Why Wilson is backing this ASX All Ords share for repeatable success

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Key points

  • Tuas is quickly growing its mobile subscribers in Singapore
  • It’s planning to soon launch a home internet offering as well
  • WAM fund manager Tobias Yao is confident on the long-term

A leading fund manager has identified an All Ordinaries Index (ASX: XAO) share that could continue performing. The business in question is the ASX telecommunication share Tuas Ltd (ASX: TUA).

Tuas is focused on the Singapore market, providing mobile services to more than 691,000 users in the Asian country. Tuas was split off from TPG Telecom Ltd (ASX: TPG).

Wilson Asset Management (WAM) highlighted Tuas at a recent ASX investor day, and portfolio manager Tobias Yao gave additional optimistic commentary to The Motley Fool team about the business.

TPG founder David Teoh is now involved with Tuas. The WAM team thinks that Teoh is a very effective entrepreneur and that he may be able to replicate the success of TPG with Tuas in Singapore. Yao is also a fan of the Tuas CEO, Richard Tan, and said that he "knows the Singaporean telco space inside out."

Why should investors be positive on the All Ords ASX share?

One of the main reasons why the ASX telco share could keep rising is that it can offer customers better value.

How? The fund manager explained:

If I had to summarise it's the engineering around designing the mobile network, plus their cost discipline, which means they can pass on more of that benefit to their customers.

Tuas is seeing growth of revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) – the FY23 first half saw revenue rise by 55% to $39.6 million year over year, while EBITDA jumped 127%. However, the net loss after tax was $7.5 million, though this was an improvement from a loss of $13.4 million in HY22.

It's not making profit yet, but making cash profit is more important because a lot of the loss relates to depreciation and amortisation. On this, fund manager Yao said:

Optically, if you look at the P&L statement, it's loss making, but when you look at the cash flow statement, it's actually producing pretty good net cash flow. Because you get your operating cash flow minus maintenance capex. Overall capex is higher for a couple of years due to the rollout of their 5G network which will benefit future earnings as it gives them the ability to go after the mass market.

Do Tuas shares have a positive long-term future?

Yao believes that Tuas can keep winning market share with its mobile division, and the launch of the home internet offering could be another pillar of growth if the ASX All Ords share can execute well.

Over the next five years, Yao suggested there is the potential option for the business to make acquisitions, though this would be "probably towards year five rather than year one."

The WAM fund manager pointed to TPG's history of success at identifying and integrating acquisitions into the business. Tuas could do the same thing while winning market share and building its customer base.

Tuas share price snapshot

The All Ords ASX share has risen by 27% since the start of 2023, as we can see on the chart below.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Tpg Telecom. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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