Shares in Carsales.Com Ltd (ASX: CAR) were sold off in recent times after the automotive website fell short of investor expectations with its full year results. However, for investors with an eye to the long term, Carsales continues to impress with its eye for complementary acquisitions.
This morning the company announced that it has completed the acquisition (initially announced on 7 August) of 65% of Mexican automotive classifieds website soloautos.mx ("Soloautos"). This adds to Carsales' existing stable of international interests:
- 30% of Webmotors S.A. (Brazil)
- 20.2% of iCar Asia Ltd (ASX: ICQ) (Indonesia, Malaysia, and Thailand)
- 49.9% of SK ENCARSALES.COM Ltd (South Korea)
- 20% of RateSetter (Australian Peer-to-Peer financier)
In addition to the automotive classifieds websites, Carsales also has a stake in a number of parallel businesses such as Tyresales (Australia), automotive financier Stratton Finance (Australia), Redbook Automotive Services (Malaysia and China), and Automotive Data Services (Australia and Thailand).
Although Soloautos won't contribute to earnings in the short term, iCar Asia, Webmotors and SKENCARSALES are making progress towards profitability. Parallel businesses like Tyresales also act to enhance Carsales' network effect and long-term investors know that to replicate the effect of Carsales.com in an international market would be an enormous win for shareholders over the long term.
There are numerous signs that this kind of success is building already and I feel that Carsales' focus on emerging or under-served markets is strategically sound as there is likely to be less competition in such areas. Each dollar invested likewise stretches further compared to more wealthy regions like Europe or the US.
So while some investors might be put off Carsales after its recent results, the company continues to look like a bargain to buyers with an eye to the long term.
