Car Sales

Company info
The inception of car sales.com.au took place in the year 1997 A.d.
The company has been a leader in digital platform for automotive sales.
The company provides services like classified online ads for sellers and
buyers , data and research services on automotive & Financing solutions.
The company was listed into ASX in 2009 .
The group owns many subsidiaries with their own market niche.
The company registered revenue of 344 millions in the FY2016 with NPAT
of 114 millions
The company site registered 24 million visitors in the FY2016 with the
network of 45000 car dealers and 1,00,000 cars were listed for sales
across the globe.
Currently the company share price trades at A$10.67.
The company return on equity was 45 % in the year 2016 and the current
dividend yield is 3.6%
Products and Services
Bikesales.com.au
Boatsales.com.au
Caravan camping sales.com.au
Equipmentsales.coma
Tyre Sales.com.au
Red Book Inspect
Stratton Financial Solutions
Solo Autos , ChildeAutos , Webmotors, IcarAsia,Skencar
Rate Setter
FY2007
Acquisition of Discount Vehicles Australia and Automotive Inspection data services company
called Red Book.
The company witnessed 1.6 million visitors in car sales.com.au by august 2007 surpassing its
competitors.
Mergers with Car point/bikepoint/Boatpoint and Ihub.
99% growth rate in profit figures (11.80 million in the FY2007 and 5.91 million in the FY
2006).
Selling and distribution expenses increased by 56%(14.60 millions in the FY2007 and 9.60 in the
FY2006).
Growth in intangible assets by 48%(65 millions in FY2007 and 44 millions in FY2006).
Increment in Interest Bearing liabilities . The company borrowed 6.40 millions in the FY2007.
Company paid 5.28 millions as dividend in the FY2007.
The company invested near about 18 millions in purchase of subsidiary companies.
The company paid 2.24 millions as income tax as compared to 162 thousands in the FY2006.
The company incurred increment in domain name registration expenses with the figures of
483,716 in contrast to expenses of only 38 thousands in FY2006
The company raised the funds worth 0.92 millions through issue of shares and securities
FY2008
4th consecutive winner of Deloitte top 50 tech company.
Launch of sites like Discountnewbikes .com.au , Boatsales.com.au & Autopinions.com.au
as well as launch products for marine auto market.
Global expansion through the acquisition of Red book with a concentrated office expansion in
Malaysia to enhance data availability in marine automotive and motorcycle industry.
Increment in net profit by 58 %
Increment in revenue from operations by 56.25%(72.48 millions in FY2008 which in comparison
was 46.79 millions in the FY2007).
Sales and marketing expenses increased by 77% (25.90 millions in the FY2008 which in
comparison was 14.60 millions in the FY2007).
Increment in finance cost(1.30 millions in the FY2008 which in comparison was about seven
thousand in the FY2007).
Increment in property , plant and equipment (3.74 millions which in comparison was around 0.74
millions).
Increment in reserves(1.28 millions in The FY2008 which in comparison was 0.30 millions in the
FY2007)
Increment in dividend paid to shareholders(the company had paid dividend of 5.28 millions in the
FY2007 where as in the year 2008 , the company paid dividend worth more than 16 millions)
The company had taken cash advance facility of 18.40 millions for long term financing needs
maturing in the year 2012.
FY2009
Although the year 2009 was peak point of Global financial crisis , Car
sales.com enjoyed a moderate success . The reason behind the success in
such economic crunch was the increasing price of new cars which shifted the
focus to used cars , declined fuel prices and declining cash rates in Reserve
bank of Australia.
Increment in revenue in comparison to previous years.( The company had
revenue of 72 millions in the FY2008 where as the company registered a
revenue of 96 millions)
The growth of revenue had a positive impact with profit figures growing from
18 millions to 30 millions registering an impressive growth by 66%.

