Leading online car classified site, Carsales.com Limited (ASX: CRZ) has taken a 19.9% seat in iCar Asia Limited (ASX: ICQ), as it looks to expand its presence beyond Australia's borders.
Carsales is paying 37.5 cents a share, or a total of $13.4 million for its stake, with the company's CEO, Greg Roebuck saying, "The acquisition sees Carsales acquire a strategic stake in the leading portfolio of online automotive business across the high growth ASEAN region."
iCar owns and operates sites in Thailand, Malaysia and Indonesia, reaching 1.5 million people every month. It has the number one site in Malaysia for cars on sale, although the market appears fragmented with most Malaysians visiting an average of 11 different websites and 10% visit 21 different websites. That suggests there is plenty of opportunity to consolidate and become the clear number one, much like Carsales has achieved in Australia.
At this stage, the investment by Carsales doesn't appear to represent the first step in a full takeover, but more of a way for Carsales to help drive iCar's growth in Asia from the passenger seat. However, a takeover down the track can't be ruled out.
Investors certainly liked the Carsales announcement with shares in both it and iCar rising today. In afternoon trading, Carsales shares were up 1.8%, while iCar shares soared 32% to 39.5 cents.
One wonders whether realestate.com.au site operator, REA Group (ASX: REA) might take a page out of Carsales' book, and have a closer inspection of iProperty Group (ASX: IPP). iProperty owns Asia's number one network of property portal sites in Malaysia, Hong Kong, Macau, Indonesia and Singapore. Growth in revenues for iProperty has been rapidly accelerating, and although it has yet to make a profit, that doesn't appear too far away, putting it in a similar position to REA Group around 10 years ago, when REA Group was trading at less than $1. The REA share price is now around $27.60.
Foolish takeaway
We've seen online job site Seek successfully branch out into Asia, now it's Carsales' turn, and we could see REA Group follow in their tracks.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
