Broker snap: UBS upgrades Micro Focus to 'buy'

14th Aug 2012 10:48

UBS has upgraded its rating for business software firm Micro Focus International (MCRO) from 'neutral' to 'buy' and raised its target price from 570p to 600p, saying that the group's promise of high cash returns outweigh its modest growth prospects."At a recent analyst day, MCRO portrayed itself as neither a high-growth business in investment mode, nor an ex-growth cash cow, but rather as something in-between - a golden goose - offering high returns," the broker said in a research report on Tuesday."MCRO has yet to demonstrate it is not ex-growth, with maintenance attrition rates in double digits and the mid-point of guidance pointing to a third year of sales decline. However, management has a turnaround pedigree, cash returns are planned and there is room for execution improvements."UBS said that 2013 is a year of "getting fit". Growth guidance is "unexciting" (at best 1%) but the investment thesis is based around potential cash returns, the broker said.By 11:19, shares were trading 0.66% higher at 533.5p.BC