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iCar Asia Ltd takes market-leading position: Should you buy?

iCar Asia Ltd (ASX: ICQ), operator of a network of online car sales advertising websites covering markets in South East Asia, reported a full-year net loss, although revenue for financial year 2014 almost doubled. Organic growth and acquisitions have the company taking market share, while it builds up its revenue base.

Here are the key full-year results:

Revenue   $2.8 million, up 95% from $1.45 million

Earnings before interest, tax, depreciation and amortisation (EBITDA)    a loss of $13.2 million, down from a loss of $6.9 million

Net profit after tax (NPAT)   attributable net loss of $16.7 million, down from a net loss of $6.9 million

Earnings per share    a loss of 8.64 cents, down from a loss of 4.1 cents per share

Dividend per share    no dividend was declared, same as in financial year 2013

Full-year business highlights:

—  iCar Asia made a big move in Thailand’s online car sales market by acquiring the number one website and market leader in December. Now iCar Asia controls the country’s number one and two websites and had 1.2 million hits and about 1,700 auto dealers paying to advertise listings in December.

—  The company’s Malaysian car website and market leader had more than double the number of car listings than its closest competitor at year end. In December, had 1.3 million visits and over 1,500 auto dealers paying to advertise.

—  Business costs rose 92% to $16.7 million from $8.35 million as the company made acquisitions and invested more to establish market leadership. iCar Asia now controls the market-leading websites in Malaysia, Indonesia and Thailand.

iCar Asia is in its early development and expansion phase as it makes itself the number one auto sales website company in its three major markets. Similar to Carsales.Com Ltd (ASX: CAR), SEEK Limited (ASX: SEK) and REA Group Limited (ASX: REA), it is imperative to make its websites the market leaders to attract more dealer advertising and site visitors. Once that is achieved, it is easier to maintain and increase market dominance because the sites become the established brand name for car sales.

iCar Asia hasn’t delivered a net profit to date, yet as it increases the number of auto dealers paying to advertise and adds extra features to raise the average spend of each subscriber, business revenue can steadily grow.

For investors, it would be better to wait until the company does turn a profit before making any substantial investments. Still, I would watch the progress because there is a lot of potential.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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