iCar Asia reports ‘strong’ performance for quarter as Carmudi Indonesia acquisition comes into view

iCar Asia ASX ICQ quarter revenue Carmudi Indonesia acquisition
iCar Asia’s unaudited revenue in Q3 grew by 29% year-on-year to $3.9 million.

Car portal operator iCar Asia (ASX: ICQ) has published an upbeat periodic financial update for this year’s third quarter with the company now homing in to achieve breakeven EBITDA by the end of the year.

The company claims to be the number one network of digital automotive marketplaces amongst the Association of Southeast Asian Nations (ASEAN).

In addition to strong financial metrics, the company is also close to completing its acquisition of Carmudi Indonesia, which iCar Asia chief executive officer Hamish Stone said will enable it to record further growth in Indonesia and boost the group’s broader operations across Asia.

Improving financials

As part of a regulatory filing, iCar Asia reported a 45% improvement in operating cash flow – which now stands at $1.5 million – made possible by strong cash receipts growth and lower expenditures.

According to the company, this marks Q3 2019 as the fifth consecutive quarter of strong net cash outflow improvements and is a result of iCar Asia’s operations in Malaysia and Thailand now being consistently positive cash contributors.

In Indonesia, iCar Asia has halved its net cash outflow and corporate costs, which “remain stable” compared to Q3 2018.

Furthermore, iCar finished the third quarter with $11.1 million in cash and cash equivalents.

“We expect the trends to continue for the remainder of 2019 as the company progresses to monthly run-rate EBITDA breakeven by the end of 2019,” iCar Asia stated.

From a revenue standpoint, the company reported $3.9 million in unaudited revenue for the third quarter, an increase of 29% on a year-on-year basis.

Notably, this exceeds the company’s own expectations of 27%, with iCar attributing the improvement to “continued strong growth in its core businesses of used and new cars”, with “planned media campaigns and events” being prominently mentioned.

In terms of cash receipts – considered to be the bread and butter for retail businesses – iCar reported cash collections for Q3 2019 totalled $3.6 million, up 13% compared to the Q3 2018, with the company citing “strong cash collections in all business units” across all 3three countries it currently operates in (namely, Malaysia, Thailand and Indonesia).

Importantly, iCar’s reported cash receipts do not include net receipts from its separate auction business, which will be disclosed at a later date.

ASEAN expansion

Headquartered in Kuala Lumpur, Malaysia, iCar’s core focus is on developing and operating leading automotive portals in South East Asia.

The company claims its “online properties” are currently reaching approximately 12 million car buyers and sellers in the region every month.

In addition to growing its suite of car portals organically, iCar is actively exploring mergers and acquisitions. Just last month, the company announced a binding agreement to acquire Carmudi Indonesia, a well-established advertising and lead generation business servicing leading car manufacturers in Indonesia.

According to the terms of its deal, iCar will acquire Carmudi for US$3 million (A$4.4 million), to be paid using its cash reserves in two tranche payments.

The acquisition is set to give iCar Asia the opportunity to expand its used car business with Indonesia’s second vertical automotive site, Carmudi.co.id.

In its market update, iCar said its Carmudi acquisition is now expected to be completed “on or around 31 October 2019”, attributing the immaterial delay to “Indonesian regulatory processes”.

The combined Indonesian business is expected to more than double iCar Asia’s Indonesian revenues, increasing the country’s overall contribution to the group’s revenues from approximately 12% to 22%.

More specifically, iCar expects to boost its lead generation from the increased audience and data of the combined platforms.

In addition, Carmudi’s five physical car sales centres, called ‘Carsentros’, will facilitate a move into transactions and finance commissions that can be leveraged across the entire iCar Asia Indonesia network.

“The combined platforms of the #1 and #2 vertical automotive sites for car dealers in Indonesia will create opportunities to cross-promote products, and with the launch iCar Suite this will be a single system for car dealers to manage listings, leads and credit spend across iCar Asia’s multiple platforms,” the company said.

“We have had a very strong first three quarters of 2019 and by carrying this momentum into the last quarter of 2019, we expect to achieve monthly run rate Group EBITDA breakeven by the end of the year,” Mr Stone said.

“We are also excited about the impending completion of the acquisition of Carmudi Indonesia that will set us up well for further growth in Indonesia and across the Group,” he added.