The ASX growth share Tuas Ltd (ASX: TUA) is an important position in my portfolio. Overall, the largest positions in my portfolio these days are diversified investments such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
But Tuas is the biggest bet in my portfolio on a business rapidly growing earnings. It has the biggest 'growth' position in my portfolio, with Temple & Webster Group Ltd (ASX: TPW) being my second-largest growth stock.
I'll note that these two holdings were bought at materially lower prices than today. However, even at this elevated price, I'm still very bullish about Tuas shares for a few different reasons.
Excellent revenue potential
Tuas is a Singapore-based ASX telco share. In just a few years, the business has established a commendable market position, which has resulted in rapid revenue growth.
In the company's recent 2024 annual general meeting, the business reported making $35.5 million of revenue in the first quarter of FY25. This represented year-over-year growth of 33%, which is impressive for a telco considering it has already grown significantly in previous years.
As of July 2024, the business had a market share of approximately 10.8% of the Singapore mobile subscriber market. At the end of October 2024, the business had 1.1 million mobile subscribers, up 26.6% year over year.
Another promising area of growth is the company's fibre broadband, which had more than 10,000 active subscribers as of 30 November 2024.
I'm particularly excited by the possibility that the ASX growth share could expand to other Asian countries and dramatically increase the company's growth runway. Two potential markets could be Malaysia and Indonesia.
Increasing profit margins
Revenue growth is one thing, but it's important to see that it's translating into profit growth for the ASX share.
Ideally, profit should rise faster than revenue because a good business can extract scale benefits. That means they can spread the costs across more subscribers/customers as revenue continues climbing.
Tuas is demonstrating that positive profit margin dynamic, and I'm expecting even stronger profit margins as the business grows.
In the first quarter of FY25, the business achieved an operating profit of $16.1 million (EBITDA), which was a year-over-year increase of 46%. This represented an increase of the EBITDA margin to 45.3% in the FY25 first quarter, up from 41.1% in the FY24 first quarter.
The business also said in its 2024 AGM update that it achieved a positive net profit after tax (NPAT) in the FY25 first quarter, which is an important milestone.
Defensive earnings
While this ASX growth share is rapidly growing revenue and earnings, I don't think it's in much danger of losing ground in an economic downturn because of the essential nature of its services. Many people can't seem to live without their connection to the internet these days, so I'd expect it to be resilient.
With the company's focus on providing customers with good value, I think there's plenty of scope for the business to keep most of its customers each year and hopefully continue winning more. This may mean the company's earnings are more reliable than those of other sectors like retail or even banking.
