Eratat Lifestyle

As a follow-up to Mr Leong Chan Teik’s article in NextInsight – “ERATAT’S AGM – Keen Investor Interest In Share Buyback Mandate”, I would like to share my latest viewpoint on Eratat as I was also present at the AGM.
I still like Eratat as an S-chip. It is among the better ones of the S-chips and its valuation currently is just simply too low - a 14-cent-stock with a net cash value of 15 cents and a PE of barely 2.5x plus the ability to pay dividends; certainly not so easy to find in SGX. The company is also one of the few that has no debt. Going by stock market behaviour of the past decades, such a stock should have little difficulty fetching a PE of at least 10x in a hot bull market. At its current price of around 14 cents, its downside is considered as very low and its upside potential is at least above its IPO price of 30 cents.
However, I would not consider Eratat a good growth stock that I would want to accumulate more in the current market condition. CFO Ken has pointed out that the orders received from the current 12 distributors have been consistent for the last 2 years. Hence, I would expect the total orders for the current year to be somewhat similar to that of the previous year i.e. flat sales, unless new distributors are added to the existing number. If the revenue and the profit of a company do not grow, it is rather difficult for the share price of the company to appreciate in value in the near to medium term.
This is my personal view. Those interested in this stock should do their own assessment.

I was at the AGM as well and made the voting.

Eratat is expected to announce new distributors sometime next quarter. So 2H shld see some gradual growth. I am prefer the 1st half of 2013 to be maintained or at a slower growth rather than at a fast rapid growth.

If grow too fast, their account receivables will grow rapidly as well and the working capital needs will be tighter.

I rather they take some time to consolidate by maintaining earnings, build their cash capital for a period of time be4 embark the next phase of growth.

If profit for this yr is same as last yr, its net cash is still growing and by end of yr. Next yr dividend shld be expecting a growing dividend and its intrinsic value shld grow with time.

Ken says that be4 tbey can cut the receivable days from 120 dats to 90 days, they need to bring some strong distributors witb gd financial strength. If one distributor can perform with lesser than 120 days credit, then they will be able to pressure other distributors to work with shorter credit terms.

So 2013 is a gd year and 2014 shld be an even better year for Eratat.

observer2 wrote: As a follow-up to Mr Leong Chan Teik’s article in NextInsight – “ERATAT’S AGM – Keen Investor Interest In Share Buyback Mandate”, I would like to share my latest viewpoint on Eratat as I was also present at the AGM.
I still like Eratat as an S-chip. It is among the better ones of the S-chips and its valuation currently is just simply too low - a 14-cent-stock with a net cash value of 15 cents and a PE of barely 2.5x plus the ability to pay dividends; certainly not so easy to find in SGX. The company is also one of the few that has no debt. Going by stock market behaviour of the past decades, such a stock should have little difficulty fetching a PE of at least 10x in a hot bull market. At its current price of around 14 cents, its downside is considered as very low and its upside potential is at least above its IPO price of 30 cents.
However, I would not consider Eratat a good growth stock that I would want to accumulate more in the current market condition. CFO Ken has pointed out that the orders received from the current 12 distributors have been consistent for the last 2 years. Hence, I would expect the total orders for the current year to be somewhat similar to that of the previous year i.e. flat sales, unless new distributors are added to the existing number. If the revenue and the profit of a company do not grow, it is rather difficult for the share price of the company to appreciate in value in the near to medium term.
This is my personal view. Those interested in this stock should do their own assessment.

I recalled that early part of last year their sale were affected due to renovation of outlets. Hence, if what was claimed last year was true, eratat sale should be a lot higher in the early part of this year.

The overall lower revenue was also due to the renovation of about 370 existing shops to the upmarket ERATAT Premium shop image by the distributors, which had been anticipated when the renovation subsidy was mooted and at the time when the order book ......... So. Unless the 370 shops were closed again this year.....the revenue MUST recover according...unless there is another excuse....

Won't cash grow to 20cts /share if it collected AR of RMB 142m in Feb 13 and when there wasn't any major cash outflow during the period?

Eratat reported EPS of only 2.83 cts (RMB) for 1Q12 because of the renovation subsidy. The EPS for 1Q13 can therefore be expected to be substantially higher - my estimate is 8 to 9 cts (RMB). A good indication of Eratat’s near-term business prospects is the trade deposits it paid to its suppliers. This was RMB 98M in 4Q12, an increase of 9.6M from RMB 88.4M in 4Q11.