I know this company has many cheer leaders but what I don't understand about this company is it's been so many years now and still no NEW distributors. After many years payment terms are still heavily weighted against the company in that they pay huge amounts to supplier upfront, collect payments from distributors late, plus no new distributors - basically stagnant for many years. Plus occasionally, the company has to help distributors with things like sales incentive and renovation subsidies.
What investors should want to know before they put their money in this one is: Actually how well are the products selling? I'm sure if the sales are good there will be far far more distributors knocking on their door and they can't possibly ALL be deemed unsuitable by Eratat. Plus, existing distributors will order more to meet the good demand. Payment terms will improve as distributors compete for a larger share of products. But this hasn't happened for many years now. I will need more clarity on how the sales are doing before I put my money in.
There is no doubt that this company is trading lowly from a valuations perspective, but growth is a component of value and currently there is very little indication that sales are doing well enough to spur growth. Only when there is indication of concrete huge growth potential will this stock rise significantly, if it ever happens.
skeptic, last year in 2012, the textile industry was facing oversupply, esp the sports apparel. An industry consolidation was happening from 2012.
Eratat prob preempt this consolidation would happen and decided that the 1H2012, they shld take this opportunity to take a breathe by slower doing n do the renovation.
the lesson learnt from other sports apparel company was that they hv been taking in too maany distributors, supplying too many apparel, more than what the market can chew. end result is u see the sports apparel company like li ning, anta etc closing shops, cutting price to clear excess inventory.
last time, eratat has classic shop that sells mens n female wear. now everything is all menswear and no more old chinese logo. that explains why the renovation was necessary.
in short, they don't hv to add distributors for the sake of adding, unless the market demand requires more.
I believe the textile industry has bottomed out and thus, this is the right time for Eratat to bring in new distributors this year and start planning for next year's major expansion.
Skeptic wrote: I know this company has many cheer leaders but what I don't understand about this company is it's been so many years now and still no NEW distributors. After many years payment terms are still heavily weighted against the company in that they pay huge amounts to supplier upfront, collect payments from distributors late, plus no new distributors - basically stagnant for many years. Plus occasionally, the company has to help distributors with things like sales incentive and renovation subsidies.
What investors should want to know before they put their money in this one is: Actually how well are the products selling? I'm sure if the sales are good there will be far far more distributors knocking on their door and they can't possibly ALL be deemed unsuitable by Eratat. Plus, existing distributors will order more to meet the good demand. Payment terms will improve as distributors compete for a larger share of products. But this hasn't happened for many years now. I will need more clarity on how the sales are doing before I put my money in.
There is no doubt that this company is trading lowly from a valuations perspective, but growth is a component of value and currently there is very little indication that sales are doing well enough to spur growth. Only when there is indication of concrete huge growth potential will this stock rise significantly, if it ever happens.
Newbiestock, a lack of market demand is a negative sign, it's amazing so many of you can spin every piece of news around to make it appear positive.
China is experiencing consumption growth every year, and part of that consumption growth is going towards fashion and apparel. However so far Eratat's lack of distibutor/order book growth suggests that it is not gaining its fair share of the market pie.
Furthermore, in the trade fair earlier this year, it was mentioned that there was still no sign of any new distributor.
If the products are selling well, they will be many more distributors knocking on their door, they won't have to grant distributors such one-sided payment terms, and the growth in order book would have given them more clout over their suppliers by now.
As things stand, Eratat continuously appears to lack bargaining chips, and even has to offer distributors subsides and incentives. If Eratat products were selling very well, I doubt it would be in such a weak bargaining position.
Eratat has cash way in excess of its current market cap. Yet there is very little news of any advertising and marketing efforts going on to acquire new distributors and increase brand awareness among consumers. Till now not a single of my Chinese friends has heard of this brand. What is the management doing sitting on so much cash (and trying to raise more at potential dilution to shareholders) but unable to achieve growth?
P/E is indeed very low - but what about PEG? Where is the growth? Is it stagnant or perhaps even negative in future as more and more international and local brands start crowding the apparel market?
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