Broker snap: AVEVA's valuation too steep, says Panmure Gordon

18th Nov 2013 10:28

Panmure Gordon has maintained its 'hold' rating for engineering software firm AVEVA in spite of a broadly in-line set of first-half results, saying that the shares are still too expensive."Interim results feature 32% growth in cash generation - otherwise these were, as expected 'workmanlike' rather than a rip-roaring set of interims," the broker said.Revenues rose 11% year-on-year to £108.5m in the six months to September 30th, slightly less than the £110.6m Panmure was looking for and under the consensus estimate of £109.7m. Pre-tax profit of £32.3m, up 6%, compared with Panmure's £33m forecast and consensus at £32.23m.One major disappointment was the Enterprise Solutions division with revenues up just 5% at £12.8m, while the broker was expecting a number closer to £24m. However, this was slightly offset by the better-than-expected 12% gain in Engineering & Design Systems to £95.7m, compared with the forecast of £86.6m."The outlook statement was particularly upbeat and to remind we think that given general 'macro' improvements coupled with good housekeeping (better sales progress in US and Brazil) plus the benefits from a brace of product initiatives, E3D and Bocad Aveva should make Aveva in good shape for H2," the broker said."We remain encouraged by the operational progress but our bugbear remains the valuation - price-to-earnings ratio of 31x - and is likely to make any new buying muted."The broker has lifted its target price slightly from 2,374p to 2,386p but maintained its overall cautious stance on the stock.The share price was down 8.96% at 2,336p by 10:41.BC