The Philippines' biggest IPO since 2016 raises 25.3b pesos

Manila

CONVERGE Information and Communications Technology Solutions and its shareholders have raised 25.3 billion pesos (S$709 million) in the biggest initial public offering (IPO) in the Philippines in four years.

That is even as the Warburg Pincus-backed broadband operator priced 1.51 billion shares at 16.8 pesos apiece, an exchange filing on Friday showed, which was near the low end of its marketed range of 16.5 pesos to 19 pesos.

About 68 per cent of the offering was made up of existing shares from Converge ICT founders and Warburg Pincus.

The low-end pricing was a "surprise", considering word on the street was that the IPO was doing well, said Gerard Abad, chief investment officer at AB Capital & Investment.

"Maybe demand is just right and they couldn't pass up the opportunity to price (the IPO at 16.8 peso each) with a lucky number," he added.

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Eight is considered a lucky number in China, and Converge - the largest and fastest growing high-speed fixed broadband operator in the Philippines - was founded by Filipino Chinese spouses Dennis Anthony Uy and Maria Grace Uy.

Following the sale, the Uy family's Comclark Network and Technology will have 63.8 per cent of the company, while Warburg Pincus will have 16.2 per cent if the over-allotment option is not exercised.

The stock is slated to start trading on Oct 26 in Manila.

At US$523 million, Converge's IPO is the biggest in the Philippines since Cemex Holdings Philippines' US$539 million share sale in 2016.

A third of the proceeds will go to Converge, which will use it to fund capital expenditure and help accelerate its fibre network rollout across the nation, its prospectus filed with the Philippine Stock Exchange showed.

Pricing near the low end also helped the deal attract more interest, said analysts.

This pricing "makes the stock less expensive", said Japhet Tantiangco, analyst at PhilStocks Financial.

At 16.80 pesos, the stock is valued at 54.7 times estimated 2020 earnings compared with 61.8 times at the top end, he said.

The Philippine Stock Exchange trades at 20.85 this year's earnings.

Converge has benefited from increasing use of the Internet during the Covid-19 pandemic, as most of the country worked or studied from home.

The company's first-half 2020 profit rose 53 per cent to 1.26 billion pesos from a year ago, as revenue jumped 65 per cent to 6.49 billion pesos.

Its residential subscribers reached 750,000 in June, its prospectus showed.

The offering attracted eight cornerstone investors including Genesis Investment and Ghisallo Master Fund.

Morgan Stanley, UBS Group, BDO Capital & Investment and BPI Capital are the international and local arrangers of the sale. BLOOMBERG