Money Supermarket (MONY)

[vand]

MONY is a recent buy for my portfolio.

Frankly, prior to 2020 they were a star performer, delivering excellent growth and impressive margins year on year. However since those heedy days the share price has been cut in half as their travel business first suffered from shutdown, and now with the ramp in fuel prices and energy suppliers going bust, their home switching service has suffered.

However, I think it's still a good company

- They're well diversified, and are still profitable from their other lines of business.
- They now pay a nice 6% dividend, although I have to say that I wouldn't have minded seeing this slightly trimmed as its basically taking up all their 2021 earnings
- Strong balance sheet

I'm holding as a recovery play. 2021 was hopefully the bottom of the cycle. Travel and insurance premiums went through a slump are now turning up, and this should eventually show through in their business.

[Pendrainllwyn]

I don't hold but I think you might be onto something with MONY.

Pendrainllwyn

[seagles]

I brought recently as, like you, I believe they have a good range and are successful there. Liked their purchase of Quidco, which I have used for years and have been more than happy with. I thought they were undervlaued and brought on what I thought a low, they continued the downward trend but seem to be recovering well. As this is a long time hold and income share will see how they go.
As an aside I noticed last week, when looking at car insurance, that all of the "comparison" sites had the same 2 companies at the top, Swinton followed by LV. The LV price was identical and Swintom varied by 30p. However, Quidco offered £35 off that price? I wonder if we will see some "merging" of the 2 sites.

[kempiejon]

I've held MONY a long time, I think I bought it as a value purchase then when it had doubled I took my stake out and had left the balance to run. I did make a top up last year, today the price is well below that. Income has been bonza for my holding and has probably more than paid my stake back in dividends.
I'm not sure I have high hopes for continued capital out performance. I predict some pressures to their market place.
Changes to renewal and new customer deals in insurance will take some of the attraction from the shop around clan that drives the brand. For now, energy switching is off the table and I think the new energy market that emerges the other side of current price pressure will be a smaller place.
They have the brands Moneysavingexpert, travelsupermarket.com and quidco who are big in the internet shopping comparison market.

[simoan]

MONY is a recent buy for my portfolio.

Frankly, prior to 2020 they were a star performer, delivering excellent growth and impressive margins year on year. However since those heedy days the share price has been cut in half as their travel business first suffered from shutdown, and now with the ramp in fuel prices and energy suppliers going bust, their home switching service has suffered.

However, I think it's still a good company

- They're well diversified, and are still profitable from their other lines of business.
- They now pay a nice 6% dividend, although I have to say that I wouldn't have minded seeing this slightly trimmed as its basically taking up all their 2021 earnings
- Strong balance sheet

I'm holding as a recovery play. 2021 was hopefully the bottom of the cycle. Travel and insurance premiums went through a slump are now turning up, and this should eventually show through in their business.

I agree. I held MONY for a similar recovery last year but sold out in September once it was clear the Energy switching business was going to be hit and recovery of Travel was delayed. Things seem a little clearer now with regard to Covid affecting travel and so the timing is probably better and yet the share price is 10% below when I sold out.

It's worth noting the FY22 dividend is hardly covered by earnings (although cover is forecast to improve this year) and not covered by free cashflow, so unless things improve as forecast, it could be cut. However, I like how efficiently earnings convert into FCF - 100% earnings to free cash conversion is great. Net debt increased with some acquisitions but is very manageable at ~0.5x EBITDA. However, there was a big outflow of working capital in FY21 which would need further investigation but is likely to have been caused by cash funding of the acquisitions. I'm also wary that ROCE has halved since FY19 but hopefully will recover post Covid. If you believe brokers they are anticipating EPS of 14p for FY22 which would put it on a PER < 14. Reasonable value if you are expecting the travel business to recover strongly.

All the best, Si

[moorfield]

I bought some MONY last year on the strength of its cashflows and dividend cover. However looking at its prelim results last week it now has £40m of long term debt (previously, none) and another £100m of intangible assets (85% of all assets) on its balance sheet from that QuidCo takeover, and is holding the dividend. So I am wary of buying more and probably will not do this year, until we can see how it's turnover and interest cover looks in next year's results.

[WickedLester]

I bought some of these today. I presume the price has fallen because the shares recently went ex div. I actually wouldn't mind if they suspended the dividend for a year to pay off the debt. I think the price comparison sites have a reasonable future and as far as I know the market is really concentrated in the hands of this and Go Compare.

It's not shockingly cheap but I can't argue with that cashflow.

Hopefully with a recovery in travel on the cards the profit will be better going forward but I'm less confident about the prospects for energy.

[simoan]

I bought some of these today. I presume the price has fallen because the shares recently went ex div. I actually wouldn't mind if they suspended the dividend for a year to pay off the debt. I think the price comparison sites have a reasonable future and as far as I know the market is really concentrated in the hands of this and Go Compare.

