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(08-08-2013, 05:06 PM)Boon Wrote: [ -> ]On page 5 of 2Q2013 result statement,

Bond and Warrant Issue : “ On 20 June 2013, the Company entered into to a bond and warrant subscription agreement (the “Subscription Agreement”) with SHK Securities (Nominees) Limited (“SHKSN”),whereby the Company would issue to SHKSN (1) a redeemable 12.5% per annum nonconvertible bond with principal amount of RMB134.0 million (the “Bond”), and (2) 82.5 million warrants (the “Warrants”). The subscription price for the Bond and Warrants was RMB100.5 million (the “Subscription Price”). The Bond and Warrants were issued on 24 June 2013 and 8 July 2013 respectively (Please refer to the announcements made on 20 June, 6 July and 8 July 2013 for details).
As at 30 June 2013, the Subscription Price has been recognized as “Bond payable” in the Balance Sheet. In accordance with Financial Reporting Standards (“FRS”), the difference between the Bond principal amount and the Subscription Price of RMB33.5 million will be amortised over the 2-year Bond period. For the current quarter, RMB321,000 has been amortised in the profit and loss account.”

From the above statement, Eratat has treated the Subscription Price of Warrant as “zero” - which was in line with what d.o.g. had assumed.

Also, the difference between the Bond principal amount and the Subscription Price of RMB33.5 million will be amortised over the 2-year Bond period - which was consistent with what I had assumed.

Therefore, in so doing, Eratat has indirectly confirmed that “borrowing cost” for the issuance of “bond and warrant” equals to 32% gross (before tax deductibility) and around 24% (after tax deductibility), as worked out by d.o.g. and I in earlier postings.

Question remains : why ………………………………………………………..?

(Not Vested)

This expensive exercise will wipe 8 million off NP every quarter, the question if whether the expansion in shanghai can more than offset this amount.

Assuming no significant changes(since there no increase for years) in orders for the 12 existing distributors who altogether account for about 800 outlets (can't remember where i read this 800 outlets), and Eratat managed to get a new distributor for its Shanghai expansion, I think its quite prudent to see that the new distributor won't be opening more than 66 outlets over the 2 years. On av. each distributor contribute about 17.5 million per quarter of revenue, and the latest 1H margin of 15%(2Q margin is 12%), the distributor will add 2.6 million NP

I know the estimate is very rough, as the distributor might contribute above av. revenue, and also stocking up for opening will definitely be much much higher than renewal of stocks, but the above calculation will give some idea of the longer run profits possible.

Working backwards,with a NP margin of 15%, 20%, the revenue required to offset the 8 milllion financial cost will be 53 million, and 40 million in each quarter. That is about 1 quarter to 1/5 of the current revenue. Can the new distributors contribute that amount, even if margin is higher in Shanghai, I still think its a tall order, although not impossible.

If you believe Eratat can expand by more than 25% over the next 2 years, and in doing so, need more than 500 million (the cash they had before they conduct the exercise) , then everything will fall into place

But I am still skeptical even after reading the nextinsight article
http://www.nextinsight.net/index.php/sto...rant-issue

How can bank loans have costs higher than 24%?

my 2 cents worth only...
comments welcomed

After reading below nextinsight news :
http://www.nextinsight.net/index.php/sto...rant-issue

I roughly know why the CFO proceeds with bonds issuance..
First, I'm partial agree with the CFO , by not doing any new placement and convertible bonds as the current price is consider very low with PE less than 2.5. However , I believe the CFO should had propose right issue, it will not dilute the shareholding if the shareholders exercise the right issue , at least shareholders are given choice whether they want to dilute or not..
AND If the CEO exercise the right issue, it will give moral boost since the CEO owns around 25% of the company..

Second, well, im not sure how bank in china work.
By book, there are 2 type loan secure and unsecure loan.
It is impossible for Eratat to get secure loan of RMB 100M given their fix asset only at RMB 55M.. or personal guarantee from CEO shares? I don't think bank like this, once the company bust, there is no value on the shares.
Now left with 1 option of unsecure loan to apply RMB 100M, i'm not sure how much bank charge the interest , given the recent, tightening loan market, I can assume the rate is high, maybe the EIR is 24%?
** For comparison, i saw SCB personal loan (unsecure) offering rate of 4.68% pa however the EIR is 10.42% pa based on 2 year..

