>>> Remy Cointreau
*Further reductions to estimates and TP
Having reduced our estimates after the profit warning with the 1H results, we have become even more cautious following the surprising departure of the new CEO at the end of December. Our further reductions today take account of further weakness in the China business, together with a higher impact from lost agency brands in FY15E. Our TP reduces to EUR 45 from EUR 51.
*Some uncertainty about cognac in China
*Buy-back provides small support
*Valuation – expensive versus peers
Even after the fall in the share price, on our reduced estimate, the shares trade at a premium to spirits peers on a calendar 2014E P/E of 26.2x vs Pernod (16.6x) and Diageo (18.1x), with a spirits average of 19.9x. At our TP, the shares would be valued at a P/E of 20x. We retain our Reduce rating.
>>> Pernod Ricard : China now in share price; upgrade to Buy
*Slow 1H as expected
*Increase to TP despite cutting FY14E
*Getting towards the end of the hiatus period
*Valuation
Pernod trades at a calendar 2014E P/E of 16.6x vs Diageo at 18.1x and spirits average at 19.9x. At our target price, Pernod would trade at a P/E of 18.5x.
>>> Anheuser-Busch InBev : Earnings visibility offers protection to rating; higher returns offer attractions
* Upgrade to Neutral from Reduce
We upgrade ABI to Neutral from Reduce and increase our DCF-driven price target to EUR 75 from EUR 67. Although we see a number of pressures for big beer, as flagged in our 12 September report, we believe that good earnings visibility at ABI combined with scope for higher returns to shareholders provides some protection to the premium rating (calendar 2015E P/E of 17.9x vs the beer average 17.0x).
*Pressures for big beer….
*….but earnings visibility offers protection to the rating…
*…and higher returns offer attractions….
*‘Steady-as-she-goes’…..but not ‘rock-and-roll’