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 267.00

• Despite the lower financial performance in the financial year 2020, the Company has a strong cash conversion and maintained full-year dividend.
• As per valuation metrics, EV/EBITDA, Price/Earnings 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.
• In the last three months, the Company delivered a decent return of ~1.15% and delivered higher returns compared to the benchmark Index (FTSE-250 Index).
• From the technical standpoint, 14-day RSI is supporting an upside move (around 38 level), which means the stock price could increase in the short term.

Key Risks

• The Company 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.
• The operations may be impacted by an increase in the competition as it operates in a highly competitive and dynamic marketplace.

Financial Highlights – FY2020 (31 December 2020) (released on 18 February 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, due to the impact of the covid-19 pandemic, the Company’s revenue declined by 11%.
• Due to lower revenue and gross margin rate, the profitability for the period declined. The Company’s adjusted EBITDA declined by 24%.
• The Company has net cash of £23.6 million along with operating cashflow of £83.9 million as on 31 December 2020, reflecting strong cash conversion.
• Driven by robust cash generation and confidence in longer-term growth prospects, the Company maintained full-year dividend of 11.71 pence.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

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

Conclusion

The Company has shown a significant decline in financial performance in the financial year 2020. Both the revenue and profitability for the period declined. The Company’s end markets remained impacted by the covid-19 related restrictions and recovery pace in 2021 is dependent on easing in lockdown measures. MONY expects adjusted EBITDA to be in between £96.4 million to £128.8 million. The Company expects revenue and profit to recover strongly in the second half of the financial year 2021. Overall, the Company seems to be well-positioned to deliver growth in future and to navigate through an uncertain period. The stock made a 52-week low and high of GBX 233.79 and GBX 354.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Moneysupermarket.Com Group Plc at the current price of GBX 267.00 (as on 30 March 2021, before the market close at 9:34 AM GMT), with lower double-digit upside potential based on 22.45x Price/NTM Earnings(approx.) on FY21E earnings per share (approx.).

*All forecasted figures and Industry/Peer information have been taken from Refinitiv, Thomson Reuters.

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

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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