Last, I notice it has started the shanghai business, I believe the impact on revenue can be seen in Q3 report.

Now I just hope the company is on right direction since I have vested
Since the PE is 2x , by doing simple assumption on the PE, the price level should double in next 2 years

Status of number of distributors/sub-distributors/number of stores as at FY2012

Lilanz/Lilang (HKEx) http://www.lilanz.com/lilang/en_about.html
Number of distributors = 89
Number of sub-distributors = 1,540
Total number of retail outlets = 3,479
Number of retail outlet operated by distributors = 1,239
Number of retail outlet operated by sub-distributors = 2,240
Number of flagship stores/Self-operated stores = ？

Xiniya (NYSE) http://www.xiniya.com/
Number of distributors = 29
Number of sub-distributor = 1,378
Total number of retail outlets = 1,710
Number of retail outlet operated by distributors = 118
Number of retail outlet operated by sub-distributors = 1,590
Number of flagship stores/self-operated stores = 2

Zuoan (NYSE) http://zuoancn.investorroom.com/
Number of distributors = 16
Number of sub-distributors = 325
Total number of retail outlets = 1,329
Number of retail outlet operated by distributors = 180
Number of retail outlet operated by sub-distributors = 1,142
Number of flagship stores/self-operated stores = 7

Eratat: (SGX)
Number of distributors = 12
Number of sub-distributor = Not disclosed ?
Total number of retail outlets = Not disclosed?
Number of retail outlet operated by distributors = Not disclosed?
Number of retail outlet operated by sub-distributors = Not disclosed?
Number of flagship stores/self-operated stores = 0 (coming soon in Shanghai)

Comments:
1) How could investors find out on the accuracy and reliability of these figures ?
2) Why couldn’t Eratat provide these numbers?

Changes in number of stores over the last three years:

FY 2010 (Lilanz) :
Total Number of stores at beginning of year = 2,561
Number of stores opened during the year = 544
Number of stores closed during the year = 220
Net increase in number of stores during the year = 324
Total Number of stores at end of year = 2,885

FY 2011 (Lilanz) :
Total Number of stores at beginning of year = 2,885
Number of stores opened during the year = 480
Number of stores closed during the year = 97
Net increase in number of stores during the year = 383
Total Number of stores at end of year = 3,268

FY 2012 (Lilanz) :
Total Number of stores at beginning of year = 3,268
Number of stores opened during the year = 414
Number of stores closed during the year = 203
Net increase in number of stores during the year = 211
Total Number of stores at end of year = 3,479

Changes over 3 year period (FY2010, FY2011 and FY2012) (Lilanz) :
Number of stores opened over the 3-year-period = 544 + 480+ 414 = 1,438
Number of stores closed over the 3-year-period = 220 + 97 +203 = 520
Net increase in number of stores over the 3-year-period = 324 + 383 + 211 = 918

Xiniya : Not Disclosed
Zuoan : Not Disclosed
Eratat: Not Disclosed

Comments:
3) Why couldn’t Eratat (Xiniya, Zuoan) provide these figures ?
4) Lilanz managed to open up 1,438 new stores over a period of 3 years - impressive !
5) 520 stores were closed over the same period – equally impressive ! - look like a high turnover game ?

Store Locator
Lilanz : None
Xiniya : None
Zuoan : None
Eratat : None

Most foreign brand apparel players in China have “stores locator” on their websites.

For example:
Uniqlo (Japanese) : http://www.uniqlo.com/cn/shop/
Gap (USA) : http://www.gap.cn/store-locator?___store=english
Bossini (Hong Kong, HKEx listed): http://www.bossini.com/corp/en/shop/Mainland-China
Hugo Boss (Germany) : http://www.hugoboss.cn/cn/en/storeLocator/
H&M (Swedish): http://www.hm.com/hk/en/store-locator
Giordano (Hong Kong brand, HKEx listed) : http://cn.giordano.com/shopaddress.aspx
Esprit (HKEX listed): http://www.esprit.com/storefinder

