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Should you buy iCar Asia Ltd and iProperty Group Ltd?

While having similar names and methods of operation, there are a lot of differences between the classifieds business of iCar Asia Ltd (ASX: ICQ) and iProperty Group Ltd (ASX: IPP).

History

iCar and iProperty were both listed in 2013 and were founded by current chairman Patrick Grove, who also founded ASX-listed company iBuy Group Ltd (ASX: IBY), which has since been renamed to Ensogo Ltd (ASX: E88).

iProperty Group owns real-estate listing websites and iCar Asia owns car listing websites operating exclusively in Asia, with the plan of replicating the success that Carsales.com Limited (ASX: CAR) and REA Group Limited (ASX: REA) have had in the much smaller Australian market.

What’s to like?

The main reason to buy iProperty and iCar is the belief that they can replicate the system used by Carsales.com.au and Realestate.com.au to dominate the significantly larger, but still heavily underdeveloped, Asian online classifieds market.

They’re so underdeveloped in fact, that both companies have already achieved market-leading positions in their markets of Malaysia, Indonesia, Thailand (iCar), and Malaysia, Indonesia, Hong Kong, Singapore and Thailand (iProperty).

Buy one or both?

The major difference between the two is that iProperty is much further along its road to consistent profitability than iCar. In its most recent quarterly report iProperty announced that it was profitable in 3 out of its 5 operating regions and posted collections of $7.5 million and cashflow of $100,000 for the quarter.

iCar meanwhile announced record quarterly cash collections of $1.4 million but recorded negative cashflow of $3.7 million, albeit affected by acquisitions.

The other major difference is the size of the companies. iCar has a market capitalisation of $205 million versus $473 million for iProperty. To put this in perspective, Carsales has a market cap of $2.3 billion and REA Group $6.2 billion.

To say the opportunity for iCar and iProperty over the next 5 to 10 years is extraordinary is an understatement. Indonesia alone has over 10 times the population of Australia, Thailand has a population three times the size, and Malaysia around 1.5 times.

High growth companies will outperform as they demonstrate their successes but can also underperform in a market crash. How you deal with those situations defines you as an investor and underpins your success.

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Motley Fool contributor Andrew Mudie owns shares of iCarAsia Limited. You can find Andrew on Twitter @andrewmudie

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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