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

Robust Revenue Growth Witnessed in FY 2018: iCar Asia Limited (ASX: ICQ) gives a platform which has the potential to connect over 600 million car buyers and sellers throughout ASEAN. As on March 12, 2019, iCar Asia has a market capitalization of around $46.12 million. The company had garnered revenues amounting to $11,555,944 which implies the rise of 27% on a YoY basis, mainly because of core classified and media businesses, with small but higher contributions from the new cars dealer activities. Further, the company expects that events and auction businesses would be contributing more significantly towards growth in 2019. ICQ incurred operating expenses of $22,867,719 in 2018 which reflects the rise of 9% primarily because of increased employment cost with deployments towards staff so that the growth of existing and new businesses can be supported. From the margins’ perspective, we believe, the company is in a decent position. The company’s net margin has witnessed a significant YoY improvement at the end of June 2018 demonstrating its ability to efficiently convert its top line into the bottom line. During the same period, the company’s operating margin also improved YoY which is reflective of its cost-effective strategies.

Therefore, we expect that the company is expected to be helped by its robust cash generation capabilities and by the digital transformation which ASEAN region is undergoing. Also, the adoption of steps with respect to the monetization strategy is expected to act as a tailwind for iCar Asia’s Indonesian business which might, in turn, help the overall company’s performance. 
 
  
Facts and figures of 2018 (Source: Company Reports)

Understanding ICQ’s Cash Flows: iCar Asia’s receipts from the customers during 2018 witnessed the rise of 46% and stood at $13,688,016 and its net cash used in operating activities reduced by 14% and stood at $11,469,810. Also, the company’s net cash used in investing activities got reduced by 39% and stood at $719,172. As a result, the company witnessed an overall 17% reduction in its free cash flow usage (i.e., operating cashflow + investing cash flow) and stood at $12,188,982. We expect that the effective usage of free cash flow would continue to strengthen its cash position which, in turn, would provide it headroom for further growth prospects. At the end of December 31, 2018, ICQ was having $9,531,721 in cash, cash equivalents and investments.

The robust growth in revenues and cash receipt was aided by a strong set of operational metrics as audience witnessed 34% rise to approximately 12 million unique visitors per month and number of leads generated witnessed 12% rise on the YoY basis. In 2018, the company witnessed used car transaction of 4.2 million representing a YoY rise as in 2017 it was 3.8 million.

 
Used Car Transactions (Source: Company Reports)

Malaysia Business Became EBITDA, Cashflow Positive: In September 2018, ICQ’s Malaysia business managed to become EBITDA and cash flow positive and also delivered first full quarter of positive EBITDA and cash flow in the fourth quarter. Thus, the full year 2018 EBITDA loss had witnessed a significant decline of 77% YoY and stood at $0.31 million. This was achieved because of robust growth in revenue which rose 17% YoY and stood at $5.34 million. The business witnessed average monthly audience growth of 49% on a YoY basis in 2018 supporting the 41% leads growth as car buyers have been moving online. The company expects that robust operational metrics would be fuelling future growth across all business units in Malaysia in 2019. We expect that the current traction would continue to support the business’ bottom-line.
 
 
Malaysia Business (Source: Company Reports)

EBITDA Loss Reduced By 50% for Thailand Business: The Thailand business of iCar Asia Limited became EBITDA and cash flow positive in December 2018. The business witnessed a significant 50% fall in EBITDA loss for 2018 on a YoY basis and stood at $0.57 million. The company’s Thailand business garnered revenues amounting to $5.07 million which implies robust growth of 33% on a YoY basis. In 2018, the business witnessed a YoY growth of 27% in an average monthly audience. We expect that the lead generation with respect to the company’s Thailand business would be supported by the focus on the quality of leads rather than on the number of leads. However, in 2018, the business’ lead generation witnessed a YoY fall of 13%.
 

