Carsales chief executive Cameron McIntyre sees Asia and Latin America as the key to capturing potential revenue of more than $1 billion from the group's international division in the long term, which would far outstrip its Australian business.
The newly installed Carsales boss, who took over from founder and long-time chief executive Greg Roebuck earlier this year, used his first results to reiterate the business' international growth strategy and for the first time outlined what it sees as the opportunity beyond Australian shores.
"I'd like to see international to become the major part of our revenue and earnings at some point in the long term," Mr McIntyre told The Australian Financial Review.
"The strategy has always been and will continue to be looking for high-growth markets. Looking for markets were we can contribute our intellectual property, and looking for markets where we can acquire a No.1 or No.2 in that market at a reasonable price."
Expansion in more parts of Asia and Latin America makes a lot of sense within that investment thesis, Mr McIntyre said, rather than mature markets such as the United States and Europe.
"As a business, we remain acquisitive. We're the sort of business that's acquisitive and aggressive ... But, we like to plant acorns to grow oak trees."
The Melbourne-based car classifieds business delivered a net profit of $109.5 million for the 12 months ended June, up marginally from a year earlier. Adjusted net profit was up 8 per cent to $119.1 million; the difference was related to a number of small one-offs related to mergers and acquisitions in Carsales' international business.
Carsales shares finished Wednesday up 3 per cent at $12.88, compared with a 12-month high of $13.63 reached in August last year.
Revenue rose 8 per cent in the year to $372.1 million, beating Bloomberg analyst consensus of $367.7 million, while earnings before interest, tax, depreciation and amortisation was in line at $176.5 million.
Carsales' finance and related services revenue dipped in the year, down 12 per cent to $55.4 million, which weighed on earnings, however, Mr McIntyre noted the second half of the year was much stronger for the segment.
"It's pleasing to see some early signs of recovery in core finance revenue," Mr McIntyre said.
"The business responded well to this challenge with overall core finance broking revenue declining by only 3 per cent on prior corresponding period, and returning to growth in Q4. Finance lead generation remains strong and the initiatives we put in place to improve conversion rates and lower service costs have been positive."
Domestic revenue was up 7 per cent to $363.8 million across the year.
However, it was the international business where Carsales outlined significant opportunity.
Carsales, based on replicating its core share of Australian gross domestic product believes there is a potential revenue opportunity for the business to the tune of $1.12 billion in the markets it is already invested in – the biggest of which is Brazil with a potential revenue opportunity of $398.4 million.
"Carsales is now seeing stronger growth from domestic and international investments, which will diversify the business away from the maturing core," Citi analyst David Kaynes, who has a buy recommendation with a $13.75 target share price, said.
Discount the finance segment, Mr Kaynes said domestic investments had revenue growth of 61 per cent and EBITDA was up from $1 million to $4 million with Tyresales and Redbook driving the jump.
Mr McIntyre said a business like Tyresales has an addressible market of $4 billion, of which Carsales is only a small portion, stating he still sees a lot of opportunity in tyres alone.
Mr Kaynes said the key disappointment in Carsales' result was a slowing in domestic dealer revenue growth. Revenue growth slowed from 10 per cent in the first half to 6 per cent in the second half.
"Carsales has price increases and rising take-up of premium products contributing to growth. However, most of the lead volume growth was in the free category [cars under $4000] with paid lead volume growth slowing to low single digits."
Carsales has declared a fully-franked dividend of 21.5¢.
