1 ASX share on the cusp of profitability

This growth stock is rocketing towards positive financials.

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The ASX share Tuas Ltd (ASX: TUA) is expanding so quickly that it could soon be making a profit rather than a loss.

Tuas is a Singapore mobile business rapidly becoming a sizeable player in the Asian country. Despite being on the ASX for just four years, its market capitalisation has grown to more than $1.8 billion.

The company is led by executive chair David Teoh, who helped TPG Telecom Ltd (ASX: TPG) grow into a significant competitor in the Australian telco space by providing good value offerings. Tuas appears to be following the same playbook.

Rapidly approaching profit

The business reported a net loss after tax of $13.3 million in the second half of FY22, a net loss of $7.8 million in the second half of FY23 and a net loss of $3.5 million in the first half of FY24. With this rate of progress, I think Tuas will likely generate a profit in the first half of FY25.

The ASX growth share is achieving a significant increase in its active mobile services every reporting period. In the HY24 result, it reported 938,000 subscribers, up 35.7% from 691,000 in HY23. It had 487,000 subscribers in HY22, which has grown over 90% in two years.

In a sign of its low costs for customers, its average revenue per user (ARPU) per month was $9.56 in HY24 (up from $9.37 in FY23)

One of the most compelling aspects of the company's growth is that it's showing good signs of operating leverage, with profit margins rising. HY24 revenue rose 38% to $54.7 million, and EBITDA jumped 56% to $22.4 million.

If Tuas' subscriber base can continue growing at a solid double-digit rate, the profit metrics could improve at a very satisfactory rate. The company explained that its expanded plan range catered to an array of customers' needs.

Pleasingly, the business has already reached positive cash flow status – in HY24, it generated $27.5 million of operating cash flow while only using $23.9 million of that for its investing activities and $0.3 million for its financing activities.

Growth plans

Tuas is benefiting from the 5G rollout, which allows it to offer customers a better service. I think 5G could be key for the future.

The ASX growth share is also working on its fibre broadband offering, which could enable it to capture more value from existing and new mobile subscribers.

The company is expecting "continued subscriber growth" in the second half of FY24, which I think is very promising for the company's shorter-term profit growth prospects.

It's planning to spend between $45 million and $50 million on capital expenditure in its mobile and broadband divisions, which I think can help accelerate growth and improve its offering in the next few years.

Tuas share price snapshot

The Tuas share price is up 3.75% at the time of writing, trading at $4.15. The company's shares have rocketed 30% since the start of 2024 and are up 120% over the past 12 months.

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 no position in any of the stocks mentioned. 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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