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Broker tips: Moneysupermarket, Hargreaves Lansdown, Mitchells & Butlers

By Iain Gilbert

Date: Thursday 22 Feb 2024

Broker tips: Moneysupermarket, Hargreaves Lansdown, Mitchells & Butlers

(Sharecast News) - Berenberg upgraded Moneysupermarket on Thursday to 'buy' from 'hold' and lifted its price target on to 295p from 290p, noting that since it re-initiated coverage on 20 November 2023, shares have declined by 12%.
"Shares are now trading on 14.1x FY24E price-to-earnings, which we think is a better buying level, trading on a 15% discount to the group's five-year average 12-month forward P/E multiple," it said.

Berenberg's new price target implies around 20% upside from the current share price.

The German bank pointed out that FY23 results on 19 February showed that group revenue came in 2% above consensus at £432m, driven by a strong performance in insurance.

"The growth in the vertical was driven predominantly by insurance premium inflation, which was circa 35% in car and home," the bank said. "Money was -3% yoy, but this was against a tough comparable following a large switching offer in FY22 that did not repeat and interest-rate increases dampening demand for borrowing products, although current-account switching was strong."

Berenberg also noted that home services saw another year of negligible energy revenues and broadband switching was weaker, but said mobile switching was strong in the year.

Analysts at Deutsche Numis lowered their target price on financial services giant Hargreaves Lansdown from 1,043.0p to 996.0p on Thursday despite the firm's interim results coming in "a little ahead".

Numis stated that in the first half, assets under administration increased 6.1% to £142.0bn, with net inflows of £1.0bn, 1% of opening AuA in "very difficult market conditions".

Client retention was 91.6%, down a little from last year, while revenues increased by 5% to £368.0m, against the analysts' forecasts of £369.0m, with underlying costs increasing by 10% to £161.0m.

Deutsche Numis noted that while this was "significant progress", it does not believe HL has reached the "terminal yield" on assets under administration for active savings.

However, the analysts also noted that overall, underlying pre-tax profits increased by 5% to £122.0m, against its forecast of £219.0m and consensus of £215.0m.

"While the AuA was ahead of our forecasts, due to a shift in mix, towards lower-yielding shares away from higher-yielding cash balances our EPS forecast for this year decreases by 2% to 66.9p from 68.5p and by 4% next year to 70.3p from 73.2p. HL is now being valued at 12.0x current year earnings, providing an attractive yield of 6.6%," Deutsche Numis, which reiterated its 'buy' rating on the stock.

Shore Capital upgraded Mitchells & Butlers to 'buy' from 'hold' on Thursday as it said robust trading year-to-date points to strong trading in FY24 and noted the share price has mirrored the wide-ranging moves in energy prices over the last couple of years.

"We believe that this masks the underlying robustness in trading, a resilient UK consumer, rebuilding margins and material deleveraging. With profitability set to rebound strongly this year, and forecasts appearing conservatively set, we believe current valuation metrics are too low (7x EBITDA)," said Shore Capital. "Over the medium-term, we see double-digit EPS CAGR, leverage down to 2x EBITDA and a significant rebuild in NAV towards 500p per share."

The broker said improving cash flow was a precursor to restarting shareholder returns.

"With annual free cash flow of circa £100m in the current year, M&B is getting closer to being able to meet mandatory bond repayments out of internal cash generation," it said. "Reaching this milestone brings into play the potential for reinstating the dividend and further M&A opportunities."

In the longer term, ShoreCap continues to view the refinancing of the securitisation debt as a potential game changer to the investment case.


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