Tuas (ASX:TUA) Q4 2026 Earnings Call

0:00 Thank you for standing by and welcome to the 2S Limited Full Year Financial Year 2026 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during Q&A time, simply press star followed by the number 1 on your telephone keypad. And to withdraw your question, press the star 1 again. For operator assistance throughout the call, please press star 0. And finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Richard Tan, CEO, to begin the conference. Richard, over to you.

0:37 Good morning and thank you for joining us. I'm Richard Tan, CEO of Simba Telecom, the principal operating entity of the Tuas Group. Also on the call today are Mr. David Teo, Executive Chairman of Tuas Limited, Tony Moffat, Tuas Limited Company Secretary, and Mr. Harry Wong, CFO of Simba Telecom. It is a pleasure to present the financial results for TWAS Limited for the fiscal year ended 31st July 2026, covering the period which started 1st August 2025. Let me briefly outline today's agenda as shown on slide 2.

1:23 We'll begin with Harry, who will walk through the financial performance and key metrics for the year. I'll then provide an update on our operational progress, strategic initiatives and outlook for FY27. We'll conclude with a Q&A session to address any questions you may have. Please note that all financial figures discussed today are denominated in Singapore dollars. With that, I'll now hand over to Harry to take us through the numbers.

1:59 Good morning everyone, my name is Harry Wong, CFO of Simba Telecom. I will be presenting the financials of the TWAS Group. On slide 3, you'll see that we achieved a notable improvement in the financial results during FY26 when compared to FY25. Revenue for the year is $187.6 million, up from $151.3 million last year. Underlying EBITDA increased 22%, up from $68.4 million in the prior year to $83.7 million. We achieved an underlying full-year net profit after tax of $29.6 million, which was a significant improvement on the prior year's profit of $6.9 million.

2:48 On slide 4, we show the growth in revenue and EBITDA for each of the last four halves. Revenue increased 24% in FY26. EBITDA margin has been stable year-on-year at 45% of revenue. Growth output for the year was 9.42%. The key drivers of the year-on-year EBITDA uplift continue to be increased subscribers and expanded plan mix catering to different customers' needs. We are satisfied with the way our products are being embraced by customers in a very competitive market. Slide 5 shows our sustained mobile subscriber growth over the last two years.

3:36 As of 31st July 2026, we have about 1.4 million subscribers, representing a 16% increase over the past year. We estimate Zimba's mobile subscriber market share to be around 15%. Slide 6 shows the broadband subscriber base. As of 31st July 2026, we have approximately 62,000 active services, adding 36,000 subscribers over the year. Despite this growth, we still hold a relatively small share of the home broadband market. So increased market share in the fixed broadband continues to be a potential growth of possible.

4:26 We put in the cash flow on flight seven, Apologies on the typo for the date reference. It should be referring to the year ending 31st July 2026. We continue to show positive cash flow. Opening cash and term deposit balance was $80.7 million. Net cash generated from operating activities was $91.3 million. The main cash outflow comes from acquisition of land and equipment and intangible assets of $39.3 million. Largely, mobile network and some fixed broadband infrastructure. We raise funds from the capital market of $360 million to support the M1 acquisition. This brings the end cash and term deposits to $498.8 million as of 31st July 2026. Slide 8 shows the movement in cash from operations and cash capex over the past five financial years.

5:31 We are quite proud of our track record showing efficient deployment of capital, generating strong cash returns for the company. With this, I will let Richard proceed with the business updates.

5:46 Thank you, Harry. The Singapore mobile market remains highly dynamic, and we are continuing our capital expenditure investments focus on network densification for better performance and capacity and to expand our 5G footprint. On the technology front, our mobile core upgrades are fully complete. Our network planning for our 5G standalone transition remains ongoing. We are also actively transitioning to a new cloud-based business support system or BSS to enhance customer experience and improve cost efficiency.

