Here's a follow-up write up from this newsletter in the AFR...

Here's a follow-up write up from this newsletter in the AFR today:

Low-cost carrier Amaysim and data centre provider NextDC are the two stocks earmarked by fund manager and former telco boss James Spenceley as the biggest winners from the NBN, which has levelled the playing field at the expense of bigger providers.
In Spenceley's first investment letter to MHOR Asset Management clients, obtained by Fairfax Media, he argues that the NBN's structure offers no advantages for size or scale, and it is the most efficient operators that will reap the biggest rewards.
"It's very rare for a sector to have an external event of such scale as NBN, and unheard of for that event to level the pricing playing field for all industry participants; this is unchartered waters for any industry," he said.
Spenceley established MHOR with fund manager Gary Rollo in August, starting out in small cap stocks. He resigned from the board of Vocus in October in a highly public exit and disclosures suggest he no longer holds any shares in the telco business he founded in 2007.
Now as a stockpicker, Spenceley favours a challenger brand and a listed data centre business as the best ways to play the NBN.
Amaysim is a mobile virtual network operator (MVNO) which means it leases its wireless infrastructure and "has no NBN downside compared to its fixed listed telco peers," the fund manager says.
Trading at 14 times earnings, which are estimated to grow by 25 per cent, he argues the stock's comparatively low multiple "implies a free option on NBN upside success".
"That gets even more interesting given it is entirely possible [Amaysim] could earn more in absolute dollar margin per subscriber from NBN than from their MVNO business."
Amaysim stock plunged in February after rallying strongly following its 2015 float. The stock is trading at $2.16, up 1.2 per cent today, compared with its low of $1.55 nine months ago and $1.80 offer price.


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