The float of an exciting new company can ignite investor interest in the shares of already-listed peers. This certainly seems to have been the case for MoneySupermarket.com (MONY), which has seen its shares run up 16 per cent since the IPO of fellow price comparison website Gocompare.com (GOCO) at the end of 2016. We think the shares should also be buoyed by Comparethemarket.com owner BGL joining the market later this year. And, before then, there is the prospect of a share price fillip based on the growing likelihood that the cash-generative company will declare a special dividend.
- Likelihood of a special dividend
- Excellent cash generation
- Demand for price comparison websites is rising
- Growing listed price comparison peer group
- Big marketing expenditure
- Market turbulence could cause difficulties
BGL has been twiddling its thumbs about its float since the start of 2016 and has recently pushed back its listing date to the second half of this year. Perhaps the current murmurs of economic turbulence in the UK remind it of the time that Moneysupermarket became a public company in 2007, soon after which trading turned down, taking the shares with it.
But today the price comparison market looks much more stable and has recently been growing strongly. According to market research firm Mintel, more than two-thirds of consumers have researched an insurance product using a price comparison site and demand is also being driven by rising car insurance premiums, which were up on average by £95 last year, encouraging more people to shop around. MoneySupermarket is estimated to be the second-largest price comparison player in insurance after Comparethemarket and generated 45 per cent of its revenues from this area in 2016. Insurance revenue growth for the year came in at 11 per cent, including a 30 per cent revenue rise in the final quarter.
Switching provider is a growing trend in the energy market. MoneySupermarket's home services division - which includes energy and accounts for 15 per cent of sales - is still in its infancy and is growing fast, with sales up 36 per cent last year. Meanwhile, the group's wholly owned site TravelSupermarket.com (7 per cent of revenue) seems on the cusp of a recovery, with 21 per cent growth in the final quarter compared with -9 per cent for the year as a whole. And the group's 'money' revenues from savings and loan product comparisons (23 per cent of the total) stand to benefit should interest rates rise.
Rising revenues are crucial for growth at MoneySupermarket, given high marketing costs. An effective ad campaign is key to the success, so it can be seen as a positive that MoneySupermarket's "epic dance off" campaign has attracted plenty of attention last year.
MONEYSUPERMARKET.COM (MONY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 333.4p | MARKET VALUE: | £1.83bn | |
| TOUCH: | 333.3-333.4p | 12-MONTH HIGH: | 354p | LOW: 226p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 30.3p* | NET CASH: | £10.7m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2013 | 226 | 76 | 10.8 | 20.2 |
| 2014 | 248 | 89 | 13.1 | 8.0 |
| 2015 | 282 | 99 | 14.5 | 9.2 |
| 2016** | 313 | 109 | 15.8 | 9.9 |
| 2017** | 335 | 116 | 16.9 | 10.7 |
| % change | +7 | +6 | +7 | +8 |
Normal market size: 7,500 Matched bargain trading Beta: 0.34 *Includes intangible assets of £162m, or 29.5p a share **JPMorgan Cazenove forecasts, adjusted PTP and EPS figures, 2013 payment includes special dividend of 12.92p | ||||