6:34 The network infrastructure investments are directly reflected in network performance. Looking at the OpenSignal mobile network experience reliability metrics covering the period April to June 2026, Simpa achieved an outstanding reliability score of 909 points out of 1,000, placing us second in the market. OpenSignal is a third-party investigating agency who reports on network forms. Moving to Fibre broadband, we continue to roll out enhancements to deliver 10Gbps connectivity across homes and businesses.

7:25 Our product offerings now include exclusive Wi-Fi 7 premium router packages that deliver the best value in the industry, as well as a market-leading 10Gbps business package priced at SGD$139 per month with GST. The value proposition for Simba fixed broadband products is backed by top-tier performance. According to Speedtest Intelligence, which is another third-party reporter, data collected from January to June 2026 shows Simba Telecom leading all providers in Singapore for network consistency with a market-topping consistency score of 96.2%.

8:17 outpacing our major competitors. From this and the previous slide, it is clear that Simba engineers its networks for both reliability and consistent connectivity, and this is appreciated by our customers. Next, I would like to address the status of the proposed M1 acquisition. As you will know, The acquisition could not complete without IMDA regulation. Following the announcement of the proposed transaction, IMDA notified SIMBA of its designation as a Critical Information Infrastructure Operator on 24 September 2025.

9:07 The consolidation application was formally accepted by IMDA five days later. On 9 February 2026, the Ministry of Digital Development and Information publicly disclosed for the first time that all four Singapore telcos were targeted by advanced persistent threat groups. Confirmation was provided that no sensitive data was exfiltrated and core systems remained uncompromised. After that, the implications of the merger on national cybersecurity issues generally became an item under consideration by the IMDA in the consolidation application.

9:59 On 17 May 2026, IMDA announced that it had suspended its review of the proposed consolidation pending an investigation. Because the sales and purchase agreement reached its contractual long-stop date of 21 May 2026 without regulatory clearance, the transaction lapsed and did not proceed. Regarding regulatory compliance, Simbra has been fully cooperating with the IMDA investigation. Adherence to regulatory standards remain a top priority across all our operations. and Tuas will await formal announcements from the INDA before providing further public comments.

10:50 Looking ahead, our strategic priorities focus on broad-based revenue growth by leveraging our value proposition and network infrastructure, which is well established. We will maintain our focus on product innovation and services enhancement. More importantly, we will not lose sight of the value we have brought to the market by driving competition while providing reliable and dependable services. We expect combined mobile and broadband CapEx for FY27 to sit between $50 and $55 million. This CAPEX will be required for a range of initiatives, not the least of which is the standalone 5G network and other network upgrades.

11:44 In addition to that business as usual CAPEX, incremental CAPEX and OPEX year mark for cybersecurity compliance are projected to total somewhere between 15 to 30 million in FY27. I will now hand back to the moderator for the Q&A session. Thank you, Richard. And as mentioned, we will now begin the Q&A session. For those listening by phone and would like to ask a question, please press star, followed by 1 on your telephone keypad to raise your hand and join the queue. And to withdraw your question, simply press star 1 again. When called upon, please use your handset, ensure your line is unmuted and be ready to ask your questions. Again, that is star one to join the queue.

12:32 And your first question comes from the line of Suraj Ahmed of Citigroup. Please go ahead.

12:39 Morning, Richard. I just have three questions. Just on the first one, I know you can't mention too much on the spectrum use, but just can you elaborate on whether it was a software or a hardware issue and just confirming that it is being fixed now?

13:01 The situation, as Richard has mentioned, was that there was some use of Spectrum that was permitted by the IMDA and we then used it outside the limitations that were in that purpose. In terms of whether it was a software or hardware type of issue, It's, you know, that's just a function of the way in which the system works. It's kind of a combination of both of those things. And, you know, that's really all we can say about that at this stage.

13:42 Sure. And any, Tony, anything on the timeline when we can expect some news from IMDA?

13:48 We don't have any information from the IMDA about when they're going to make their decision.

