The ASX growth stock Tuas Ltd (ASX: TUA) is one of my favourite buy ideas because of its long-term potential.
I'm always on the lookout for businesses that can significantly scale from where they are today.
I think Tuas could be one of those companies that may be much bigger in five years' time.
Why?
The company is demonstrating a lot of characteristics that make me believe its revenue and, more importantly, profit could be notably higher than it is today.
Let me explain why I'm confident about the ASX growth stock's revenue and profit growth, which could help its market capitalisation rise much higher. I'd rather buy now than wait until it has risen even higher.
Strong revenue growth
One of the most important things for the telco company is to simply keep adding more subscribers in its home market of Singapore, which I think is a great country to operate in. It's winning over customers by offering great value.
In FY24, the business grew its active mobile services by 28.6% to 1.05 million. At its recent annual general meeting (AGM), the company reported that its active customers had grown to 1.11 million, which was an increase of 26.6% year over year and a rise of 5.7% quarter over quarter.
I'm expecting the company to continue to grow its mobile subscriber numbers in Singapore for a long time to come.
According to Tuas and the latest available mobile subscriber data, it had reached a market share of 10.7% in Singapore as of July 2024.
Another growth avenue for the company to pursue is broadband. As of 30 November 2024, it had reached 10,000 active subscribers, and I think it can add tens of thousands of subscribers in the coming years. To help boost long-term growth, it's looking to make network quality upgrades and target new mobile segments.
One of the main reasons I'm optimistic about the ASX growth stock at the current valuation is the likelihood of it expanding beyond Singapore, which only has a population of just over 6 million.
The investment team at Wilson Asset Management (WAM) believe the business could expand to countries like Malaysia and Indonesia, which have populations of more than 34 million and 279 million, respectively. These are much bigger markets for the company to tap into.
In summary, the business is making strong progress in driving its revenue higher. In FY24, the business grew revenue by 36% to $117.1 million, and in the first quarter of FY25, it made $35.5 million in revenue. I think this shows that the business continues to make very good revenue progress.
Why I'm optimistic about the ASX growth stock's profit growth
Investors usually value a business based on how much profit it makes, so if profit margins rise, then the profit can rise faster than revenue, which could help push the Tuas share price higher at a faster rate.
In the ASX growth stock's FY24 result, its operating profit (EBITDA) grew by 60% – faster than revenue, with the EBITDA margin improving to 42%, up from 36% in FY23.
There are signs that the company's profitability grew even further in the first quarter of FY25 – it made $16.1 million of EBITDA, representing a 45% EBITDA margin.
The company also reported that its first quarter FY25 net profit after tax (NPAT) was positive, and it also made $18.3 million of operating cash flow.
In five to ten years, I think the business could make a very exciting profit in Southeast Asia, and it could make strong capital growth between now and then.
