Eratat Lifestyle

If a stock is already sinking or bleeding over many months even on paper it appear so fantastic, then there must be a reason. We can hope or dream. Market know best. Market no FOOL.


So is the market efficient or isn't?

There are many companies (not just individuals) that talk a lot of prospects into certain areas they want to expand in, and say many good things about it. Delivering results is another thing.

I had experience (in losing $$ in low 5 figures) over another listed company before for choosing to believe what their management said, and promised, over what their financials say. The picture painted was always rosy. Fortunately that amount of cash isn't enough to dent my portfolio or annual gains at all.

Apart from the reasons of "the CFO knows best" or "the management knows what they are doing better than you do", Eratat venturing into self-owned flagship stores is something they have no experience in. This is an area they are largely untested.

Lots of words and fluff, but dig into the financials. Cash balance alone is never sufficient to justify whether a company is a good investment. Nor is mere P&L.

rock and momoeagle,

appreciated the points.

But I see no reason to sell Eratat..

1) Firstly, Eratat combined 1H profit for 2013 is already UP 53.4% over the previous 1H profit for 2012, giving them a good headstart for this year.

2) For 2H 2013, the apparel trade deposits are up more than 20% over the trade deposits for 1H 2012, which will build further earning momentum. In short, this year will be a record profit year for Eratat, so will next year too in 2014. And, I expect an increase in dividend next year. With a 53.4% net profit increase in 1H and 20% increase in apparel for 2H, u think its net profits still can't beat the high interest rates of the bonds?

3) Eratat has setup a training academy and all the sales agent found in the distributor shops are trained by their own training academy. so, momoeagle, ur assumption that Eratat venturing into self-owned flagship stores has no experience is based on your own assumption, which doesn't hold ground at all. If eratat doesn't know their business well, they would not have survived through and moved away from the sports apparel.

4) I am bullish over their new relationship sales model, which I believe will maximise their sales figure per shop. Having image consultant which creates personalised apparel services is a good step.

5) A system of sales network has been established in place. so, what would really go wrong with this asset light distribution model? Will the casual apparel end up saturated just like the sports apparel in 2011-2012? maybe yes someday, but certainly not now in the short term. The casual segment has more design variation and more design differentiation whereas sports design is quite limited.

6) if cash balances and P&L are not good indications, then what are better, momoeagle? Growing P&L and Growing cash means growing dividend in the future. I rem I criticise about Sino Grandness, about how capital intensive it needed to grow its business.

7) whatever the co promises to do, it did fulfill. it never fails to give dividend. it has already reduced its trade receivables days from 150 days to 120 days. it says it wans to build a training academy and Eratat did execute it. Have it ever failed to deliver the results it promises?

Momoeagle, i do order goods from my China supplier for some of my projects and i hv to pay 100% payment before they shipped the stuffs to me because I hv no volume to offer. For eratat, a deposit of 30% to 50% is already a good negotiation deal. It is a business reality in the manufacturing sector. If u are a manufacturer, would u allow credit and give your goods, if your customers don't place a deposit first? u wont right cause u also need the cashflow to pay your production staff right?

9) Market is irrational and always foolish. there are news brewing out from Eratat but it looks like the co is withholding it, including the new distributors on board.

Firstly, do not ever compare Eratat with qingmei or fuxing. If eratat is suffering losses, i would not hesitate to cut n sell all. But Eratat is making profits n cash balances growing.

This year is a final preparation phase and next year will be the start of their aggressive expansion. Their next three year horizon looks good and China outlook will still look optimistic. of coz, i can't say for sure for the 4th yr onwards. But next three years, Eratat should continue to do reasonably well based on their long term strategy plan.

Rock,since there is no QE3 tapering, the shutdown for th fed shld end soon and there will soon reach an agreement to raise short term debt limits temporarily, I expect a really good year end rally.

The Q3 result and Q4 result should do all reasonably ok, so in my opinion, this is the best time to scoop low and wait for the long awaited rally.

time will tell when dec comes....

The fact are :
1. Share price is now at 8.8cents near all time low of 7.4cents

2. The company director sell ALL of 32m at 13.8cents

3. After the director sold off the share price come down all the way and lost 5cents from 13.8cents

4. H/E the company's financial data does shown a very good result and very nice cash balance : cash/share 21cents; NAV 40cents; Bond conversion 25cents... 1H 2013 much better than 1H2012. Management is positive on 2013 performance 'bearing unforeseen circumstance'.

There is a CONFLIC signal from the above as the market said it is 'worthless' and the management presented a 'nice' in fact too nice picture. Who do you believe ? SGX is the only place the company make a proper announcement and that place tell u how nice the company is so far. SIAS also painted a report not long ago said the intrinsic value is at 28cents up from 27cents after the bond issue.

The conclusion is: The management is NOT investor friendly as it doesn't care about the share price keep coming down and not even show its concerned such as doing share buy back or see some director buying share instead we see director DUMP 32m shares is a TRUE fact. Hence REDUCE position for NOW.

insider buying is a very strong indicator bcos they know the co better than us. but i hv not seen one yet.

The Company should be fine for now given that Sun Hung Kai Financial has appointed their people onto Eratat's Board presumably to keep an eye on the Company and ensure that the Company is not fraudulent like some other S chips...