Canaccord Genuity downgrades EMIS Group to 'hold'

On Friday afternoon, Optum UK announced the acquisition of EMIS for £1.2bn - a 49% premium to its closing price on Thursday. The analysts hiked their target price on the stock from 1,560.0p to 1,925.0p in order to match the per-share value of the deal.

Canaccord Genuity highlighted that the deal will see EMIS fold into Optum UK, a subsidiary of UnitedHealth Group and long-term provider of software to the NHS, as well as both a customer and partner to EMIS.

While the Canadian bank did not not identify any "material overlap" between the core software offerings, it believes Optum's data analytics capabilities offer a "complementary proposition" to the EMIS-X analytics suite, with the combined offering proposed to deliver greater access to integrated analytics for clinicians across the NHS. The deal was also expected to enable EMIS to accelerate development, backed by the resources of the enlarged group.

"The all-cash offer is a 49% premium to the undisturbed share price and 23% above our prior target price and is recommended by the board. It values EMIS at a FY22E P/E of 31x, EV/EBITDA of 18.5x (versus pre-take out multiples of ~21x and ~11x, respectively) and 6.8x EV/Sales (vs 4.3x). All metrics are above valuations of other recent industry deals. We therefore change our recommendation to 'hold' and raise our target to reflect the 1,925p/share cash offer," said Canaccord.

Reporting by Iain Gilbert at Sharecast.com