Broker tips: Informa, Moneysupermarket Group

18th Oct 2016 17:00

(ShareCast News) - Informa got a boost on Tuesday after Investec upgraded the stock to 'buy' from 'hold' as it integrated the accretive Penton acquisition and £715m rights issue.The brokerage said that while a £1.2bn deal adds risk, this is mitigated by the close business fit and Informa/Penton interaction over the years. "We thus see Penton as a 'big bolt-on'," it said.Investec said Informa's management knows Penton well, with frequent interactions over a number of years across the business, especially at the top level."The skew to overseas (and more $) earnings, plus a systematic plan to boost growth/return on invested capital, make us fundamentally positive."Investec said the Penton deal will add US exposure and skew the group more to big events, boosting an attractive vertical further within Informa.The brokerage cut its price target on the stock to 706p from 728p to adjust for the deal and rights issue.The Penton integration, cost savings and the rights issue led Investec to up its earnings per share estimates for full-year 2017 and 2018 to 45p and 48p from 43.7p and 46.2p respectively. Numis on Tuesday initiated its coverage of Moneysupermarket Group with an 'add' rating and target price of 325p."Moneysupermarket's portfolio of verticals is a key strength and provides protection at a group level to wobbles in a particular quarter in an individual vertical," Numis said."We expect high single digit top line growth at Moneysupermarket for the foreseeable future (around 8% run rate through 2018)."Numis believes the main drivers of the price comparison website's growth are technology investment, opportunity in the energy switching market and the MoneySavingExpert brand.The broker said Moneysupermarket has a long history of consistent and strong cash generation with excess cashflow distributed to shareholders.The company has said that once the cash pile rises above £40m they will make more returns to shareholders." Our year end 2016 cash position falls a touch short of the £40m that will trigger a distribution, but at the very least we would expect an announcement on this by the time of interim results in 2017," Numis said.