obviously, we all believe that the "dating" of Eratat and SHK will create value in some ways. But until things are confirmed, it cannot be openly said.
Eratat investors have been pressing the company for a sharebuyback for very long... and they just received bond proceeds in July... we shall wait n see, if our calls will be answered.
Was told during the briefing that SAFE needs about a month to two to clear any funds that needs to be sent out of China for chinese companies...
Bestworld wrote: What is their plan for the 500m they holding? That is the bigger picture than focusing on the 100m from the bond. What have SHK contributed so far other then getting ready to collect the huge interest?
very good question on the 500m rmb cash. I don't have a definitive answer but I was thinking of something along these lines.....
Sales a year about rmb1 billion. eratat has to pay trade deposits of 30% cash when placing orders for the goods. I don't what the credit terms are (after receiving the goods) but what we know is that when Eratat delivers to its distributors, it gives them up to 120 days credit (was 150 days last year). There is a big mismatch obviously and to sustain that, Eratat needs a big cash buffer.
Thought they have been operating in that mode for the last 2 years. Apart from the 500m hard cash, there are also few 100m of receivable that formed part of the operating fund. So, unless the business is going to grow by more than 100%....I really don't see the need to hold on to 500m cash doing nothing!
"The Board is of the view that the Proposed Bond and Warrant Issue is beneficial to the Group as it will allow the Group to strengthen its cash position to grow its business and its access to new contacts and opportunities through the Subscriber's network, thereby increasing exposure of the Company's shares to new investor communities, funds and financial
institutions in Hong Kong and the PRC."
"Pending the deployment of the proceeds for the purposes mentioned above, such proceeds may be deposited with banks and/or financial institutions, invested in short-term money markets and/or marketable securities, or used for any other purpose on a short-term basis, as the Directors may, in their absolute discretion, deem appropriate in the interests of the Group."
- See page 4 out of pg 7 of the warrant n bond issue announcement.
Why need to strengthen Cash flow when they have 500m sitting there doing nothing? If new distributors are only give 60 days credit. 100m cash can easily generate a revenue of 600++m in a year. Still cannot see the reason for the one issue...
NextInsight
a hub for serious investors