FY2010
The company broke the 200,000 units mark in June 2010.
The mobile version of the car sales site was introduced(carsales.mobi)
Growth in revenue by 29 %( The company had total revenue of 95 million in
2009 where as in the year 2010 the company had revenue of 123 million).
FY2011
The calamitous events like flood in Queensland and Tsunami in Japan rounded up an ominous year
globally. But , Car sales firmly managed to tackle these setback and managed to register an
impressive growth in revenue by 26%.
NPAT increased by 34 %(i.e. From A$43 millions to A$58 millions)

FY 2012
Revenue increased by 21 % from the previous year(152 million in 2011 to 184 million in 2012)
Increase in Net profit by 22 % (58 million in 2011 to 71.58 million in 2012)

FY2013
Revenue Increased by 17 % from the previous year (A$184 million in 2012 to A$215 million in 2013)
Increase in net profit 17 % ( A$71.6 million to A$83.5 millions)
The company acquired 19% stakes in Icar Asia( an operator of online automotive service in Thailand ,
Indonesia and Malaysia) and a 30% stake in Webmotors(A leading portal for automotive in Brazil).
The company invested A$104 million in purchase of associates in the year 2013 as a result the
company cash was negative during the year.
FY2014
Increment in revenue by only 10%(i.e. From A$215 million to A$235 million)
Acquisition of 50.1 % stake in Stratton Finance and 49.1% stake in
Skencarsales.com
Introduction of pitchi.com( An online video platform for sales pitch)
Increment in Cash and cash equivalents by 7.33%( i.e. From A$15.14 millions
to A$26.04 millions)
The company had negative company cash flow because of their increased
investments in associates.(i.e. The company invested A$133 millions in their
associates which was about 27% increment from the previous year.)
FY2015
The dealer revenue and private seller revenue increased by 7% & 8%
respectively.
The revenue increased by 32% (From 235 millions in 2014 to 311 millions in 2016)
50 % stake acquisition in Stratton Finance(Australias biggest motor finance
broker) which has helped to simply financing solutions to the clients.
Acquisition of auto inspect(50.1%) and its integration into Redbook has
strengthened the capacity of data and research services as well as acquisition of
Ratesetter has helped to simplify Peer to Peer financing solutions.
Marginal performance of Webmotors(Brazil) with the country being host of the
FIFA worldcup and ongoing political turmoil with sliding economy.
Strong focus on Search engine Optimization
Strong performance in South Korea with Sknecarsales.com(31% revenue growth
rate) , loss worth of A$3 millions in Icar Asia.
Increment in selling and distribution expenses by 53 %(56 Million in 2014 to 86
millions in 2015).
FY2016
24 million visitors in the company's website.
Vehicle inspection of more than 1 million vehicles , growth in android app user by 30%
Increment in revenue by 10 %(i.e. 311.75 Millions in 2015 to 344 millions in 2016)
Selling and marketing expenses increased by 15%9(i.e. 84 millions in 2015 to 97
millions in 2016)
Net profit figures grew only by 7% (i.e. 107 millions in 2015 to 114 millions in 2016)
intangible Assets grew by 23%(i.e. 155.94 millions in 2015 to 191.57 millions in 2016)
Increment in employee benefits by 22% (i.e. 63 millions in 2015 to 77 millions in 2016)
Retained Earnings increased by 18 % (i.e. 113 millions in 2015 to 134 millions in 2016)
 Composition of Revenue (In Millions)
CAGR is
10.8%

CAGR
is
CAGR is 6.78%
9.89 %
CAGR is
21%

Online Advertising Services Data and Research Services International Operations Finance and Related Services
 Net Profit and Total Revenue (In Millions)

CAGR for revenue CAGR for Net profit For the

for past 10 years in past 10 years is 25 %
22 %

Net profit Total Revenue

Net Profit Margin and Gross profit margin (In %)

Net profit margin

Net Profit , Operating Cash Flow and Company Cash Flow (In Millions)

