Pandemic Brings Opportunities For Duopoly Challenger: Converge ICT Solutions, Inc

Converge ICT Solutions, Inc.
FRI 09 OCT 2020
Pandemic brings opportunities

for duopoly challenger
Raising Php8.1Bil from IPO. CNVRG will be offering up to 1,505.3Mil shares at an offer
price of Php16.8/sh. The offer will consist of up to 480.9Mil primary shares and up to
1,024.4Mil secondary shares owned by Comclark and Coherent Cloud. CNVRG’s gross
proceeds from the offering of primary shares is expected to reach Php8.1Bil, bringing net
proceeds to Php7.7Bil after deduction of fees and expenses. The offer period will run from
October 13 to 19 while the listing is scheduled on October 26.
Underpenetrated residential fixed broadband market. According to MPA, the current
residential market size of 3.5Mil subscribers only represents 18.9% of the total addressable
market of around 18.5Mil households in the Philippines. MPA said it expects the Philippines
to experience a significant growth in fixed broadband penetration due to higher connectivity
needs coupled with the rapid fixed network rollout of incumbent operators. In addition,
fiber penetration is expected to rise as fiber service replaces outdated digital subscriber
line (DSL) and HFC technology in the near future. DSL and HFC infrastructure cannot satisfy
Filipinos’ need for higher speeds as digitalization of day-to-day activities has become more
prevalent in the post-pandemic world.
Sustain aggressive subscriber acquisition. As of end June 2020, CNVRG’s fixed broadband
market share stood at 19.1%, mainly due to the rapid pace of subscriber additions over the
past few years. CNVRG recorded 732k residential fixed subscribers in 1H20, higher than
the 530k base it had as of end 2019. This was largely due to the significant increase in
subscriber additions following the lockdown. The pace of growth has been maintained
with around 70k monthly new subscribers in August and September, which is much higher
than the pre-COVID monthly net additions of around 20-30k subscribers. CNVRG aims to
have 1Mil residential subscribers by the end of the year, which should be achievable given
current subscriber additions exceeding 70k per month.
Current valuations expensive compared to peers. At its offer price of Php16.8/sh, CNVRG
will be trading at a 15.6x 2020E EV/EBITDA, which is a significant premium compared to
the 5.4x median multiple of its regional peers. Note that this is assuming the company can
sustain its 1H20 top-line growth and 1H20 EBITDA margin of 51.1% throughout the year.
Similarly, the company’s 2020E P/E of 43.3x is notably higher than the 16.8x median P/E
of its comparables. For its EV/EBITDA multiple to be at par with its regional peers, CNVRG
will need to record an EBITDA of Php22.4Bil, which is 3x higher than its FY20E EBITDA. This
means that CNVRG will have to significantly expand its current customer base and increase
ARPU to justify its IPO price.
FORECAST SUMMARY
Year to December 31 (PhpMil) 2016 2017 2018 2019
Total Revenues 1,894 2,940 5,055 9,139
% change y/y - 55.2 71.9 80.8
EBITDA 851 1,727 2,794 4,609
% change y/y - 102.8 61.8 65.0
EBITDA margin (%) 45.0 58.7 55.3 50.4
Net Income 574 1,230 1,242 1,905
% change y/y - 114.2 0.9 53.4
Net Margin (%) 30.3 41.9 24.6 20.8
EPS (Php) 0.082 0.175 0.176 0.270
% change y/y 114.2 0.9 53.4
Adrian Alexander Yu
Research Analyst
Relative Value
adrian.yu@colfinancial.com
P/E (X) 206.1 96.2 95.3 62.1
EV/EBITDA (X) 138.9 68.7 43.2 26.1 Kerwin Malcolm Chan
P/BV (X) 59.5 36.7 25.7 9.7 Research Analyst
ROE (%) 28.9 38.1 26.9 15.7 kerwin.chan@colfinancial.com
so urce: CNVRG
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FIELD NOTES I CNVRG: PANDEMIC BRINGS OPPORTUNITIES FOR DUOPOLY CHALLENGER
FRI 09 OCT 2020
Company Background
Converge Information and Communications Technology Solutions, Inc. (CNVRG) is a pure-

