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 301.80

1. 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.

2. MONY helped its users to save more than £1 billion through MoneySuperMarket and MoneySavingExpert brands, with strong cash flow in the crisis situation.

3. As per valuation metrics, EV/Sales, EV/EBITDA and Price/Cash Flow multiples of the Moneysupermarket.Com GroupPlc are currently lower as compared to the corresponding multiples of the Media industry. It reflects, shares are undervalued as compared to the industry.
 

Financial Highlights – H1 Financial Year 2020 (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% to £183.2 million (H1 FY2019: £199.4 million). Reflecting lower revenue and increased distribution expenses, the adjusted EBITDA and operating profit declined to £62.8 million and £52.7 million, respectively, in the first half of the financial year 2020 (H1 FY2019: adjusted EBITDA of £72.9 million and operating profit of £61.4 million).

The Profit after tax declined by 19% to £40.6 million in H1 FY2020 (H1 FY2019: £50.2 million), reflecting lower revenue and adjusted EBITDA. The adjusted basic earnings per share stood at 7.9 pence in H1 FY2020 (H1 FY2019: 9.4 pence), while reported basic earnings per share stood at 7.6 pence in H1 FY2020 (H1 FY2019: 9.4 pence). The operating cash flow declined by 19% to £41.7 million in the first half of the financial year 2020 (H1 FY2019: £51.4 million). The Company also proposed an interim dividend of 3.1 pence for the period.

One Year Share Price Chart


Daily Chart as of August 25, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Key Risks

The Company operations are 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.

Valuation Methodology

Technical Performance

The shares were trading well above the short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Recommendation
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 at the current price of GBX 301.80 (as on 25 August 2020, before the market close at 9:18 AM GMT+1), with single-digit upside potential based 23.60x 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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