Fund manager Wilson Asset Management (WAM) has revealed one of its largest ASX stock positions in the WAM Microcap Limited (ASX: WMI) portfolio. It's the ASX telco share Tuas Ltd (ASX: TUA).
For readers that don't know this business, it operates in the Singaporean mobile telco space. It's rapidly growing and the company is aiming for success in both the mobile and home broadband space.
WAM talked about three reasons to like this business.
Subscriber growth
There are two main drivers of revenue for a telco business – the number of subscribers and the average revenue per user/subscriber (ARPU).
In the first quarter of FY24, the company saw ongoing growth for its primary mobile business.
The ASX stock's active mobile services increased by around 60,000 to 879,000 as at 31 October 2023 (the first quarter of FY24). That compared to 819,000 at the end of the FY23 fourth quarter and 643,000 at the end of the FY23 first quarter, representing growth of 7.3% quarter over quarter and growth of 36.7% year over year.
Financial performance
This subscriber growth is helping the ASX stock deliver growth in its financials.
In the first quarter of FY24, revenue rose by 41% year over year to $26.7 million and the earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 67% year over year to $11 million.
That compares to revenue of $86.1 million and EBITDA of $31.1 million for the whole of FY23. So the company has made a good start to achieving double-digit growth for these two metrics.
WAM said this reflected the company's "strong operating leverage".
Expansion of services
The fund manager also said it's positive on Tuas' ability to continue expanding its services, with the company announcing that the upcoming launch of its 5G and fixed broadband services is "on track for delivery".
Final commentary on the ASX stock
WAM concluded its bullish outlook on the stock by saying:
We continue to believe the market is underestimating the strong runway for growth and cash generation, whilst earnings accretive acquisitions could provide a catalyst over time for a share price re-rating given expectations of market consolidation.
