Converge (CNVRG) IPO

Converge ICT Solutions will debut on October 26. As you all know, Converge is in the business of providing fiber internet to households.

Initially, they priced it at a high range, at 24 pesos per share. Then lowered it again at 19 per share and eventually settled at 16.8/sh.

The good:

It is in the sector that is in demand. As you know, we have one of the slowest internet speeds in Southeast Asia. Second, more and more people are subscribing to broadband connections at home for work and school purposes during the pandemic.

In 2016, they had 70,000 customers. In 2020 they have 730,000 subscribers with less than 1% of the customers disconnecting their services. Strong customer retention and growth rate.

Converge ICT is the fastest-growing fixed broadband operator in the Philippines, having captured 56.6-percent market share of new residential subscriptions since 2018. It has 55% of the market share for fixed high speed broadband internet for fiber technology. They claim to have 2.2x speed compared to the other competitors.
For 2016-2019, they have a CAGR (compounded annual growth rate) of 69%. Their operations are mostly in Luzon, so there's still a lot of room for growth.

The bad:

The IPO will raise 25B pesos. Only 30% of the IPO, or 8B of the proceeds will be fresh capital for the company, the rest will be owners and investors cashing out. In July 2019, Warburg Pincus, a global investment firm, invested 225M dollars for 2B shares of the company. In the IPO, they will sell 1B or half of their shares. They invested at around 5-6 pesos and will sell half of their investment at 16.8 per share.
It is also one of the heaviest IPOs in recent history, second only to RRHI in 2013. That is bigger than MPI, LTG, MEG, FGEN, GTCAP, BLOOM. If you're thinking it will be a DD or MM, it most likely will not given its size.

At the current offering of 16.8/ share, it has a 54x PE.

Summary: To summarize, CNVRG is a strong growth company in a very attractive industry, but is expensive. I would wait for better valuations and will not buy at the IPO.
Data taken from various articles and the Investa youtube video.

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