If for example you had 500k in the bank earning little to no interest, doing almost nothing, will you go out and borrow 100k so desperately at 32% annual interest rate?? Does that make sense to you?
The CFO's explanations would be valid if like proper high growth companies, Eratat was sacrificing positive cash flow to achieve revenue growth - where any cash gained is immediately recycled into the continuous growth cycle, and the company had little outstanding cash. But Eratat has over 500 million in cash - why need to borrow 100 million at loan-shark interest rate??
I believe most of the bad s-chips have been filtered out in recent years and most of the ones that remain are well run, honest companies. But I have to say for Eratat I'm not 100% sure what's going on. Let me remind all that China Hongxing was and is a valid genuine business too - Erke stores are scattered all over China and I even regularly see Erke ads on Chinese television. It doesn't mean there was nothing wrong with the accounting. Yes there may be a valid explanation for all this, but until you know for sure, are you prepared to take the risk? To me, no, there are many other better s-chips out there whose business and accounting make complete sense to me, which are well positioned to ride the China growth story.
Ask yourself, if this company is so undervalued, trading at PE of 2 and a small fraction of book value, why hasn't the CEO, CFO or any of the other directors bought a single share to date? If it's you, and your company is trading at PE of 2, and 1/5 of NAV, wouldn't you think it's super undervalued and buy some shares yourself? Can there possibly be a better alternative investment out there? Unless of course you know there is more to it than meets the eye.
u still keeping to the old mindset why must they issue the proceeds. do u hv any other new things to say other than stubbornly harping on to the high interest rates?
if i say they already have plans and have considered all the possible options how to utilise the cash and earn better returns, would u believe it? How the company going to utilise the cash, they will announce it when the time is appropriate. And, by then it may be too late to jump into the boat. it is quite a norm for companies to borrow more or raise more than what they need.
if cash is not there, would SHK still hold onto that 20% bond? And, julian so is now on the non-executive board. There is likely to be some attractive terms that SHK has offered to Eratat, but obviously it can't be announced yet. do u know that they can redeem the bond any time they want and if the bond is redeemed early, the interest rate they pay can be much lower than the 30%. Be flexible la. And, don't compare Erke to Eratat. Totally different league.
I am not asking anyone to buy but I a confident of the company's prospects and Eratat has the potential to be a multi-bagger. u can talk whatever u want. Time will tell and their expansion plans is on the way. 6-9 months time, i am sure mr market will give it a fair valuation.
Newbiestock you assume SHK will somehow propel Eratat to greater heights - I prefer not to count my chickens before they hatch. SHK invests in tons of companies, what is Eratat to them? Furthermore, they don't even own Eratat shares, they are just bondholders. Furthermore, when Eratat attempted to do the placement with CMIA 2 years ago, they said the exact same thing, in the end nothing materialized, it was just empty verbiage that tends to come a lot with these types of fund raising activities. In the end CMIA didn't want to go ahead with the placement but Eratat went ahead and did a placement at 15% discount to 'sophisticated investors' any way - who certainly did not contribute to Eratat any way in terms of tying them up with any connections, so my suggestion is don't count your chickens before they hatch.
ThePeak you are naive if you think anything I say on this forum will affect share price materially. Also, you are naive if you take SIAS's recommendations seriously. They have been recommending this stock for over 5 years without fail no matter what the circumstance - it's pretty obvious what kind of relationship they have with Eratat. As you can be seen by the low volume today, the market doesn't give a hoot what SIAS says.
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