iCar Asia Limited

ICQ Details

iCar Asia Limited (ASX: ICQ) is engaged in the development and operation of internet based automotive portals in Southeast Asia.

Acquisition Proposal from Carsome:

As per a recent update, ICQ has received a non-binding proposal of acquisition from Carsome Group Pte Ltd, to acquire all the remaining ordinary shares of iCar and its associates for $0.55 cash per share.

• Carsome has also entered an agreement with Catcha Group Pte. Ltd to acquire 89,456,448 iCar shares, representing 19.9% of ICQ’s total shares, from Catcha and one of its subsidiaries, in exchange for the issue of Carsome shares.
• The proposal is at the initial stage and is subject to a number of conditions and includes due diligence procedures, receipt of joint bid relief from ASIC, iCar shareholder approval and court approval, etc.

YTD April 2021 Financial Performance:

• The company reported an uptick in revenue during the period, with an increase of ~37% to $5.83 million, compared to $4.26 million in the previous corresponding period driven by the car trading business in Malaysia.
• EBITDA loss narrowed down to $1.82 million during the period, compared to a loss of $2.75 million in the pcp.
• The company agreed on a new loan facility of $10 million with Catcha Group in 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company has been impacted due to the onset of COVID-19 and the threat of the pandemic still lingers on.

Outlook: The company is focussed on driving the digital transformation of the ASEAN automotive industry through the launch of innovative and professional products. 

Valuation Methodology: EV/Sales Flow Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has reported the recovery of market sentiment in Malaysia and posted revenue growth of ~105% during the YTD April 2021 period, in the region. As per ASX, the stock of ICQ is trading close to its 52-weeks’ high levels of $0.490. The stock of ICQ gave a positive return of ~62.06% in the past nine months and a positive return of ~56.66% in the past one month. It has a support level of $0.4050 and resistance level of $0.49. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a correction of mid-single-digit (in % terms). We believe that the company can trade at a slight premium to its peer median EV/Sales (NTM trading multiple), considering the improved performance in YTD April 2021, acquisition proposal and expected recovery in key markets. For this purpose, we have taken peers such as RMA Global Ltd (ASX: RMY), GUD Holdings Ltd (ASX: GUD), Hipages Group Holdings Ltd (ASX: HPG), to name a few. Considering the current high trading levels, recent rally in the stock price, negative ROE performance and the key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.48 (as on 15 July 2021, 10.:53 AM (GMT+10), Sydney, Eastern Australia).

ICQ Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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