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

While online automotive advertising portals are seeing traction in last couple of years, one particular stock that looks to be an option in bargain territory is iCar Asia, which owns and operates ASEAN’s No. 1 network of automotive portals. The group specifically runs leading automotive portals in Malaysia, Indonesia and Thailand. iCar Asia is continuously working to capitalize further on its market-leading positions, with online properties currently reaching over 4.8 million car buyers and sellers in the region every month. Its brands include One2Car, Thaicar.com & Autospinn.com in Thailand, Carlist.my & Livelifedrive in Malaysia and Mobil123.com and OTO Spirit in Indonesia. With the transformation of the business completed and a strong end to 2017, the Group is well set-up to benefit in 2018 from the positive economic conditions in the fast-growing ASEAN region and the recovery in the automotive industry across all of the markets where iCar operates. The automotive markets it operates in, continue to exhibit positive signs and growth, and the Group is well positioned to maintain its leadership positions and grow these markets in 2018 and beyond. ICQ is thus putting efforts on its strategic moves under the leadership of Hamish Stone with focus on reinvestment initiatives. Further, the group’s capital raising efforts are expected to strengthen its balance sheet to support the investments for future prospects. The stock looks to be bullish on its top line growth and we expect the bottom line to get support from the ongoing efforts.

Product innovation: iCar released its new car product in Malaysia, which is an Artificial Intelligence (AI) powered platform, a Chatbot, for selecting and buying a new car with abilities to tailor information based on a user behaviour, car specifications, and stock availability. Such innovative products are expected to accelerate growth. It is interesting to note that iCar is evaluating whether technology innovations including cryptocurrency and blockchain can be applied to car ownership transfer or not.

Rise in revenue and improvement in losses: In the year ended 31 December 2017, the Group’s revenue was up 37% as it generated $9,111,498 against 2016 figure of $6,663,394 (which was up 6% over previous year). On a FOREX-neutral basis this represents year on year revenue growth of 41%. The growth was primarily driven by the Group’s core Classified and Media businesses. Incremental revenue came from the introduction of events in Malaysia and Thailand and from new streams including finance, insurance, warranty and broker services. With a tight control over costs, operating expenses increased only 2% in the year ended 2017 to $20,937,315 (2016: $20,476,139). Of the $2,448,104 of additional revenue added in 2017, $1,986,928 (81%) flowed through to EBITDA with losses decreasing by 14% year on year to $11,825,817 (2016: $13,812,745). As at 31 December 2017, the Group had $21,477,295 in cash, cash equivalents and investments and indicated access to up to an additional $15,960,826 in funding net of all fees, for a total of up to $37,438,121 in conditionally available funds post the recent capital raising initiatives. The Company estimates a cash flow of ($6,400,000) for the next quarter.


Thailand Performance (Source: Company Reports)

Strong leads in Thailand and Malaysia: The Thailand business had a strong year in the Classified segment with the introduction of bundled subscription products and increased depth product usage driving sales. Audience and leads volumes grew strongly year on year with 61% and 60%, increases respectively. Revenue grew 39% year on year to $3,818,442 (2016: $2,740,728), along with a 32% improvement in EBITDA loss to $1,133,116 (2016: $1,669,977) as increases in operating expenses were held to 12%. In Malaysia, audience grew 38% year on year driving leads growth of 55% as car buyers continued to move online. Revenue increased 29% year on year to $4,567,506 (2016: $3,535,081), along with a 39% improvement in EBITDA loss to $1,310,773 (2016: $2,126,449) as increases in operating expenses were held to 4%. In Indonesia, revenue grew 87% year on year to $725,550 (2016: $387,585) as the Company moved further through its monetisation strategy.


Malaysia Performance (Source: Company Reports)

Rise in quarterly cash collection: The Company reported that cash collections for the first quarter of FY18 were up 41% versus Q4 2017, and totalled A$3.14 million. This is the Company’s highest-ever quarterly cash receipts and represents an increase of A$0.64 million over the same period last year. During Q1 2018 and compared to Q1 2017, net operating and investing cash outflows significantly improved from A$3.22 million to A$2.20 million. This represents a significant reduction of cash outflows by A$1.02 million or 32% versus Q1 2017 excluding a one-off recoverable VAT adjustment of A$0.71 million for legacy intercompany services. The Company closed Q1 in a strong cash position. As at 31 March 2018, the Company had A$18.8 million in cash and cash equivalents and access to up to an additional A$15.7 million in funding net of all fees, for a total of up to A$34.5 million in available funds. The Company has started 2018 continuing its strong momentum, generating its fifth successive quarter of growth in its key financial and operating metrics.


Collections Trend (Source: Company Reports)

Positive Outlook: 2017 has been an exceptional year for the Group, making the right choices in product investment, technology, marketing optimisation and the reshaping of the sales process. These choices have delivered growth in all of all its key operating metrics and a return to strong revenue growth across all markets while tightly controlling costs. This demonstrates that iCar Asia can deliver sustainable growth as it heads towards profitability. In 2018, the Group expects to continue to grow the core business of used cars and advertising solutions and leverage its market leadership positions to further establish the new car, events and car services operations. The remainder of 2018 will see the Company reach important milestones in Malaysia and Thailand, which are on track for run-rate EBITDA profitability, and successful expansion of New Car and Other Car Services offerings.


Estimated cash outflow for the next quarter (Source: Company Reports)

Stock Performance: The financial results were achieved in conjunction with delivering growth in all of the Group’s key operating metrics for all countries. iCar Asia Limited issued 55,554,130 shares in connection with a non-renounceable entitlement offer to raise $10,000,000. Gross proceeds were $9,999,744. Subject to shareholder approval, the Group entered into a $5,000,000 secured loan facility provided by Catcha Group Pte Ltd to be used for working capital purposes if and when required and which may be drawn down subject to a related issue of options to Catcha Group Pte Ltd. As the largest and most trusted automotive online marketplace across the ASEAN region, iCar Asia is in a great position to capture the returns as the region continues on its road of digital transformation. The Company is expected to continue to deliver strong revenue growth in 2018 through the audience and leads dominance with improved conversion, App and messaging adoption and through expanding online advertising solutions into physical events. As its core business of used cars and advertising solutions continues to grow, the Group is focused on building and extending its proposition into New Car and Other Car Services (including Finance, Insurance, Inspection and Car Trade-In). ROE as at June 2017 was (15.6 per cent) and as at December 17, it was (14.2 per cent). Current Ratio (Current Assets/current Liabilities) improved from 4.14 in June 2017 to 5.90 in December 2017. The stock price has declined by 52 per cent in past five years and rallied about 22.5 per cent since the start of the year. In the last five days, the stock was up by 8.89 per cent. We give a “Speculative Buy” recommendation at the current market price of $0.25 (up 2% on May 15, 2018) as the Company seems to be gearing up on its potential and regaining the lost momentum since the start of 2018.
 

ICQ Daily Chart (Source: Thomson Reuters)

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