play fixed-broadband operator that currently provides fiber-optic broadband services in
Luzon. The company was originally a wholly owned subsidiary of Comclark Network and
Technology Corp. (Comclark), which was founded by Mr. Dennis H. Uy.
In September 2019, a United States-based private equity firm Warburg Pincus, entered
into a share subscription agreement with CNVRG through Coherent Cloud Holdings
B.V. (Coherent Cloud) for an aggregate amount of US$225Mil. The share subscription
agreement was completed in February 2020, which resulted in 51.1Mil convertible
preferred shares for Coherent Cloud. After Coherent Cloud’s conversion, Coherent Cloud
had a 29.03% stake in Converge with the remaining 70.97% held by Comclark.
Meanwhile, MetroWorks ICT Construction, Inc. (MetroWorks) is indirectly owned by

CNVRG through Pentagon Holding Co. Inc. (Pentagon). MetroWorks provides ICT
infrastructure services for CNVRG by laying fiber-optic cables on the ground.
Exhibit 1: Company Structure
source: CNVRG
COL Financial Group, Inc. 2

FRI 09 OCT 2020
CNVRG mainly operates in Metro Manila and several parts of Luzon. The fixed broadband
company has two main businesses: 1) residential business, where they provide fixed
broadband internet services to their residential clients, and 2) enterprise business, where
they offer fixed broadband services, private data network solutions, cloud services, and
other connectivity solutions to their enterprise clients.
Their residential business offers two types of fiber access networks: 1) fiber to the home
(FTTH) and 2) hybrid fiber coaxial (HFC). FTTH technology utilizes an end-to-end fiber
network as the fiber extends all the way to the end-user. Meanwhile, HFC technology
uses a mix of fiber and coax cables to deploy their network, in which fiber is used for the
backhaul while coaxial cables are used to connect the optical node to the end-user.
Meanwhile, the enterprise business only offers end-to-end fiber network via fiber to
the premise (FTTP) technology to their four customer groups: 1) Large Enterprises, 2)
Corporates, 3) SMEs, and 4) Wholesale customers.
As of end-June 2020, CNVRG’s fixed broadband market share was 19.1%, much higher
than its 4.6% share in 2017. This was mainly due to its 56.6% market share in terms of
total net additions recorded in the residential fixed broadband market from 2018 to 1H20.
Their fiber network covers over 200 cities and municipalities across Luzon, serving around
4.1Mil homes or 29% of total households in Luzon. CNVRG’s network is comprised of
approximately 87% FTTH and 13% HFC as of end-June 2020.
Raising Php8.1Bil from IPO
CNVRG will be offering up to 1,505.3Mil shares at an offer price of Php16.8/sh. The offer
will consist of up to 480.9Mil primary shares and up to 1,024.4Mil secondary shares
owned by Comclark and Coherent Cloud.
CNVRG’s gross proceeds from the offering of primary shares is expected to reach Php8.1Bil,
bringing net proceeds to Php7.7Bil after deduction of fees and expenses. Coherent Cloud
will get Php13.9Bil of total IPO proceeds while Comclark will get Php3.3Bil. Following
the IPO, Coherent Cloud’s ownership in CNVRG will drop to 16.2% from 29.0%, while
Comclark’s ownership will drop to 63.8%. The public will own 20.0%.
The offer period will run from October 13 to 19 while the listing is scheduled on October
26.

FRI 09 OCT 2020
Exhibit 2: IPO Details
Stock Symbol CNVRG

Offer Price Php16.8/sh
Market Cap
Total Shares Offered 1,505.3Mil
Primary 480.9Mil
Secondary 1,024.4Mil
Gross Proceeds from Primary Shares Php8,078.1Mil
Net Proceeds from Primary Shares Php7,734.4Mil
Share Outstanding Post IPO 7,526Mil
Offer Period October 13 to 19
Listing Date October 26
source: CNVRG
Approximately 90% of the net proceeds from the IPO or Php7.0Bil will be used to
accelerate the company’s nationwide fiber network rollout. CNVRG plans to have
Luzon, Visayas, and Mindanao under its system by early 2021. Around 60-80% will be
used for investments in their domestic backbone, distribution networks, and access to
international connectivity networks, among others. Around 10-20% will be used for
inside plant equipment and electrically powered network equipment, while another 10-
20% will be for investments into other property, plant, and equipment, and intangible
assets. The remaining Php773.4Mil will be used for general corporate purposes including
their working capital requirements.
Exhibit 3: Use of Proceeds

