Broker tips: Money Super Market, Greene King, Lonmin

Peel Hunt upgraded Moneysupermarket.com to ‘buy’ from ‘add’ on Monday following recent share price weakness, with the stock down 14% from mid-June.

The shares have weakened following good interims as the spectre of Amazon entering the market has been raised, although the nature and scope of its interest in insurance are far from clear, the brokerage said.

"For sure Amazon has the advantage of no inherent cost of customer acquisition, but at this stage, there is no clear indication that it is intending to address a mature motor marketplace or to offer a broad-based panel for comparison.

“The potential for Amazon to disrupt is significant, but for the moment we are a long way away from a direct incremental competing motor service. We have previously seen Google investigate UK PCW services without material success. The attractions to international online companies of entering the UK financial services marketplace may be tempered by the regulatory burden that has to be addressed."

In addition, it noted that the Decision Technologies deal has completed, paving the way for more B2B partnerships to be pursued to expand the market for switchers and the new CFO identified.

Moneysupermarket’s shares are now trading on forward price-to-earnings levels, of 15x, not seen - other than for a couple of months - since 2014.

Peel Hunt left its 340p target price unchanged.

Analysts at JP Morgan said that nature had given Greene King a somewhat unexpected boost throughout the first 18 weeks of its fiscal year 2019 as the UK's long, hot summer drove the pubco's like-for-like sales ahead 2.8% year-on-year.

JP Morgan said England's successful World Cup bid had also boosted sales, with Greene King, which sold 3.7m pints of beer during the seven World Cup matches, benefitting more than others due to its higher proportion of wet-led local pubs and extensive outdoor space.

With like-for-like sales up 61% on the date of the semi-final, the broker praised the landlord's "undoubtedly" good start to the year, but noted that against a weak comparator of 1.2% over the same period last year, and the factors contributing to the strong performance, it could not be extrapolated to the balance of the year.

JP Morgan kept its full-year adjusted pre-tax profit estimate unchanged at £244.0m, in line with the company-compiled consensus of £242.0m, adding that it could see "no let-up in cost inflation" and plenty of reason to remain wary of consumer demand as the UK approaches the deadline for its exit from the EU.

The broker reiterated its 'underweight' rating and 475p target price on Greene King.

Lonmin is looking a less risky investment than it seemed a few months ago, said broker Liberum on Monday, upgrading the miner to 'hold'.

The broker had in May considered the rate of cash burn and that the chance the proposed merger with Sibanye falling apart were too high, downgrading the shares to 'sell'.

A 30% devaluation in the South African rand in the last six months, as the emerging markets currency crisis and the confirmation that the country has gone into recession, will benefit Lonmin's cost base as it is predominantly in local terms.

"Lonmin as result is no longer losing cash for each ounce they produce and should finish the financial year with circa $40m in cash (assuming they have managed to unlock the $47m of PGM ounces in the smelter)."

Another factor is the public support from the Public Investment Corporation for the merger, which Liberum said has "derisked the merger substantially, although not entirely", with the Competition and Markets Authority having also approved the deal.

Liberum had a 40p target price on the shares and noted that shares trading a 12% discount to the implied bid, "a more a suitable discount for a deal that is still far from certain to complete".