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Analyse aandeel Reed Elsevier

Reed Elsevier heeft een structurele verdediging tegen concurrenten, omdat het met zijn wetenschappelijke, technische, medische en juridische uitgaven opereert op een oligopolistische markt. (rapport in het Engels)

Philip Gorham 06 januari, 2015 | 14:49

INVESTMENT THESIS

We think Reed Elsevier is a solid business. Around 80% of its operating profit is generated in markets that we think provide natural defenses against competition. We also approve of the strategy to shed no-growth or structurally disadvantaged businesses, as we believe this has the potential to improve the company's long-term competitive positioning.

Three of Reed Elsevier's five business segments have attractive long-term top-line drivers. In the scientific, technical and medical segment, those drivers include aging populations in developed economies and rising prosperity in developing economies, as well as governments' financial incentive to invest in research and development to improve the health of their people. The risk solutions segment is benefiting from an increased focus on risk management in the aftermath of the financial crisis, particularly in the financial services sector. The implementation of Basel III shows that operational risk as well as financial risk is coming under the scrutiny of regulators. This increased regulatory intensity is part of a broader trend that should provide a tailwind for the legal segment. The number of lawyers globally is on an upward trend as a result of increasing legislation and litigation. For example, in the U.S. (the legal segment's largest market), the number of lawyers increased 5.4% between 2010 and 2013 versus an increase in the general population of just 2.5% over the same period, according to the American Bar Association.

We are less optimistic about the growth prospects of the business information and exhibitions segments. Although the digital age is driving demand for high-quality industry data, we think highly cyclical business-to-business marketing spending will be the key revenue driver for these segments. In addition, few barriers to entry in the exhibitions space and several heavyweight competitors in business information mean that these are structurally less attractive businesses. Reed Elsevier was unsuccessful in its attempts to sell the business information segment in 2009, but we would be supportive if its portfolio realignment strategy were to include the disposal of these two businesses.


VALUATION

Economic Moat   Fair value   Stewardship Rating   Elsevier
Narrow   EUR 15,00   Standard  
Moat Trend   Uncertainty   Sector  
Stable   Medium  

Cycl. consumptiegoederen - uitgeverijen 


BULLS

  • Structural defenses against competition exist in the scientific, technical, and medical and the legal segments, which operate in oligopolistic markets.

  • Elsevier has successfully digitized its legacy journal holdings, which should stabilize revenue as its print platforms continue their long-term decline.

  • Around three fourths of the Reed Elsevier family of businesses have positive long-term growth drivers.

 

 

BEARS

  • A material portion of Elsevier's sales is derived from businesses that rely on academic or state budgets. Cuts in funding could lead to pressure on revenue and pricing.

  • The shift from print platforms to electronic is a potentially disruptive force in the publishing industry.

  • While Reed's industries look poised to grow, the businesses that lack competitive advantages may miss out on some growth opportunities to competitors and new entrants.

 

 

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Over de auteur

Philip Gorham  

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