Eratat Lifestyle

Reading into Nextinsight analyst report on the expensive bond borrowing which the question para has been re-produce as below seems the borrowing is justified for its Shanghai expansion program as well as transform into a more prestige high class product segment and there choose SHK seems has more (+ve) objective beyond the current borrowing needs (perhaps aiming SHK for its financial support to start with good relationship and for the eventually right issue later on when the share price adjusted itself). With the expansion into Shanghai city it is a TEST for Eratat's product and should the product take off in the city Eratat share will fly. They transform from low end product to high-end men's casual lifestyle apparel is a wise move. So far there is no reason to believe the company has any account irregularity as no sign of that except the only concerned now is the high receivable which there are addressing it thru their own store opening and new distributor is a good beginning. I am very positive at current price of 9cents. Vested.

Q: You incurred finance cost of Rmb 8.7 million in 3Q2013 on bonds payable of Rmb 102.6 million. Why do you need to raise the Rmb 100.5 million via such an expensive bond issue when you have a large cash reserve (Rmb 584.2 million as at 30 Sep)?

In actual fact, we have been exploring various options and searching for the right party to raise money from for the past two years before deciding on SHK.

In reality, it will be more pressurising when the expansion is on going and the funding is not enough or not raised in time to keep pace with the plan. It will be even tougher to raise money when the financial resources then run low.

We are at the stage of network expansion that requires huge cash outlay. Apparel manufacturing that is 100% outsourced requires upfront trade deposit payment to our suppliers.

We have over 30 suppliers for each season and production order to each supplier may not be sizable. These suppliers produce for top international brands. We pay them deposits upfront in order to secure their services and to get priority treatment.

It is also important to retain sufficient cash reserves in case of unforeseen contingencies caused by external factors that can turn into a drastically challenging economic environment. In recent years, we have seen what severe financial crisis can do.

(After rigorous discussion, investors were convinced that Eratat's current cash level is not unreasonable).

oh, elbert, were u there too at the briefing...?

since nextinsight and voyager has released their report, i just add three points.

1) the CFO mentions ideally a company should keep a cash reserve that can lasts them at least 6 months, should something happens. so, RMB 500+ mil cash is somewhere there.

2) regarding SHK, the nextinsight statement below sums everything up:


“The SHK Group is listed in Hong Kong, and has sizable real estate and financial businesses in Hong Kong and China.

"Obtaining financing from them also gives us new avenues to Hong Kong and China’s capital markets, in addition to Singapore.

"This may draw the attention of Hong Kong and China’s investors to the under-valuation of our current share price,” said Mr Ho at its results briefing at M Hotel on Monday.

To clarify first statement, since SHK has sizable real estate business, the network that SHK has will help Eratat when it comes to finding the right contacts to talk to when opening shops in big shopping malls.

As for second and last statements, we leave it to the investors here to imagine. Maybe more news will come in 2014 how SHK can help them open up capital markets in HK and China (Hope go beyond just beyond bond investors).

3) To clarify nextinsight report regarding sharebuyback, the management use the word "consider" and "option". If the company really do sharebuyback, they want to make sure the buyback creates a sustainable outcome. They do not want the buyback end up only creates a temporary artificial increase in the share price.

BotakBrian wrote: Newbiestock, u bought eratat more today?

botak, will still accumulate whenever i hv spare cash.

No reason for me to sell yet.

1) company still profitable

2) outlook for the company clearer as company has laid down its expansion plan for growth in 2014.

3) The share price looks like hit a bottom. if it comes go down and hv consolidate for long, then it must go up.

4) Sharebuyback mandate lasts till the next AGM comes. As long as the company considers and keeps sharebuyback as an option, I rather accumulate, hold and bet that the management will do something over the next few months. It will be silly to sell now, when its share price is at its nearly all time low.

5) I am still expecting S-chip to rally end of the year till early next year since majority of S-chips are still at its all time low. And, the S-chips with strong fundamentals should rally hard.

Why s-chip always rally end of the year? Two reasons.

a) Q4 is always the strongest quarter, be it in US or China (until Chinese New Year comes).

b) Because audit comes after the year end. tat's when ppl are relieved that the accounts are properly checked and it is also during this period, ppl are less wary of s-chips. And, tat's when the s-chip rally party starts.

Thus, it will be silly and make no sense to sell right now, when its share price is at its all time low. so, I'll still continue to accumulate, before the masses come n join the party...

It is worthwhile to read d.o.g.'s history check that SHK securities and SHK finance is not related to SHK Properties.
"In 1996, SHK Securities was sold to Lee Ming Tee's Allied Group."

Therefore, "SHK has sizable real estate business, the network that SHK has will help Eratat when it comes to finding the right contacts to talk to when opening shops in big shopping malls." may not be true.

The bond issue was also mentioned in SHK Finance's report submitted to HK Exchange btw, if anyone is interested. However, they did not mention who borrowed it, but of course we could deduce it from the timing and amount.


To be more accurate, the real estate business probably come from Allied Properties HK Ltd (listed on HK) and lesser from SHK group. My information is however from 3rd party source of course, the forum post in VB.

However, according to the post in VB, the Allied Group didn't really have a glorious past.



The most sane thing I read in the NextInsight report is that the CFO recognises that share buybacks does not necessarily help share prices.

ok, fundamentalist, whatever lol.

Or u can also google julian background lol.

The CFO did mention the SHK contacts in real estate will help them linked to the right people in the malls.

It is good that people helping to dig deeper into the associates h/e in the foreseeable future the company is rather positive with current share price JUST 9cents. I won't bother too much with such -ve comments as I do not see what is beyond the reasonable period of time and no one can especially small company. This is not an investment call but rather it is a trading opportunity.

newbiestock wrote: ok, fundamentalist, whatever lol.

Or u can also google julian background lol.

The CFO did mention the SHK contacts in real estate will help them in talking to the right peope in the malls.