UniCredit Bank Maintains its BUY Rating on Software AG

October 07 00:00 2011

LONDON, October 7 (RainbowNewsLine.com) – Analysts at UniCredit Equity Research have reiterated their BUY opinion on the shares of Software AG (ETR: SOW). The target price is set to €36.00.

The analyst have reiterated their BUY opinion on the shares of Software AG, as the consensus estimates have come down too much, trading at the trough multiples of the last cycle and fair value for no maintenance growth is €24. The analysts have provided some brief points to support the BUY recommendation.

  • The share price has been corrected more than 40% from its peak price, despite confirming its full year targets.  The company has surprised the market with their 2Q’11 consensus miss announced.
  • The company has continued to grow their EPS at a double-digit rate every year. After 2Q11 estimated consensus EPS is lowered by 5% bringing it to €2.24.
  • The current share price is currently trading at 1Y fwd P/E of around 9x.
  • The analyst estimate of €342 million that is above current consensus estimates of €330 million for 2011.
  •  In the view of the analysts, the stock is trading very cheap if current EPS estimates are met.
  • In 2009 and 2010, 1H contributed 40% and 2H contributed 60% of full year license revenues.

The stock will trigger when IBM declares its 3Q results on 17 October, and Software AG’s 3Q result that is due on 27 October, the analysts say.

The share has experienced a 12-month high of €43.50 and low of €22.20. The cost of equity is been computed as 7.8%.