Eratat Lifestyle

[quote="1.618" post=14912

No point arguing.

it's a forum for discussion and share our views.

His name says it all, period[/quote]

ya, 1.618.

Tat's the Golden Ratio number, bro...

Newbiestock,

You obviously don't understand the terms of the Sino Grandness agreement and I don't have the time now to explain it in detail to you now as I have a busy Saturday night. The credibility of your views here is already seriously under question with your inability to grasp the meaning of 'subscription price' as shown in earlier discussions.

In summary, Garden Fresh is not listed yet, although it is on track. Secondly its bonds were issued at 10-13% below par, but with zero coupon rate (meaning no interest). If Garden Fresh is listed, the bonds are converted into shares and are not redeemed. Only if Garden Fresh fails to list will the bonds be redeemed at an effective interest rate of between 15%-25% depending on the terms. Therefore the penalty only applies if it fails to list.

Also, unlike Eratat, Sino Grandness has obtained bank loans and before the convertible bonds did not have a big pile of cash lying around to use for growth. Unlike Eratat, its revenue and net profits have been doubling almost every year since listing, and it has used the cash it has raised (never at absurd interest rates like Eratat) to growth effectively. The chairman has also repeatedly purchased more shares in the company. If Garden Fresh lists successfully, there is no redemption, so the interest rate factor doesn't even come into play. The redemption only comes into place if it fails to list, which is why it is not the base case.

In Eratat's case, no matter what happens, the bonds will be redeemed and it will pay an effective interest rate of 32%. It is the base case and unavoidable.

Anyway I suggest you do more research before you compare apples to oranges. Meanwhile I have a busy night ahead of me and will not be able to elaborate further.

This Maybank KE analyst report is a very good summary for sino grandness.

www.remisiers.org/cms_images/research/Ap...randness_0804131.pdf

If the bonds for sino grandness is converted to shares, the dilution can vary from 25% to 34% for the shareholders.

For eratat, if all the warrants are exercised, an addition of 82,500,000 shares increased the total share supply by 17% only, which is fixed. And, the proceeds from the warrant can also be used to offset the principal payment.

If the best scenario case for sino grandness is to have garden fresh listed, then the best case scenario for Eratat is to have its share price exceeded 25 cents and have all the warrants exercised.

overall, the deal structure will involve some areas of give and take (interest, discount to bonds, dilution if exercised/convert etc), regardless whether it is Eratat or Sino Grandness.

if u ask me, Sino grandness bond has too much uncertainty whereas Eratat bond issue is much more straightforward. And, mind u, 30%+ dilution is a lot...

The bank loans that sino grandness obtained are used for land acquisition and buiding of plant factory. There is an asset pledged, so banks are more willing to lend. But if u are borrowing money for expansion, who will lend u money if it doesn't invvolve an asset??? if open a factory, banks can still lend, cause if fail, banks take back the machine and land. Is there a bank that will lend u a loan to open a retail shop? do some common sense.

skeptic, u are just picking bones from eggs again. If u want to complain CEO Lin and the company never do sharebuyback, that I agree with your point. But do note that last year, Eratat did not obtained the sharebuyback mandate so insiders n company are not allowed to buy. But for this year, they have sought shareholders' approval for the buyback mandate. I do not know when or do not know if they really will do a sharebuyback but the CFO did say they will take the buyback mandate into consideration. so, don't make your conclusion so early about Eratat. This bond issue for Eratat is just the beginning of the beginning.

come on, i hv honestly admitted earlier that i did not spot the subscription price as it was a quick glance from my computer so i thought the bond was issued on par. whether ppl think i am credible or not is not decided by u. The forummers here will judge. I can't be bothered with u but if u do wish to criticise Eratat, please make some sensible remarks and stop stubbornly repeating the old complaints like why not bank loan, rights n blah blah.

so u wan to tell me that just because Sino Grandness bond can be converted to shares, hence it's a good deal while Eratat is a lousy deal? But hey, u factor in the share dilution or not? Despite all the various fund raising, why sino grandness only have RMB200+ mil RMB. all those money go to where but production lines, factory construction, buying of land etc. Go check sino grandness investing cashflow for the past quarterly and yearly basis. It's kinda scary. More than half of its 2012 net profit after tax goes into investing. No wonder sino CEO has to fork out money in himself. If Sino can be a gem, i don't see why not for Eratat in the future.

Why not lower interest rate and a lower conversion price?

since its P/E is way too low, honestly, i will prefer a higher interest rate and a higher warrant conversion price.

The dilution will be greater with more shares issued for the same amount of proceeds raised if a lower conversion price was used. who would like to issue shares at P/E btw 1 to 3?

Bestworld wrote: Why not lower interest rate and a lower conversion price?

No one is extremely sure what this investment will turn out to be. There r good n bad ones. As long as we had done our homework, rest let the market decides... Its a great discussion here guess we all r now more well informed. Thanks for allrd info guys....