iCar Asia: Result 2017
Recommendation
There weren't too many surprises in iCar Asia's full-year result after the disclosures around November's rights issue and the quarterly cash numbers published in January. Those cash numbers showed slightly weaker receipts than we'd expected, but also lower costs. The overall cash outflow for the fourth quarter was slightly better than expected at $3.1m, to give $13.4m for the year.
Overall, revenue rose 37% to $9.1m in 2017, slightly below the guidance given at the time of the rights issue for 44% annual growth from 2017 to 2020. Excluding the effects of currency movements the growth would have been 41%.
Year to Dec ($'000) | 2017 | 2016 | /(–) (%) |
---|---|---|---|
Malaysia revenue | 4,568 | 3,535 | 29 |
Malasia EBITDA | (1,311) | (2,126) | (38) |
Thailand revenue | 3,818 | 2,741 | 39 |
Thailand EBITDA | (1,134) | (1,670) | (32) |
Indonesia revenue | 726 | 388 | 87 |
Indonesia EBITDA | (3,831) | (3,835) | (0) |
Group costs | (5,551) | (6,181) | (10) |
Total revenue | 9,111 | 6,663 | 37 |
Total EBITDA | (11,826) | (13,813) | (14) |
Dep. & Amort. | (1,800) | (1,319) | 36 |
Total EBIT | (13,626) | (15,132) | (10) |
In terms of the specific country guidance, Malaysia increased revenue by 29% (somewhat behind the 39% targeted for 2017–2020); Thailand increased revenue by 39% (compared to guidance of 40%) and Indonesia increased revenue by 87% (compared to guidance for 83%).
The growth reflects strong operating metrics across the group, with a 48% increase in total audience to 11.2m unique visitors and a 12% increase in listings to 479,000.
Costs rose 2% to $22.7m (excluding amortisation), below the guidance for 4% annual growth to 2020 and, as already noted, less than we'd expected. The difference was particularly apparent in Thailand, where costs came to $5.0m compared to our expectations for $5.4m, but that probably has less to do with the company's performance and more to do with our short-term forecasting abilities.
The result means Thailand leapfrogs Malaysia to be the country closest to profitability, with an earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $1.1m compared to $1.3m for Malaysia and $3.8m for Indonesia. Management's guidance remains for Thailand and Malaysia to reach monthly EBITDA profitability by December 2018, with Indonesia to follow by December 2020.
Net cash ended the year at $21.5m compared to $26.6m in December 2016, but that was after raising $9.6m in the rights issue. That should be enough to get the company through to profitability if it hits its revenue and cost guidance, but there isn't much wiggle room. We estimate that the company will bottom out at $3m of net cash in 2020 if it hits its targets. But that's a big if – it's missed targets before. Note that if it gets close to them, though, then it's likely the options will be exercised (assuming the share price is above the exercise price of 20 cents in June 2019) bringing a further infusion of $11m.
The stock is very high risk, but for up to 2% of a diversified portfolio we continue to recommend that you HOLD.
Join us for a live Q&A wrap-up, as we reflect on the winners, losers and themes from the latest reporting season. Register here.
Note: The Intelligent Investor Equity Growth Portfolio owns shares in iCar Asia. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.
Disclosure: The author owns shares in iCar Asia.