The S&P/ASX 300 Index (ASX: XKO) stock Tuas Ltd (ASX: TUA) has been one of the best performers in my portfolio lately. Tuas shares are up 24% since 23 September and, amazingly, have soared more than 150% higher in the last 12 months, as shown in the chart below.
A costly mistake investors can make is assuming that an ASX growth share is done growing.
Think of names like Pro Medicus Ltd (ASX: PME), REA Group Ltd (ASX: REA), WiseTech Global Ltd (ASX: WTC) and TechnologyOne Ltd (ASX: TNE) – they have been successful for a long time, but an investment a year ago would still have delivered excellent market-beating returns.
Tuas has already performed incredibly well for shareholders, but I believe the Singaporean telecommunications business still has plenty of potential for growth. I'll explore these reasons below.
Attractive subscriber offering
Firstly, the company has managed to achieve an impressive market share in Singapore, an attractive place to do business.
Tuas is trying to provide great value for customers, which is appealing in this era of higher living costs.
The ASX 300 stock's offering is clearly resonating – in FY24, its subscribers grew 28.6% year over year to 1.05 million. The company also noted its mobile average revenue per user (ARPU) grew by 3.3% to $9.68.
To me, the company is showing good trends that its growth can continue in Singapore for the foreseeable future.
Additionally, it's investing in capital expenditures to support subscriber growth and expand 5G coverage. Home broadband is another targeted area for growth — it wants to grow its broadband presence in the country. Tuas said it had 4,000 subscribers at the end of FY24 with "strong consumer interest".
Appealing operating leverage
One of the most appealing elements of a great business is that it can deliver operating leverage where profit margins increase, enabling profit to rise even faster than revenue.
With how focused investors are on seeing profit growth, operating leverage can deliver stronger shareholder returns over time.
In FY24, the ASX 300 stock reported a 36% rise in revenue to $117.1 million and a 60% increase in operating profit (EBITDA) to $49.7 million. The EBITDA margin increased from 36% to 42% in FY24.
With the company continuing to grow its subscriber and revenue numbers at a good pace, I think there is a high likelihood the EBITDA margin can keep rising.
International expansion potential
Singapore is a great country, but according to the World Bank, it has a population of only 5.6 million. Tuas will eventually reach a growth ceiling if it keeps gaining market share. However, in the future, the company could expand to other Asian countries with much larger populations.
The investment team at Wilson Asset Management (WAM) has suggested that Tuas could enter Malaysia and Indonesia, which have populations of 34 million and 275 million, respectively, according to the World Bank.
Growing into those new markets and beyond would significantly increase Tuas' total addressable market (TAM) and lengthen its growth runway.
While I'm already a shareholder, I'm planning to buy more Tuas shares sooner rather than later.
