Broker snap: Credit Suisse hikes AVEVA target but stays cautious

24th May 2013 10:20

Credit Suisse has lifted its target price for engineering data and IT group AVEVA from 2,013p to 2,240p to reflect the company's cash return and a lower tax rate.However, the broker has maintained its 'neutral' rating for the stock, highlighting concerns with weak cash flows and a slowing core business.AVEVA results announced on Thursday were in line with the pre-close trading update with headlines results (revenues up 12% and adjusted earnings up 14%) meeting expectations. However, analyst Charles Brennan pointed out that "weak cash flows suggest that 4Q13 must have been a nervy quarter where deals came in very late during the period." The broker said that the only other news was the decision to return £100m to shareholders in the form of a special dividend of 146p per share."Valuing AVEVA on a 35% sector premium and accounting for the 146p capital return points to our revised 2,240p target price. Hence we stay at 'neutral'."Despite the Enterprise Solutions business beating profit expectations, the group's bottom line was "merely in line with market expectations" because of a slowdown in the core Engineering and Design division, Brennan said."Bulls will likely point to the strength of the business that it can still make numbers despite headwinds, while the bears will highlight the core business slowdown."The stock was up 3.91% at 2,393p by 10:33 on Friday.