iCar Asia posts better than expected earnings figures as ASEAN car market continues to expand

Car portal operator iCar Asia (ASX: ICQ) has announced better than expected financial performance figures after reaching earnings breakeven in November, one month earlier than it forecast earlier this year.

iCar stated that its incremental improvements over the past year including an earnings accretive acquisition of Carmudi have contributed to achieving positive EBITDA (earnings before interest, tax, depreciation and amortisation) margin growth in its core markets of Malaysia, Thailand and Indonesia.

In November this year, iCar acquired Carmudi Indonesia for $4.4 million and began to integrate the business into its own existing operations.

The focus of the integration has been squarely on Carmudi’s new and used car business units as well as its car sales centres operating under the Carsentro brand.

At the time, iCar said the deal would provide access to Carmudi’s established advertising and lead generation business which services Indonesia car makers and racks up approximately 2 million website hits per month.

iCar claims it is currently ASEAN’s number one network of digital automotive marketplaces and delivers the most comprehensive web and mobile apps in the automation industry.

The Carmudi acquisition is therefore a direct attempt to expand iCar’s used car business with Indonesia’s second vertical automotive site, Carmudi.co.id.

According to iCar, the combined Indonesian business has approximately doubled its monthly Indonesian revenues and increased the overall present contribution of Indonesia to iCar’s revenues from approximately 12% to 22%.

When fully absorbed and consolidated, iCar said the combined Indonesian businesses will break even in late 2020.

Sporting a growing base of more than 8 million users, iCarAsia claims it has become the leading car portal network in the ASEAN region and has forecasted revenue growth to rise above 50% over the next 12 months.

One step back two steps forward

Despite its strong commercial performance, iCar said it plans to make further investments into its operations with a short investment period of a few months, reflected in higher expenses, and therefore, a temporary return to EBITDA loss.

Following the upcoming investment period that will raise expenses, iCar said it expects to return to EBITDA breakeven and profitability.

Moreover, the company intends to become cash-flow positive in the second half of 2020 in line with its previous forecasts and record EBITDA positivity for the entire financial year.

“To get to this point off the back of the huge effort of the whole team in creating a market-leading and sustainable growth business is a huge achievement,” said Hamish Stone, chief executive officer of iCar Asia.

In recent years, the ASEAN region has become a significant catalyst for the global car market as a whole with automobile manufacturing as well as sales growing rapidly on the back of a mushrooming middle-class, growing disposable incomes and attractive manufacturing conditions for multinational manufacturers.

The leader in the pack has been Thailand with its local car industry being nicknamed “The Detroit of Asia” given that it produces over 2 million cars every year while ranking as the largest auto manufacturer in Asia and the 12th largest globally.

Thailand exports more than half of its output to more than 100 countries with domestic demand also growing.

As a means of tapping into the Asian growth spurt, iCar has based itself in Kuala Lumpur, Malaysia and seeks to match car buyers with sellers via a growing list of online brands including Carlist.my, Mobil123.com, One2Car.com and ThaiCar.com.

“As the business looks ahead to 2020 and beyond, iCar Asia has only just begun on its journey to building a business that defines the automotive digital landscape in South East Asia,” said Mr Stone.

This morning’s news boosted iCar Asia shares by over 11% up to $0.30 per share, valuing the company at around $127 million as measured by market capitalisation.