June 7, 2018 / 7:18 AM / 16 days ago

Remy Cointreau shares fall on concerns over flat dividend and valuation

PARIS, June 7 (Reuters) - Remy Cointreau’s shares fell back from recent record highs earlier this month, as concerns over the stock’s valuation and a flat dividend offset the company’s higher profits and bullish outlook.

Remy Cointreau was down 2.3 percent at 124.40 euros in early session trading, although the stock remained close to its earlier record high of 131.30 euros reached on June 5. The stock is still up 7 percent so far in 2018.

Remy achieved higher-than-expected annual profits and predicted more earnings growth this year, but it kept its dividend flat.

“Dividend only flat - lacking confidence?,” wrote one trader in a note.

Remy Cointreau’s stock market valuation is closer to that of many luxury good stocks, rather than food and drinks stocks.

Its shares, up some 10 percent so far in 2018, trade at 38.6 times on their 12-month forward earnings (P/E), compared to P/E ratios of 23.4 for Pernod and 21.9 for Diageo.

“Our forecasts and target price are under review, but we anticipate maintaining our ‘Sell’ rating primarily on valuation,” wrote analysts at brokerage Investec.

“With underlying earnings only growing in the low teens (versus high single-digit/low double-digit for the sector), and a more volatile business model than other Staples companies, we do not feel such a high premium is warranted,” added Investec. (Reporting by Sudip Kar-Gupta; Editing by Dominique Vidalon)

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