The FT market indexes yesterday were moved by a report from analysts Exane BNP Paribas that suggested that growth in the North American legal information market had resumed. EBP raised its rating on the publishing group to “outperform”, saying that its industry contracts suggested that sales growth had resumed in the American legal information market.
Target prices for Reed Elsevier are reckoned to be up by 36 percent, to 600 pence for the UK-listed shares and to 10 euros for the Dutch-listed stock after 16 percent relative underperformance in the year-to-date.
The broker says concerns on the group’s LexisNexis information business are overdone, noting its industry contacts suggest that sales growth has resumed in the US legal information market in Q3 2009.
The broker has increased its 2011 cost savings estimate by around 20 percent as it expects Reed Elsevier to benefit from the gradual phasing out of print academic journals over the next three years and further efficiency gains.
Exane BNP Paribas sees a good buying opportunity in the stock ahead of the announcement of a new three-year plan in February 2010 which would underpin its assumption of a return to mid single-digit organic revenue growth by the firm.
The broker also raises its overall rating for the European media sector to “outperform” from “neutral” as it feels it “offers one of the best combinations of earnings growth, valuations and visibility.”
Recent share price weakness had created a good buying opportunity, particularly as there were signs of a recovery in the US legal market.
“From our recent contacts with the senior management of one of Lexis-Nexis’ competitors, we believe that subscription sales activity has improved in third quarter with at least one company reporting positive sales growth,” said analyst Sami Kassab.
Slaw observers may feel that the fundamentals for online legal publishing have not changed, and that all publishers will have to demonstrate enhancements to convince lawyers to pay more and more for the commercial services.