8.4% to P4.28 billion from P3.95 billion in the first half of last year.
If positive results from prospects are achieved, Converge’s full-year revenues are estimated to grow by 9.1% to P36.7 billion, said Mr. Arce.
For Mr. Yu, the company this year could see revenues grow by 8.1% to P36.4 billion and its net income by 12.2% to P8 billion.
“Converge stock support is valued at P8.2 and resistance at P10.2,” he added.
“We believe that investor sentiment in the stock will pick up as the interest in the overall market picks up,” Mr. Yu said.
Mr. Arce placed Converge’s support level this week at P8.10 to P7.93 and its resistance at P9 to P9.50. — A.C. Abestano
