Fosters - Time to buy, page-3

Hi,

A few friends of mine used to own McGuigan wines and always told me to buy... I never bought them simply because I never did my research on the stock. Sorry but I don't know enough about the company to comment.

I have also become keen on Fosters since the beringer purchase. It seems the market (especially stock analyists) got fed up when FGL experienced a one off drop in cashflow... most was due to a build up in inventory but the rest was explained due to timing irregularities.

Their US wine assets have an excellent brand and an excellent market. The US consume a very small volume of wine per capita and with an aging population there consumption could double or treble over the next few years. Also given they are postioned in the Premium sector it gives them some protection to price wars.

We're seeing Southcorp drop the price of some Aussie labels simply to move inventory but Fosters doesn't have to worry about that. FGL also suffered bad sentiment as SRP copped a beating over the past few months. Many SRP problems don't affect FGL at all.

Currency will affect FGL, I'm not sure about their hedging policy. Their debt to fund the US purchase was denominated in USD so that provides a natural hedge. The wine glut should help FGL as it lowers the costs of an input.

One major risk will be the consolidation of retailers in Aus. Woolies etc could demand higher margins there by hurting fosters.

Cheers,
Munch