Proactive Investors - Run By Investors For Investors

UBS upgrades Micro Focus, eyes spin-out of Linux unit

UBS upgrades Micro Focus, eyes spin-out of Linux unit
The growing SUSE unit is already run as a standalone business, UBS highlighted

UBS eyed a possible spin-off of Micro Focus’s (LON:MCRO) open-source and Linux arm SUSE as it upgraded the FTSE 250 technology company to ‘buy’ from ‘neutral’.

The upgrade comes ahead of an analyst day at the SUSE base in Germany next week, and UBS analyst Michael Briest highlights that more info about the unit’s profitability could also come in December when group financial results are released.

“SUSE's high growth profile is somewhat at odds with the rest of Micro Focus and management has indicated that if it doesn't believe SUSE's value is adequately reflected in its share price, a sale or spin-off will be considered,” the analyst said in a note.

He added that the fact SUSE is being run on a standalone basis adds weight to the comments from management.

Elsewhere, Jefferies has upgraded APR Energy (LON:APR) to ‘hold’ from ‘underperform’ as analyst Will Kirkness acknowledged that a proposed buy-out by existing investors, priced at 175p per share, was “some way” better than expectations.

Credit Suisse was the latest City broker to downgrade publisher Pearson (LON:PSON) following its recent disappointing financial results.

“Whilst we continue to see the potential for longer term upside for the group as it makes the digital migration, we believe these results demonstrate that it is no longer possible to have any meaningful conviction in the group's short-medium term trading and as such we no longer believe its assets deserve a premium to its more stable professional publishing peers,” analyst Joseph Barnet-Lamb said in a note.

The Swiss bank now rates Pearson as ‘neutral’, down from ‘outperform’, and the price target drops sharply to 970p from 1455p.

Movie and TV distributor Entertainment One (LON:ETO) was cut by Peel Hunt to ‘hold’ from ‘buy’.

Meanwhile, Liberum Capital downgraded builders supplier SIG (LON:SHI) to ‘hold’ from ‘buy’. It marks a rather quick re-think from the broker.

“We moved SIG to BUY in August having been cautious for over 7 years,” analyst Charlie Campbell said in a note.

“Within three months, the positive investment case has disintegrated as sales fall in Europe and margin progress has stopped.”

Liberum’s target price comes down to 135p from 220p.


Register here to be notified of future MCRO Company articles

No investment advice: The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Copyright ©, 2019. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use