Optimism Abounds for the New AspenTech; FVE Up to $220

Wide-moat AspenTech completed its first full quarter following the merger with Emerson Electric and embarked on integration efforts between the Heritage Aspen, Digital Grid Management and Subsurface Engineering Businesses. Management adjusted the range on select figures within their fiscal 2023 outlook, due to market uncertainty and anticipated investment in integration between businesses. Still, AspenTech is confident that it is on track to achieve intended synergies and is optimistic in rising end market demand further driving long-term profitability. We believe the firm is well-positioned to capitalize on secular trends and will particularly benefit from capital-intensive industries undergoing the dual challenge of meeting increasing resource demand in a sustainable way. We are also pleased to observe healthy momentum in acquisition activity, with the firm adding data management firm Inmation to their portfolio. We continue to fine tune our post-merger model, resulting in an increase in our fair value estimate to $220 per share, from $205. We have some skepticism around synergies until we see evidence they are being delivered, and therefore view shares as overvalued.