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 - Moneysupermarket.Com Group Plc – Buy at GBX 290.80

• The Company continued to make progress on Reinvest strategy and experienced a robust performance of Decision Tech with the launch of automated energy switching on MoneySavingExpert.
• As per valuation metrics, EV/Sales, and Price/Cash Flow multiples of the Moneysupermarket.Com Group Plc are currently lower as compared to the corresponding multiples of the Software & IT Services industry. It reflects, shares are undervalued as compared to the industry.
• The Company has given a substantial ROE (Return on Equity) of 20.5% in H1 FY2020, the ROE remained consistent since FY2015 and is significantly ahead of industry median of 0.5%.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 41 level), which means the stock price could increase in the short term.

Key Risks

• The Company operations may be impacted by an increase in the competition as it operates in a highly competitive and dynamic marketplace.
• MONY may experience operational glitches, which may result in the transfer of incomplete or incorrect data to or from partners, which could negatively impact brands reputation.

Financial Highlights – H1 FY2020 (30 June 2020)

(Source: Interim Report, Company Website)

• In the first half of the financial year 2020, due to lower revenue generated by Insurance and Money businesses, the revenue declined by 8%.
• The Company’s profitability declined for the period, driven by lower revenue and increased operating expenses.
• The Company reported robust cash conversion with operating cash of £41.7million in H1 FY2020 and net cash of £7.5 million as on 30 June 2020.
• Despite the lower financial performance, MONY maintained an interim dividend at 3.1 pence, indicating confidence in the business model and strong cash flow characteristics.

One Year Share Price Chart

Daily Chart as of 10 September 2020, before the market close (Source: Refinitiv, Thomson Reuters)

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

Conclusion

In the first half of the financial year 2020, the company has shown a decline in financial performance. Despite the decline in financial performance, the Company’s Home Services business performed well. The Company has a strong cash conversion with £41.7 million of operating cash and £7.5 million of net cash. MONY maintained interim dividend, which reflects, confidence in the business model and strong cash flow characteristics.

The Company is committed to making an additional marketing investment of £5 million in H2 FY2020 and will continue to control Operating expenditure. At present, the Company expects uncertainty in some markets and will not be able to provide any future guidance and believe to face greater earnings pressure in the second half. The stock made a 52-week high and low of GBX 402.10 and GBX 210.00, respectively.

Based on the above rationale and support from the valuation as done using the above method, we have given a “BUY” recommendation on Moneysupermarket.Com Group at the current price of GBX 290.80 (as on 10 September 2020, before the market close at 9:20 AM GMT+1), with high single-digit upside potential based 22.90x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).

*All forecasted figures and Industry Information have been taken from Refinitiv, Thomson Reuters.
*Dividend Yield may vary as per the stock price movement.

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