Credit Suisse ups target price as Aveva at 'turning point'

On Tuesday, the FTSE 250 engineering software firm increased revenue 11.5% to £93.9m compared to the same time a year prior, with strong growth in the Asia Pacific region and stabilisation in the Europe-Middle East-Africa market.

Adjusted profit before tax was ahead 13.2% at £10.3m, and Aveva's reported loss before tax came in at £12.4m, a swing from the £5.5m profit it reported twelve months earlier.

The company's board said "exceptional costs" incurred in relation to the Schneider Electric Software business combination brought about the loss.

Preparation for completion of the combination with France's Schneider was “on track”, with closure expected to be at or around the end of 2017.

Credit Suisse pointed to the stronger-than-expected 6% underlying revenue growth as an indication that end markets had begun to improve, and that although management was hesitant to define a turning point, leading indicators had been positive and believed that management would inevitably be late to call the cycle, highlighting the window of opportunity presented to investors.

According to the Swiss bank's analysts, Aveva's 2017 project awards looked to be around 70% higher than in the previous year, which it said pointed to "improving company sentiment and oil prices" and while the early phases of recovery would not necessarily be broad-based, the direction of travel felt increasingly positive.

Credit Suisse assumed a synergy target of £20m for the Schneider merger to justify revising Aveva's target price from 2,200p to 3,000p, arguing it was a "modest target for a global market leading software company that is arguably at a cyclical trough".

Aveva's shares were trading around 2,500p on Wednesday afternoon.