Broker snap: Micro Focus oversold

23rd Dec 2010 13:02

Investors spooked by the chairman of Micro Focus , Kevin Loosemore, selling a third of his shareholding in the business software maker might feel a lot more sanguine about the company's prospects once they know the circumstances behind the sale, Panmure Gordon reckons."Mr. and Mrs. Loosemore have just completed the purchase of a property, but are not in a position to sell the current family home. In order to fund the purchase the family liquidated all other investments and sold 200,000 Micro Focus shares," explained Panmure analyst George O'Connor."Mr. Loosemore tells us that he remains convinced of the potential value in Micro Focus shares as evidenced by the fact that he, and his wife, still hold 400,000 shares. To remind investors Mr Loosemore built his holding from his own resources and over the past five years has acquired 600,000 shares," O'Connor added.The broker remains "relaxed" about its current "buy" recommendation."We like the Micro Focus business, the track record of cash generation, the wider opportunity as the legacy applications modernisation company, the 'selective acquisitions' strategy, the enviable customer base (18,000+ customers, 2m+ licensed users) and the delivery team. Investors expecting another profit warning at interim results were disappointed and now with the new Silk' (i.e. Test) products in revenue generation, Micro Focus can address the investor gripe of 'where is the growth supposed to come from?' Doubting Thomases - get your fingers ready!" advises the broker.