13:52 Okay. Thank you. Second one, Richard, just on the subscriber growth, it does look like there's a bit of slowdown in that fourth quarter, right? We'd love some color on this. Is it you purposely slowing growth or not taking because of the IMJ review or is it more about competition with the churn? Some color would be really helpful.

14:16 Well, the mobile market is highly competitive with many of our competitors mimicking our plans. And then there was also increased termination of SIMs arising from SIMs that were used for scam activities. Now, this obviously applies to all the telcos as well. So that's basically what was happening in the fourth quarter.

14:45 Okay, so that termination of SIMs, that would be a one-off, isn't it? Should it be continuing into next year?

14:53 Well, as far as we know, scammers will always find ways to acquire the SIMs and this is ongoing activity by the Singapore Police Force as far as we are aware. We continue to receive requests to terminate SIMs that are used for scam activities.

15:16 Correct. Last one, Richard, you have close to 500 million of cash on the balance sheet, right? I guess just the question is, do you think Simlan Tours will still be allowed to take part in consolidation in the Singaporean market? Or is there something stopping you from that perspective?

15:34 Tony, you may want to comment to that.

15:37 There's We can't really say what's likely to happen as far as consolidation in the market is concerned. We, I don't think, will be blocked out from participating in consolidation should an opportunity arise, but there's nothing that's happening at this stage that would lead us to a view that that was likely to happen in the near term.

16:12 Okay. Maybe we have the way to ask it. So then, Richard, you sort of mentioned 5G densification. There's a bit of concern given, I mean, M1 would have helped you with the 5G standalone sort of spectrum, right? You have a little bit of spectrum. Do you think, and it's impressive your mobile score as well, right, from the open signal. Do you think the densification just adding new sites and sales is enough or you actually have to get some more spectrum? Thanks.

16:41 Well, densification, obviously there's always a balance between densification and spectrum. And the path forward is obviously network densification. But what is also clear is that we are allowed to run 5G on both the 2100 and the 900 MHz band. So our planning takes into consideration on this to provide the best network experience. And as we stand right now, we are quite comfortable based on the plans that we have established.

17:16 Perfect, thanks. I'll jump back in the queue. And before we continue on to the next question, a reminder, if you would like to join the queue, to press star 1. And your next question comes from the line of James Bales of Morgan Stanley. Please go ahead.

17:33 Thanks, guys. Maybe firstly, just following up on Saraj's question on mobile subs, you talked about the benefit the brand got when the M1 transaction was announced. Has that unwound or how should we think about the potential brand damage from the controversy?

17:56 The brand continues to be very, very strong and we continue to also invest in the brand. We have very loyal customers because I've been going around talking to dealers and customers and they are obviously They obviously love what we're doing and the services that we provide for them. So we're very confident in terms of moving forward.

18:20 Great. And then maybe just on the cyber security spend, can you help us understand what are you spending the $15 to $30 million on? What are the required outcomes from that and maybe just help us understand the mix of direct versus other OPEX versus CAPEX in terms of composition of that?

18:47 Okay, obviously I would like to provide as much color as I can, but it's just that the cybersecurity framework is also an evolving framework. And the threats are also, by definition, evolving. And there is AI happening in the background, which makes obviously the threats more sophisticated. So based on the overall evolving landscape, we definitely need to do whatever is necessary to meet the evolving threats. So therefore, we are trying to do it the most efficient way because this is frankly the Simba DNA to do it the most efficient way to ensure not only compliance, but to address the threats that hit on.

19:35 We're not giving a split right now in terms of CAPEX and OPEX because, as I've said, we may look at potentially moving to a more CAPEX-like model so that it is also more cost-efficient.

19:52 I guess what I'm after too is like what would the regulator think, okay, that program's been a real success, you've ticked all the boxes. Like what are the key outcomes that you're on the hook to deliver there?

20:08 As I said, there is a framework and the framework is being established and that framework will also evolve and there will be requirements that we will need to step up to. So the incremental CAPEX expenditure and OPEX expenditure will address those stepping up of requirements. And as I've repeated myself, it is evolving because this landscape is moving very, very quickly. Nevertheless, we believe that this range is a very, very comfortable range, and this is why we are signaling this range to the market.

