#SaxoStrats: Remy Cointreau's undeserved valuation premium
Remy Cointreau delivered FY16 (ending 31 March) results yesterday showing 8.9% y/y revenue growth with only 1.7% y/y organic growth. Net profit was up 10.6% y/y, but despite decent results investors were not satisfied as the company did not deliver revenue guidance due to volatility in all regions. Zero revenue visibility does not warrant a 20% valuation premium to global peers in our book and as a result we believe the probability of more negative surprises has gone up.
Remy Cointreau is valued at 12-month forward EV/EBITDA 16.5, around 100% premium to STOXX 600, and 20% premium to its global peers. The high valuation is driven by its safe haven status and very predictable cash flows. However, with zero revenue visibility the current consensus forecasts on revenue are likely overshooting the actual underlying trend. This means lower EBITDA and lower revenue growth should impact the valuation level negatively over coming quarters.
Sell Remy Cointreau (RCOP:xpar) and hedge with CAC (FRA40.I) with exposure 1:1 – so EUR neutral. Holding period is expected to be the rest of 2016.
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