Superloop Ltd (ASX: SLC) describes itself as Australia's modern challenger telco but as "more tech than telco". It has been one of the best-performing ASX shares over the past 12 months, rising around 215%. That's a strong return for an ASX telco stock.
However, I think the business Tuas Ltd (ASX: TUA) could be an even more appealing choice for investors.
Australia is a great place to do business, but it's not the only country where a company can make solid earnings and have an exciting future. Tuas is an Asian telco that's headquartered in Singapore. It has an operating business called Simba which offers both mobile and broadband connections.
Great revenue potential
I think any business that's growing revenue rapidly and could continue growing for a long time to come is worthy of attention.
In the first quarter of FY25, the company had reached 1.11 million active mobile subscribers in Singapore, which represented 26.6% growth year over year.
Based on IMDA's last available mobile subscriber data, Simba's market share had reached 10.7% as of July 2024. It shows how effectively the company has grown its presence in just a few years. Tuas was incorporated in March 2020.
It's targeting a new market segment with data-only SIMs and eSIMs, which are online only and have instant activation.
I think the ASX telco stock can continue growing its mobile revenue in Singapore at a double-digit pace (in percentage terms) for the next few years.
It's also exciting to think of how much its broadband market share could climb. At 30 November 2024, it had 10,000 active broadband subscribers (compared to 1.1 million mobile subscribers).
I'd be very willing to buy some (more) Tuas shares at the current price because I believe it will eventually expand into other Asian countries, such as Malaysia or Indonesia. These countries have significantly higher populations than Singapore. If it does expand to other countries, I think Tuas' growth runway would become significantly longer.
In the first quarter of FY25, the company reported its revenue rose 33% to $35.5 million, which is a strong number, in my view.
Good record on costs
Delivering revenue growth is one thing, but it's equally important to achieve profit growth.
David Teoh has a good track record of achieving profit growth with limited cost growth during his leadership of TPG Telecom Ltd (ASX: TPG) before it merged with Vodafone Australia. I think Tuas will demonstrate good cost discipline in the coming years.
We're already seeing some of that dynamic play out with its recent profit growth. In the first quarter of FY25, operating profit (EBITDA) rose 46% to $16.1 million, achieving an EBITDA margin of 45%.
I believe Tuas has a very exciting future if operating profit continues rising faster than revenue.
Defensive earnings
We should remember that Tuas is not some sort of cyclical e-commerce retailer. It's an ASX telco stock, which should mean its earnings are quite resilient and able to withstand global economic shocks considering the utilities nature of its operations.
Tuas made a positive net profit after tax (NPAT) in the first quarter of FY25, and I think its profit can keep growing from here. Its Singapore operations provide a stable base for the company to invest in expanding into other countries.
It may eventually start paying a dividend, which could help boost returns and reward long-term shareholders. I think it's a great investment to buy and hold today.
