Tuas Ltd (ASX: TUA) reported its first-ever net profit in FY 2025 as it continues to capture market share in Singapore’s competitive telco market.
When TPG Telecom Ltd (ASX: TPG) merged with Vodafone in 2020, its Singapore operations were spun out as Tuas. The company operates under the brand name Simba, replicating the same low-cost, high-value telco services TPG succeeded with in Australia.
Tuas is chaired by TPG co-founder David Teoh, who holds a 32% stake in the company.
Note all financial numbers are in Singaporean dollars.
Tuas Financial Performance FY 2025
Tuas continued to gain market share in FY 2025 by signing up predominantly foreign workers and cost-conscious Singaporeans underserved by incumbent competitors.
Historically, Singtel and Starhub, best thought of as a bit like Telstra Ltd (ASX: TLS) and Optus for Australian readers, have made a motza charging for overseas minutes and relatively low data plans.
Key financial numbers for FY 2025 include:
- Revenue of $151.3 million, an increase of 29% year-on-year
- Earnings before interest, tax, depreciation and amortisation EBITDA of $68.4 million, a 38% increase year-on-year
- Maiden net profit after tax of $6.9 million, up from a $4.4 million loss in FY 2024
The mobile business achieved 19% growth, with average revenue per user stable at $9.60. Simba’s primary service is selling $10/month SIM plans. Competitors don’t come close on price, nor do they offer the same level of minutes and data.
Last year Simba launched its broadband offering. New services numbers were up 78% over the half to 25,592, albeit this is coming off a low base. Management noted that average revenue per user should increase in the next financial year as customers transition from the $20/2.5 Mbps plan to the $30/10 Mbps plan.
Regarding cashflow, Tuas recorded a consecutive year of cash flow, with free cash flow of $25.6 million. When we originally covered the business, we were critical of the cash losses Simba was incurring, so it’s positive to see the business reach sustainable profitability.
Tuas Acquires Competitior M1 Telecom
Tuas announced in August that it had agreed to purchase rival M1 Limited for $1.43 billion. The purchase will create a combined entity with $948.8 million in revenue and $256 million in EBITDA.
At the current share price of $7.14, Tuas has an enterprise value of $4.8 billion.
Simba will gain valuable market share and earnings, but it will come at the expense of a new $1.1 billion debt facility. The remainder of the purchase will be financed by a $385 million equity raising and $50 million share purchase plan.
Growth will also take a hit, with Simba’s contribution spread across a much larger revenue and earnings base. The investor presentation conveniently left our details regarding M1’s historical performance, which suggests the business is not performing well.
That’s confirmed with market share data from Starhub, which shows M1 ceding market share to Simba.
Broader pricing in the mobile market has intensified with Simba’s arrival, with competitors forced to increase data and roaming inclusions in addition to lower prices.
Roaming, especially, is an important factor for consumers. Singaporeans frequently cross the land border to Malaysia, while foreign workers are typically from surrounding countries, including the Philippines, Indonesia, and India.
Source: Starhub 1H25 Presentation
Why Tuas Purchasing M1 Makes Sense
It’s a huge purchase that leverages the balance sheet of what looks to be a declining asset, so it is good to approach an assessment of it with some degree of scepticism. Clearly, Teoh’s intent was to avoid unnecessary dilution (and to retain control), wagering that M1’s $178 million in EBITDA would adequately cover the debt repayments. Hence, the use of debt.
Simba will benefit from an expanded customer base and network. M1 is one of only two operators to be granted a national 5G standalone network license.
Indeed, there will be some customer cannibalisation, but a consolidated number three played under Teoh is an exciting proposition against legacy incumbents unable to compete as effectively on price.
Singtel positions itself as a premium operator with the best network. Starhub takes a similar approach, albeit this hasn’t been fruitful with the business downgrading earnings guidance in August.
“Customers are willing to pay and those who pay, we want to move away from the commoditization of data where like you said, in a crowded market everybody is throwing hundreds of gigs, but we are trying to differentiate. We can do the gig game, but we want to clearly be able to differentiate our network.” – Ng Tian Chong, Singtel Singapore CEO, 22 May 2025
Put simply, a combined M1 and Tuas will be better positioned to take market share from incumbents.
It’s also worth noting the seller was keen to offload M1 for non-operational reasons. Keppell is a $16 billion Singaporean conglomerate attempting to shift its business model from business ownership to asset management.
With a more focused owner, M1 (and therefore Tuas) will benefit from both cost and network synergies.
Why I Like Tuas Shares
Under the stewardship of Teoh, Tuas has gone from a tiny subsidiary largely ignored and spun-off in the TPG-Vodafone merger into a profitable disruptor in the Singaporean market. That’s reflected in the share price, which has already 10-bagged since listing at $0.68 in 2020.
I [Lachlan Buur-Jensen here] failed to see the forest from the trees when it came to profitability in 2022. While it was negative at the time, revenue and free cash flow have since trended in the right direction. The lesson for me is to back good management and consider compensating for elevated risk through investing smaller amounts, rather than eschewing an idea altogether.
The enterprise value to EBITDA multiple of 19 prices plenty of growth in the years ahead. And that business is now inherently more risky as it navigates integrating M1 and servicing a $1.1 billion debt pile.
It’s also worth noting that mature telco businesses don’t trade on high multiples. Telstra for example, trades on around 11x EBITDA.
Despite all that, I’m going to bite the bullet and purchase a position in Tuas. It will be a small purchase, as I remain apprehensive about the debt position. The simple truth is that higher debt means higher risk, all else being equal. However, I will wait two full trading days after this article is published before buying shares.
Some will say that’s reactionary, and that the returns have already been made. That may be true, but I’m confident that Simba will continue to take market share for the foreseeable future. I trust Teoh to be across the potential synergies, and additional scale should entrench Simba’s value offering.
Starhub and Singtel aren’t interested in competing for lower-value subscribers. Moreover, M1 gives Simba a foothold in broadband and enterprise markets.
Teoh is a Tier 1 operator, and that’s exactly the kind of person I want to invest alongside.
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Disclosure: The author of this article does not own shares in TUA and will not trade TUA shares for at least 2 days following the publication of this article. The editor of this article, Claude Walker, does not own shares in TUA and will not trade TUA shares for at least 48 hours following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
The information contained in this report is not intended as and shall not be understood or construed as personal financial product advice. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement. Nothing in this report should be understood as a solicitation or recommendation to buy or sell any financial products. A Rich Life does not warrant or represent that the information, opinions or conclusions contained in this report are accurate, reliable, complete or current. Future results may materially vary from such opinions, forecasts, projections or forward looking statements. You should be aware that any references to past performance does not indicate or guarantee future performance.