{"id":322490,"date":"2023-03-30T01:51:44","date_gmt":"2023-03-29T17:51:44","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=322490"},"modified":"2023-03-30T01:51:46","modified_gmt":"2023-03-29T17:51:46","slug":"stock-in-focus-converge-ict-cnvrg-30-mar-2023-by-regina-capital-development-corp","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-converge-ict-cnvrg-30-mar-2023-by-regina-capital-development-corp\/","title":{"rendered":"Stock in Focus: Converge ICT (CNVRG) – 30 Mar 2023 by Regina Capital Development Corp."},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>CNVRG<\/td><\/tr>
Company Name<\/strong><\/td>Converge ICT Solutions Inc.<\/td><\/tr>
Broker<\/strong><\/td>Regina Capital Development Corp.<\/td><\/tr>
Opinion Issued on<\/strong><\/td>30 Mar 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 17.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

We will be maintaining our BUY recommendation on CNVRG, albeit with a
lower Target Price to P17.00<\/strong>, as we expect the launch of the prepaid internet to offset the slowdown in subscriber growth.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

Converge ICT Solutions, Inc. (CNVRG)’s Net Income for the 4th quarter 2022 shrank -32.04% year-on-year (y\/y) to P1.3 billion as the company records an increase in its depreciation and amortization expenses. Total subscribers has increased +11.5% y\/y to 1.92 million, albeit much slower than previous growth rates, a trending sign that growth will start to normalize soon at single digits as CNVRG has already established itself and reached saturation.<\/p>\n\n\n\n

Net Profit Margin (NPM) is dow to 14% in 4Q 2022 as the company recorded a +50% y\/y increase in depreciation and amortization. Increased costs is attributed to fiber
network expansion. Impairments on unrecoverable assets also significantly
attributed to the decline in NPM as this registered a +105% y\/y increase.<\/p>\n\n\n\n

Churn rates are up by 75bps y\/y to 1.75% as customers are prone to increasing inflationary pressures amid the current macroenvironment, much more
prominent in the 2nd half of 2022 as this was the period where inflation started to pick up. Although on a q\/q basis, churn rates are declining, as the company reinstated upfront payment requirements back in July 2022.<\/p>\n\n\n\n

CNVRG would be expanding into the lower income segment by launching a
prepaid fiber product under Surf2Sawa, offering fiber services at much lower
costs. In the trend of consumer downtrading, this would be a strategic move to
increase overall subscriber base.<\/p>\n\n\n\n

CAPEX guidance for 2023 to be reduced significantly y\/y as CNVRG shifts
focus to port deployment in the Visayas and Mindanao region. This is on the
ground that CNVRG has sufficiently invested in a network with an already
significant built-in capacity as port utilization is at 23.8%, reducing need for
additional capital expenditures.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>