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

Healthy Cash Collections:iCar Asia Ltd. (ASX: ICQ), which is an online automotive classifieds website operator, saw its stock price surging about 4.5% in last five days (as at October 16, 2017) with the report on cash collections surging 39% on a year on year basis for the third quarter of 2017 reaching A$2.18 million, which is the highest third quarter cash receipts for the group. The group delivered a 29% rise in first quarter of 2017 while generated a 35% increase in the second quarter of 2017. iCar Asia has A$15.43 million of cash and cash equivalents, as of September 30^th, 2017. The group’s overall leads across the company surged 47% on a year on year basis as of September 2017 quarter while number of bumps (product promoting listing to top of a relevant search result) enhanced 66% on a year on year basis. The group’s paid accounts continued to show strength with an increase of 15% on a year on year basis in total and surged 66% in Indonesia. Overall listings were also seen to be up 12% year on year.
 

Cash Collections Performance (Source: Company reports)
 
Digital Initiatives:The group’s Used Car Dealers App is witnessing high usage levels while the Dealer training programs are helping the adoption of the App. The Used Car App’s dealer penetration in Malaysia is 31% as of the second quarter of 2017 while dealer penetration in Thailand has been 60%. Their New Car initiatives are on track line with their strategy. The group’s revamped digital product is live in Malaysia. The group’s first cars have already been sold under their new transactional model while aiming to ramp up their business in time for the end of year promotions. The group’s business is on track to launch the New Car experience in Thailand and Indonesia by the fourth quarter of 2017. Their artificial-intelligence enabled Chatbot, is currently being trained in several languages to support the car buyers across the ASEAN region. The group’s consumer as well as dealer mobile applications are currently live in all markets.
 
Target Market Space: The group operates in a $2 billion Auto Advertising Market having 16% spending on digital channels. Auto advertising spend is forecasted for a CAGR of 22% from 2017 to 2022 with a growing digital component. Digital represents over A$1 billion opportunity by 2022; and is expected to account over 49% while non-digital is forecasted to be 51%. New Car Advertising Spend market opportunity is indicated over A$2.2 billion in Malaysia, Thailand & Indonesia, and about A$1.2 billion opportunity in Australia.As per the core markets, the improving purchasing power in Australia would continue to drive the demand for the vehicles.
 

Upside across Core Markets (Source: Company reports)
 
Improving Market Position in Asia:The group’s Audience growth in Malaysia has been flat in the first half of 2017 on the back of the timing of the festive season. Despite this, the group’s Malaysia performance is still 5.3x of their nearest auto vertical competitor. They have 75% share of listings which is ten times more as compared to their nearest direct competitor. Over 54% of car manufacturers and 12% of new car dealers are currently paying to advertise on the group’s network in Malaysia. The group’s Thailand segment has shown solid audience growth which is leading 1.5x their nearest auto vertical competitor. They have 60% share of listings which is 2x more as compared to their nearest auto vertical competitor. 31% of car manufacturers and 4% of new car dealers are currently paying to advertise on the group’s Thailand network. On the other hand, the timing of festive season in Indonesia has impacted the performance during the first half of 2017 showing a loss of 11% on a year on year basis. The group is a market leader in the major Java market (with 75% share of listings and 3.9x their nearest auto vertical competitor). The group delivered a 68% rise in number of paying accounts boosted by new freemium model and sales team effectiveness. 22% of car manufacturers and 14% of new car dealers are currently paying to advertise on the group’s network in Indonesia and this sets a strong base for upcoming new car launch.
 
Aiming for Cash Flow Breakeven by CY2019: The group’s operating expenses increased by 21% in the first half of 2017 to $10,983,971 as compared to $9,114,443 in the first half of 2016 mainly on the back of a 52% rise in discretionary marketing expenses against pcp (prior corresponding period). The group incurred an EBITDA loss of $6,501,390 during the first half of 2017 against $5,943,673 in pcp; while it was a 17% improvement over second half of 2016. For the first half of 2017, the group’s revenues, however, surged 49% on a forex neutral basis. The group delivered a solid performance in core Classified and Media businesses driven by rising paying dealer accounts which surged 28% on a year on year basis in the first half of 2017. Their listings surged 22% on a year on year basis while the take-up of paid ‘depth’ products was enhanced. Subscription pricing rose in Thailand coupled with the bundling of an allocation of ‘depth’ products into each pricing tier. The group launched bundles in Malaysia which would enhance monthly spend. As per their Malaysia performance, they delivered a revenue growth of 38% in the first half of 2017 wherein the Media business surged 87% over pcp. The launch of Drive car show in the first half of 2017 is expected to enhance performance in New Car in the second half of 2017. With regards to the Indonesia performance, the revenue surged 117% on a year on year basis boosted by take up of freemium model and a 68% rise in paying accounts. With the given efforts on driving efficiencies and accelerated revenue growth, ICQ is aiming to achieve a cash flow breakeven by CY2019.
 

First half of 2017 Revenue Performance (Source: Company reports)
 
Stock performance: ICQ stock traded on volatility on October 17, 2017 with a slip of over 6.5% and lost about 11.5% in the last three months (as of October 16, 2017). On the other hand, the improving economic conditions enabled the group’s target markets to witness growth in new car sales. Moreover, the new car market represents one of the biggest opportunities in the digital space. The group’s products that were rolled out in the first half of the year started showing better results across their businesses. The group also expects their core classifieds and media business to continue to grow in parallel with their expansion into adjacent market segments including new car transactions, finance, insurance and events. ICQ’s enhanced cash position of $18.78 million as of 2017 as compared to $13.03 million in the prior corresponding year is also giving support to the development and investment activities. The group’s ASEAN economies are showing further signs of growth with continued adoption of digital channels. Focus on margins via optimization of spending and cost management measures is another area the group is working on. We believe investors can leverage the recent correction in the stock as we give a “Buy” recommendation at the current price of $0.215
 
ICQ Daily Chart (Source: Thomson Reuters)

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