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Micro Focus shares are almost 10% off-side this morning after its first set of results since completing the HPE Software acquisition. Whilst H1 financials themselves failed to live up to City expectations – both MF and HPE growth undershot – there is good news in the form of a 16% dividend hike and looming US tax reform benefit.
However, this does nothing to offset guidance being considered below par. Which is a worry when the CFO has moved to a more M&A focused role, suggesting more purchases, acquisition risk and integration of slower growth. Although at least his replacement has pedigree as ex-CFO of ARM Holdings, easyJet and EMI.
Perhaps investors need more time to see that the latest monster acquisition is providing value before hearing more about incremental additions of the older product types the company likes to eke the most out.
The shares may be well off their worst levels (-11.9%; over-reaction?) but have made a significant breach of intersecting support at 2420p, after gapping sharply lower this morning. This has undone the bounce from mid-December, and more. Bulls will need to get back above December lows of 2400p (+3.7%). Bears will be eyeing September lows of 2160p (-7.5%).
Mike van Dulken, Head of Research, 8 Jan 2018
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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