Berenberg reiterates 'buy' on Relx after Friday rout

Analysts at Berenberg reiterated their 'buy' rating on analytics firm Relx on Monday, arguing that the fall in the group's share price on Friday was "overdone".

News late on Thursday that the University of California had not renewed its subscription with Dutch scientific publisher Elsevier, a Relx subsidiary, sent shares south on the next day, but Berenberg felt the news did not "remotely merit the share price reaction".

"While the University of California may be a well-known institution, and the news of its dispute with RELX is thus considered significant, in reality, its relative importance underlines what Relx management said at results," said Berenberg.

The University of California paid Relx roughly $11m in 2018, equating to just 0.3% of the Scientific, Technical and Medical division's revenues, a figure that would disappear in rounding, according to the analysts.

"In other words, while the university is an important academic institution, its importance to RELX is diluted by the fact that the group has thousands of other clients."

Berenberg also said Friday's share price movement represents "a somewhat rare opportunity" to build a position in a "quality blue-chip compounder".

The German broker estimated that Relx will deliver more than 4% of organic revenue growth in 2019, coupled with steady margin expansion driven by the group's strategy of keeping cost inflation below revenue growth.

"The stock is meaningfully less expensive than peer Wolters Kluwer, but also looks cheap versus staples which offer lower growth," said Berenberg, which also reiterated its price target of 1,850p on Relx.