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UBS analysts like Aveva but reckon the potential is priced in

Published: 10:40 26 Jun 2018 BST

factory
Aveva merged with France-based Schneider Electric's industrial software business in March

Shares in Aveva Group PLC (LON:AVV) were off on Monday as UBS downgraded the engineering software group to ‘neutral’ on “valuation grounds”.

Analyst Michael Briest said the FTSE 250 group has “good prospects” but warned that all the potential is already priced in to the shares.

Earlier this month Aveva, which recently merged with French group Schneider, reported a 15% rise in full-year sales, while Schneider delivered growth of 7%.

READ: Aveva targets cost savings after Schneider merger

“There were some one-offs in both that mean an underlying trend of 5-6% on a blended basis is likely a truer reflection of the run-rate, but the improving end market backdrop bodes well for a continuation and even acceleration,” wrote Briest in a note to clients.

“However, with the shares at over a 30x CY 19E PE [price-to-earnings] and some integration risks unavoidable (even if the process has started well), we downgrade to ‘neutral’.”

The analyst has upped his forecasts and is looking for 5% underlying growth in 2019 revenues to £727mln, followed by 8% growth in 2020 to £786mln (was £753mln).

He hiked his target price to 2,850p (from 2,280p), although given that shares aren’t much below that, he lowered his rating to ‘neutral’.

Aveva shares fell almost 1% in mid-morning trading to 2,712p.

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