RELX Group PLC: Acceleration in Legal & STM organic in 1H

Research evidence excerpt

RELX Group PLC: Acceleration in Legal & STM organic in 1H

Forecast returns

Forecast price appreciation 46.7%

Forecast dividend yield 3.1%

Forecast stock return 49.8%

Market return assumption 9.2%

Forecast excess return 40.6%

Company Description

RELX is a broad-based publishing business with four business units: the Elsevier academic

publishing unit is a global leader in the scientific, techical and medical (STM) industry; the RBA

unit is a leading provider of data and analytics services, mainly in the US; Legal is the number

two player in the global legal information services market, and Reed Exhibitions is a leader in

the global exhibitions industry.

Valuation Method and Risk Statement

RELX operates four segments: STM and RBA account for c75% of our EV. Highlighted below

are some specific risks we believe imply risk to our investment case: Currency: RELX generated

54% of revenues from the USA, 18% from Europe, 20% from the Rest of World (principally

Japan and Australia) and 8% from the UK. A 1% change in the GBP impacts EPS and our

valuation by c1%. STM: a switch to immediate open access (either Green or Gold) poses a risk

to journal subscription revenues, especially given perpetuity clauses in library contracts (these

allow for continued online access to archived journal articles, even if the library stops paying a

subscription). RBA: we believe auto insurance revenues are at risk from autonomous cars.

RBA insurance revenues account for c38% of RBA revenues of which the bulk of insurance

revenues are auto related. In KPMG’s report: Automobile insurance in the era of autonomous

vehicles they predict incidence of traffic accidents could fall as much as 80% by 2040

resulting in a 40% fall in the insurance premium pool.