Market Analysis: Moneysupermarket & Rio Tinto

This week's contributions begin with Dan Thomas, Senior Analyst at Third Bridge, the global primary research firm, commenting on Moneysupermarket. "The FCA’s price-walking proposals could lead to smaller differences between the insurance premiums offered to new and existing customers. Ending the practice of price-walking could lead to a reduction in switching volumes as customers are less inclined to shop around.

"Price comparison websites like Moneysupermarket could offset potential volume headwinds by negotiating higher fees with insurers as they seek to reflect the increased customer lifetime value associated with lower churn.

"In 2020 the availability of credit products was a real challenge for Moneysupermarket, as banks and credit cards tightened lending criteria. This resulted in a less compelling range of alternatives for consumers.

"Players like Experian and Clearscore are also moving into Moneysupermarket's territory offering competing services alongside their more traditional credit bureau products."

Peter McNally, Global Sector Lead for Industrials, Materials & Energy at Third Bridge, adds his analysis on Rio Tinto, which "reported a solid set of year-end 2020 results, delivering EBITDA of nearly US$24bn, up 13% on the prior year and comfortably ahead of the consensus $23.2bn.

"Higher commodity prices were key to their results, and this helped the company overcome some lower output levels.

"The big factor for Rio Tinto has been iron ore, which has allowed the company to deliver US$9.4bn in free cash flow, the highest figure of the past decade. Management signalled its confidence with a strong dividend. While those results are positive takeaways, our experts point out that future Capex is creeping higher, moving up by $500m to $7.5bn for 2021 and 2022.

"As long as iron ore prices are sustained and Rio Tinto can deliver their volumes in a safe operating environment, their financial outlook remains healthy. New management continues to express regret for the destruction of the rock shelters at Juukan Gorge and is implementing action plans for more sustainable mining activities."