Converge shares fall in PSE debut

Con verge Information and Communi c at ions Technology Solutions Inc., a company that installs broadband Internet in homes using fiberoptic cables, made its debut at the Philippine Stock Exchange ( PSE) on Monday.

The company said it is the country's biggest initial public offering ( IPO), but its shares failed to fly as investors had decided to cash out.

Shares of Converge, the most traded stock, fell 9.4 percent during its first day of trade, closing at P15.22 per share from its IPO price of P16.80.

“Investors that weren't interested in holding it for the longer term cashed out,” Chistopher Mangun, research head at AAA Securities Inc., said.

“Short-term traders cashed out of Converge shares as they speculated on the prospects of the country amid the pandemic. Many are debating as to how fast the company can meet its growth targets given effects of the lockdown,” Luis Limlingan, managing director at Regina Capital and Development Corp., said.

Aristotle Reyes, trader at UPCC Securities, explained that assuming Converge's earnings for the first half at P1.26 billion is the same as in the second half, the company will end the year with P2.5 billion in income. At the said price, it would be 50 times its price to earnings ratio using its IPO price of P16.80, he said.

Converge raised some P29.1 billion in fresh cash from its listing, which the company said it will spend for its capital expenditure program for the next 18 months.

“We are fully committed to building the largest fiber broadband network in the Philippines and to providing affordable and reliable high- speed Internet connectivity to millions of Filipinos nationwide,” Pampanga businessman Dennis Anthony H. Uy, the company's founder and CEO, said.

“Our extensive, proprietary end-to- end fiber broadband network will enable us to support the digitalization of the Philippine economy. With our experienced senior management, differentiated offering and strong value proposition, Converge is well- placed to address this significantly unserved demand and create long-term value for our business and shareholders.”

Finance Sec ret a r y Ca rlos Dominguez III said the planned infrastructure expansion of Converge following its stock market debut will contribute to the country’s strong economic bounce-back from the pandemic and quickened transition to the digital-based New Economy.

Dominguez said Converge’s IPO and listing this week is a “strong vote of confidence in the economy’s capacity to bounce back strongly after the difficulties brought by the Covid-19 pandemic.”

“I encourage Converge to use the proceeds of this public offering to continue investing in network improvements to serve more Filipinos nationwide,” said Dominguez during the IPO listing of the company at the PSE.

Dominguez, along with Uy and PSE President- CEO Ramon Monzon, led the ringing of the opening bells at the Bonifacio Global City trading floor in Taguig City to mark the company’s listing on the main board of the bourse.

The company, the only pure-play fixed broadband operator in the country, hopes to get 55 percent of the residential market in the country by 2025. It still is silent on its plans on how to grow the enterprise market, where it will collide head- on with telecom behemoths PLDT Inc. and Globe Telecom Inc.

Grace Uy, the company's president said Converge's residential business, which represent three quarters of its revenues, is the fastest- growing in the industry, while the rest comes from the enterprise business, which is also growing over three times than the average market growth.

“Put together, we have built a robust business model that has allowed us to achieve industry-leading trifecta of 65 percent growth, 50 percent margin and 20 percent ROIC [return on invested capital], which we expect to sustain over the long run,” she said.

On the domestic front, the Converge offering secured over P4.85 billion of domestic demand, making it one of the largest domestic IPO take-ups in the country.

Meanwhile, its cornerstone investors secured over P10.93 billion, covering approximately 40 percent of the base offering, while the investments from blue- chip, long- only institutional investors accounted for over 80 percent of the transaction.

Converge is the second company to publicly list on the stock market this year amid the coronavirusinduced economic crisis, following Merry Mart Consumer Corp. IPO last June.

The benchmark PSE index ended slightly higher by 7.13 points to close at 6,491.19 points after its weak opening.

“We saw some profit taking in early trading however, investors were quick to pick up issues that pulled back. In terms of individual issues, the performance of blue chips was mixed. We may see the main index decline in the coming days as more investors secure profits,” Mangun said.

Total value of trade reached P31.09 billion, mainly on Converge's listing. Gainers and losers were almost even at 102 and 107, respectively, while 44 shares were unchanged.