- UBS thinks Sapient (NASDAQ:SAPE) could be viewed as a logical acquisition target because:: 1) SAPE now has an independent chairman, 2) business model attractiveness (high-end service offerings coupled with balanced onshore/offshore delivery model), 3) buyers could benefit from sizeable revenue & cost synergies (which would enhance the accretiveness of the acq), 4) attractive valuation, 5) an efficient path to creating shareholder value given SAPE's execution issues.
Firm analyzed SAPE from the perspective of both strategic and financial buyers. Their merger model suggests that at a 10% EV/EBITDA discount to peers (implied takeout price of $7.80/sh), SAPE would be EPS-accretive in yr 1 by anywhere from 0.3% for IBM to about 9% for CTSH & Capgemini. LBO model indicates potential IRR of 26% for financial buyers at $7/sh.
In firm's view, macro demand for SAPE's core consulting/SI services and onsite/offshore model remains strong, as evidenced by the co's recent pre-announcement of revs at or above the high end of guidance. To support their positive thesis (i.e., shares are undervalued on the basis of core earnings power), they will be looking to catch up with the new CEO/CFO on strategic priorities soon.
Maintains Buy and ups tgt to $8.50 from $8.
Notablecalls: I think this one is a pretty powerful call. I also like the fact they will catch up with the CEO/CFO as it means we will have at last one more positive note on SAPE in the coming weeks. Actionable call!
Firm analyzed SAPE from the perspective of both strategic and financial buyers. Their merger model suggests that at a 10% EV/EBITDA discount to peers (implied takeout price of $7.80/sh), SAPE would be EPS-accretive in yr 1 by anywhere from 0.3% for IBM to about 9% for CTSH & Capgemini. LBO model indicates potential IRR of 26% for financial buyers at $7/sh.
In firm's view, macro demand for SAPE's core consulting/SI services and onsite/offshore model remains strong, as evidenced by the co's recent pre-announcement of revs at or above the high end of guidance. To support their positive thesis (i.e., shares are undervalued on the basis of core earnings power), they will be looking to catch up with the new CEO/CFO on strategic priorities soon.
Maintains Buy and ups tgt to $8.50 from $8.
Notablecalls: I think this one is a pretty powerful call. I also like the fact they will catch up with the CEO/CFO as it means we will have at last one more positive note on SAPE in the coming weeks. Actionable call!
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