Remy’s Cognac Business Shows Nice Rebound in Q2; Recovery Remains Tenuous, and Valuation Frothy

With shares of narrow-moat Remy Cointreau on a tear heading into its fiscal second-quarter sales update, investors ostensibly expected evidence of strong recovery across the firm’s main geographies. Overall, while there was sequential improvement, certain parts of the portfolio continue to struggle, and the horizon remains littered with uncertainty. We plan to hold our EUR 110 fair value estimate in place until the company reports full first-half results at the end of November (when year-to-date profitability will be divulged), as there may be some offsets to time value of money adjustments. Regardless, the lofty multiple at which shares currently trade is unwarranted, in our view. Opportunities in the distillation industry are sparse, but there are still pockets of value in brewing, for example in wide-moat, best-idea Constellation Brands and no-moat Molson Coors.