Growing telco Amaysim Australia Ltd (ASX: AYS) has seen its share price plummet 10% to $1.94 following the release of a trading update at its annual general meeting today.
In the first half of FY 2017 management revealed that it expects its core mobile business to grow by a solid 58,000 to 60,000 net subscribers. Unfortunately though the average revenue per user (ARPU) is predicted to be lower than in FY 2016.
Last year Amaysim reported an ARPU of $25.24, which itself was down 3.4% from $26.12 in FY 2015.
But it is important to remember that this decline is the result of its exposure to the sub-$30 market through the recently acquired Vaya brand.
The ARPU decline is only expected to be temporary and management is confident that in the second half of FY 2017 there will be an improvement.
Another cause for concern for investors today may have been management's revenue guidance in FY 2017 of low-double-digit growth. For many investors this level of growth isn't sufficient to justify its shares trading at 26x full year earnings.
While this may be the case, I believe there is a lot of growth beyond FY 2017 being priced into the shares which may justify the premium.
In my opinion Amaysim's broadband service could be a big driver of future growth. Early in 2017 it is expected to be launched and I expect the company will be in a strong position to win NBN market share from the forced migration of consumers to the NBN.
One of the big fears for shareholders of Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM) has been the negative impact on margins from the NBN. Thankfully for Amaysim this is not a problem, but rather an advantage.
Due to the company's asset-light business model, Amaysim can provide great value NBN products without sacrificing its margins. However, it should be noted that Amaysim will still be operating in a competitive market.
Overall, I would consider the first half of FY 2017 as being a transitional period and expect thereafter to see the company's growth accelerate. As a result the sell off today could be seen as a buying opportunity for investors with a long investment time horizon.