Following the U.S. Fed\u2019s 75 bps rate hike, the PSEi sank 39.98 points (-0.63%) to close at 6,301.71. As a knee-jerk reaction to the U.S. session, the PSEi dropped to a session low of -1.8% to 6,227.58 before finding its footing and mount a recovery from thereon. Majority of the PSEi index members closed in the red, with CNVRG declining the most, by 11.30% to close at PHP 14.92\/share. While a weak market session was widely anticipated, the magnitude of decline in CNVRG took many by surprise.<\/p>\n\n\n\n
Our View:<\/strong> A report showing CNVRG to be a likely deletion candidate during the MSCi index rebalancing in November may have caused a recent aberration in its stock price. To our knowledge, the review cut-off for the November rebalancing will be anytime during the last 2 weeks of October and thus the numbers today is just indicative of what the actual changes will be when the rebalancing results are announced on November 10.<\/p>\n\n\n\n We think CNVRG will just get relegated to the smaller MSCi indices should it fail to meet certain liquidity filters. The stock would still experience passive fund outflows but to a lesser extent than a complete removal from the MSCi indices. The stock was just included in the MSCi Standard index last May 31 when its free float level was just at ~23% compared to 30% today. However, its stock price has declined by 43.7% from its May 31 close of Php 26.50\/sh to its close yesterday of Php 14.92\/share.<\/p>\n\n\n\n CNVRG\u2019s growth momentum has slowed down. Index rebalancing-induced sell-offs have, in the past, served as a good opportunity to position in stocks which offered good growth prospects. The growth prospect of the stock is the key ingredient with these types of event-driven plays and CNVRG has had difficulty sustaining its growth momentum recently. Subscriber growth has faltered and delinquencies increased. This led to an inevitable downgrade in earnings of 17% for 2022.<\/p>\n\n\n\n CNVRG is currently trading at a 12.6x 2023PE vs GLO\u2019s 14.4x 2023PE and TEL\u2019s 13.9x 2023PE. We are still not compelled by this discounted valuation compared to its peers especially with TEL and GLO offering a projected dividend yield of 6.27% and 5.07% respectively. Notwithstanding, trading positions may be carried out for a mean reversion trade.<\/p>\n","protected":false},"excerpt":{"rendered":" Here’s a commentary on an important issue or event affecting the stock market <\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-317663","post","type-post","status-publish","format-standard","hentry","category-special-reports","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"_links":{"self":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317663","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/comments?post=317663"}],"version-history":[{"count":4,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317663\/revisions"}],"predecessor-version":[{"id":320500,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317663\/revisions\/320500"}],"wp:attachment":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/media?parent=317663"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/categories?post=317663"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/tags?post=317663"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}