Company Overview: iCar Asia Limited is an Australia-based company, which is engaged in the development and operation of Internet-based automotive portals in South East Asia. The Company's segments include Malaysia, Indonesia, Thailand and Corporate. It offers a Response Management System (RMS). It brands include Carlist.my and LiveLifeDrive.com in Malaysia; Mobil123.com and Otospirit, in Indonesia, and One2car.com, Autospinn.com and Thaicar.com in Thailand. Carlist.my connects car buyers and sellers to a single platform, which encompasses car classifieds and content. Mobil123.com is an online automotive classifieds Website with over 200,000 listings. Mobil123.com allows both motor vehicle dealers and private sellers to list cars for sale. Autospinn.com is an automotive content Website. The Company's subsidiaries include iCar Asia Pte Ltd, iCar Asia Management Services Sdn Bhd, Netyield Sdn Bhd, iCar Asia Sdn Bhd, PT Mobil Satu Asia, DQBP Sdn Bhd, One2Car Co., Ltd and Perfect Scenery Ventures Limited.
 

ICQ Details

Decent Operational and Financial Performance: iCar Asia Limited (ASX: ICQ) is involved in the operation and development of internet-based automotive portals in South East Asia. As on December 3, 2019, the market capitalisation iCar Asia Limited stood at ~$118.84 Mn. For the half-year ended June 30, 2019 (or 1H FY19), the company generated $6.01 million in revenues, representing YoY growth of 20% with all three countries of operation registering positive growth in the period. The company’s operating expenses (excluding depreciation and amortisation) fell 10% in 1H FY19, and the figure stood at $9.70 million. It was achieved as a result of effective cost management approach via optimisation of marketing expenses, lower employment and administrative expenses and reclassification of lease rental of $0.3 million to depreciation and amortisation expenses after the adoption of new accounting standard AASB 16 Leases. It was added that the group witnessed an EBITDA loss for the half year amounting to $3.69 million reflecting a reduction of $2 million, implying 36% improvement on prior corresponding period because of higher revenue and lower expenses.

During the half-year, the company received $7.67 million from the exercise of options issued. This further strengthened the company’s balance sheet with cash and cash equivalents of $12.9 million at the end of 1H FY19. The company’s strong performance during the half-year period continued to its third-quarter ending September 30, 2019, wherein it reported unaudited revenue of A$3.9 million, up 29% on pcp, driven by continued strong growth in its core businesses of Used and New Car. Notably, the revenue growth in Q3 FY19 was higher than the guidance of 27%. The company reported cash collection of $3.6 million in Q3 FY19, up 13% on pcp, driven by strong cash collections in all business units including Used Car and New Car across all 3 countries. As a result of strong cash receipts growth and reduced expenditures, the company was able to reduce its net operating cash outflow by 45% on YoY basis to $1.5 million. 

Moving forward, decent liquidity levels, operational capabilities, acquisition of Carmudi Indonesia and tight cost control are expected to act as tailwinds for long-term growth. 


Revenue (Source: Company Reports)

Top 10 Shareholders: The following table provides a broader overview of the top 10 shareholders in iCar Asia Limited:


Top 10 Shareholders (Source: Thomson Reuters)

Improvement in Key Margins: The company’s key margins have improved in H1FY19 on YoY basis, which reflects that the company’s financial position has been improved, providing a base for better future performance. At the end of June 2019, the company had a current ratio of 2.65x, as compared to 2.3x at the end of December 2018, which implies that ICQ is in a decent position to meet its short-term obligations. Additionally, decent liquidity standing provides the headroom for further deployment towards strategic growth objectives. Over the first half of 2019, the company’s current assets increased by $13.52 million in December 2018 to $16.9 million in June 2019, further strengthening its base to meet its short-term liabilities. As mentioned above, the company’s net operating cash outflow has declined, which reflects the company’s operational capabilities have been improved. The improving margins, better liquidity levels and operational capabilities are expected to support its long-term growth and can also help it in attracting the attention of market players. 


Key Metrics (Source: Thomson Reuters)

Completion of Acquisition of Carmudi Indonesia: iCar Asia Limited has made an announcement that it has inked long form documents and deed of shares transfer for the acquisition of 100% interest in Carmudi Indonesia. With the signing of the documents, the acquisition has been deemed completed, and ICQ will now proceed to the next steps of consolidating and integrating Carmudi Indonesia with its existing operation. The focus of integration planning would be throughout 3 core areas of Carmudi business, i.e., New Car, Used Car and Car Sales Centres (Carsentro). 

