Eratat Lifestyle

greenrockie - good point.
Eratat started off as a sports shoe maker, i think in 1983. that's why the shoe production plant is still around till today. after tat, the business changes to sports wear, and then eventually shift from sports wear to casual wear and now, going higher end into the PREMIUM range.
I did ask Ken whether they did consider selling off their shoe production and outsourced the shoe manufacturing completely. ken said as of now, it's not necessary and their current shoe plant can fit their current needs. since their shoe plant already existed long ago, they might as well just make use of it. Ken told me they won't consider build an apparel plant because tat's not their expertise. so, it's better to outsource apparel production. i think tat's gd so that Eratat's cost and margin won't be too heavily affected by the increasing labour costs in China.
currently, Eratat only focuses on PRC market. I think it's a good because I don't need to worry too much abt its fundamental being influenced by the volatile global market. PRC textile is still set to grow. And, there's still so many cities that they can set up their shop outlet. so, growth for next 1-2 yrs are still likely to be good. note that the success of the PREMIUM in shanghai will be very critical. Do note there are still other 1st tier cities that PREMIUM hasn't entered yet such as Beijing.

Guess for now, the issue is whether investors are comfortable with the revenue being collected a bit later. i think it's fine, as long as company makes money and grow consistently. I don't mind they collect the bills three to four months later.
actually, i did joke with Ken. Looking at the PREMIUM shop design, i ask him if Eratat ever consider opening one PREMIUM shop along Orchard Road, side by side with all the Gucci branded shops. ken says, a possibility but of course, gt to look at the distributor.
so any apparel retail businessmen, u shld go approach Ken and open one shop in Orchard Rd. i'll go support for sure.
 

Looking forward to meet CFO Ken Ho and IR VP Kellyn Tan this weekend at the Invest Fair, Suntec City to check out Eratat products. You can ask all the tough questions and will appreciate their honest answers as compared to other S-Chips which are shrouded in secrecy. Why not ask your business friends to come along too as this counter could turn out to be a real gem?
Hats off to the most hardworking IR team who regularly meet retail investors or keep them informed via their excellent website.

relaxing, I hope you have a fruitful time at the Eratat event...

Hey, just wanted to share this reply fr Eratat to SGX query today. Does explain clearly the issue of receivables and I hv underscored an important development.
The Board of Directors (the “Board”) opined that currently no provision for doubtful debts
is required because:
i) there are internal control process in place to monitor the collections of trade receivables, which include monthly reconciliation of trade receivables balances and diligent follow up of collection with customers. Remedial actions may also be deployed where necessary to recover debts, such as stop shipment or legal actions;
ii) the trade receivables as at 30 June 2011 are still within the 120 days credit terms (please also refer to the trade receivables ageing analysis in item 2 on page 4 of the Results Announcement);
iii) as of to-date, 100% of the 90-120 days old of RMB124.6 million has been collected; and
iv) the Group did not have any bad debts for at least the last 5 years. 
 

Hi Dele - It's good that the mgt is transparent re trade receivable & meet investors/analysts after every quarterly SGX report. They have steady sales/profit growth & yearly dividends even at the height of US subprime fiasco in 2008/2009.
Present EU problems will take several mths to settle down but China's growth will still continue at 8 to 10 %. As Eratat's biz is only in China & that they already have Rmb550 million orders on hand for delivery in 2nd half this yr, maybe good idea to consider switching from S-Chips with high PE to this stock? 

A few points from the fair.
1) Q2 and Q4 utilises the most capital because after the respective trade fair (spring-summer and autumn-winter), they have to place around 50% trade deposits for their apparel orders for the entire season. so, Q2 and Q4 tends to have negative cashflow. But Q1 and Q3 shld have a positive cashflow and for the full year, the net operating cashflow shld also be positive. Once the 50% trade deposit is placed for the full six months season, the goods are delivered by batches to Eratat.
2) One key point to note is that Eratat has over 40 different manufacturing suppliers that make apparels for them. Some make jackets, some pants, some shirts etc. Most have worked with them for about a year to two years plus. Since all the apparels are customised design, the individual design qty order is not large. It will definitely need some time for the suppliers and Eratat to build a closer working relationship in the long term. And, hopefully, as years go by, Eratat can someday negotiate a better payment terms with them, such as reducing the % of deposits when they have worked with suppliers more longer.
Hope this helps... !!!     

Couldn't take the temption at 13.3cents and took the plunge. Think PE 1.6 is really low given earning visiblity of order book 550 million.
However, I am willing to hold this out for the long run as I expect the receivables to continue to be very high for quarters to come, simply because of the  collection of cash could not catch up with the increasing sales.
The figures will not be beautiful for those who look at Eratat number isolated quarter from quarter. BUt if you look at the past few years numbers carefully, you will not be unduly worried.
The turning point, if they could maintain the high margins and assuming the high growth start to pleatu off, could happen Q3 next year.
In the meantime, I expect worries about its receivables to continue, and I am prepare to hold it out. At prices depressed like this, I guess safety margins should be high, and the potential returns even higher
Regards