Eratat Lifestyle

Investors should be more concern on whether the company managed the use of the proceeds to achieve what it suppose to be achieve i.e. sales and marketing office and showroom in shanghai, target of 10 self owned flagship shops in shanghai by end of 2013. And also more importantly Sun Hung Kai & Co Limited providing opportunities, new contacts of new investor communities, funds and financial institutions to eratat so as to compensate for the high interest rate paid to them else it will become a win lose situation.

momoeagle, u still didn't get my point.

The meaning isn't about 240 days, but about the fact that it is not within your control

It is not Eratat has no control. They have already dropped the credit days from 150 days to 120 days, which means Eratat does have control over the credit days. When they began the transformation, 150 days is a necessary for the long term business growth. Now the transformation is on track, reducing it to 120 days make sense as the distributors have now grown financially stronger.

Thus, I completely disagree with the point you say Eratat has no control. It makes the business decision based on what fits the business needs best at that point of time.

Momoeagle, u can also refer to AR 2012. But, please to paint an accurate picture, please exclude the VAT and the trade deposits to suppliers. To compare trade receivables, we usually look at the latest quarterly report. To calculate financial ratios such as ROA, ROE, we usually combine the full year four quarters results, so that to avoid any seasonal or cyclical performance.

If you don't like a company that has inventories and receivables, then go and invest in a service company then. Product company will definitely have some inventory, some deposits and some receivables. if that asset is not in receivables, then a big bulk of assets will be in the form of inventory and trade deposits. Having high % of inventories and trade deposits are equally not as good as having receivables, isn't it?

Try talk to any electronics components wholesalers, which buy electronics in huge quantity. Ask them their about their inventory and the deposits. For electronics components, trade deposits and inventories will form big bulk of their assets too. U can go check out farnell or mouser electronics. Go look at the TV industry, go look at the furniture industry or go look at the car industry if u wan. Go ask them what's the average inventory turnover. anyway, the TV industry is a dying industry. The electronics industry is still shrinking and the demand is still far from its peak lol. And, don't forget standarded electronics components have very low gross margin (< 5%), even lower than apparels lol. The good thing about selling electronics is u can sell it online without having a shop. For apparels, a shop is needed as u still need a shop for people to come and try.

Let's not compare the interest rates in China to USA and Singapore. China is a totally different environment from USA and Singapore, all right?

As for your question on bond issue, I dun want to go too detail into it. But all I want to say is they do have plans in place. so if they dare to borrow at that rate, they definitely have a way to put the money to work and make sure the profits beat the interests. We just watch n see what the company plans to do, ok.


momoeagle, regarding your point that China products don' sell, this is my response.

Almost everything in the world now is manufactured in China. What is important is how the company does the marketing, build the brand and how your design differentiates. Even German automakers are setting up their car plants in China. So, Made in China product don't sell? I don't think. Even adidas sportswear are also made in China lol.

The question to ask is this: "are there any menswear you know marketing their apparels as "新英伦时尚美学的高级男装品牌"?

Was watching the channel 8 9 pm show by Julie ad Bryan Wong. There are people willing to pay few hundred dollars for David Gan or Eddy Lee for a haircut design. so, if a company can create a good design differentiation, it can also be the David Gan version in the apparel industry. As what bryan wong said, a good hair design has life. A good apparel design also has life.

Guys, no hard feelings. Cheers.

Momoeagle,

Eratat
30-Jun-13
Trade receivables 473394
Other receivables 101517
Total assets 1158127
49.6% of total assets are receivables


Now, where is the misinformation?
I'm using your data, which has proven my point.

Momoeagle, please read back my previous posting. For Eratat, they lumped the trade receivables and trade deposits to supplier as one single value in the balance sheet.

If u exclude the VAT and trade deposits to suppliers, Eratat trade receivables from the distributors is only RMB 271.4 million. Please check page 4 of their 1H2013 result.

Eratat is still relatively young company compared to lilanz and Xiniya etc. Every year, the assets will grow and eventually, the receivables will form lesser and lesser % of the current total assets.

Let me begin to newbiestock, no hard feelings too. It has been good to do this as a exercise on financials.

My point is not about Eratat having no control. It is you who have no control; you aren't Eratat. In no where have I mentioned that Eratat has no control. In fact, I mentioned how they could play around with credit days easily.

As for receivables, based on the data qwerty89 digged out, it has already shown Eratat having the largest relative size of receivables as part of their total assets.

Now, while this is a concern, there is still the possibility that Eratat can reduce this percentage. But question is how? History has shown them reducing it by renovation subsidies and sales incentives. In other words, it is written off and repackaged nicely. Certainly not a confidence booster.


And again, I did not say China product won't sell well. Again, to summarize what I said in lesser words, Eratat will face an uphill task to build their brand in the world of premium clothing, especially since they are a China brand. You are comparing with brands who has been around for many many years, and expecting Eratat to achieve similar status within 3 years. And I say the possibility of it happening is extremely low.

newbiestock wrote: Momoeagle,

Eratat
30-Jun-13
Trade receivables 473394
Other receivables 101517
Total assets 1158127
49.6% of total assets are receivables


Now, where is the misinformation?
I'm using your data, which has proven my point.

Momoeagle, please read back my previous posting. For Eratat, they lumped the trade receivables and trade deposits to supplier as one single value in the balance sheet.

If u exclude the VAT and trade deposits to suppliers, Eratat trade receivables from the distributors is only RMB 271.4 million. Please check page 4 of their 1H2013 result.

Eratat is still relatively young company compared to lilanz and Xiniya etc. Every year, the assets will grow and eventually, the receivables will form lesser and lesser % of the current total assets.

Total assets has already grown, simply by issuing bonds which adds to liabilities. Without it, it would be lower.
I compare apples with apples, all receivables from all the companies are lumped together for an easier comparison.

Unless the data of other companies are digged out in greater detail, I see no point in digging the great details just from 1 company for comparisons. Doesn't make it fair.

Just a thought, would it be more informative to compare receivables as a % of revenue instead, as receivables are outstanding only when goods are sold on credit?

However, this metric also shows that Eratat is faring worse than its peers. Not sure why the distributors are able to squeeze Eratat so tightly, but I suspect this is a key reason why Eratat is going to open its own shops.