Thailand Business (Source: Company Reports)

Understanding ICQ’s Indonesia Business: The Indonesian business of ICQ witnessed transformative year as they moved ahead through monetization strategy with robust growth in the number of dealers paying for advertising products on site with an introduction of listing fee subscriptions in September 2018. As a result of this, there was a robust growth trend in revenue which rose 58% on the YoY basis and stood at $1.15 million. The business witnessed average monthly audience growth of 32% and the lead volumes growth of 16% on a YoY basis in 2018. With respect to the used car, the business witnessed price increases in May 2018 (average increase was 82%). We expect that these price increases coupled with the listing subscriptions would continue to support the company’s Indonesian business. Therefore, we expect that the monetization strategy might help in reducing the losses of the Indonesian business moving forward.
 
 
Indonesia Business (Source: Company Reports)

Cash Receipts in Q4 Rose 36% YoY: The company generated cash receipts amounting to A$3 million in Q4 FY 2018 which reflects the rise of 36% on the YoY basis. With respect to Malaysia business, the company stated that the robust performance across Q4 2018 was witnessed as the business delivered a positive EBITDA margin. The strategy of business to focus on listing quality resulting in deletion of low quality or sold listings had led to a marginal decrease in listings quarter on quarter for Q4 of 2%. The company’s Thailand business was focused towards growing paid accounts and, as a result, these rose 17% as compared to the equivalent quarter in 2017. Finally, ICQ’s Indonesia business took the next steps with respect to the monetization strategy for the used car. The other operational metrics of Indonesian business also demonstrated positive growth as compared to the equivalent quarter in 2017 as listings rose by 5% and the audience increased by 16%. The company’s net cash used in operating activities decreased and is down 19% in Q4 2018 on a YoY basis.
 

Receipts from Customers (Source: Company Reports)

Other Key Updates: Recently, the company had made an announcement about the change in its Registered Office and Principal Place of Business address. The new Registered office is C/O Boardroom Pty Limited, Level 12, 225 George Street, Sydney NSW 2000 while the new principal place of business address is at Kuala Lumpur, Malaysia. Also, the company has announced that Mr. Hasaka Martin has replaced Mr. Mark Licciardo and Mrs. Belinda Ann Cleminson from the designation of Company Secretary.

Future Drivers: In 2019, there are expectations that iCar Asia Limited would grow its core business of used cars and advertising solutions and it would also be leveraging the market leadership position to scale the auction and new car businesses. The company happens to be in a robust position and would be able to capture returns as the ASEAN region continues on the road of digital transformation. The company’s Malaysia and Thailand businesses are now EBITDA positive, and Indonesia is in the healthy position to reduce the EBITDA loss making the group on track to achieve the run rate EBITDA breakeven by 2019 end.

The company is focused towards the vision of driving digital transformation with respect to the automotive industry in ASEAN region, and it sees 2019 as a year to confirm its position in the region as the catalyst for the change. The company’s Malaysia business is expected to be aided by an average monthly audience and leads growth in the future across all the businesses. As the company’s two largest markets are now becoming positive cash contributors and there is a stable expense base, ICQ expects that moving forward, there would be reductions in the net operating cash flow which would help it in 2019. 

Stock Recommendation: On the daily chart of ICQ, Exponential Moving Average or EMA has been used and default values were used for the purposes. After careful observation, it was noted that the company’s stock price has crossed the EMA and had moved upwards after the crossover which reflects bullishness. Therefore, there are expectations that the company’s stock price might witness a rise moving forward. On the other hand, the company is expected to be helped by the digital transformation which is being witnessed in the ASEAN region. Also, the Indonesian business of ICQ happens to be in the position to reduce the losses in EBITDA which might benefit the overall company moving forward. However, the company’s stock is quite volatile as, on the YTD basis, it has delivered the return of -11.11% and, in the span of 6 months, it delivered the return of -47.83%. Hence, the stock seems to be trading at attractive prices. Fundamentally, the business strategy is on track and the group is improving a platform for the next phase of its growth. Hence, considering aforesaid facts and current trading level, we have a “Speculative Buy” recommendation on the stock at the current market price of A$0.140 per share (up 16.667% on 12 March 2019).

 
ICQ Daily Chart (Source: Thomson Reuters)

 
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