LONDON (ShareCast) - Shares in Aveva faced heavy selling pressure on Thursday after both Morgan Stanley and JPMorgan Cazenove cut the engineering software group to 'underweight', though Westhouse Securities stayed positive with an 'add' recommendation.
"We retain our 'add' stance, aware of current risks to estimates, but bear in mind the group's long-term strategic value," said Westhouse analyst Gareth Evans, raising hopes that potential deal activity could support the shares.

Aveva, which provides engineering software for the plant and marine industries, has seen its share price fall sharply recently on the back of the collapse in oil prices.

Evans said Aveva has "significant exposure" to the oil market and so the planned reductions in spend and delays to major exploration and production projects - in response to oil prices sinking to five-year lows - "are clearly not good news for the company".

Historical recurring revenues will "simply not recur", he said. Meanwhile, struggles in the Asian shipbuilding market could continue if the Baltic Dry Index keeps falling and orders for new vessels reduce further.

"Offsetting this, we believe Aveva's platforms are gaining material traction across multiple industries, and the idea of long-term ownership of 3D models of complex plant is beginning to take hold," Evans said.

"Aveva remains very well placed, and if the oil price continues to impact on Aveva's shares, then M&A could provide a more positive end-game."

Evans said that IBM, Oracle, HP or Dassault Systemes could all be interest in the company, and use its 3D modelling skills across a range of new industry segments.

On Friday, Aveva said non-executive director Philip Dayer had spent £14,901 buying 1,134 shares in the company, which Evans said was also a "useful positive" for sentiment.

After a heavy fall the previous session, the stock was up nearly 2% at 1,279p by 09:49 on Friday morning.

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