It's not shockingly cheap but I can't argue with that cashflow.

Hopefully with a recovery in travel on the cards the profit will be better going forward but I'm less confident about the prospects for energy.

This company has been coming up on one of my screens for what seems forever. And yet the price has continued falling. It is now at lows last seen in the late spring of 2014. It's strange, but you can see why because the results for 2014 and 2021 are almost identical on the bottom line; diluted EPS was pretty much the same at 10.2/10.3p. However, revenue was 20% higher in 2021 than in 2014.

With regard to the debt, 0.8x Net debt/EBITDA is not a problem for such a cash generative company IMHO.
All the best, Si

[WickedLester]

Hi Simoan

I'm hoping that with a squeeze on living standards companies such as MONY will become even more relevant in the future as even more people look to save money on their household bills.

[Wasron]

I had another look at moneysupermarket this morning, after yesterday’s update, but two things are putting me off.

One is the significant rise in intangible assets (£171m to £288m)

The other is the rise in Trade and Other Receivables (£54m to £71m)

(figures from HL website)

Revenue is declining, so these increases can’t be explained by business growth.

I’m not an accountant, but from my limited understanding of reading balance sheets these look like red flags to me

If there’s a logical explanation for them then I’ll happily be educated

Wasron

[WickedLester]

I had another think about these and decided to sell out at about breakeven. They don't look cheap enough to me for a company which seems to have gone ex growth but i'll keep them on the watchlist.

[abtan]

Some brief additional thoughts from me (as a holder.)

2 of MONY's main competitors have sold for x20/x25 OP multiples in the last 1 year or so (gocompare and confused.com)
Applying the same multiple to MONY's 2021 Operating Profit of £73m gives a valuation of £1.4-£1.8b.
This should hopefully be a "low" valuation given that 2021 was a very weak year for the group.

The current EV of the group is c£1b.

Given the current economic outlook I imagine that demand for the group's services will be high in the near future, especially those offered by MoneySavingExpert. In any case the addition of Quidco last year should take 2022 revenues back to 2019 levels, with 2019 EBITDA levels hopefully returning in the next 18-30 months.

In the meantime there's a safe 7% dividend yield, easily manageable debt, high SEO rankings, which is where the company's true strength lies, and various other levers left to pull, such as the move into car insurance comparisons by MoneySavingExpert.

My estimate is that the company generates £80m of FCF this year (before the dividend payment.)
For me this is excellent for a quality company with an EV of £1b.

There's also the hope that those lucrative energy revenues come back eventually, but even if they don't, nothing really changes my thinking noted above.

At these levels I am a big fan.
Cheers
A

[WickedLester]

Some brief additional thoughts from me (as a holder.)

2 of MONY's main competitors have sold for x20/x25 OP multiples in the last 1 year or so (gocompare and confused.com)
Applying the same multiple to MONY's 2021 Operating Profit of £73m gives a valuation of £1.4-£1.8b.
This should hopefully be a "low" valuation given that 2021 was a very weak year for the group.

The current EV of the group is c£1b.

Given the current economic outlook I imagine that demand for the group's services will be high in the near future, especially those offered by MoneySavingExpert. In any case the addition of Quidco last year should take 2022 revenues back to 2019 levels, with 2019 EBITDA levels hopefully returning in the next 18-30 months.

In the meantime there's a safe 7% dividend yield, easily manageable debt, high SEO rankings, which is where the company's true strength lies, and various other levers left to pull, such as the move into car insurance comparisons by MoneySavingExpert.

My estimate is that the company generates £80m of FCF this year (before the dividend payment.)
For me this is excellent for a quality company with an EV of £1b.

There's also the hope that those lucrative energy revenues come back eventually, but even if they don't, nothing really changes my thinking noted above.

At these levels I am a big fan.
Cheers
A

Hi abtan. Your post made me reconsider again and I bought some shares again today. I paid a slightly keener price than I last sold at so that is all good. Thanks for your input.

[monabri]

Hi abtan. Your post made me reconsider again and I bought some shares again today. I paid a slightly keener price than I last sold at so that is all good. Thanks for your input.

A better punt than "Renewi" I reckon.

http://financials.morningstar.com/ratio ... region=GBR

Nice margins..debt not too bad..share base stable..

[vand]

A pleasing update.
https://www.investorschronicle.co.uk/ne ... ice-storm/

[vand]

It seems MONY's share price recovery is well under way now, and with headlines like this doing the rounds it seems like their most lucrative income stream - which has been efffectively shut off for the last 18 months - is about come back online

Ovo launches energy deal below government price cap
https://www.bbc.co.uk/news/business-65080014