Est. Amount Est. Amount Est. Timing of
Use of Proceeds
(Php) (%) Disbursement
Capital Expenditures Php6,961.0Mil 90% 2021-2022
Investments on outside plant equipment Approx. 60-80%
Investments on inside plant equipment Approx. 10-20%
Investments into other PPE and intangible assets Approx. 10-20%
General Corporate Purposes Php773.4Mil 10% 2021-2022
Total Net Proceeds Php7,734.4Mil 100% 2021-2022
source: CNVRG

FRI 09 OCT 2020
Key Investment Highlights
Underpenetrated residential fixed broadband market
According to Media Partners Asia’s (MPA) analysis, the Philippines had approximately
3.5Mil residential fixed broadband subscribers in 2019, accounting for only 14.1% of total
households. Moreover, the Philippines had 1.5Mil residential fiber broadband subscribers,
representing just 6.8% of total households. The fixed and fiber broadband penetration in
the Philippines is much lower than that of other ASEAN peers such as Vietnam, Thailand,
and Malaysia, implying that the market is underpenetrated and that there is ample room
for growth.
Exhibit 4: Southeast Asia Fixed Broadband
source: MPA Analysis, CNVRG
Exhibit 5: Southeast Asia Fiber Broadband Penetration of Total Households in 2019
According to MPA, the current residential market size of 3.5Mil subscribers only represents
18.9% of the total addressable market of around 18.5Mil households in the Philippines.
MPA also said it expects the Philippines to experience a significant growth in broadband
penetration due to higher connectivity needs coupled with the rapid fixed network rollout
of incumbent operators. The Philippines’ fixed broadband penetration is expected to
reach 32% of total households by 2025, equivalent to around 8.9Mil subscribers.

FRI 09 OCT 2020
Meanwhile, fiber penetration is expected to rise to 27% of total households by 2025

from 6.8% in 2019 as fiber service replaces outdated digital subscriber line (DSL) and HFC
technology in the near future. DSL and HFC infrastructure cannot satisfy Filipinos’ need
for higher speeds as digitalization of day-to-day activities has become more prevalent in
the post-pandemic world.
Exhibit 6: Philippines Fixed Wired Broadband Subscribers and Penetration Forecast
Exhibit 7: Philippines Fixed and Fiber Broadband Penetration (as a % of households)
Outdated fixed broadband network in the Philippines
The fixed broadband market in the Philippines remains underserved as incumbent

telecommunication operators place more focus on their mobile phone businesses.
Incumbent operators have been investing heavily in expanding their wireless infrastructure,
for both mobile and fixed wireless services.

FRI 09 OCT 2020
In addition, 54% of the existing fixed broadband network (by ports) are made of legacy
copper, which is used for DSL technology. The use of outdated DSL technology is the
main reason for the country’s slower fixed broadband speed compared to other countries
in the ASEAN region. Incumbents’ prioritization of expanding their wireless network
infrastructure, coupled with their large-scale outdated copper network are responsible
for the underserved fixed broadband and fiber broadband markets in the Philippines.
Increasing consumer appetite for broadband data
Because of the COVID-19 pandemic, Filipinos were forced to digitalize their regular activities
(working, studying, and others) to stay productive despite the lockdown. Based on AMPD
research data, online activity has grown significantly due to the COVID-19 pandemic with
weekly usage of video conference applications increasing by 8.5x during the lockdown.
Meanwhile, video streaming, social media, and mobile gaming applications also saw
significant increases with the limited mobility. Aside from corporations implementing
work-from-home, many schools and institutions are now starting to use online platforms
to conduct classes. All these developments are resulting to increased data consumption.
CNVRG is aiming to capitalize on Filipinos’ increased connectivity needs brought about
by the pandemic as they ramp up the rollout of their fiber network.
Exhibit 8: Online activity increased after COVID-19 ECQ announcement
Source: MPA Analysis based on AMPD Research data, CNVRG

