Fiber internet service provider Converge ICT Solutions Inc. has connected Visayas and Mindanao to its national fiber backbone as part of its P6-billion domestic submarine cable project.
CNVRG is eyeing 600k to 700k net subscriber adds for its residential segment, as well as a 10% increase in enterprise revenue, which is seen to translate to a total of P25 Billion revenues. With VisMin already connected to the backbone, the company will be able to ramp up its fiber rollout across the region.
Much of the net adds and earnings growth for the year may materialize in second half of 2021 (2H21) on the back of the completion of the national fiber backbone. This means we may see substantial quarter-on-quarter (QoQ) revenue growths for the third quarter 2021 (3Q21) and fourth quarter of 2021 (4Q21) as CNVRG penetrates the white space fiber market of VisMin.
EBITDA margin is likely to expand as well, estimated at 52.9% this year from 52.5% in full-year 2020 (FY20), due to economies of scale as subscriber base expands. CNVRG last traded at P18.80, below our revised 5-year DCF-based Target Price of P26.20.