Broker tips this tech stock as next takeover target after Aconex Ltd

The stunning $1.6b takeover offer for Aconex Ltd (ASX:ACX) has left investors wondering who in the sector could be next. Bell Potter thinks it may have the answer.

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Tech stocks look well placed to dominate 2018 following the surprise takeover of Aconex Ltd (ASX: ACX) by US tech giant Oracle. Investors will be left wondering who in the sector could be next to find a suitor knocking on their doors.

Aconex isn’t quite a “10-bagger” from its $1.90 initial public offer price, but I doubt many shareholders will be complaining about Oracle’s $7.80 offer for the company.

A 10-bagger is a stock that has risen in value by 10-fold and nothing brings out the animal spirits (or greed to cynics) like billion-dollar takeovers.

This has already been a great year for tech with leading disruptors like Carsales.Com Ltd (ASX: CAR) and Hub24 Ltd (ASX: HUB) generating handsome returns for shareholders in 2017.

The good times look set to roll on well into the new year!

If you are wondering who could be next to get a billion-dollar offer, Bell Financial Group Ltd (ASX: BFG) has a hot tip. It thinks electronic design software company Altium Ltd (ASX: ALU) is the most likely to get a takeover bid among the tech stocks that it covers.

This is because Altium has a strong and growing presence in global markets for its software, it has an open register that isn’t dominated by a strategic party, and it has a partnership with French technology and defence company Dassault Systèmes.

The broker thinks Dassault is an obvious bidder for Altium and that its share price performance over the short to medium term will be driven more by its takeover appeal than earnings growth.

It also notes recent global merger and acquisition (M&A) activity with Appen Ltd (ASX: APX) buying Leapforce and Thales’ interest in Gemalto.

Bell had slapped a “sell” recommendation on the stock following its 70% surge this calendar year but has now upgraded the stock to “neutral” as it lifted its price target by 24% to $13.00 a share to better reflect the takeover premium.

Altium is trading 2.8% higher this morning at $13.75. To me it looks like the only reason you’d buy the stock today is for its takeover potential. That doesn’t seem like a particularly enticing option to me.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ACONEX FPO. The Motley Fool Australia owns shares of Altium and Appen Ltd. The Motley Fool Australia has recommended Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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