Analysts at Canaccord Genuity raised their target price on software and services firm Ideagen from 350.0p to 365.0p on Wednesday after the group bulked up its balance sheet via an equity raise earlier in the month.
Canaccord Genuity said last week’s £103.5m gross equity raise at 270.0 per share created substantial merger and acquisition headroom as it turned Ideagen’s £84.0m pre-raise net debt into an expected roughly £21.0m net cash position by the end of the 2022 trading year.
The Canadian bank, which stood by its ‘buy’ rating on the stock, also noted that Ideagen’s management had reiterated that current trading was “in line”, leading it to leave operating forecasts unchanged.
“In our view, the shares remain a core holding in UK SMIDcap enterprise software as they offer the highly attractive combination of double-digit end-market growth, a very high share of recurring revenues and scope for future EPS upgrades from earnings-accretive M&A,” said the analysts.
“Reflecting the 15% higher share count (+37.0m shares) and lower interest costs leads us to reduce earnings per share by 8-9%, although our estimates do not factor in (we believe inevitable) future M&A.”