For New Car, it stated that Carmudi Indonesia has well-established advertising and lead generation business servicing leading car manufacturers in Indonesia, and the website is witnessing around 2.0 million visits per month. iCar Asia has around 6.0 million visits per month, and there is a low overlap of audiences of around 20% as per Similarweb. With respect to used car, it was added that acquisition would also be giving iCar Asia an opportunity to expand the market-leading used car business with Indonesia’s #2 vertical automotive site, i.e., Carmudi.co.id. Notably, Carmudi has been operating five physical car sales centres, called “Carsentros”. These are transaction platform for the car dealers and leading car financing businesses and garner the finance commission income. The five centres are operating throughout cities of Semarang (2 x Carsentros), Solo, Surabaya as well as Yogyakarta. Further, Carsentros would be planned to compliment car dealers and audience throughout the newly combined iCar Asia Indonesia business.

Understanding Performance of Malaysian Business: The company’s Malaysia business continues to be EBITDA as well as cash flow positive for YTD 2019. The strategy to focus on listing quality, where low quality or sold listings are removed, was introduced in Q3 FY18, and as a result, the listings in September 2019 reflected an increase of 6% as compared to September 2018. It was added that the paid accounts for September 2019 quarter reflected an average rise of 25% on Q3 FY18. The following image provides an overview of 1H FY19 performance:


Malaysia Business (Source: Company Reports)

Paid Accounts Rose 3% On Q3 FY 2018 In Thailand: The company added that Thailand business continued to be positive EBITDA and cash flow for YTD 2019. The number of paid accounts rose 3% as compared to Q3 FY18 while the listings reflected a rise of 5% on YoY basis in September 2019. The audience and leads witnessed an improvement quarter on quarter and increased by 2% and 3%, respectively as compared to Q2 FY19. In 1H FY19, account volumes were at the same levels as in Q4 FY18, and the listings reflected an increase of 18% on YoY basis in June 2019.


Thailand Business (Source: Company Reports)

EBITDA losses Halved YoY in Indonesia: ICQ’s Indonesia business witnessed another quarter of results in which it has managed to half its EBITDA losses on YoY basis, as the business progresses monetization strategy for Used Car and builds further its New Car businesses. It was added that the audience and leads rose marginally by 2% and 5%, respectively on YoY basis.

What to Expect from ICQ Moving Forward: The key personnel of iCar Asia stated that the company witnessed a robust first three quarters of 2019 and, by carrying the momentum into the last quarter of 2019, the company is anticipating to achieve monthly run rate group EBITDA breakeven by year-end. In the context of the acquisition of Carmudi Indonesia, the combined Indonesian business is anticipated to more than double the iCar Asia’s Indonesian revenues, and might increase the overall contribution of Indonesia to the group’s revenues from around 12% to 22%. The identified synergies are anticipated to result in combined Indonesian businesses breaking even in 2020, which could attract the attention of market participants. As can be seen in the below chart, the company has managed to maintain its corporate costs as per 1H FY18. It can be said that tight cost control is expected to benefit the overall company and can also help the company in further improving the key margins. 


1H Corporate Costs ($ '000s) (Source: Company Reports)


Key Valuation Metrics (Source: Thomson Reuters)

Stock Recommendation: The company’s stock has witnessed a rise of 69.70% in the span of previous three months, while in the time frame of past six months, the stock rose 27.27%. As at 30 September 2019, the company had cash and cash equivalents of A$11.21 million. The September 2019 quarter was fifth consecutive quarter of robust net cash outflow improvements and is a result of (1) iCar Asia’s operations in Malaysia and Thailand which are now consistently being positive cash contributors, (2) Indonesia halving the net cash outflow, and (3) corporate costs remaining stable as compared to Q3 FY18. Given the backdrop of synergistic acquisitions, growth in revenue, decent liquidity position, and expectation to achieve monthly run rate group EBITDA breakeven by year-end, we recommend a “Buy” rating on the stock at the current market price of A$0.270 per share (down 3.571% on 3 December 2019).

 
ICQ Daily Technical Chart (Source: Thomson Reuters)

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