UBS keeps the faith in Aveva despite recent profit warning

19th Sep 2014 10:25

UBS has substantially reduced its target price for Aveva after the engineering software group's recent profit warning, but has kept a positive stance on the stock, saying "it would be wrong to sell now".The bank slashed its target for the shares from 2,500p to 1,950p though it maintained its 'buy' rating.It has Aveva on its "M&A watch list" and pointed out that the board is considering the possibility of a share buyback, given the £118m of net cash it had at the end of March.Aveva, which works in the plant and marine industries, said on 12 September that interim results will show a "material impact" from currency movements and the timing of certain rental renewals.These issues, along with a salesforce reorganisation and softness in demand in certain areas, meant that first-half revenues are now expected to be around £84m-90m, compared with £108.5m the previous year and well below analysts' forecasts.UBS, which recently attended a capital markets day at the group, highlighted a "subdued tone" from management with the company emphasising that the demand picture was still mixed.However, while the bank has cut its forecasts, expecting sales for the year to March 2015 to fall 7% compared with its previous estimate of 10% growth, it said it continues to "see intrinsic value in Aveva".The stock was down 1.1% at 1,542p by 10:52, but still well below the 2,100p level seen last month.