Broker tips: Moneysupermarket, Genel Energy, ITV

For the year to the end of December, the price comparison service said statutory profit after tax grew 20% to £63.4m as revenue pushed up 14% to £281.7m.

Moneysupermarket pointed to particularly strong growth in the Money and Home Services businesses, while growth in Insurance was lower as a result of strong second half comparatives in the previous year and tougher competition.

Adjusted earnings per share came in at 14.5p from 12.3p the previous year and the group said it will pay a final dividend of 6.6p per share, taking the total dividend for the year to 9.15p from 8p in 2014.

The company said it remained confident of delivering its expectations for the year. The company traded solidly to the end of February, delivering 12% growth, although insurance revenue was down 4% and travel is deteriorating.

“Nonetheless, given continued strong growth in Money, which accounts for 27% of group revenues and rising, we are nudging up our forecasts, with EBITA up from £103.9m to £105.1m,” said Investec analyst Simon Davies.

“This drives a 1% uplift in EPS from 15.0p to 15.1p.”

The analyst said there was definite scope for further cash returns as Moneysupermarket.com remains committed to a progressive dividend policy and ongoing monitoring of the appropriate capital structure.

The increase in the target price represents a 15.0x full year 2017 enterprise value/EBITDA, and 21.2x cash adjusted price earnings ratio.

Citigroup downgraded Genel Energy to ‘neutral’ from ‘buy’ and slashed the price target to 120p from 253p.

It pointed to the fact the company has reduced the expected gross ultimate recovery from its Taq Taq field in Iraqi Kurdistan on the back of revised assumptions on the fracture porosity within the Shiranish reservoir at the field.

On Monday, Genel downgraded its assumptions for Taq Taq – its largest oil field – to 356m barrels of oil from 683m.

As a result of the reserve downgrade, Genel also said it expects to record an impairment of around $1bn due to a lower carrying value for the Taq Taq field in its full year 2015 results, which is around 28% of its current equity value.

“Our ‘buy’ case on Genel was based on a view that despite the political uncertainties in the Kurdistan region, Genel held a significant low cost resource base that was undervalued and remained relevant to the wider industry,” Citigroup said.

However, Monday’s news changes this investment thesis and makes it more challenging for Genel to fund its Miran gas development, Citi said.

“With continued political uncertainty (and ongoing pipeline issues), we believe Genel could trade at a discount to core NAV in the near-term.”

Goldman Sachs marked down its valuation of ITV’s shares as a result of the recent de-rating in its US peers and cut the M&A premium it attached to them, although it still saw the company as a potential takeover target.

Interestingly, the broker lowered its 12-month target price on the stock from 329p to 297p, in part as it lowered the M&A premium on the stock’s valuation from 50% to 30%, with the rest of the shares’ value, 70%, now being a function of the company’s fundamentals.

The latter also came down as a result of the de-rating of ITV’s US peers and was set at 14.5 times’ the estimated 2017 P/E, down from 15 times.

“We see more limited NT upside given the lack of major positive earnings momentum and the de-rating of US peers,” Goldman said.

The broker also downgraded the stock to ‘neutral’ and removed it from its Pan-Europe Buy list.

Nonetheless, at a price-to-earnings multiple for 2016 of 12.8 the shares were not “expensive”, the analysts said.

Furthermore, the trend towards a rising value of content and convergence between telcos and media made the company a potential M&A target, Goldman said.

Weak prospects for advertising and poor ratings were also set to weigh on programming costs at ITV, Goldman Sachs said in a research note sent to clients.

The latter had seen ITV’s audience decline by 4%-5% in 2014/15, while the end of major shows – such as Downton Abbey or Mr.Selfridge - and a change in the Director of Television might result in greater programming reinvestment in the near-term, the broker said.

Nonetheless, the shares were up by 432% since being added to Goldman’s Buy list on 12 October 2009, versus an advance of 9.8% for the FTSE World Europe benchmark, analysts Lisa Yang, Otilia Bologan, Sarah Watson and Katherine Tait said in a research note sent to clients.

Goldman was in-line with the company consensus, anticipating 2015 NAR growth of 5.6%, programming costs of £1040m and earnings per share of 16.1p.

However, the broker saw upside to forecasts for ordinary dividends of 5.9p plus an extraordinary pay-out of 7.8p.

For the first quarter of 2015, Goldman anticipated NAR would grow by 1% and for all of 2016 by 3%. The latter was down from a previous projection for a rate of growth of 4.5% and below the consensus estimate for 3.8%.

Programming costs in the first three months of the year were pegged at £1057m.

Earnings per share were now seen reaching 17.8p, 5% less than previously (consensus: 18p).

ITV was also “structurally well-positioned” and had “strong” management, the analysts wrote.