iCar Asia directors resign

Perhaps we weren't alone in our dissatisfaction with the flow of information from iCar Asia's management. Today the company announced that both of Carsales.com's directors on the board had resigned.

Clearly it's not a positive, and iCar Asia's share price fell 12% as a result. As outsiders we can only speculate why, but presumably there has been some disagreement at board level over the management or strategic direction of the iCar Asia business.

(It's possible that Carsales's directors have resigned to allow the company to launch a takeover, but it's probably unlikely).

So what now? Carsales still has a 17% stake and may decide to exit the register, although a buyer is not obvious. Our view is that the other major shareholder, Catcha Group, is more likely to be a seller than a buyer at the right price (even though it recently topped up its stake to 27% in the capital raising at 32 cents a share).

Relationship breakdown

Longer term, any breakdown in the relationship between iCar Asia and Carsales means that the former won't benefit from the latter's management expertise. Perhaps new managing director Hamish Stone resented Carsales' interference.

To make matters worse, President-elect Donald Trump's victory has thrown Asian bond yields and currencies into a spin. Any further weakness in Malaysian and Indonesian currencies could again affect used car imports, as it has over recent months.

iCar Asia remains a very speculative situation. With losses likely until 2020, there's a risk the share price keeps falling – a market capitalisation of $65m for a portfolio of loss-making websites doesn't seem particularly cheap. But we can also see upside if Carsales sells its stake to a trade buyer, or there's a merger with Latam Autos (to give two examples).

iCar Asia is in no danger of failure thanks to the capital raising, which makes it seem like the wrong time to sell. But with the reasons why we originally bought – including the Carsales relationship – having now largely evaporated, our patience is wearing thin. HOLD.

Note: The Intelligent Investor Growth Portfolio owns shares in iCar Asia. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.