LONDON (ShareCast) - (Sharecast News) - Analysts at Canaccord Genuity reiterated their 'buy' recommendation for the shares of Belfast-based software manufacturer Kainos on Wednesday, stating that recent weakness in the group's shares appeared to be the result of investor concerns about government spending.
Canaccord said Wednesday morning's trading statement from Kainos confirmed this but also highlighted "strong demand" for its enterprise services, Workday implementations and software, with management expecting to meet market expectations for the full-year.

The Canadian broker also said Kainos' comments on soft government spending tallied with its proprietary data tracker, which suggested a slowdown in new contract awards over the past six months.

But in any case, Canaccord highlighted how non-government revenues "should" continue to grow at a compound annual growth rate of around 20%, driven by strong demand for enterprise digital transformation work and the success of Workday, and thus more than offsetting weaker government delays.

"We leave FY20 estimates largely unchanged but tweak FY21 & 22 revenue estimates 1% to 2% lower to reflect more muted government momentum," said Canaccord, which also dropped its price target on the group's shares from 660.0p to 620.0p.

"In light of expected 10% revenue and 14% EPS FY19-22 CAGRs coupled with low single-digit upside potential to consensus, the recent de-rating of the shares towards the lower end of the peer group seems overdone to us.

"We hence see an attractive buying opportunity for SMIDCAP investors wanting exposure to the secular growth themes of enterprise and government automation and Workday adoption."

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