A break-up of Relx Plc (LON:REL) could create “material value” according to Citigroup which has upgraded the publisher.
With a ‘buy’ recommendation and a 2300p price target Citi sees some 16% upside to the current price of 1,986p.
In a note, Citi analyst Thomas Singlehurst said: “a break-up of the group – either a spin or a direct sale of STM/Legal – would make sense given different growth/return profiles and capital requirements of the business vs. the faster growing risk and exhibitions businesses.
“What is more, we think it would create material value.”
Singlehurst added that the Risk/Exhibitions business is structurally undervalued, meanwhile, the Academic business is challenged but “deeply discounted”.
October’s third quarter trading update told investors that the company expects full-year results to be in line with last year, although the weak print book market has offset improving electronic revenues.
As a result, “modest” underlying revenue growth is expected from the scientific, technical & medical and the legal segments for the full year, having gone up 1% and 2% respectively in the first nine months. Underlying revenue has increased 4%, showing “some improvement” compared to the first half.
The FTSE 100-listed company said it keeps improving the analytics software in the science segment, while it expands in the “stable” legal services market environment by rolling out new dataset platforms.
The risk & business analytics and exhibitions arms, where underlying revenue grew by 7% and 6% in the period, are expected to deliver a similar performance to last year.
The revenue growth rate in the exhibitions segment is expected to drop by five or six percentage points due to “cycling-out effects”, according to a trading update.