Broker snap: Acquisitions shine at Micro Focus

11th Nov 2009 11:16

Broker Charles Stanley has described the turnaround in the performance of Compuware and Borland under the new ownership of Micro Focus as 'stunning'.The market appears to agree, with the share price of the UK legacy software specialist rising sharply in early trade on Wednesday.The broker says that trading at the core business is creditable, but the acquisitions are 'motoring ahead'.'Guidance on EBITDA [earnings before interest, tax, depreciation and amortisation] margins for the full year has doubled to 30% from 15%, with revenue guidance for the run rate increasing from $150m to $160m. We knew Micro Focus was a powerful integrator of acquired businesses but this performance is stunning, for two business that were barely profitable prior to acquisition. The revised guidance adds $17m to FY 2010 EBITDA,' said investment analyst Ian Mitchell.The broker has upped its earning per share (EPS) forecast for 2010 by 11%, and its 2011 EPS figure by 12%.'We see Micro Focus now turning its attention to organic growth opportunities and strategic initiatives such as Cloud computing, where it is well placed. We hope today's positive update will draw a line under the departure of Stephen Kelly and illustrates what a strong, resilient business Micro Focus is,' Mitchell said.Charles Stanley has reiterated its 'buy' recommendation and 570p price target for the stock.