Last Friday, the fiber internet provider submitted with the Securities and Exchange Commission (SEC) its registration statement to do a public offering of up to 1.5 billion shares at a maximum price of P24 each.
The offering is targeted to begin on Oct. 13 until Oct. 19, with listing on the main board of the Philippine Stock Exchange on Oct. 26.
If it goes according to plan, Converge ICT would be the second company to do an IPO this year, following MerryMart Consumer Corp., whose offering was two times oversubscribed when it raised P1.6 billion last month.
Following this trend of an “essential” business thriving in its public offering, Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said Converge ICT may also attract investors from a market bereft of IPOs.
“Like MerryMart, we may also see excitement with Converge ICT’s IPO,” he said in a text message Saturday.
He noted since Converge ICT’s business is in the telco industry, it is positioned to benefit from the global shift to the digital economy, which has hastened recently because of the coronavirus pandemic.
“[G]iven the silver lining in the telecommunication industry, the firm’s strong performance, and the opportunities that lie ahead as they tap other regions, we may see a favorable response from the market with respect to its offering,” Mr. Tantiangco said.
AAA Southeast Equities, Inc. Research Head Christopher John Mangun thinks so too, saying the transition of education and office work online makes Converge ICT’s services more important, despite not having voice, SMS or mobile data services in its portfolio.
“The company is trying to raise an enormous amount despite having focused on one business segment of the telco sector which is fixed internet service… However, there is tremendous growth in residential and business fixed line internet,” he said via text on Saturday.
While work-from-home schemes and online learning are not set in stone, Mr. Mangun said companies are expected to choose this option down the line if it lowers costs and if fast internet is available in more households.
Both Mr. Tantiangco and Mr. Mangun said Converge ICT has the potential to further expand its client base, noting the company has already grown by 20% or a record 60,000 new subscribers in June to a total of approximately 750,000 residential subscribers at the end of the month.
“As for opportunities, the company is yet to establish their ground in the Visayas and Mindanao regions giving them further room for growth. Majority of the net proceeds of the company’s primary share sale would go to capital expenditures which in turn would be supportive of their nationwide aim,” Mr. Tantiangco said.
Converge ICT already claims a 54% market share of high-speed residential fixed broadband subscriptions as of March 2020. It also recorded a 76.3% compounded annual growth rate between 2017 to 2019, with its 2019 revenues reaching P9.14 billion.
“We expect demand for broadband subscriptions to increase as supply continues to meet the significant latent demand,” Converge ICT said in its prospectus.
It noted fixed broadband penetration in the Philippines is expected to increase from an estimate of 17% for 2020 to 32% by 2025, citing market research company Media Partners Asia.
“We believe that the Philippine fixed broadband market is currently at an inflection point, with Converge, in particular, serving as a catalyst for market growth as it continues to lead efforts to address current unserved demand,” the company said.
Converge ICT is owned by Pampanga-based businessman Dennis Anthony H. Uy. It is backed by United States-based private equity firm Warburg Pincus, which poured a $225-million equity funding to the company last year. By Denise A. Valdez, Reporter|BusinessWorld
Source: Peso Economics
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