Micros Systems Not Getting Big Yet

We maintain a Hold rating on the shares of Micros Systems, Inc. (MCRS). The company reported its Q4:FY08 EPS of EPS of $0.41, which beat our and consensus expectations of $0.39 and $0.38, respectively, as a $1.6 million grant from the Irish Development Agency and a minority interest true-up contributed $0.02 and $0.01 in EPS, respectively.

The 2009 EPS guidance of $1.53-1.64 on revenue of $1.075-1.100 billion in 2009 was largely in line with our and consensus expectations for $1.58 in EPS. The implied 9-12% growth is a slight decrease from the 14% organic constant-currency growth recorded in FY08. Operating margin expansion guidance of 60-70 bps would lead to the high end of EPS guidance, but we feel it is ambitious given the y/y adjusted operating margin contraction in Q4 of 120bps.

The stock is currently trading at 18.1x our revised 2009 EPS estimate of $1.58. Our current $32.00 price target equates to a multiple of 20.3x our 2009 EPS estimate. The P/E multiple is currently higher than the market multiple, and we believe, a reflection of the company’s improving growth prospects in the hotel and casino markets.

However, we would like to remain on the sidelines until we have better clarity of its FY2009 growth prospects, given the end-market risks of a consumer slow-down in the US along with the meltdown of the financial markets and a slowdown in the company’s core market of hotels and restaurants.

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