Carsales.com limited

Solid performance in FY18 across all front: The Carsales Group (ASX: CAR) has reinforced its position as Australia’s number one online destination for buying and selling cars, motorcycles, trucks, boats, caravans, and machinery. The group delivered pleasant growth in FY18 against last year across all three key financial metrics with revenue up 19%, EBITDA up 16% and adjusted NPAT up 10% whilst continuing to invest in future growth priorities. On Domestic Portfolio front, the Group is showing solid growth in Online Advertising and Data, Research and Services segments with revenue up 10% and 7%, respectively on a Y-o-Y basis. There is continued strong revenue growth in their core leads on the back of solid growth in yield in private listings from tiered pricing and an increased take-up of premium products reflecting a strong consumer value proposition. On International Portfolio front, there is a continuous evolution of growth strategy with the acquisition of the remaining stakes in both South Korean and Mexican Business. The integration of the SK Encar business into the Group has progressed smoothly, with the starting to benefit from IP. Local Currency revenue and EBITDA were up 17% and 10% on PCP in H2. Webmotors in Brazil continued its strong recent trajectory, delivering an outstanding result with local currency revenue and EBITDA being up 28% and 81% respectively. The Chilean business continuously performing well with very good revenue and EBITDA growth, being up 40% and 33% respectively. The Group is also making progress in Mexico and Argentina on their stated goal of achieving clear leadership in these markets.

From the analysis standpoint, on revenue prospects, the Group has posted the revenue of $444 Mn in FY18, up 19% (YoY), up CAGR 17.2% over the last five year. Pleasing overall EBITDA performance of $204.6 Mn up 16%(YoY), up CAGR 10.3% during FY14-18. The internationally growing carsales contribution reflects the strength of the international growth strategy. The international carsales revenue and EBITDA grew 54% and 76% respectively.As of now, the Carsales Group continues to review its capital structure to maximize shareholder returns. SK Encar acquisition completed in January 2018. The company entered a competitive new five years floating rate funding facility for $545 Mn in July 2018 which is supported by a syndicate of six banks. Simultaneously entered A$335 Mn notional Korean Won fixed interest rate swaps over the same term to access attractive KRW fixed interest rates and provide a partial hedge of the A$450 Mn carrying a value of SK Encar.


Key Financial Metric Trend (Source: Company Reports)

Meanwhile, the stock has fallen 23.51% in the past three months as on December 05, 2018. The stock is trading at a lower level with PE multiple of 15.48x. Hence, we suggest that the investors should wait for a few more trading sessions to get the better levels for an entry, that’s why we maintain our “Expensive” recommendation on the stock at the current market price of $11.47considering all positive developments have been discounted at the current market price.
 

iCar Asia Ltd

Core Business Model on Track: iCar Asia Limited (ASX: ICQ) owns and operates ASEAN’s No 1 network of automotive shopping portals operating in the three largest automotive markets – Malaysia, Indonesia, and Thailand. Approximately 12 million people visit an iCar Asia website every month to research, buy, or sell a car. The Group recorded A$3.0 million in unaudited revenue for its Q3FY18, an increase of 51% compared to the same period last year. This was achieved on the back of continued strong growth in core business in the Used and New car. Moreover, Malaysia operations become EBITDA and cash flow positive in September. This is expected to continue a quarterly basis and is four months earlier than iCar Asia’s guidance. Thailand remains on track to reach EBITDA and cash flow breakeven by the end of 2018. Cash receipts for Q3 of A$3.2 million growing at 46% (YoY) and net cash used in operating activities reduced to A$2.8 million, down from A$3.4 million compared to the previous quarter. Besides this, operational metrics continued to grow strongly with combined audience increasing 20% (YoY) to approximately 12 million unique visitors. Malaysia closed Q3 with an audience of 3.96 million, on average 85% higher than the corresponding quarter last year. They continue to pursue the policy of increasing listing quality on the site by removing low-quality listings, and it has resulted in an increase in buyer leads of 23%(YoY). In Thailand, Q3 shown continuous growth in both dealer accounts which increased by 22% (YoY) and listings increased by 8%. In Indonesia, there is more potential for growth due to continuing growth in listings, audience and leads. In September, listings reached more than 280,000, up 19% (YoY). With this progress in operational metrics and the company achieved record growth in Q3FY18. This gives confidence in the business model, and they are building the business in the right way. The core business showing strong growth, and this coupled with high levels of audience growth means they are on track for group profitability.


Cash Collections on Rise (Source: Company Reports)

Meanwhile, the stock has generated a negative YTD return of 35.0% and is trading close to lower level. Based on its decent fundamentals and current trading scenario,we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.130.
 

Automotive Holdings Group Limited

Decent outlook backed byburgeoningautomotive industry: Automotive Holdings Group Limited (ASX: AHG) is an Australia’s largest retailing and logistics group with operations in every Australian mainland state and in New Zealand. The company has operations in Western Australia, New South Wales, Queensland, and Victoria. AHG’s Logistics business include AHG Refrigerated Logistics, AMCAP, Vehicle Storage and Engineering, Genuine Truck Bodies and KTM Sport motorcycle and HQVA. FY18 was a challenging year for AHG because of headwinds faced across the automotive sector from the decline in the new vehicle market and the regulatory intervention in the sale of finance and insurance products. Despite this, the shareholders received a full year dividend of 16.3 cents per share and maintained its dividend payout policy in the range of 65-75% of operating profit. However, the company-maintained debt-to-equity ratio of 1.78x during challenging operating environment. Additionally, for FY18, the new car market sales were flat, and the WA market remained depressed. The WA market in FY2018 was 24% down from its peak. Despite the challenging operating environment, AHG’s have invested both organically and by acquisition where ever they see the value and future opportunity. On the analysis front, the company recorded FY18 Net margin of 0.6% which is broadly in-line with the prior year. As a result, the group has also generated a positive return of shareholder’s fund with ROE at 4.2% which is down from the prior year.

The stock price declined by 43.73% in the past six months and down by 17.59% in the last one month as on December 05, 2018. The stock is trading at the lower level with the PE multiple of 16.02x. Based on foregoing and burgeoning automotive industry, we maintain our “Hold” on the stock at the current market price of $1.635.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.