HomeServe PLC

HomeServe PLC (LON: HSV) is a FTSE 250 listed Company that provides services related to home repairs and improvements.

Rationale for Valuation – HOLD at GBX 886.50

• Favourable Macro Dynamics: British manufacturing grew slightly in December 2021, and therefore, the IHS Markit/CIPS UK Manufacturing PMI for December stood at 57.9.
• Solid Fundamentals: HomeServe reported a strong set of financial results in H1 FY22 with strong performance in North America and early progress to broaden UK business.
• Technical Indicator: From a technical standpoint, the MACD line has given a bullish crossover against the signal line, supporting the positive price potential.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, and Price/Earnings multiples are undervalued against the average of the Consumer Non-Cyclicals industry.

Key Risks

• Omicron Variant: The international markets are opening slower than anticipated due to the resurgence in Covid-19 cases.
• Macroeconomic Uncertainties: Weak industrial data, global shortage of semiconductors, supply constraints, tightening of monetary policy can hamper the business prospects.

Interim Results (for the six months ended 30 September 2021, as on 16 November 2021)

(Source: Company Website)

• Top-line Growth: During H1 FY22, revenue and adjusted operating profit grew 14% and 24%, respectively.
• Financial Position: Despite strong investments in the period, the financial position remained strong.
• Dividend: It reported a 10% increase in the interim dividend to 6.8 pence, reflecting confidence in the Group’s growth prospects.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

Conclusion

The Home Experts division is on track to achieve profitability in this financial year. The Board remained confident to deliver an acceleration in performance in FY22 compared to FY21.The increase in the interim dividend was underpinned by business resilience, strong future growth potential, and robust cash generation.

Moreover, as more people seek to make their homes better and greener, the demand for home repairs and services shall continue to grow in future. The stock made a 52-week high and low of GBX 1,218.00 and GBX 787.00, respectively.

Based on the strong trading performance, reiterated guidance, favourable market dynamics, and support from the valuation as done using the above method, we have given a “HOLD” stance on HomeServe PLC at the closing market price of GBX 886.50 (as on 4 January 2022).

Moneysupermarket.com Group PLC

Moneysupermarket.com Group PLC (LON: MONY) is an FTSE 250 listed Company, which provides price comparison services through three brands - TravelSupermarket, MoneySuperMarket, and MoneySavingExpert.

Investment Highlights – HOLD at GBX 224.60

• Strong Platform for Growth: MONY sustained strong gross margin performance in Q3 FY21, and projects FY21 EBITDA to be in line with the market expectations. The positive future is underpinned by continued investment in technology platform, good cash conversion, and constant recovery in the travel market.
• Growth Drivers: the modernisation of data infrastructure and capabilities shall simplify internal processes and expand offerings.
• Acquisition of Quidco: On 19 October 2021, MONY acquired 100% stake in the Maple Syrup Media Ltd (trading as Quidco) for an initial consideration is £87 million in cash with additional deferred payment of £14 million. The transaction will bolster MONY’s position in the cashback business and shall be earnings accretive in FY22.
• Technical Indicator: From a technical standpoint, the MACD line has given a bullish crossover against the signal line, supporting the positive price potential.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, Price/Earnings and Price/Cash Flow are undervalued against the median of the Technology industry.

Key Risks

• Subdued Energy Market: The energy market dynamics remained challenging, which led to a 10% fall in Q3 FY21 revenue year-on-year basis.
• Macroeconomic Risk: The resurgence in Covid-19 cases across the globe can dampen the economic recovery and keep the travel market disrupted.

Q3 FY21 Trading Update (for the quarter ended 30 September 2021, as on 19 October 2021)

 (Source: Company Website)

• Revenue Impact: The revenue was impacted by unprecedented energy market conditions.
• Operational Progress: The demand for travel insurance returned to nearly half of pre-Covid-19 levels, for the third quarter. It also intensified customer acquisitions despite the softened car and home insurance market.
• Guidance: FY21 EBITDA is likely to be in line with current market expectations, with strong margin performance.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion

MoneySuperMarket is repositioning the brand image to drive growth. It is focusing on attracting more customers by enhancing data management. FY21 performance is expected to align with market expectations since the factor influencing the performance remained unchanged. Moreover, the expected synergy with the combination of TravelSupermarket and Icelolly.com shall offset the expected EBITDA loss of Icelolly.com due to the travel restrictions. The stock made a 52-week high and low of GBX 311.00 and GBX 196.70, respectively.

Based on the strong strategic execution, sustained dividend, resilient business performance, unchanged market factors, full-year outlook, with support from the valuation as done using the above method, we have given a “HOLD” recommendation on Moneysupermarket.com Group PLC at the closing price of GBX 224.60 (as on 4 January 2022).  

*All forecasted figures and Peer Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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