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Why the iCar Asia share price has been stuck in reverse

Asia focused online classifieds business iCar Asia Ltd (ASX: ICQ) this morning reported an operating cash loss of $2.5 million on revenues of $3 million for the quarter ending December 31, 2018. The stock is down around 85% over the past three years due to the group’s inability to grow revenues and manage costs as online automobile classifieds in South East Asia have proven a much tougher market to crack than somewhere like Australia.

According to the company the net cash outflow decreased for the third quarter in a row with management claiming it expects this trend to continue.

It has $9.5 million cash on hand in addition to a $5 million debt facility and potential share option “proceeds of $11.5 million contingent on the prevailing share price on or before the option date,” although it’s not factoring the debt facility or option proceeds into its “capital plans”.

As such the share price could remain under pressure due to the possibility that iCar Asia will have to raise capital again by the issue of new shares within the next 12 – 18 months.

On the bright side the group did report that its Thailand business reported positive EBITDA and cashflow in December, with its core Malaysia market also posting its first positive quarterly net cashflow and EBITDA. Cash losses are also reducing, but the lack of revenues at just $3 million per quarter remains its Achilles Heal.

As such is iCar Asia a long way off repeating the success of a business like Carsales.Com Ltd (ASX: CAR) in Australia. Carsales itself has been a heavy investor in iCar, but will be nursing losses like the majority of other investors.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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 Scott Phillips.

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