Competition can be fierce for internet related companies, but businesses that have carved out niches for services or established themselves as the number one leader can turn a good profit for their shareholders. These two stocks are making moves to expand and you should know about them.
Carsales.com Limited (ASX: CRZ) delighted shareholders by reporting a half-year 17% gain in net profit in February, sending its share price back above $10.50 after previously dropping to $8.69.
In addition to being the number one vehicle sales listing portal in Australia, it has investments in overseas car listings websites such as Brazil-based WebMotors and ASX-listed iCar Asia Limited (ASX: ICQ), to take advantage of their growing online car sales markets. The company announced this week that it has increased its interest in iCar Asia from 19.9% to 22.9%, growing its stake in the leading network of online automotive sites in ASEAN.
Carsales.com can add to its growth by tapping into highly populated countries, where a growing middle class is buying more cars. That's why I see more revenue and earnings for the company by establishing links with local operators as they grow in scale.
iiNet Limited (ASX: IIN), the internet service provider, is proceeding with the integration of its Adam Internet business, which it acquired for $59 million last year. Along with organic growth, the acquisition increased total broadband customers by 70,000 to 926,000 in the half-year ending in December.
That's getting close to the 996,000 fixed line internet customer base of Optus, the number two broadband provider owned by Singapore Telecommunications Limited (ASX: SGT). The gain gives the company a 16% share of the broadband market, and it will be driving for more. It is actively promoting its bundled internet and phone services, and recently added the Fetch video-on-demand service to its bundling offers.
It has over 30,000 NBN customers, a 25% market share of the new high speed fibre network to be rolled out across the country.
It invested $24.3 million in capital expenditures in the first half of FY2014 for business customer growth and upgrading its network capacity, so it is making the right moves to strengthen its services.
Foolish takeaway
Both the online car sales and internet service provider markets move at a quick speed, but these two companies are putting great focus on growing their market base and seeing progress. I would expect them to expand even further.
