Broker snap: Micro Focus is a 'cash monster', says Evolution

7th Dec 2011 10:37

Evolution Securities has kept its buy rating on business software firm Micro Focus International, saying that the company is a "cash monster" following the announcement that it is to return cash to shareholders.The firm announced today that revenues fell 2.6% in the first half, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 8.5%. It also revealed that it intends to return around $134.4m in cash by way of a B and C share scheme.Analyst Roger Phillips said: "With another 10% buyback still to be executed and consensus earnings per share [forecasts] moving sharply upwards for FY12, we see significant outperformance for the next six months."The broker admits that Micro Focus is "deservedly discounted to the sector" because of the lack of a bid story and uncertainties over long-term revenue growth. However, it says that the stock is cheap and an "effective return of capital to shareholders is something software companies are not always good at."A 410p target price is maintained.The stock was among the best performers on the FTSE 250 on Wednesday morning, trading 6.3% higher at 405.4p by 10:36.BC