Net profit Operating Cash Flow Company Cash Flow

 Net profit (In Millions)

The CAGR of net profit for ten

years has been above 25%

Net profit margin (In %)

 Cash Position (In Millions)

Net Change in Cash Beginning Cash Balance Ending Cash Balance

Long term debt and Operating Cash flow (In millions)

Operating Cash Flow Long term Debt

ROE and Return on Capital (In %)

Return on Equity Return on Capital

 EPS , DPS and BPS

Earnings Per Share Dividend Per Share Borowings Per Share

 EPS , EQPS , BPS & DPS (In A$)

Earnings Per Share Dividend Per Share Borowings Per Share Equity per share
Dividend Payout Ratio (In %)
 Major assets Growth Over the Years (In Millions)

CAGR for intangibles(goodwill)

has been 10 % for the period of 10
Years

Cash Account Recievable Intangible Assets(Goodwill)

Allocation of Goodwill for the year 2016 (In Millions)

Composition of Goodw ill

Receivables Turnover Ratio (times)
Selling/General/Administrative Expenses (In Millions)
Net debt to Equity(In %)
 SWOT Analysis

STRENGTH
It is the market leader for used car sales in Australia.
Car sales group owns the most of the database and research works on
used cars , including the quality inspection as a result have managed
to increase revenue through their data and research services.
The vehicles listed on car sales.com are quality certified with
inspection details hence have managed to build a strong brand
image.
Car sales has a dedicated car financial broker company called
Stratton Finance Company which provides car financing solutions to
its clients through its network.
The major strength of car sales is its strong network with various
brands and auto dealers
WEAKNESS
Car sales heavily relies upon its network and brand image so
constantly has to remodel its strategies and plans to stay ahead of
the competition.
There is always that nagging pressure of devising new services
and products which may lead to unwanted acquisitions.
Car sales.com lately has been prolific in extending its service
portfolio through various acquisitions but simultaneously , the debt
portion has been increasing at a higher rate. So , car sales has been
constantly pressuring itself to keep the pricibg power its has held
almost for the past decade.
OPPORTUNITIES

Acquisition of Auto inspect and its integration into Red Book Inspect has furthered the
prospect of increment in quality inspection of vehicles.
Acquiring stakes in Soloautos(Mexico) & Chileautos(Chile),Webmotors(Brazil) which are market
leaders in their country , can help to expand network across south American region where
linguistic background of Spanish is quite common
Stake in e-payment site Pay promise can ease up clients comfort in securing their
transaction . As a part of alliance with Pay Promise , the company has innovated a product
called Pay Protect.
The listing of cars under budget of A$3000 can attract teens who look for their first cars ,
recent immigrants &university students.
Establishment of Dedicated PR team to establish relationships with various car companies to
will help to increase the revenue.
Introduction of Hackathon and Idea summit programs within the company can help in
innovation of products and services as well as contribute to organizational synergy
Focus on CSR activities , Environmental activities like association with green fleet to plant trees
on behalf of car sales owned fleet , cloud based computing to reduce environmental footprint
THREATS
The contract clause of some car companies requiring retailers to
prohibit price listing at online sites can result in loss of customer
attraction towards these vehicles and ultimately reduce the
revenue from those brand of cars.
The growth of Gumtree , a rival of Car sales.com in Australia has
been providing private sellers with free ad display and has managed
to attract a lot of dealers to its site.
With increasing market penetration of online automotive in Australia
, Car sales.com will face a stiff competition within next 2-3 years.
Car sales limited faces interest rate risk arising from its debt and
since the company has not entered the hedging contracts. The
company faces a constant threat of variability in interest rates in
market.
1) Does the company have a durable competitive
advantage ?

