Converge Declines in Philippine Debut After $523 Million IPO

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Shares of Converge Information and Communications Technology Solutions Inc., a high-speed fixed broadband operator in the Philippines, slipped in their first day of trading following the company’s 25.3 billion peso ($523 million) initial public offering.

The stock closed at 15.22 pesos in Manila, 9.4% lower than its IPO price of 16.80 pesos, after dropping to as low as 14.92 pesos earlier in Monday’s session.

The Warburg Pincus-backed broadband operator and its shareholder sold 1.51 billion shares, 68% of which are from Converge’s shareholders including its founder Dennis Anthony Uy and the investment bank. Including 225.8 million overallotment shares, the sale raised 29.08 billion pesos.

The IPO has helped secure funds needed for Converge’s expansion until 2025, Uy said in an interview with cable channel ANC on Monday, adding that the company plans to roll out is fiber network to over 60% of Philippine households and install 8 million ports by then. Its operations are currently focused in the main Luzon island including capital Manila.

“The stock was overvalued at its IPO price,” said Japhet Tantiangco, an analyst at PhilStocks Financial Inc., adding that at 16.80 pesos, the company was valued at about 48 times his estimated earnings for 2020, and at 34 times those for 2021.

The stock’s fair value should be at about 12.84 pesos, indicating a multiple of 26 times estimated 2021 earnings, even after taking into account Converge’s prospects for “fast” growth, he said. “It’s under pressure to decline further as it remains expensive at this level.”

©2020 Bloomberg L.P.

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