Hi all, I'm new to posting in the forums, but I've actually been following the threads historically. I'd like to add my own insights to eratat lifestyle.
Firstly, there's been a lot of talk about focusing on the fundamentals of the company, and then the analysis goes to compare between how this year's results compared to last year, especially the order book numbers.
I find that quite strange because erata is still by 9% plus quarter on quarter and 53% or so for the 9 months comparison.
In addition, all of the fundamentals are still good actually... in terms of NTA, price to book value ratio, cash holdings, etc. Yes, receivables is rather high, but from what I've seen and know of, the community have been able to track the physical development of their stores, etc... so we know that receivables (and cash for this matter - since the communicty have been able to track the cash holdings too) is based on real orders from new store opening from their distributors, etc.
Please don't be so alarmed about the order books. Remember that when eratat moved to their premium range, all of their distributors would have started with 0 inventory. As such, the first order will normally be much bigger than subsequent orders (at least until the distributors scale up).
As such, I'm not surprised that the total order for everything is less than the year before (although premium orders is up). This would imply that footwear and classic orders would be lower.
Wasn't that somewhat expected? Eratat had switched from classic to premium and have decided to move up the value chain... giving up sales from more traditional sources. It's quite unreasonable to NOT expect a hit while this happens.
Strategy takes time to manifest and cannot be observed over 1 or 2 quarters only.... I would dare say that if such observations can be observed so fast, I'd worry more - in cases of fraud, etc.
Anyway, I think that those vested should be patient because the fundamentals are still very solid, and cash, receivables, etc can all be tracked. In addition, they have managed to collect back all receivables above 120 days (as mentioned in their Q3 financial statements).
I've followed a couple of other stocks before, with turnaround stories (including Asia Dekor - with a turnaround strategy, and Zobee - with a moving up the value chain story). They had been undervalued for a long time, but eventually moved to provide with very good returns.
While Eratat's story is not a turnaround story like Asia Dekor, eratat's story does exhibit certain similarities because it's a strategic move too. Follow the ratios - like the product mix ratio, the margin ratios, the account receivables, etc. It does make sense. It might not all be great - but that's exactly how a change in strategy should look like - some parts will falter while the change of focus from classic to premium is made.
The same occured with Zobee - when they moved from OEM to ODM to retail. Their stock price moved in excess of 1000% - from a low of about 2 cents to 20 odd cents... and eratat has far been fundamentals and governance/transparency. Either way, I believe that the stock still has very strong fundamentals (good liquidity ratios (also use acid test ratios as a more stringent liquidity ratio), good NTA, PTB, margins, etc... effectively, all the fundamentals are in the right direction).
As such, we next have to look at the governance/transparency aspects. So far, the story told by management, and from the analyst and store vists, including tracking of capital and actually seeing it being translated into their fashion shows and shop openings, etc... does indicate that there's no funky business occuring).
Expected EPS at 8 cents for the year end is just crazy. It really doesn't matter if growth is slowed while they switch strategy.
Hold it for a bit and it's almost a certainty that the market will notice it. After all, it's a market of fear at the moment, with all of the bad news and the uninformed investor will most likely stay away until things look better.
Going in later will likely just mean that one will be too late because it's not easy for the retail investor to time the market. Small caps also don't really move until a sudden interest peaks and elements of greed take over the fear rationale. Just be patient, and adopt a wait and see (with monitoring) approach. That's my 2 cents. Cheers