Comments:
6) Why couldn’t Eratat (Lilanz, Xiniya, Zuoan) provide “store locator” services on their websites ? If listed entities like Esprit, Girodano, and Bossini could do it, why not Eratat, Lilanz, Xiniya and Zuoan?
7) I would consider “store locator” as basic essential services expected of any apparel brand nowadays by consumers - this is consumer unfriendly and make no business sense.
8) Without the “store locator”, investors would have no way in finding out on the accuracy of store numbers given by the management. IMO, this is simply a problem with lack of transparency.
9) It looks like this "store locator" is a unique "problem" among Apparel Companies that have adopted the “asset-light-distribution-model” a.k.a. “wholesale model” - perhaps, this business model should be nicknamed “black-box” model”. By investing in this type of companies, I guess investors would have to place a lot more faith and trust in the management than say by investing in Giordano or Esprit.

How many stores? Esprit shares fall amid exaggeration rumours
http://www.standard.co.uk/business/how-m...52601.html

(Not Vested)

Hi Boon,

isn't it amazing?

Quote:Comments:
1) How could investors find out on the accuracy and reliability of these figures ?
2) Why couldn’t Eratat provide these numbers?

Eratat supposedly got
1) 2nd highest score for the Governance and Transparency Index (“GTI”) amongst the PRC companies listed on SGX-ST (40th Overall, out of 680 Co) in 2010

2) 3rd highest score for Governance and Transparency Index ("GTI") amongst PRC companies listed on SGX-ST, ranked 52nd in overall out of 657 companies in 2011




But to be fair, they did mention this in 2011
- 11 ERATAT Premium shops commenced operation in Shanghai
- 50 ERATAT Premium shops commenced operation in Zhejiang, Guangdong, Henan, Shandong, Anhui and Shanxi

Source: http://www.eratatgroup.com/v2/corporate-milestones



[Not Vested]

Director/Chief Executive Officer who may also be a substantial shareholder/unitholder (Form 1)
http://infopub.sgx.com/FileOpen/FORM1_YS...eID=253490

(22-08-2013, 07:09 PM)Behappyalways Wrote: [ -> ]Director/Chief Executive Officer who may also be a substantial shareholder/unitholder (Form 1)
http://infopub.sgx.com/FileOpen/FORM1_YS...eID=253490

Ye Sanzhi was the second largest shareholder with 6.77%. He sold down to zero in one shot. He seems to be in an awful hurry, especially given the low valuations using the reported financial figures. As an executive director and substantial shareholder, does he know something that minority shareholders don't?

Myself, I prefer not to get involved when I see things such as:

1. Financially irrational deals (see prior bond/warrant discussion); and
2. Insiders selling down in a big hurry

Those who believe that "history doesn't repeat, but it rhymes" may wish to keep in mind what has happened so far at Foreland Fabrictech and Qingmei. I will not spoil the fun by giving away details, so I will leave it to the curious to read up on their own.

As usual, YMMV.

aiyoh....intrinsic value $0.27....lol.....


http://www.eratatgroup.com/v2/files/rele...3_sias.pdf

Been raising the red flags since 2011, and the red flags are still up and flapping

I'm suspecting that 32mil that was sold at 13.8 cents has something to do with the exceptionally high volume on 15th August, which closed at 13.8 cents.

It may be a coincidence though... Correct me if I'm wrong, volumes of married deals are also in SGX right?
If so, then it should be reported within 2 business days, but the date of change in interested mentioned in the pdf is 21st August ...

Hmmm

(23-08-2013, 02:06 PM)momoeagle Wrote: [ -> ]I'm suspecting that 32mil that was sold at 13.8 cents has something to do with the exceptionally high volume on 15th August, which closed at 13.8 cents.

It may be a coincidence though... Correct me if I'm wrong, volumes of married deals are also in SGX right?
If so, then it should be reported within 2 business days, but the date of change in interested mentioned in the pdf is 21st August ...

Hmmm

I dont see how Ye Sanzhi sell off related to the 15th Aug high volume.. If the sell off done on 15th, then it is not off market sell off..

What i suspects are someone ( more than 1 ) are collecting the share
secretly, they are avoiding the mandatory limit for announcement of new subsantial shareholders..

I think they have collected around 10% of the outstanding shares..

Let see for next few days