Damien,
Fundamentally on paper Eratat is one of the most under-value stock around. Company before the loan is debt free, super fast growth cashflow, cash per share now double NAV 4 times its share price. Yet today it is sold down to PE 1.5X. Such super performance should be trading at least PE 10X.
Why sales incentive award of RMB 51.7 million that is why market don't buy the idea???
On 22/8/2013 Eratat director disposed of all his share holding of 6.77%, another big question, why after profitable 2Q 2013 reports???
Do you believe market is unfair to Eratat or markets are FOOL??? The high interest rate loan raise more questions???
Just look at Qingmei at one time was hotly discuss in this forum and what happen to the stock now?
Damien wrote: Other then the extremely high interest loan, which was deemed unnecessary
This one single factor not enough?
At an effective interest rate of 32% p.a.
If you take into account the 2012 financial statement and calculate the ROE, it is about 14.7% (assuming my calculations are right). The ROA is a mere 4.32%, mainly because its receivables already comprise of 50% of its total assets.
With an ROE of 14.7%, it certainly does not makes sense at all to borrow more cash at 32% effective interest p.a.
Sure, it can be argued that they may return the loan earlier, but that is an unknown factor no one knows when.
In addition, we have the following points that have been discussed long time ago:
1) High Receivables, although recently offset by nicely packaged Sales Incentives and Renovation Subsidies
2) Director suddenly offloaded everything at a price that is way below the cash per share. "For Personal Reasons" is mainly a nice way to package and conceal the reason for the sale.
3) Supposedly being a transparent company and very particular about who its distributors are, Eratat has never ever revealed who its distributors are.
These are the red flag risks investors have to consider before entering. One is already a lot, now we have four.
Rock wrote: On 22/8/2013 Eratat director disposed of all his share holding of 6.77%, another big question, why after profitable 2Q 2013 reports???
If it is a third party who bought all his shares at a married deal, that third party would have become a substantial shareholder and Eratat will have to report it.
If it is bought by another director, then Eratat will also have to report it.
So either Eratat failed in its duties to report who bought it, or it has been sold to multiple entities pte ltd set up to buy it (which raises the question on why the need to hide), or it has been offloaded on the market, and not a married deal as reported.
If we take a look at the market, the typical daily volume is about 3~4 mil.
On 15th August, the volume was about 36mil.
And 32mil shares were offloaded on a married deal.
The maths work out reasonably that the stocks may have been sold at that date.
Yet if so, it should have been reported within 2 business days (19th August), but the date of change in interested mentioned in the pdf is 21st August.
If anyone is interested enough, just go to the corporate secretary (Boardroom Pte Ltd) and pay a small fee ($5, I think) to view the entire shareholder list (which comes with their addresses & IC nos.).
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