The UK an "exciting opportunity" for Iress: MPW

The acquisition of Avelo provides Iress with entry into the underdeveloped UK market, but conditions in Australia and New Zealand prevent more ambitious estimates in the short term.

Iress's(IRE) $360 million acquisition of Avelo provides the market technology company with immediate scale in the UK and long-term growth potential, according to Macquarie Private Wealth.

The broker lifted its recommendation on the stock to "neutral" from "underperform" and lifted the target price by $1.08 to $7.89. Iress last traded at $8.27.

Macquarie thinks the acquisition, which is expected to be earnings per share accretive in 2013-14, offers Iress and its extensive blue chip customer base in the UK and attractive revenue growth opportunities in the medium term from its Exchange Portal technology.

Further, competition is limited in the market for next-generation wealth products.

However, while the first-half result was largely within Macquarie's forecasts, Iress's business in Australia and New Zealand has faced tough conditions, having to focus on downsizing, consolidation and cost reduction.

"We continue to believe the stock is fully valued in the short term; however we are warming to the longer term growth potential in the UK," the broker said.