newbiestock wrote: Reason for taking on more debt is very simple.
Momoeagle, with the additional cash, they can grow faster. if the bond did nt clear, then probably they will expand slower, maybe having lesser of their flagship store instead of opening 10 flagship store at one go.
The expansion plan is gg on, including their shanghai HQ and their flagship stores that they plan to open and that should be able to contribute significantly to their P&L, especially in 2014.
I fail to see how they can grow.
I give you a simple scenario. If you are earning on average $15 for every $100 you have per year. That's a profit!
But why would you want to borrow money with effective interest of $32 for every $100 just so that you can earn more $15 per $100???
The numbers does not make sense at all.
All the talk about opening new branches doesn't make sense if the company cannot bring their percentage earnings up to be more than $32 per $100.
the CFO is not dumb. they already hv plan in mind to recover the interest n even make profit out of the bonds.
talks with SHK has been ongoing for a year. And they didnt just talk to SHK alone but has also talked to other investment banks before deciding to hv this deal with SHK.
like i say, their expansion will bear fruits next year n be reflected in their p&l. if u can hold until next yr, whatever price u buy this year, even at the 16.3 cents high, shld be able to turn profit next yr.
if u hv capital loss, just close the screen and wait lol.
of coz, if u are speculating n expect profit to be made within a month or so, then sorry.
i am also expecting them to do "something" to exercise the 25 c warrants sometime around end of next year and use the warrants money to pay the debt prematurely.
if their expansion do bear fruits next year, then this is probably the last chance to scoop it cheap below 10 cents.
seriously, if courage marine still loss making, can close at 9.5 cents ytd, the current market price does not value Eratat fairly. at least, someone is confident to lend money to Eratat for expansion. But on a similar comparison, is there any banking institution confident to lend the same amount of money to courage marine?
I have estimated the bottom for eratat to come this week. but mayb i enter a bit earlier on monday. see how the price moves over the next few days. I dun expect it to hit 7 c low like last year in 2012, especially this year net profit should be much better than last year.
The most concerned is the director dispose 32m share at 0.138 and after then the share price has keep coming down non-stop. WHY the director want to sell ALL at such a cheap price knowing the cash/share is 21cents and NAV is 40cents/share plus warrant conversion is at 25cents /share ?
It doesn't make sense to unload ALL at this price ?
This is a RED flat as the director is an insider knowing what the Q3 performance will be. It is likely Q3 will be a disappointment with a miss ?
elbert wrote: The most concerned is the director dispose 32m share at 0.138 and after then the share price has keep coming down non-stop. WHY the director want to sell ALL at such a cheap price knowing the cash/share is 21cents and NAV is 40cents/share plus warrant conversion is at 25cents /share ?
It doesn't make sense to unload ALL at this price ?
This is a RED flat as the director is an insider knowing what the Q3 performance will be. It is likely Q3 will be a disappointment with a miss ?
We will know on 18th nov during q3 briefing. But based on the trade deposit which shows a 20% growth, i would expect its apparel revenue for 2H to grow 20% as well. The footwear revenue will be hard to estimate but the drop should nt be much. So i dun think q3 will disappoint. The q3 shld also show strong cash balances.
Ye sanzhi bought those 32 mil shares in 2009 at abt 12 c n sold at 13.8 c n he has hold more than 4 yrs. Signs are pointing to better earning growth for eratat so i would say ye sanzhi selloff is more like personal reasons.
The question to ask is who he sell to n why are they willing to buy at 13.8 c from ye sanzhi. I am sure those who bought frm ye sanzhi will also want to make profit too.
fundamental analysis does not just involved numbers purely, it is important to look at the numbers with the qualitative aspects of the company.
I shall not dwell on the red flags, much have been said about that.
Going forward, their plans are:
1) moving up the value chain, building a "luxury brand" -> number to look at, margins
2) Increase distributors -> announcements if any, as newbiestock seem to say that management will announce new distributors by this year.
3) gain a solid foothold in shanghai as a platform for other things.
Assuming you are BLIND to all red flags, you will need to decide if they can execute their plans, and their track records.
I have no future numbers, that is for investors to look at. But looking at track records, and if you see the following, you may say that company is delivering but market are FOOLS
1) 40 % margin for accessories is highly respectable, they have that for years. Shanghai business should further improve margin. If shanghai is too small and margin is diluted, they can give a segmented results to show that, it will be A-class, disclosure and you can claim they are delivering.
2) Show increase in distributors, with SIGNIFICANT increase in orderbook, since stocking up for opening required far more stock than simply repleshing orders.
You cannot take away the expansion execution in your calculation as the cost of it is too high to be ignored, they have issue bonds for it and also cancel receivables to offset renovation subsidy for brand building.
The longer they take to CONFIRM distribution and INCREASED ORDERBOOK,the clearer the path to troubles. If they show increase distributors and orderbook increase this year, then there is something going for it.
8 cents is a super steal if they delivered, get ready to have a multibaggers.
IF there is no new distributors for 2014, get ready for value trap for a long long time. And that is not the worst scernario
