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

Internet-based automotive portal company, iCar Asia Limited (ASX: ICQ), is expected to have an overall improved performance in terms of the group’s efforts of raising funds for business improvement, better trends in performance across operating geographies and improving new and used car sales trend in Australia. Amidst the recent updates, it is worth noting that group’s directors have acquired ICQ shares, as announced on December 19, 2017.
 
Boosting capital position: iCar recently finished a non-renounceable entitlement offer to raise over A$10 million at an issue price of A$0.18 per New Share. Eligible Shareholders who subscribed for the Offer got 1 unlisted option for every New Share subscribed for (New Options), exercisable at A$0.20 until an expiry date of 18 months from the date of issue. Post the offer, the group had 55,555,556 New Shares leading to a total Shares on issue of 377,777,665 Shares, and 55,555,556 New Options leading to a total Options on issue of 59,305,556 Options. The group intends to use these proceeds for marketing, improving technology capabilities as well as for business development. They are aiming to enhance their New Car sales category via marketing of the New Car platform while maintaining their position as the leading online Used Car marketplace. The group is also enhancing their number of car shows and sales events to build transaction volumes across its New Car and Used Car product offerings. ICQ is also investing in sales and operations to support roll-out of the New Car business while expanding into adjacent market segments including auto finance, insurance, inspection and warranty services. They are making solid investments as well as targeting to optimize their New Car platform. ICQ intends to boost their innovations in mobile app functionality to drive further user engagement as well as extend their competitive technical advantage. They are aiming to expand artificial intelligence capability to enable further application in New Car and Used Car segments.
 
Catcha Group’s support to the offer: Catcha Group has been confident on the group’s progress as well as their strategy and has agreed to take up their total entitlement of over $1.07 million and sub-underwrite a further $3.56m of the Offer (including the entitlement of ICQ Holdings Berhad, a company controlled by Catcha Group Pte Ltd) leading to a total maximum commitment of over $4.63 million under the Offer. Catcha Group also indicated to have a voting power in the range of 26.97% and 29.81% post finishing the Offer. ICQ had earlier signaled to issue up to 11,333,330 unlisted options exercisable at $0.20 until an expiry date of 3 years from the date of issue to Catcha Group. As per the December update, a part of 44% of total New Shares’ shortfall has been subscribed by Catcha under priority sub-underwriting arrangement.
 
Solid used car performance: For the third quarter of 2017, the group’s used Car business performance was strong which delivered a 47% rise in total leads as of 2^nd September 2017 against the prior corresponding period. The segment delivered a 66% growth in the number of bumps during the quarter on a year on year (yoy) basis while reported a 15% yoy rise in total paid accounts during the quarter. The segment reported a 12% rise in new and used car listings in September 2017 against prior corresponding period. Mobile app downloads, active usage as well as dealer engagement improved in all markets. The Used Car transactional business model for dealer cars and private seller cars were launched in Thailand while sales doubled in October as 15 cars were sold as compared to September where 7 cars were sold. The Inspection Services enhanced in Thailand with over 1,000 cars inspected from May 2017 launch. In the Malaysia region, the group is aiming to extend their Used Car proposition into an online to-offline experience.
 
New Car transactional platform went live in Malaysia: The group’s New Car transactional platform went live in Malaysia and the group signed 23 of the top brands (with 90% coverage of new car brands sold in Malaysia). They are targeting to launch New Car in Thailand and Indonesia during the fourth quarter of 2017.  Media and advertising revenue drove the segment’s performance during the second half of 2017. iCar is showing consistent delivery and high engagement with top car brands, finance institutions and insurance providers. Their marketing efforts for the segment included the Luxury Car Test Drive Event in Malaysia as well as iCar Asia’s ASEAN Car of the Year Awards.
 
Ongoing growth in Thailand: The group’s Thailand region continued to show a solid revenue growth of 24% during the first half of 2017 as compared to the prior corresponding period driven by the Classifieds and Media businesses. Pricing optimization as well as a better depth product usage driving Classifieds drove the region’s performance. The Inspection Services increased with over 1,000 cars currently being inspected since the launch in May 2017. The region’s EBITDA loss improved 37% on a yoy basis during the period. On the other side, the group’s Malaysian region is narrowing its loss and reported a solid revenue rise of 33% in the first half of 2017 from the prior corresponding period. The Media business in the region was outstanding with a revenue rise of 87% during the first half of 2017 against prior corresponding period. The region’s EBITDA loss also improved by 30% during the half period as compared to the prior corresponding period. As per their Indonesia progress, the region is currently moving into monetization phase and delivered a 24% revenue growth during the first half of 2017. The revenue growth was driven by take up of freemium model. The ongoing paying account delivered growth in the third quarter with 66% rise on a year over year basis in September. The group continued to build market share in the region, but the first half EBITDA loss improved 5% as compared to the prior corresponding period.
 

Narrowing loss in Malaysia (Source: Company reports)
 
Guidance: The group is targeting to reach a monthly EBITDA profitability in the fourth quarter of 2019, with Malaysia and Thailand expected to reach a monthly EBITDA profitability in the fourth quarter of 2018, and Indonesia by the fourth quarter of 2020. The group expects revenue to rise at a CAGR of 44% to 2020. They forecast their Used Car revenue to continue to deliver growth boosted by rising dealer penetration, enhanced marketing of premium and promotional products as well as price increases. The group expects a rising Advertising and Events revenue with automotive manufacturer advertising spend as well as launched an event business to leverage online demand at an offline event. The New Car transactional revenues are growing based on a model that monetizes the transaction with a combination of fees on the sale, finance and insurance. The operating costs for the Company would be constrained to rise at a CAGR of 4% to 2020, via optimization of marketing costs, efficiencies in products and technology development leading to cost savings, while employment costs are expected to be flat by rationalization of headcount.
 

Profitability forecasts (Source: Company reports)
 
Stock performance: The shares of ICQ corrected about 31% in the last six months (as of December 18, 2017) on the back of lower than expected first half of 2017 performance. The group reported a revenue rise of 28% yoy during the first half against the prior corresponding period. They delivered a revenue acceleration of $1.0 million and a cost optimization of (-$0.4m) resulting to a better EBITDA against the second half of 2016. On the other hand, the group is undertaking further measures to enhance efficiencies in marketing spend and employee costs while focusing on driving towards cash flow breakeven during CY2019. They are also making preliminary discussions with relevant parties for acquiring a business in South East Asia. With their recent efforts of capital raising, focus on New Car segment along with improving Thailand and Malaysian businesses, we believe the sentiment on the stock would improve in the coming months. ICQ stock has been consolidating in the last four weeks generating over 2.8%. We believe that the stock price dip can be leveraged as an entry opportunity; and accordingly rate it as a “Speculative Buy” at the current price of $0.18

 
ICQ Daily Chart (Source: Thomson Reuters)

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