By Denise A. Valdez, Senior Reporter
SHARES in Converge ICT Solutions, Inc. declined on their first day of trading at the Philippine Stock Exchange (PSE), after completing a P29.1-billion (around $600-million) initial public offering (IPO) amid the coronavirus pandemic.
The fiber internet provider’s shares, which were priced at P16.80 each during the IPO, slumped by 9.40% to close at P15.22 apiece on Monday. Converge shares opened at P16.78 each, and fell by as much as 11.2% to P14.92 during the session.
“Short-term traders cashed out of Converge shares as they speculated on the prospects of the company amid the pandemic,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.
Converge on Monday announced it will spend P29 billion for capital expenditures (capex) in the next year and a half.
“We have planned to deploy about P29 billion or $600 million of capex over the next 18 months to roll out our network to tens and of thousands of communities across the Philippines,” Matthias Vukovich, chief financial adviser of Converge, said a virtual press briefing after its listing ceremony.
This would help the company meet its target of reaching about 55% of households nationwide by 2025, he added.
However, investors are wary of these targets given the hurdles posed by the ongoing coronavirus pandemic. Several parts of the Philippines, including the National Capital Region, have been under varying levels of quarantine for over seven months.
“Many are debating as to how fast the company can meet its growth targets given the effects of the lockdown,” Mr. Limlingan said.
Converge’s shares also continue to be perceived as over-valued by analysts, with Philstocks Financial, Inc. projecting a 2020 price-to-earnings ratio of 48.64x for the company.
“The sell-off can be attributed to Converge’s expensive valuation… Because of this, the stock was sought for a lower price at the secondary market,” Japhet Louis O. Tantiangco, senior research analyst at Philstocks, said in a text message.
The overall weaker trading at the PSE also weighed on Converge shares, as investors started profit taking after last week’s 10% rally for the main index. The PSEi was flat on Monday, recording a 0.11% uptick to 6,491.19.
“Despite Converge’s strong fundamentals, its IPO price was never exceeded, mainly attributable to its lofty valuation and the current economic condition being a recession, with most investors at the sidelines. Also, the local market consolidated after the run-up (last week),” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.
Converge’s offering marked the Philippines’ largest-ever IPO in peso terms, after generating P29.1 billion (about $600 million), including the over-allotment shares. In dollar terms, Robinsons Retail Holdings, Inc. was the country’s biggest IPO, raising P26.79 billion or around $627 million in 2013.
Converge is only the second company to go public this year, following grocer MerryMart Consumer Corp. in June.
“We celebrate our successful IPO today as a significant milestone for the company and as evidence of our strong operational and technological capabilities,” Dennis Anthony H. Uy, founder and CEO of Converge, said in a statement.
The company’s offering was “well oversubscribed,” booking more than P4.86 billion of domestic demand and P10.93 billion of cornerstone investment.
“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,” Mr. Uy added.
Finance Secretary Carlos G. Dominguez III said he hopes the company will use its IPO proceeds to improve internet services in the country.
“We will count on your company to help us bridge the digital divide as we purposely move forward to a New Economy,” Mr. Dominguez said during Converge’s listing ceremony.
Converge posted a net income of P1.26 billion in the first six months of 2020, up 53% from the same period last year. Its revenues grew 65% to P6.49 billion on increased demand for internet services during the lockdown.
The company is backed by US-based private equity firm Warburg Pincus, which invested $225 million in equity funding last year.