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雷达卡
Global professional publishing
SECTOR REVIEW
What's the future for education?
We are becoming more cautious on the education segment. We now expect
relatively lower growth and less margin improvement compared to the other
segments in the professional publishing sector.
1. We believe the US school market is nearing maturity after the
implementation of the No Child Left Behind Act (NCLB) of 2001 over the
last few years, and that a strong new adoption cycle in 2007–09 in the US
will have only a modest impact on overall market growth.
2. We are concerned about the recent weakening of US state budgets, which
provide 50% of funding for kindergarten-12th grade (k-12) and 35% for
college. Education remains the main area of focus within state budgets, but
we believe that the risk of a slowdown in growth for public sector spending
in general should be factored in.
3. The migration to online products has only just started in education. This will
likely provide additional growth in the medium/long term, but we believe it
could weigh on the potential for margin expansion over the next two to three
years compared to a marked improvement in profitability in professional
publishing such as legal and finance.
4. The education segment may suffer from increased competition from Google
Book Search, especially in subjects such as Reading, and Google Earth,
Maps, Images and Glossary, all tapping into the reference market (please
see our report, You’ve been Googled, dated 20 March 2007).
Within the European media sector (which we recently downgraded to
Underweight), we remain positive on professional publishers but are shifting our
preference from Pearson (downgrading from Outperform to Neutral and
decreasing our target price to 820p from 900p) to Reed Elsevier (upgrading
from Neutral to Outperform and confirming our target price of 675p). Our new
target price for Pearson partly reflects the risk of slower growth in US spending
for education, while we think Reed’s planned disposal of its education business
could be a positive catalyst for the stock. Among professional publishers, we
also see good value in Reuters (Outperform), while Wolters Kluwer
(Underperform, raising our target price to
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