Broker tips: Hiscox, Aveva, Kewill

25th Jan 2010 13:13

A market valuation that is 1.1 times net tangible assets is 'too low by a long chalk' according to finnCap, which has reiterated its 'buy' rating for underwriter Hiscox.'The investment return for 2009 is approximately 7.2% of the average value of the portfolio over the year. This compares with 6.5% after nine months,' the broker notes after Hiscox's trading update on Monday. 'Hiscox has low investment leverage so it can afford to take a modicum of risk in non-government bonds and equities which enhanced the yield achieved for the quarter and year as a whole,' analyst Charles Coyne said.The broker has reiterated its target price of 370p.Broker Panmure Gordon thought it detected undertones of caution in the trading statement from engineering data and IT systems provider Aveva, along with the bullish comments about prospects in Brazil.'There is a hint of caution in the narrative with performance being "satisfactory" and "uncertainty" in underlying markets - this might lead to some profit taking,' suggests analyst George O'Connor.The broker has increased its forecast for adjusted profit before tax by £1.5m to £49.4m, to reflect recent currency moves. This feeds through to an increase in its earnings per share forecast from 49.3p to 50.9p.The broker has maintained its 'buy' recommendation and inched its price target up to 1143p from 1142p. Charles Stanley has upped its price target for Kewill after a 'steady as she goes' trading update on Monday from the logistics software developer.The small cap IT sector trades on 13.6x prospective earnings, the broker notes, and believes that 'Kewill deserves to trade in line with this, resulting in our target price of 100p (from 80p).''We expect the continued push towards higher compliance requirements in import and export to remain a key driver for Kewill,' Charles Stanley analyst Ian Mitchell said. 'Its increased scale, both through organic growth and acquisition, also helps elevate the business above local/national competitors and into direct competition with the likes of SAP and Oracle, where its depth of functionality and expertise is a differentiator,' Mitchell added.The broker sees 'value enhancing acquisitions' adding a bit of vim to the group's organic growth prospects which are forecast to be below the sector average. 'We believe it is right to factor this into the target multiples we apply to Kewill, although obviously not into our forecasts themselves,' Mitchell said.