Eratat Lifestyle

skeptic,

I am talking about the 43 m loan that the chairman Huang and his board gave to sino in 2008.

A good business model should see its cash balances growing consistently over the years as its profits and revenue double.

But if u look at sino, look at the investing and its operating cashflow from 2008 to 2012 (latest on Left)


Cash from Operating Activities
65.828 94.162 77.843 16.015 50.128


Cash from Investing Activities
-172.825 -153.383 -136.165 -65.155 -59.501


Cash from Financing Activities
170.591 99.332 -17.131 139.925 6.528


Total Cash, Equivalents & Short Term Investments
138.342 81.516 32.525 146.538 15.652

Net Income
289.693 151.463 117.240 66.155 55.015

In 2011, 153,383 mil were invested in PPE and the full year net profit jumped from RMB 151.463 mil in 2011 to RMB289.693. Seems like the net profit growth is even less than the invested amount. I didn't expect Sino Grandness to be so capital intensive until I look at all these figures.

Skeptic, don't use market cap to do a comparison. sino grandness is trading at P/E 6+ now and when the convertible bonds were launched, its P/E was around 4x. Eratat, on the other hand, is super undervalued with a P/E around 2x.

Or u mean to say dilution is OK for sino grandness shareholders since it has a big market cap with good P/E? Then good luck to those who bought sino grandness at the high recently, esp between $1.30 and above. Judging at sino grandness present valuation, I am not interested in buying unless it falls below 80 cents. Sino share price is overhyped as speculators are riding on its subsidiary listing in HK. Wait till the big boys end the party n those late long gonna cry.

If Eratat is trading at 4x or more, it would not have an issue doing placement or rights. At 25 c, P/E would be around 4x or even lesser after factoring the growth from its upcoming expansion.

A RMB 250 mil net profit for sino grandness Garden fresh is a big deal??? Eratat this year alone should be able to achieve a net profit of RMB 180 mil +/- 15 mil this year. And, with next year expansion, breaking the RMB200 mil is a breeze. Don't be surprised that Eratat become a fast growth stock next year.

Given the invested amount Sino makes every year vs the growth in net profit, Sino at this point is not really attractive to me.

I believe someone posted a yearly cash balance list for Eratat before. Eratat has the flexibility to grow based on a distributorship model or a flagship store model. Hence, its investment activities is minimal, unlike Sino Grandness. By fundamentals, need I say more? Anyway, i'm not here to debate about whether sino grandness is a gd stock to invest in now. But if u really want to criticise eratat, pls do a fair criticism on sino grandness as well.


Market will someday do a fair justice for Eratat...

When Sino Grandness ann. it’s bond issue, it looked like a big red flag at that time. It’s CEO made a huge gamble which now appears to be paying off, so congrats to those investors who took the risk with him then. Though it’s hard to defend Eratat’s CEO Lin , he has put his 25% shares on the line, so I presume he has a plan. To me, the main question now is whether the present price of 12 cts is a fair bet ?

It’s interesting that Eratat opted for unconvertible bonds + warrants which can be exercised anytime instead of convertible bonds which can only be exercised at end of 2 yr tenure. As for the 25 cts warrant exercise price, it’d be absurd to be below it’s 23 cts cash/share. IMHO, its not expensive to buy 15% of coy at 25 cts ( assuming all warrants are exercised by a single entity ) as it’s NTA of 41 cts does not even include the intangible brand/distribution network value.

There are those who distrust Eratat’s reports but yet happily hold other S-Chips as though they know? As for me, I’d accept all YE financial reports signed off by a reputable international auditor , otherwise why bother investing ? Basing on Eratat’s YE2012 results alone , I think it’s worth much more than 12 cts, esp when it has been paying dividends yearly. Anyway, there are always risks in share investment. My views only. Am vested. Dyodd.

hi newbiestock, I am also vested, but my only concern was about the receivables.

How do you think about the receivables in the long run for Eratat?

If cash is real.... Minus the bond interest...minus the receivable....it is still way undervalued!

The credit terms used to be maximum 150 days in the past, but now it has been cut down to 120 days. so the receivables is already in better control than before, though still got room to improve.

Was told by Ken during AGM that when more distributors come in, it should create internal sales competitions among the various different distributors. If one distributor can perform the sales with shorter credit terms by leading an example, they can use it to pressure the other distributors to accept shorter credit terms. so, I guess give Eratat a year or so, i believe they will gradually cut it down to the normal 90 days for their distributors.

plus with their new flagship store, the cash is immediately received the moment the goods are sold.

since their investing activities is minimal (unless they open their own flagship shop) their cash balances should grow according to their total net profit in four quarters for every 365 + 120 (credit) days. (unless got special situation like sales incentives/renovation subsidy).

1.618 wrote: hi newbiestock, I am also vested, but my only concern was about the receivables.

How do you think about the receivables in the long run for Eratat?

Bond issue completed. Super cash rich now!