FRI 09 OCT 2020
Large addressable enterprise business
According to the Philippine Statistics Authority (PSA) and MPA, the Philippine Enterprise
Wired Connectivity Market grew at a CAGR of 14.7% from US$456Mil in 2015 to US$788Mil
in 2019. This was mainly due to the continued growth within the service sector such as
BPO, financial services, and ICT industries as they normally require high performance
enterprise connectivity to successfully operate. There are also various large and small
enterprise clients that request for data network solutions and other value-added services.
Looking ahead, the Enterprise Wired Connectivity Market is projected to grow at a 14.6%
CAGR from US$744Mil in 2020 to US$1,472Mil in 2025 as the service sector continues
to demand for enterprise connectivity and digitalization amid the COVID-19 pandemic.
Enterprises must adopt digital technology to continue operating under the new normal.
Hence, enterprise ICT services including cloud-based resources, multi-location operations,
and video conferencing are expected to grow moving forward. Moreover, MPA expects
the total number of enterprises in the Philippines to grow at a 7.3% CAGR from 111,000
in 2020 to 158,000 by 2025.
Exhibit 9: 2015-2019 Enterprise Wired Connectivity Market Size (in US$Mil)
Source: MPA Analysis based on Philippine Statistics Authority
Exhibit 10: 2020E-2025E Enterprise Wired Connectivity Market Size (in US$Mil)
Source: MPA Analysis based on Philippine Statistics Authority

FRI 09 OCT 2020
Key Strategic Plans
Sustain aggressive subscriber acquisition
According to MPA estimates, as of end June 2020, CNVRG’s fixed broadband market
share stood at 19.1%, mainly due to the rapid pace of subscriber additions over the
past few years. CNVRG recorded 732k residential fixed subscribers as of end June,
significantly higher than the 530k subscriber base it had as of end 2019. This was largely
due to the significant increase in subscriber additions following the lockdown, with
additions reaching 49k in May, 61k in June, and 65k in July. The pace of growth has been
maintained with around 70k monthly new subscribers in August and September. Note
that the current pace of additions is significantly higher than the pre-COVID monthly net
additions of around 20-30k subscribers.
CNVRG aims to have 1Mil residential subscribers by the end of the year, which should
be achievable given current subscriber additions exceeding 70,000 per month in August
and September.
Exhibit 11: Fixed Wired Broadband Market Share
Source: MPA Analysis
Exhibit 12: Residential Subscriber Additions
Source: CNVRG

FRI 09 OCT 2020
CNVRG’s total homes passed and total ports have also increased significantly over the
past few months. Additional homes passed reached 240k and 297k in June and July
2020, while monthly port additions reached 120k and 150k in June and July. This is much
higher than the average monthly additions of 191k homes passed and 100k ports in
2019. Consequently, as of end June, CNVRG’s homes passed increased to 4.1Mil homes
from 3.2Mil as of end 2019, covering approximately 17% of total households. Meanwhile,
total ports also reached 2.5Mil, 22.5% higher than 2.0Mil ports as of end 2019.
Despite the rapid growth, the company is looking at further deepening its penetration
in Luzon, where there is still a lot of potential to increase its current customer base. In
addition, CNVRG is constructing its domestic backbone in Visayas and Mindanao which
is scheduled for completion in 2021. CNVRG is working towards its long-term goal of
covering around 55% of all Philippine households or 15Mil homes by 2025 (27.5Mil
households, according to MPA).
Exhibit 13: Converge’s Residential Network Snapshot

2018 2019 % Change 1H20 % Change
Customers 264,865 529,629 100.0% 731,563 38.1%
FTTH 118,662 330,621 178.6% 512,597 55.0%
HFC 146,203 199,008 36.1% 218,966 10.0%
Homes Passed 1,432,074 3,221,743 125.0% 4,111,661 27.6%

