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ASX stock of the day: iCar Asia (ASX:ICQ) share price explodes on takeover offer

flying asx share price represented by cartoon car rocketing above all other cars on the road
Inage source: Getty Images

iCar Asia Ltd (ASX: ICQ) shares are exploding today after the auto platform received an indicative takeover offer. The iCar share price is trading at 43 cents per share at the time of writing, a 34.38% increase from yesterday’s closing price of 32 cents. We are, however, still aways off making a new 52-week high with iCar shares, since the company was trading as high as 48 cents per share earlier in the year (in January to be precise).

The iCar share price has also had an extremely volatile few years, going as low as 12 cents per share in the midst of the March ASX share market crash. This means that, at today’s prices, shareholders are up nearly 260% since 23 March. Before that, iCar shares rose 258% between 1 February 2019 and 21 February 2020, before plummetting 60% between 21 February and 20 March 2020. On the current share price, the company has a market capitalisation of approximately $185 million.

So what is iCar, and why is its share price rocketing so dramatically today?

What is iCar?

iCar describes itself as “the leading cars portal network” in Malaysia, Indonesia, and Thailand. It offers very similar services to a company ASX investors might be more familiar with – Carsales.Com Ltd (ASX: CAR), which coincidentally once invested in iCar. iCar’s platform offers marketplaces for buying and selling vehicles, connecting buyers with sellers as a middleman. The company tells us that its success is due to “consistent consumer audiences, and listings leadership due to deep car dealership penetration and engagement via our market-leading Response Management System (RMS) which is integrated into dealers’ businesses.”

iCar’s brands include the Carlist.my website (Malaysia’s premier car website, according to the company), Mobil123.com, the Indonesian equivalent, and one2car.com (Thailand’s No. 1). The company’s Carmudi website is also popular in Indonesia. iCar tells investors that its websites enjoy more than 8 million visits per month.

Why is the iCar share price on the highway today?

The company released two ASX announcements this morning before market open, which seem to be responsible for the dramatic expansion of the iCar share price today.

Firstly, a quarterly update for the quarter ending 30 September 2020 hit the markets this morning. In this update, iCar Asia told investors that the company had recorded its “best ever net operating cash flow for the second straight quarter”, despite the effects of the coronavirus pandemic. Even so, this number is still negative at an outflow of $1.05 million, although it did improve by 32% over the previous corresponding 2019 quarter.

In terms of revenue, the company told investors that revenue for the quarter increased by 33% compared with the previous quarter (the quarter ending 30 June 2020). It also mentioned that despite the pandemic, earnings before interest, taxes, depreciation and amortisation (EBITDA) remained positive for both the Malaysian and Thai markets. Even so, iCar also told investors that it has drawn down $1 million of a $5 million debt facility during the quarter, which was provided by major shareholder Catcha Group.

A takeover proposal on the cars

Secondly, and most importantly, iCar told investors that it has received a takeover offer from the United States-listed company Autohome Inc (NYSE: ATHM). Autohome, even though it’s US-listed, is based in China. In its release, iCar describes Autohome as “a leading destination for automobile consumers in China”. It currently has a market cap of US$11.54 billion.

The offer is non-binding, but does propose to acquire 100% of iCar shares at a price of 50 cents per share (a 16.28% premium to the current share price and a 56.25% premium to yesterday’s closing price).

Even so, iCar notes that the proposal is subject to a number of conditions, including “negotiation and signing of transaction documentation, FIRB approval and iCar shareholder and Court approval”. “There is no certainty that the proposal will result in a transaction being agreed and put forward to iCar shareholders for consideration”, the company has told investors.

It’s these caveats that have probably halted the iCar share price from rising to the level of the takeover proposal today.

Despite this, these announcements are almost certainly behind the massive appreciation we’ve seen in the iCar share price today. It will be interesting to watch this potential takeover play out over the following months.

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Returns as of 6th October 2020

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. 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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