11th Dec 2015 12:28
LONDON (Alliance News) - Barclays has increased its price target for FTSE 250-listed software firm Micro Focus to 1,780 pence from 1,400 pence following first half numbers that were "considerably ahead of expectations", saying the company's full year guidance is looking increasingly conservative.
Micro Focus Thursday reported a big jump in pretax profit to USD98.8 million, up from USD57.1 million, as revenue nearly tripled to USD604.5 million from USD208.3 million, on the back of its significant USD2.5 billion acquisition of The Attachmate Group Inc towards the end of last year.
Barclays noted that, with results exceeding expectations, "it is easy to overlook the fact Micro Focus is still in the midst of such a large scale integration of two businesses."
A significant contributor to the company's outperformance was a smoother-than-expected integration of the two businesses, with anticipated disruption not materialising.
Barclays believes that the focus for the market should increasingly be on Micro Focus' Linux distributor businesses SUSE; Barclays believes that SUSE could account for around 25% of the company's enterprise value, and expects the market to increasingly work on the embedded valuation of and options for this business.
Liberum was more reserved in its response, and whilst it increased its earnings before interest, tax, depreciation and amortisation estimates by 7.0% and 6.0% for the company's current year and the following year respectively, it retained its Hold rating on the stock. It said that Micro Focus is executing "very well", but sees limited upside, expecting earnings per share growth to slow and struggle to justify a much higher share price.
Liberum increased its price target to 1,365p from 1,300p as a result of the increased estimates.
Shares in Micro Focus were up 1.5% at 1,538.00 pence Friday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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