FTTH 762,294 2,423,944 218.0% 3,301,240 36.2%
HFC 669,780 797,799 19.1% 810,421 1.6%
Ports 1,050,927 2,009,771 91.2% 2,461,041 22.5%

FTTH 381,147 1,211,972 218.0% 1,650,620 36.2%
HFC 669,780 797,799 19.1% 810,421 1.6%
Source: CNVRG
Well positioned to offer integrated solutions to a broad range of

enterprises
CNVRG’s enterprise customer base grew by a CAGR of 33% from 4,292 in 2016 to 10,083
in 2019. As of end June 2020, its customer base increased by 4.1% to 10,498 from 10,083
in FY19 despite the complications caused by the pandemic. This was mainly due to its
efforts to replicate normal operations for its enterprise clients through work-from-home
arrangements. CNVRG assisted its large enterprise customers, which accounted for 44%
enterprise revenues, by installing and providing internet connections in their employees’
homes. Meanwhile, its BPO clients were given tailored-fit connectivity solutions as they
continued operating during the lockdown. The company also ensured that banks and
offices had internet connectivity solutions for their daily operations.

FRI 09 OCT 2020
Moving forward, CNVRG is looking at growing its enterprise customer base with plans
to provide cloud solutions, private data network solutions, and other services to its
clients. On top of this, CNVRG plans to install fiber in major commercial buildings and
hubs across the country, where majority of its large enterprise clients are located. Its
strategic collaboration with real estate operators and building owners should strengthen
its enterprise segment as it expands its network not only in metropolitan cities but also
in emerging business areas nationwide.
Strategic partnership with MetroWorks should fast-track network rollout
As a wholly owned subsidiary, MetroWorks is fully dedicated to serving CNVRG as its

sole customer. Through Metroworks, CNVRG has been able to maintain full visibility
over its network rollout, which allowed it to modify its rollout plans to suit the needs of
the customers. This helped CNVRG come up with the strategy to prioritize fiber ports
back in 2018, with 90% of the ports rolled out since 2019 being fiber. This synergistic
relationship also gives CNVRG the ability to coordinate the network rollout with its sales
and market teams, simultaneously. The company is also able to manage contractors and
subcontractors directly without intermediaries, thus removing unnecessary costs. With
MetroWorks, CNVRG is able to build its end-to-end fiber infrastructure at a faster pace
and lower cost.

Company Financials
Robust growth supported by accelerating subscriber base acquisition
From 2017 to 2019, CNVRG’s revenues grew by a CAGR of 76.3% driven by the robust
growth in subscribers. In 2019, the company’s residential customer base reached 529,629,
which is 4x larger than their customer base in 2017. CNVRG’s EBITDA likewise grew by a
CAGR of 63.3% to Php4.6Bil while recording an EBITDA margin of above-50% over the
last three years.
CNVRG’s 1H20 revenues increased by 64.6% y/y to Php6.5Bil from Php3.9Bil due to the
record monthly subscriber additions during the past few months and the higher data
needs of subscribers. In addition to having more subscribers, CNVRG was able to also
generate higher revenues from the sale of additional connectivity solutions such as
speed-boosts for residential subscribers and other add-ons for their enterprise clients
during the lockdown. Moving forward, CNVRG should be able to sustain its growth as the
demand for larger data-denomination packages is expected to remain elevated, coupled
with the growing subscriber base.

FRI 09 OCT 2020
Exhibit 14: 2017-2019 Results Summary
in PhpMil 2017 2018 % change 2019 % change

Total Revenues 2,940 5,055 71.9 9,139 80.8
EBITDA 1,727 2,794 61.8 4,609 65.0
EBITDA Margin (%) 58.7 55.3 50.4
Operating Income 1,299 1,740 34.0 2,772 59.4
Operating Margin (%) 44.2 34.4 30.3
Net Income 1,230 1,242 0.9 1,905 53.4
Net Margin (%) 41.9 24.6 20.8
Source: CNVRG
Exhibit 15: 1H20 Results Summary
in PhpMil 1H19 1H20 % change