20:45 Okay, got it. And maybe on your outlook comments, what are you referencing with the comment, more broad-based revenue growth in the outlook statement? Should we be thinking about more products or... You know, what exactly was the messaging there?

21:10 Well, I think the messaging is quite straightforward in the sense that both consumer, enterprise and SME markets, they're all very, very big. We believe we have done quite well in the consumer mobile market, but there's obviously much work to do in the business and enterprise space. I think Harry also highlighted the fact that our market share in Fibre broadband and consumer is still kind of small so we have more work to do to grow that and nonetheless we are also very excited by the opportunities presented to us in the enterprise broadband space. Therefore, by definition, we can be very hopeful that we'll be able to achieve broad-based revenue growth across the various segments which I have just mentioned.

22:01 Okay, got it. And we saw the business mix shift gross margin down in FY26 with more broadband. If that strategy plays out and you're selling more of those services into SME and enterprise customers, should we expect that trend to continue?

22:23 Not necessarily because we are able to leverage the existing infrastructure that we have built for the business market as well. So it's early days right now. We're not giving any guidance in terms of how EBITDA will be moving forward. But what I can say is that we are building on what we already have. Therefore, we are in a very comfortable position in terms of managing costs.

22:56 Perfect. Thanks, Kaza. I appreciate the help. You have a follow-up question from Siraj Ahmed of Citigroup. Your line is open.

23:08 Thanks, Richard. Just on following up with James's question about that investment in cybersecurity next year, Richard, is this like a one-time step-up, and it can come off in FY28 because you're taking consultants or something like that, or is it just a one-time step-up and then it goes from there?

23:28 Yeah. based on what I can say is that we will need to continue to spend on cyber security because we will not obviously want to take the pedal off the foot in terms of maintaining the cyber security posture of our network so it is very very important and we are also looking forward to the new frameworks and things initiatives that are being set by the regulator as well as the cybersecurity agency in Singapore. So we expect the spend to continue. What it will be in future years, hard to say. That is why the range that we provided is for FY27, and when we are ready, obviously, we'll provide guidance for FY28.

24:18 Perfect. And then on that then, and on this broad-based revenue growth into next year, do you think, I mean, you've been a price leader in the market, right? Do you think this sort of, given the investment in cybersecurity and stuff, it's time to increase ARPU, or is it still the view that you'll be the price leader?

24:41 Well, price leadership, is important but I think we also need to consider the basic philosophy that we need to deliver value at great reliability as well especially for the business market and based on what we have built from our network infrastructure as well as the cost efficiency from our business operations point of view We believe that we are in a good position to deliver both price leadership as well as an incredible amount of value packed at those price points which we are pitching our products at.

25:31 And I mean, to the extent that you can mention, you're talking, you're flagging innovative new products into 27. Is that for the business in SME, so the enterprise in SME market, or is it something else for the consumer side as well?

25:44 Well, this is potentially, you know, competitive, sensitive information, but obviously, whatever, you know, wherever there is market growth, as well as market opportunity, we will definitely want to enter those markets and, you know, embrace those opportunities.

26:08 Okay. Last one. Just on cash balance again. I mean, Tony sort of mentioned you're still, you know, nothing's blocking you. Just how should we think about, I mean, you sort of raised that cash for the M1 acquisition. It looks like it's excess capital that's there. What should we be expecting from a capital management perspective?

26:28 It's a matter for the board to decide, but obviously any good opportunities that come our way, we will raise it to the attention of the board.

26:36 Perfect. Thank you. Thanks, Richard. And this concludes our Q&A session for today. I'll turn the call back over to Richard for final closing remarks.

26:49 Thank you all for your time and for engaging with our business update. The Board and Management of TWAS Limited We look forward to delivering further value and growth in the months ahead. Thank you. This concludes today's conference call. Thank you all for joining us. You may now disconnect.