LONDON (ShareCast) - Legacy software replacement specialists Micro Focus (LSE: MCRO.L - news) delivered full-year results ahead of
pre-close period guidance, prompting broker KBC Peel Hunt to reiterate its recommendation to buy the shares.
"Our FY10 forecast, pre the acquisitions, was for 6% revenue growth and EBITDA [earnings before interest, tax, depreciation and amortisation] margins of 40.5%. We are upgrading by 3.5% to 44.85c, PBT [profit before tax] $128.44m, based on 42% EBITDA margin in Micro Focus ex Compuware (NASDAQ: CPWR - news) ," the broker said, adding that the acquisition of Compuware has been included in its 2010 forecasts but the proposed purchase of Borland has not.
"The key question is what margin Micro Focus can drive from both acquired businesses on a two year view - logic would suggest it would be closer to 20% than Micro Focus's 40%, but there is ambition to achieve closer to the latter," KBC analyst Alex Jarvis said.
"The current share price still takes a conservative view of the acquisitions. Micro Focus paid a good price for both and could enjoy significant strategic and financial upside from a successful integration," Jarvis (LSE: JRVS.L - news) believes.
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