Total Revenues 3,942 6,490 64.6
EBITDA 1,939 3,314 70.9
EBITDA Margin (%) 49.2 51.1
Operating Income 1,150 2,145 86.5
Operating Margin (%) 29.2 33.0
Net Income 825 1,259 52.6
Net Margin (%) 20.9 19.4
Source: CNVRG
IPO brings down leverage
As of end June 2020, CNVRG’s outstanding loans amounted to Php10.5Bil. Note that their
principal sources of funding since 2016 have been: 1) US$225Mil equity investment from
Warburg Pincus; 2) cash flows generated from operations; and 3) bank financing. The
company ended 1H20 with a D/E ratio of 0.6x. However, with fresh capitalization from
the major shareholders and proceeds from the IPO, CNVRG’s D/E ratio will fall to 0.4x.
CNVRG plans to maintain its conservatively levered balance sheet as it continues with
its network rollout plans. For the remainder of 2020 and 2021, the company expects to
spend US$602Mil, after spending US$121Mil in 1H20. They expect to fund their capex
through the: 1) the IPO proceeds; 2) US$180Mil in cash and cash equivalents available as
of end June 2020; 3) further cash to be generated; and 4) bank financing. CNVRG still has
another Php21.4Bil or US$429Mil available for drawdown as authorized by the indenture
of their bank borrowings as of end June.

FRI 09 OCT 2020
Valuations
For the rest of the year, CNVRG should likely sustain its 1H20 top-line growth as monthly
subscriber additions continue to reach record highs. In addition, the company should
also be able maintain its 1H20 EBITDA margin of 51% throughout the entire year. This
should allow CNVRG’s FY20E EBITDA to reach Php7.7Bil, which is 66.7% higher y/y than
Php4.6Bil booked in FY19.
Thus, at its offer price of Php16.8/sh, CNVRG will be trading at a 15.6x 2020E EV/EBITDA.
The said multiple is a significant premium compared to the 5.4x median multiple of its
regional peers. Similarly, the company’s 2020E P/E of 43.3x is notably higher than the
16.8x median P/E of its comparables.
For its EV/EBITDA multiple to be at par with its regional peers, CNVRG will need to record
an EBITDA of Php22.4Bil, which is 3x higher than its FY20E EBITDA. This means that
CNVRG will have to significantly expand its current customer base and increase ARPU to
justify its IPO price.
Exhibit 16: Relative Valuation
Name 20E EV/EBITDA 20E P/E

CNVRG 15.63 43.33
PLDT INC 5.75 11.08
GLOBE TELECOM INC 5.36 12.50
TELEKOM MALAYSIA BHD 5.33 16.79
AXIATA GROUP BERHAD 5.17 36.00
ADVANCED INFO SERVICE PCL 7.71 18.50
TOTAL ACCESS COMMUNICATION 4.91 14.15
MAXIS BHD 12.92 26.47
TELEKOMUNIKASI INDONESIA PER 4.49 12.80
TIME DOTCOM BHD 12.56 21.96
HKBN LTD. 11.15 47.67
LINK NET 3.12 7.12
Median (ex-CNVRG) 5.36 16.79
Source: Bloomberg, CNVRG

FRI 09 OCT 2020
Converge ICT INCOME STATEMENT (IN PHPMIL)
Solutions, Inc. Total Revenues

