SAP ?accumulate?

17.07.06 - AC Research

LONDON, July 17 (newratings.com) ? Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on SAP (SAP-EUR).

According to AC Research?s research note dated July 14 and published this morning, the company has reported its preliminary 2Q06 results. SAP was able to grow its total sales by 9% y/y to ?2.2 billion, and license sales rose 8% to ?621 million, the analyst mentions. The company?s pro forma operating result was up 13% to about ?558 million, while pro forma margins climbed to 25.4%, the analyst adds. SAP?s pro forma corporate earnings are likely to have jumped 38% to ?432 million, or ?1.41 per share, the analyst says.

The company has pre-announced its sales results marginally short of the estimates. In the North American region, SAP realized 18% growth in licensing revenues to ?239 million in the latest quarter, AC Research reports. In Europe, the Middle East, and Africa, the company?s revenues from license sales climbed only 3%, the analyst points out. SAP?s license revenues in Germany rose by a healthy 8% to ?100 million, the analyst adds. AC Research says, however, that the company seems to have lost some market share to competitors such as Oracle and Microsoft. SAP posted its operating margins at 25.4%, ahead of expectations.

The company has reiterated its expectation of 15%-17% software license sales growth for the full year. SAP expects pro forma earnings per share to reach ?5.80-?6.

At the current share price of ?149.50 and a 2006 P/E ratio of about 25, the company?s stock still enjoys a rather moderate rating, according to AC Research. The analyst expects SAP to meet its earnings forecasts for the current fiscal year of 2006. In view of the robust operating margins that the company reached in Q2, it may achieve the upper end of the forecasts, the analyst says. A more detailed explanation with respect to the overall disappointing license revenues is expected when the final report on quarterly earnings is published. There are more chances than risks associated with the company?s stock at present, the analyst believes.

AC Research reiterates its "accumulate" rating on SAP.