Berenberg raises target price on Relx

(Sharecast News) - Analysts at Berenberg raised their target price on publishing company Relx from 1,816.0p to 2,300.0p on Thursday, stating its sum of the parts assessment suggested the stock's current share price was "fair".
Berenberg stated that while bond yields had increased to reflect rising inflation and the expectation of rate hikes, the equity markets, and Relx in particular, had shrugged off what it considers to be the main issue for the company as regards valuation.

The German bank stated that with no "obvious catalyst" to the downside for either Relx or rival Wolters Kluwer it opted to hike its target price for the stock to reflect an assumption of higher bond yields, an estimate based on both a sum of the parts and a discounted cash flow assessment.

Berenberg also updated its group estimates to reflect the latest foreign exchange rates, and Relx's nine-month trading update, which showed it was "on track" to deliver strong results for 2021, despite the fact that exhibitions were unlikely to make much of a contribution, if any, to profits in the current year.

When compared to Wolters Kluwer, the analysts highlighted that the 'hold' rated Relx was "clearly still at a discount" given that its earnings included no contribution from exhibitions.

"We think this division can return to historical profitability by 2024, if not slightly earlier. However, we find Wolters Kluwer to be expensive at current levels. Looking at absolute values, if we apply 25x NOPAT to STM, Legal and Risk 2022 operating profit, and 15x to Exhibitions 2019 NOPAT (discounted at 8% for two years), a fair value of £23/share looks reasonable, and is consistent with our DCF. At this point, we think Relx looks fairly valued," said Berenberg.