2016
1,894.0
2017
2,940.2
2018
5,054.6
2019
9,139.5
(CNVRG) % Growth 55.2% 71.9% 80.8%
EBITDA 851.4 1,726.9 2,794.3 4,609.3
% Growth 102.8% 61.8% 65.0%
COMPANY BACKGROUND
Depreciation (248.2) (397.0) (976.4) (1,666.4)
Converge Information and Communications Interest expense (4.8) (11.2) (70.6) (275.1)
Technology Solutions, Inc. (CNVRG) is a Other income (expenses) (17.7) (31.4) (78.3) (170.6)
EBT 580.7 1,287.4 1,669.1 2,497.3
pure-play fixed-broadband operator that
% Growth 121.7% 29.7% 49.6%
currently provides fiber-optic broadband Taxes (6.3) (56.9) (427.5) (592.5)
services. Their fiber network covers over Net Income 574.4 1,230.5 1,241.6 1,904.7
200 cities and municipalities across Luzon, % Growth 114.2% 0.9% 53.4%
serving around 4.1Mil homes or 29% of
BALANCE SHEET (IN PHPMIL)
total households in Luzon as of end June
2016 2017 2018 2019
2020. CNVRG plans to have Luzon, Visayas,
Cash 316.4 420.5 476.7 6,233.0
and Mindanao under its system by early
Accounts Receivables 307.3 471.7 918.4 2,105.5
2021. Inventory 399.5 641.5 1,443.1 1,313.9
Other Current Assets 63.2 128.2 792.8 1,551.5
Total Current Assets 1,086.3 1,661.8 3,630.9 11,204.0
PPE 1,621.8 3,212.2 7,891.0 15,589.4
Other Assets 111.7 160.1 1,134.3 4,366.1
Total Assets 2,819.9 5,034.1 12,656.1 31,159.5
Accounts Payable 391.1 960.6 4,342.1 7,175.6
Loans Payable 31.6 278.3 1,521.5 1,098.3
Other Current Liabilities 120.6 119.1 745.0 1,886.6
Total Current Liabilities 543.3 1,357.9 6,608.5 10,160.5
Retirement Benefits Liability 29.8 54.8 64.9 30.9
Other Liabilities 255.9 395.0 1,374.2 8,800.3
Total Liabilities 829.0 1,807.7 8,047.6 18,991.7
Shareholder's Equity 1,990.9 3,226.4 4,608.5 12,167.8
CASHFLOW STATEMENT (IN PHPMIL)

2016 2017 2018 2019
Operating CF 475.4 1,430.2 1,480.3 1,046.4
EBT 580.7 1,287.4 1,669.1 2,497.3
Non-cash items 736.7 627.2 1,342.8 2,891.1
Change in working cap (821.9) (438.3) (1,206.1) (3,486.2)
Income Tax Paid (20.9) (46.5) (325.9) (859.8)
Investing CF (894.2) (1,691.9) (3,537.7) (6,742.7)
PPE (882.0) (1,656.8) (3,366.9) (6,132.5)
Intangible Assets (12.2) (35.2) (170.8) (510.8)
Other Non-Current Assets - - - (83.0)
Financing CF 698.6 366.0 2,113.6 11,474.0
Issuance of Convertible P/S - - - 7,056.5
Availment of Loans (47.0) 373.4 2,098.3 5,225.2
Other Non-Current Liabilities 745.6 (7.4) 15.3 (651.7)
Lease Payment - - - (155.9)
Net Cash Increase in Cash 279.8 104.2 56.3 5,777.8
Cash (Begin) 37.7 316.4 420.5 476.7
Cash (End) 316.4 420.5 476.7 6,233.0

FRI 09 OCT 2020
KEY RATIOS
2016 2017 2018 2019
ROE 28.9% 38.1% 26.9% 15.7%
EBITDA Margin 45.0% 58.7% 55.3% 50.4%
Net Profit Margin 30.3% 41.9% 24.6% 20.8%
CA/CL (X) 2.0 1.2 0.5 1.1
D/E Ratio (X) 0.0 0.1 0.3 0.1
A/E Ratio (X) 1.4 1.6 2.7 2.6

FRI 09 OCT 2020
IMPORTANT RATING DEFINITIONS

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to
12 months.
HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor
or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve
months.
SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.
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Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may be
incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are subject to change
without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial and/
or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies mentioned in this report and may trade
them in ways different from those discussed in this report.
COL RESEARCH TEAM
APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
april.tan@colfinancial.com
CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com
JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG
SENIOR RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com
ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com
COL FINANCIAL GROUP, INC.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

Pandemic Brings Opportunities For Duopoly Challenger: Converge ICT Solutions, Inc

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Pandemic Brings Opportunities For Duopoly Challenger: Converge ICT Solutions, Inc

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FRI 09 OCT 2020