ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

(31-01-2014, 01:40 PM)Greenrookie Wrote: [ -> ]There were 2 serious red flags:

1) the bonds terms there were way too ex. Given the amt raised in relation to cash

2) which I highlight at Nextinsight forum, according to the top 100 Coporate tax payers in jinjiang , Eratat haimingwei shoes did not appear, not paying even 3 million rmb. I ask investors to questioned the CFO as it is quite serious, but I have never heard of them.

In comparison, YZJ is the 50 tax payers for the past 3 years. It is the top 15 payers in 2012 I think.


I have consider trading it when it reached 8 cents, but once I think of the Bonds, I passed. After the tax issue, I never looked at it again.

As the sino grandness saga taught me, SAFe and Trade figures can be call to questions, but taxes should be the most reliable. Simple, what good would the authorities have inflating tax collected from companies?

It is not about valuation on hindsight, it is about risk assessment. It might be possible to trade Eratat profitably with it forming only a wry small amount of portfolio, but how do you assess such wanton risk? Maybe 50% of dividends income for such speculation at max?

Thank you for your immensely insightful analysis of how Mr. Market was absurdly and irrationally wrong in his valuation of Eratat.

(31-01-2014, 01:52 PM)momoeagle Wrote: [ -> ]A stock's fundamentals does not just depend on it's PE and P/NAV.

I have said many things about this company before and anything more will now be hindsight bias and totally irrelevant. Someone has pointed out the absence of Eratat's subsidiary in Jinjiang tax report way before, which probably mean the profits were not really there? Investors were already pre-warned yet none bothered to compile these discrepancies to shoot the CEO during AGMs, preferring to just brush them aside and listen to only positive news.

If you tracked their reports, the majority of earnings went into receivables, and a huge portion of receivables were subsequently written off by renovation subsidies and sales incentives. So are the earnings really good?


Many lessons I learned from studying this company. Some examples are:
1) Growing cash pile, appears to come mainly from investors and bonds. Most of operational cash went into receivables.
2) Warren Buffet's, or was it Charlie Munger's, advice to look more closely at assets than liabilities. In this case, majority of assets were in receivables. Not the first company with this sign. I think previously, Beauty China (can't really remember) accounts were similar. History repeats. 1 fund manager documented it in his monthly newsletter about all these. It pays to study different companies even though we may not invest in it. I was frequently asked on why I analyse a company I don't invest in.
3) CEOs will frequently paint a positive picture. If not positive, do business for what right? A common business sense that is sometimes not that common.

I learned a few more things about running a business with this company that I didn't think of before, both from forumers and library books. The most key of all, about sales and marketing.
1) Marketing failures. Eratat done a fair bit of marketing on their products, which on hindsight, are failures. Was reading up on marketing theories recently and trying to apply to different businesses.
2) Marketing successes. Eratat's marketing of its company to shareholders was a success and there are many lessons to pick up from.



Of course, I may turn out wrong, and the CEO suddenly appears with a huge pile of cash and declares he was merely on CNY holiday. I highly doubt it.

Anyway, Happy Chinese New Year. For investors who believed in the company, I wished you the best. Money lost can always be made back.

Kudos for your immensely insightful and detailed write-up about value investing.

Value investing is an holistic practice and should not just be a mechanical evaluation of financial and valuation ratios.

(31-01-2014, 01:52 PM)momoeagle Wrote: [ -> ]A stock's fundamentals does not just depend on it's PE and P/NAV.

I have said many things about this company before and anything more will now be hindsight bias and totally irrelevant. Someone has pointed out the absence of Eratat's subsidiary in Jinjiang tax report way before, which probably mean the profits were not really there? Investors were already pre-warned yet none bothered to compile these discrepancies to shoot the CEO during AGMs, preferring to just brush them aside and listen to only positive news.

If you tracked their reports, the majority of earnings went into receivables, and a huge portion of receivables were subsequently written off by renovation subsidies and sales incentives. So are the earnings really good?


Many lessons I learned from studying this company. Some examples are:
1) Growing cash pile, appears to come mainly from investors and bonds. Most of operational cash went into receivables.
2) Warren Buffet's, or was it Charlie Munger's, advice to look more closely at assets than liabilities. In this case, majority of assets were in receivables. Not the first company with this sign. I think previously, Beauty China (can't really remember) accounts were similar. History repeats. 1 fund manager documented it in his monthly newsletter about all these. It pays to study different companies even though we may not invest in it. I was frequently asked on why I analyse a company I don't invest in.
3) CEOs will frequently paint a positive picture. If not positive, do business for what right? A common business sense that is sometimes not that common.

I learned a few more things about running a business with this company that I didn't think of before, both from forumers and library books. The most key of all, about sales and marketing.
1) Marketing failures. Eratat done a fair bit of marketing on their products, which on hindsight, are failures. Was reading up on marketing theories recently and trying to apply to different businesses.
2) Marketing successes. Eratat's marketing of its company to shareholders was a success and there are many lessons to pick up from.



Of course, I may turn out wrong, and the CEO suddenly appears with a huge pile of cash and declares he was merely on CNY holiday. I highly doubt it.

Anyway, Happy Chinese New Year. For investors who believed in the company, I wished you the best. Money lost can always be made back.

i almost wanted to buy it at 0.96. Thought it was a sure win.
for me, it was the 6month DSO that kept me away, which you had highlighted on foresight.

looking forward to more analysis

You are absolutely right about looking at tax of the company. I think that is one of the least common ways to value a company.

