{"id":329023,"date":"2024-08-18T23:40:28","date_gmt":"2024-08-18T15:40:28","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=329023"},"modified":"2024-08-18T23:40:29","modified_gmt":"2024-08-18T15:40:29","slug":"stock-in-focus-converge-ict-cnvrg-19-aug-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-converge-ict-cnvrg-19-aug-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Converge ICT (CNVRG) – 19 Aug 2024 by AP Securities"},"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>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>19 Aug 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 15.18<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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The latest quarterly numbers from CNVRG cemented its place in our roster of turn-around stories this year along with PGOLD and ACEN. The market\u2019s growth expectations from CNVRG have normalized from where it was in the late days of the pandemic, and the company appears to have reached the level of scale where it is now able to deliver these kinds of results. Given this, we give CNVRG a STRONG BUY based on consensus Target Price (TP) of P15.18, although this TP will likely be upgraded further following the earnings beat.<\/p>\n\n\n\n

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

CNVRG beats estimates<\/h3>\n\n\n\n

CNVRG reported a 2nd quarter (2Q) 2024 net income of P2.7-Billion, surpassing consensus expectations of P2.3-Billion. Its 1st half (1H) 2024 net income came in at P5.3-Billion, accounting for 55.5% of 2024 forecasts. This growth was underpinned by acceleration of growth in both residential and enterprise segments, which saw quarterly revenues grow by 13.3% and 21.5% respectively. This is a step up from the 10.4% and 10.5% year-on-year (YoY) revenue growth recorded in the 1st quarter (1Q) 2024.<\/p>\n\n\n\n

More adds, prepaid fiber making significant contributions<\/h3>\n\n\n\n

The company attributed this revenue growth to \u201chighest quarterly fiber gross additions in 11 quarters\u201d, translating to a jump in net adds for the enterprise segment from 2,773 in 1Q 2024 to 4,983 this quarter while net adds for the residential segment dipped to 98,958 from last quarter\u2019s record of 124,793. Despite the QoQ decrease in residential net adds, this figure is still more than double the 49,302 net adds reported in the same period last year. Budget and prepaid offerings, BIDA Fiber and Surf2Sawa, are also making more significant contributions and now represent 5% of total residential revenue and more than 13% of the total residential subscriber base.<\/p>\n\n\n\n

Reaching for the sky<\/h3>\n\n\n\n

CNVRG said during the analyst briefing that it is looking forward to connecting 250-300k Sky Cable users to CNVRG\u2019s network, thus monetizing its unutilized ports. Utilization of the company\u2019s HFC ports currently sits at 16.2%, which gives more than enough room to slot in Sky\u2019s subscribers. According to the company, these subscribers will remain under Sky which will be counted as a part of the Enterprise segment.<\/p>\n\n\n\n

Robust margins, industry-leading returns<\/h3>\n\n\n\n

Effective cost management, along with lower provisioning and financing costs, allowed CNVRG to expand its EBITDA margins to 60.9% in the first half of 2024 from 57.9% in the same period last year. Despite the sequential decline from 17.4% in 1Q24 to 17.3% in 2Q24, returns on invested capital (ROIC) remained the highest in the industry. Taking into consideration the impressive 1H24 performance, the company has upgraded its 2024 guidance for EBITDA margins to 59-60% from 58-59%, and ROIC from 15-16% to 16-17%. CNVRG also upped its revenue growth guidance to 12-14% from 7-8% previously after exceeding targets for both FiberX and BIDA\/S2S.<\/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>