Yes , the company has a durable competitive advantage because of The following
reasons :
Low working capital
Pricing power
Expanded network with car manufactures and distributors.
Online sales services , data & research services and financial services
 2) Does the company have a brand name ?
Yes , the company has a brand name. The following points
exhibit that the company does have a brand name :
Trusted brand for new and old car sales service ,
review services etc.
The companys online ad platform has been among
the best for past 5 years
Has won many accolades and laurels and recently was
recognized as the with the best workforce diversity.
Many CSR activities like sponsoring scholarships , Car
sales foundation as well strong focus on employees
welfare and benefits.
3) Does the business produce products/services a
customer might need repetitive and gets used/wear
out fast?
Yes, the business provides services a customer might need
repetitive. The growth of automobile industry in the past
decade is eminent. Well , Australia is no exception to it and so
companies like Car sales has been able to tap into the
prospects of the online sales of automotive. Car sales ,
provides classified ad services to dealers and private sellers as
well as provides data and financial services.
The change in car trends and the increasing demand of
automobiles has provided a platform for car sales , and the
services are in constant need form customers.
4) Is the company low cost producer/operator with
high margins?

Yes , the company is low cost producer/operator with high

margin. The average net profit margin has been above
30% over the period of past 10 years.
5) Does the company earn high ROE (at least
20%)Per annum on Average ?

Yes , the company has been earning high ROE per annum
on average. The average ROE over the period of 10 Years
has been above 35%.
6) Does the company earn high Return on TOTAL CAPITAL
(includes equity and debt)?

Yes , the company has been high return on total

capital. The average return on total capital has been
above 25% for the past 10 years.
7) Does the company produce consistent and
upward earnings trend?
Yes , the company has been producing consistent and
upwards earnings trend. The CAGR of earnings has been
above 20% over the period of 10 years. Although , the
CAGR stands out but the earnings per share is very
marginal.
8) Is the company debt low (less than 5 times current net earnings) and
can be paid back from its earnings in just few years (2-3 YEARS)?

Yes , the company debt has been low over the years . but as of the years 2014 -16 , the
debt proportion has increased by a huge margin. Lately , the company has made
acquisitions in Asia and other regions as well as extended its service portfolio.
9) Does the retained earnings increase the
market value of the company?
Beginning Return on Earnings Payout Final PE ratiio Market
Equity (In Equity (In Million Equity Capilizatio
million A$) A$) n
256 25% 64 0 320 10 3200

320 25% 80 0 400 10 4000

10) Is the company share price and book value
on the rise?
Yes , the company share price and book value are on the
rise.
The share price of the company at the year 2009 was
around A$2.79 and the share price as of November 21 was
A$10.61 . So , the CAGR over the period of 10 years for the
share price is aroud16%.
The book value of the company was around A$ 63 million
and as of 2016 , the book value of the company is around
A$256 million. So , the CAGR over the period of 10 years is
15.05%
 11) Can the company increase price along
inflation without loosing market share
Yes , the company can increase price along with inflation
without loosing market share. Car sales.com has constantly
held the pricing power for past 5 years. Car sales.com has
been the most trusted platform for car purchase with its
classified ad hosting along with the data services on the
automotive industry . So , car sales.com has an upper hand on
its clients , because of the amount of visitor on its sites as well
as the quality assurance on its vehicles hosted. As a result ,
with inflation car sales.com can adjust its service pricing
without loosing market share.
12)Is the company cyclical ?

No , the company is not cyclical .The demand for used

vehicles is eminent in todays world where the growth of
automobile industry is at peak. Not everybody can afford
new vehicles , so there will always be demand for used
vehicles and Car sales provides every possible
automotive service online from ads to inspection to
financing solutions.
But on the other hand , the demand for new vehicles
might be affected with economical cycles and the
company might be cyclical under new vehicles
perspective.
13) Is the current earnings Yield and
Dividend Yield greater than the FD
rate (At least 1 year)
The Current earnings yield is 4.5% which is greater than
the FD rate whereas the current dividend yield is 3.6 %
which is at par with prevalent FD rate in Australia.