Shares in Reed Elsevier REL.LELSN.AS gain around 4 percent in both London and Amsterdam as Exane BNP Paribas ups its rating for the Anglo-Dutch publishing group to "outperform" from "underperform" on valuation grounds.
In a note, Exane BNP Paribas raises its target prices for Reed Elsevier 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.”
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