iCar Asia's lower inflows
Recommendation
iCar Asia announced its third-quarter cash flow figures recently – and the market hated them. The stock fell 12% yesterday and is now down 30% since iCar Asia finds the funds in September.
The problem seems to be that the quarterly cash inflow figure of $1.7m was the lowest for five quarters. We're not entirely sure why that surprised the market, as management had already indicated revenues would be weaker than expected this year (see iCar Asia warns on losses in August).
The quarterly cash flow statement also provided a forecast of greater spending for the fourth quarter – around $7.0m of cash expenses compared to $5.4m in the third quarter. Both revenue and expenses look consistent with the guidance management has given for 2016.
That said, we're getting impatient with management's positive spin on the numbers but lack of detail and consistency. New managing director Hamish Stone announced that ‘the company's strategic direction has been clearly defined' and yet there's been no clarity for small shareholders. Nor was any management commentary released to the ASX at the recent annual meeting. We consider that poor form.
It's sometimes the nature of small companies going through rough patches that the information flow to shareholders deteriorates. Unfortunately that seems to be the case with iCar Asia. Otherwise nothing fundamental has changed since iCar Asia finds the funds; the market is just losing patience. Don't forget the warnings in the latest review but the stock remains a 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.