With interest rates in the middle of a rising part of the cycle, growth shares are now seen as a "dirty word".
That's according to Montgomery Small Companies Fund portfolio manager Gary Rollo, who says this merely presents a chance to buy quality companies for cheap.
"It creates opportunities to invest in businesses whose share price decline is due to changing sentiment rather than deteriorating fundamentals," he wrote on the Montgomery blog.
"In this climate, one company we think deserves investor attention is Symbio Holdings Ltd (ASX: SYM)."
Symbio is a telecommunications provider that makes cloud- and software-based technology such as communications-platform-as-a-sevice (CPaaS).
The company's stock has lost about half of its value since November.
"To be honest, I don't think it was expensive before the pullback," said Rollo.
"But getting re-classified as a tech company in late 2021 seems to have been a red flag for some investors."
Symbio doesn't just provide vanilla voice and video calling solutions. Rollo expanded on a couple of use-cases that show off its software magic.
"When you are trying to find your ride-share driver, you don't want them to have your number and vice versa, but you do want to place a call to find out where that driver is. Symbio's software helps do that," he said.
"When Zoom needs to offer voice access to a video call conference it needs to be able to seamlessly join that call to its Zoom stream and have the audio terminate on the traditional telecom network. In Australia, Symbio's software helps do that."
A 15-times growth opportunity
As for that dirty word "growth", Rollo remarkably pointed out that even if the business did not expand at all from here, it would still return in excess of 10% per year from the current share price.
But that's not why the Montgomery team has bought Symbio shares.
Rollo explained that they've bought in because its "medium-term growth strategy looks plausible".
"Symbio is a dominant provider of CPaaS services in Australia, and has an enviable client list of global technology and consumer facing growth businesses," he said.
"In other markets in Asia, it's not so straightforward for these customers to turn up and gain access to the local telecom markets, and those customers want a Symbio-like player in those markets."
The company has explicitly stated Singapore, Malaysia, Taiwan, Japan, South Korea and Vietnam as six markets it would enter over the 2022 to 2025 period.
"Management's 2030 vision is for 100 million phone numbers," said Rollo.
"This compares to 6.4 million numbers Symbio hosts in its Australian CPaaS today. That's a giant shift in [the] addressable market."
Rollo pointed out how the unit economics of this is "compelling" as Symbio's offerings are entirely software-based. That software is already built, so scaling will hardly cost anything.
"In more 'normal' markets you would expect to pay for the underlying growth you are getting today and you would put some option value for the Asian growth strategy," said Rollo.
"[If] Symbio's Asian growth strategy succeeds, [it] is worth many many multiples of the current share price if it gets delivered."