(31-01-2014, 01:40 PM)Greenrookie Wrote: [ -> ]There were 2 serious red flags:

1) the bonds terms there were way too ex. Given the amt raised in relation to cash

2) which I highlight at Nextinsight forum, according to the top 100 Coporate tax payers in jinjiang , Eratat haimingwei shoes did not appear, not paying even 3 million rmb. I ask investors to questioned the CFO as it is quite serious, but I have never heard of them.

In comparison, YZJ is the 50 tax payers for the past 3 years. It is the top 15 payers in 2012 I think.


I have consider trading it when it reached 8 cents, but once I think of the Bonds, I passed. After the tax issue, I never looked at it again.

As the sino grandness saga taught me, SAFe and Trade figures can be call to questions, but taxes should be the most reliable. Simple, what good would the authorities have inflating tax collected from companies?

It is not about valuation on hindsight, it is about risk assessment. It might be possible to trade Eratat profitably with it forming only a wry small amount of portfolio, but how do you assess such wanton risk? Maybe 50% of dividends income for such speculation at max?

Sorry, which Sino Grandness saga were you referring to? Also, how do you check the tax collected by authorities? Thank you in advance!

Are these sort of scandals common in HKSE specifically S-chip?

(01-02-2014, 12:37 AM)Wildreamz Wrote: [ -> ]

(31-01-2014, 01:40 PM)Greenrookie Wrote: [ -> ]There were 2 serious red flags:

1) the bonds terms there were way too ex. Given the amt raised in relation to cash

2) which I highlight at Nextinsight forum, according to the top 100 Coporate tax payers in jinjiang , Eratat haimingwei shoes did not appear, not paying even 3 million rmb. I ask investors to questioned the CFO as it is quite serious, but I have never heard of them.

In comparison, YZJ is the 50 tax payers for the past 3 years. It is the top 15 payers in 2012 I think.


I have consider trading it when it reached 8 cents, but once I think of the Bonds, I passed. After the tax issue, I never looked at it again.

As the sino grandness saga taught me, SAFe and Trade figures can be call to questions, but taxes should be the most reliable. Simple, what good would the authorities have inflating tax collected from companies?

It is not about valuation on hindsight, it is about risk assessment. It might be possible to trade Eratat profitably with it forming only a wry small amount of portfolio, but how do you assess such wanton risk? Maybe 50% of dividends income for such speculation at max?

Sorry, which Sino Grandness saga were you referring to? Also, how do you check the tax collected by authorities? Thank you in advance!

Sorry wildzdream, my bad, it is CMZ

I simply google and baidu it. I try various key words like jiangsu tax bureau, top 100 tax payers in jinjiang etc. whatever key Chinese words I come across I think is useful, I jut search further

(01-02-2014, 02:04 AM)GPD Wrote: [ -> ]Are these sort of scandals common in HKSE specifically S-chip?

Poor corporate governance issue is prominent everywhere. This is the same as HK as well. From what I remember, you have Chaoda Modern and China Green being the CMZ version of HK. Huabao and Renhe have been short sellers' target. There are also news article which brings out accusation of fake revenue/earnings. Bawang and China Fiber Optic are some examples.

Wow ! Default on bond interest payment, what a shocker !

Even if the cash is not “real”, the un-utilised amount raised from the bond/warrant issue should be sufficient to cover the second bond interest payment – unless the amount raised had been fully utilised.

SHK has a seat on the BOD (to safeguard interest of Bondholders). It seems like the Board could not sort this out behind closed door and “dirty laundry” had to be aired to the public – not a good sign at all.

Greenrookie, which Jingjiang corporate tax payer publication are you referring to?

(Not Vested)

Those are links send by an investor, and I caught something amiss,

Below is 2 reproduce from Nextinsight :


greenrookie.

here is part of the jigsaw puzzle

app.jinjiang.gov.cn/gkxxw/dwgk/newstext.asp?id=33846

HI UB40,

Thank you for your info, can I know where you get such info, I was trying to get Yangzijiang tax numbers, are you able to help me with that?? Thanks a lot! I can only find the ranking and 2008 numbers, but not recent years tax paid for YZJ, which operate in Jiangsu.

btw... There are still unanswered questions from your link

1) From your list, 鳄莱特（福建）轻工发展有限公司 paid 5 million of taxes, but such subsidary did not pay any income tax according to their 2012 AR, so it could be VAT or other types of taxes, so where the hell are 福建海明威鞋业有限公司　and 泉州市泉港宏力鞋业有限公司which paid plenty of incom taxes in the list???



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tax paid by lilanz
www.jjjjb.com.cn/html/2013-03/25/content_371993.htm
click on pdf to down load

for eratat on tax paid, I have only part of the jigsaw puzzle.

Hey UB40,

Thank you for your link,

Can you share part of your jigsaw puzzle on Eratat tax??

for year 2012, Eratat pay 49 million tax, and of it subsidaries, only 福建海明威鞋业有限公司is not dormant, it should be captured in your list, since any company that pays 10 million tax is captured in the list...

From the propectus, Haimingwei was the major operating Subsidiary involved in the production and sales activities of our Group during the Period
under Review.

Granted its shares of company revenue and profits might had dropped, but just 30% of the income tax paid from eratat from haimingwei shuould be captured in jinjiang tax bureau

Seriously I would send this document to both eratat and SGX for answers if I am an investor

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PS; I am not trying to boast or gloat over anyone vested, juš thought I wil be good for all to see the full conversation Instead of providing 2 links. Buddies with different interpretation of the tax issues, please point them out so we can learn.

Thanks!!