Broker snap: Sanlam upgrades AVEVA to 'hold'

23rd Apr 2013 10:10

Sanlam Securities has lifted its rating for engineering data and IT group AVEVA from 'sell' to 'hold' after an in-line pre-close trading update removed short-term risks to forecasts.The firm said that it expects to hit revenue and profit forecasts for the full year after its second half saw good demand. "The update is positive in that AVEVA has been able to withstand a slowdown in the Latin America region through resourcing constraints," said analyst Roger Phillips."This was previously an important engine of growth for the business, and we suspect the Chinese subsidiary must have performed very well in Q4 to compensate."AVEVA's guidance for a move into profitability in Enterprise Solutions was also a positive. Sanlam was expecting the division to make a slight loss this year after originally missing forecasts the year before.Phillips said: "Short-term forecast risk has been removed, hence the upgrade in our recommendation. With the release of 'Everything 3D', there is a substantial upgrade opportunity for the existing [plant design management system] customer base, in addition to secular growth drivers in several vertical markets. As a result the mid-term outlook looks favourable."Nevertheless, he said that on a three- to six-month view, the stock now looks "more than up with events".A 1,980p target price was maintained.The stock was up 4.99% at 2,166p by 10:18.BC