Companies: ITL    RM.    SDL   

Icelandic-owned broker Kaupthing’s three picks from the software and IT sector include, after a ‘very solid performance’ of late, small-cap translation software play SDL. Analyst Tintin Stormont is looking for 2007 revenues to be above his top-end-of-the-consensus forecast of £114.7 million, with profits coming in at a minimum of £16.5 million. Envisaging ongoing margin progression, the broker expects a rerating of SDL in line with peers.

Kaupthing views SDL as unrivalled in its sector, being ‘the only company that can manage the complete translation supply chain’, while the recent acquisition of marketing and customer service specialist Tridion has added ‘significant cross-selling opportunities and gives the group a unique end-to-end offering’.

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Stormont likes the look of RM, the company ‘best placed’ to benefit from the government’s £30 billion to £40 billion Building Schools for the Future (BSF) programme, aiming to rebuild or refurbish every secondary school in the UK. RM – the largest supplier of IT software, services and infrastructure to UK schools, colleges and universities – has already delivered PFI projects for BSF. ‘Earnings are depressed by bid costs associated with the programme, but over time we expect the benefits to flow through,’ says the broker, targeting 225p for the 204p shares and urging clients to buy.

Bullish sentiment abounds concerning £119 million telecoms industry software provider Intec Telecom, another to buy after a ‘credible 2007’. The platform is now in place for new CEO Andrew Taylor to ‘effect a turnaround’, with organic growth and operating margins ‘some way below’ where they should be. Valuation metrics point to ‘good value’ and the business ‘should also be attractive to larger vendors in the space’.