AVEVA is one of the world’s leading engineering software providers to oil and gas sectors. The group sells 3D design software packages to companies to design and manage projects on large infrastructure and industrial plants, as well as information management software to the owner operators.

We like this stock as its latest offering of AVEVA Everything 3D has new efficiencies solutions and has been well received by customers. The group remains on track with its cost efficiency programmes, and investors should appreciate the £10m of cost savings which have been delivered during the year, with a further £3m in annual cost savings targeted. With a strong balance sheet, AVEVA’s customer list includes the world’s top ten energy companies, the top ten chemical companies and a majority of the largest ship yards. Overall, the company maintains a competitive position in the market with strong barriers to entry. However, investors should be aware that roughly 45% of the group’s revenues come from the oil and gas industry and the plunge in oil prices has, and is likely to continue to cause uncertainty in the group’s short to medium term prospects.

AVEVA is a stock for the contrarian investor who believes in the longer term recovery potential of the energy sector. We recommend AVEVA as a ‘buy’ for investors seeking capital growth and willing to accept a medium to high level of risk.

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