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

2017 has been an exceptional year for the operator of automobile portals, iCar Asia Ltd, as it made the right decisions that delivered growth in all of its key operating metrics and generated return to strong revenue growth across all markets while tightly controlling costs. This has reflected that iCar Asia can deliver sustainable growth as it heads towards profitability. It continues to deliver strong growth in 2018 through a better version of Apps and is planning to expand its online advertising solutions into physical events. As the automotive industry has recovered across all the markets it operates in, it is anticipated to continue to grow exceptionally in the coming years.

Fourth successive quarter of strong financial results: The Company reported that cash collections for the fourth quarter were up by 23% on year on year (yoy) basis which totalled to A$2.22m. This was the highest ever fourth quarter of cash receipts. For 2017, total cash collection grew by 31% as compared to prior year on a FOREX-neutral basis. The Company also reduced its cash outflows and Q4 2017’s net cash outflow (excluding Financing) improved by A$0.86m which is 20% higher as compared to Q4 2016. As on 31 December 2017, the Company had A$21.5m of cash and cash equivalent and had access to up to an additional A$15.9m in funding net of all sales for a total of up to A$37.4m in conditionally funds available.

Outstanding performance in 2017: 2017 was a turnaround year for iCar and the group is now driving directly towards profitability. The Company recorded a revenue growth of 41% on a year on year basis. The Company delivered this growth with an increase in costs of only 2%. Of the A$2.4 m of additional revenue which was added in 2017, A$2.0 m (81%) flowed through to EBITDA with losses which decreased by 14% to A$11.8 m. ICQ is now fully funded through to break even with A$21.5 m in cash as on 31 December 2017. These financial results were achieved in conjunction with delivering growth in all the Company’s key operating metrics in all the countries. Highlights included -
 

1. 48% of yoy growth in total audience numbers that reached 11.2 million of unique visitors.
2. 42% of yoy growth in total leads across the Company amounting to over 1 million of leads.
3. 23% of yoy growth in total paid accounts amounting to over 5,900 accounts.
4. Total listings growth of 12% to 479,000 of live listings.

 

Highlights of the Performance for 2017 (Source: Company Reports)
 
Update on Non-renounceable entitlement offer: In December 2017, the Company announced about the closing of its fully underwritten, non-renounceable entitlement offer and raised approximately A$10 million. In accordance with ASX Listing Rules, the Company advised that it has accepted valid applications under the offer for 22,016,392 of new shares. Of the shortfall, 9,051,724 shares were subscribed by Catcha Group Pte Ltd which was a part of its priority subunderwriting arrangement. The shortfall balance of 24,486,014 of new shares which were not subscribed by Eligible shareholders and were not included in the priority sub-underwriting by Catcha, will be issued to the Catcha and to various institutional shareholders according to the underwriting and sub-underwriting arrangements which are described in the Prospectus of the Offer. Proceeds will be used to financially support the execution of the Company’s New Car and other growth strategies.

Comparative Analysis for 1H and 2H of 2017: If we talk about the audience growth in Malaysia, in 1H the growth was 5.3 times that of the nearest auto vertical competitor and whereas it was 5.4 times in 2H. 54% of the car manufacturers and 12% of the new car dealers paid for advertisements in 1H, whereas 64% of the car manufacturers and 16% of the new car dealers paid for the advertisements in 2H. In Thailand, the listing for vertical competitor grew from 2x to 2.1x from 1H to 2H. The percentage of car manufacturers also increased from 1H to 2H (31% to 36%) who are now paying for advertisement. On the other hand, in Indonesia, the percentage of car manufacturers declined from 22% in 1H to 19% in 2H.
 

Revenue Trends (Source: Company Reports)
 
Achieved Business Transformation: 2017 has been a transformational year for the business as it made the right investments in right product and in right technology. It also achieved market optimisation, and sales were reshaped delivering a sustainable growth and return across all markets. Its Long-term strategy was clearly defined, and its used car business model was reset and optimized. Its Media business was on track and extended into Events. It expanded and achieved its leadership position across all geographies. Moreover, its single Technology Platform enabled it to gain efficiency in the development in terms of speed and cost. The product expanded into new areas such as Data Solutions-iCarData. There were few key changes and additions made to the management team which strengthened its Board position. It launched the world’s first AI-enabled chatbot for the auto industry. PM Capital Ltd, Paul Moore and its entities were noted to become a substantial holder of the Company in December 2017.
 

Growth in number of Vehicles (Source: Company Reports)
 
Risks Associated with the Business: The Company relies on users who visit their site and it helps in generating revenues so a decline in the number of users visiting the site may result in a material adverse impact on the Company’s financial performance. As the cyber threat to companies is increasing so the Company being an online business is also exposed to these risks. The online automotive advertising industry is highly competitive, so the company’s performance could be adversely affected if its existing or new customers reduce the Company’s market share from its current level. The Company’s online businesses are dependent on the ongoing maintenance of the global, regional and local internet infrastructure as well as on telecommunication operators and on data centres to provide necessary products and services, data speed and security, and thus run the risk of impact from any harm to these factors.

Optimistic Outlook for 2018: The Company is taking some great momentum into 2018 in its core business of used cars and advertising solutions and in establishing of its new car business. Building the new car business in all countries will be a key focus for 2018 and represents a substantial growth opportunity. It launched its new car digital product in Malaysia and has been executing plans to ramp this business up in the first quarter of 2018. 2018 will see a further shift of ASEAN automotive marketing spending to digital marketing. The economic outlook for all its markets is positive with the group putting in timely efforts to expand its proposition into adjacent areas.
 

Digital Market Scenario (Source: Company Reports)
 
Stock Performance: The group is eying for monthly EBITDA profitability in 2019; and in view that the group operates in a $2 billion market with less than 15% spent in digital, the opportunity looks high. ROE in 2016 was (33.1%), and in 2017, the same improved a bit to (28.0%); while ROIC in 2016 was (32.8%), and in 2017, it was (27.8%). The stock declined by 5.66% in the past six months and rose by 10% in past three months but again was down by 6.38% in the past one week (as at March 05, 2018). This company has not paid any dividends during the last 12 months. However, the growth prospects seem to be reinforcing well and we recommend ICQ as a “Speculative Buy” at the current price of $0.22


ICQ Daily Chart (Source: Thomson Reuters)
 

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