increased inventory - any thoughts?, page-3

At face value it doesn't look so great.

That said, they have sold the Loxton Winery realising c$25m or so to pay down debt so we should see a reduction in finance costs this half. AGM comments by management also noted that trading for 1st 4 months of half year were above last year. Continuing management emphasis on core brands seems sensible to me.

Some negatives - inventory may still turn out to be a concern, see if that resolves over next year or so, no answers there as yet. Pound has weakened against the $A over July-Dec 2011, but hedging will have offset this somewhat.

Nevertheless I've bought in around 30c - I think it's too cheap.

Last year's NPAT after significant items was $6.6m, at present prices PE of <7. Earlier points above suggest that things are improving (pay down of debt, improved trading for 1st four months).

Over the longer term, if you think the $A is overvalued and will come back, that will be an extra kicker for AVG (and every other exporter).

Looking forward to the half year report.