(12-02-2014, 09:20 AM)valuebuddies Wrote: [ -> ] (11-02-2014, 07:10 PM)wahkao Wrote: [ -> ]wondering whats going on
this company passed all my fundamental screens
Frauds will not pass your fundamental screens
That's true. Thats why even if u apply an enhanced due diligence on your satelite holdings, you may get it wrong reading just fundamentals. This is also why I believe asset allocation for such justification cannot be more than 10-20% of entire portfolio for people who have a bigger risk appetite.
In fact, actually there are quite a couple of counters in listed on SGX are that "sort" of category of investing I noticed.. Volume arbitrage, then you investigate that counter trades below NAV and profitable and historically good dividend yield of 3-6%.. Then you come in and nibble.
I'ill be honest, I vested this counter when I first posted on a potential breakout. I remember reading vividly some fund mgrs who are CFA accredited previously working in SWF etc etc also highlighted this counter facts and I became pretty convinced and shortlisted this counter. I admit I was lucky to divest as I managed to contra off for ease rather than picking up the stock for growth.
I can only count my blessings.
Nontheless thanks for all the sharing from VB
(11-02-2014, 07:42 PM)felixleong Wrote: [ -> ]Care to share with us whats are your fundamental screens for this counter?
the usual warren buffet ones
debt, cashflow, valuation by PE and NAV, asset growth, ROE , ROA
(12-02-2014, 09:20 AM)valuebuddies Wrote: [ -> ] (11-02-2014, 07:10 PM)wahkao Wrote: [ -> ]wondering whats going on
this company passed all my fundamental screens
Frauds will not pass your fundamental screens
some will, some wont
These will be caught by my screens
-capitalization of profits (sell assets to buff up profits), these will be caught by my screens
-unfair increase in number of shares through private placements or rights issue
i am constantly improving my screens to catch as many potential frauds as possible.
In the case of Eratat, I am trying to see what can be learnt here, and how I can improve my fundamental screens.
So far I could not find anything to improve.
The only hint was excessive cash for the business and yet paying high yield for bonds. The financial statements were mainly intact.
(12-02-2014, 10:54 PM)wahkao Wrote: [ -> ] (12-02-2014, 09:20 AM)valuebuddies Wrote: [ -> ] (11-02-2014, 07:10 PM)wahkao Wrote: [ -> ]wondering whats going on
this company passed all my fundamental screens
Frauds will not pass your fundamental screens
some will, some wont
These will be caught by my screens
-capitalization of profits (sell assets to buff up profits), these will be caught by my screens
-unfair increase in number of shares through private placements or rights issue
i am constantly improving my screens to catch as many potential frauds as possible.
In the case of Eratat, I am trying to see what can be learnt here, and how I can improve my fundamental screens.
So far I could not find anything to improve.
google and baidu the top corporate tax payers in various China province, and look at the footnote of AR to see which subsidiary pay what amount of taxes. Baidu the location of subsidiary, baidu / google the highest tax corporate tax payers of that province.
If the numbers didn't square, RUN with all your life. Some discrepancy is fine, since China documentation is not robust, but for Eratat case, they claim Hanmingwei paid taxes in excess of 10 million (cannot bothered to relook my earlier post in nextinsight), but you cannot find the name in various tax payers list provided by the tax bureaus, the case of frauds is super high!!
(12-02-2014, 10:51 PM)wahkao Wrote: [ -> ] (11-02-2014, 07:42 PM)felixleong Wrote: [ -> ]Care to share with us whats are your fundamental screens for this counter?
the usual warren buffet ones
debt, cashflow, valuation by PE and NAV, asset growth, ROE , ROA
Such quantitative screens can work, to the extent that the data being used are accurate AND the portfolio is widely diversified.
In many of the S-chips the integrity of the data is in doubt, which means that such screens simply do not work. The screens are not able to exclude fraud - they are, at best, a shortlist of suggestions for further investigation.
Even if it is clear that the companies in question are not committing financial shenanigans, the portfolio needs to be diversified across a large number of issues to offset the occasional bad bets (from operational problems, not fraud). 20 such issues would probably be a sensible minimum.
Benjamin Graham made clear that such a strategy is a
portfolio operation rather than a stock-specific one i.e. results are good on a portfolio, but uncertain on any given stock.
In short, to use such quantitative screens effectively you need to (a) first make sure the companies are not fraudulent and (b) buy many different companies. Doing only one (or neither) is unlikely to give satisfactory results.
As usual, YMMV.
I thought it was pretty clear this counter had a number of red flags.
I had the fortunate time to read up books on marketing recently. In terms of business strategies, repositioning a brand is an almost impossible event, requiring extensive resources and time. Not to mention line extension, extending from shoes to apparel. Even though the brand is registered in UK, the China tag is still there, and Chinese people aren't stupid enough not to know that in their own country. FA analysis should never be purely on numbers. Want to treat it as a business investment? Study business strategies as well!
SIAS Research has changed to Voyage Research
The update on Eratat is merely:
Eratat Lifestyle Limited has suspended the trading of its shares pending further developments. Due to the circumstances, we suspend coverage until the company is able to provide us updates and insights on the situation.
It would be useful to note the disclaimer:
Please note that all reports in this website comes with the following disclaimer. Please read before further action.
All research reports are based on information which we believe to be reliable. Any opinions expressed reflect our judgment at report date and are subject to change without notice. These research materials are for information only.
They do not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive or access these research material. It is not to be construed as an offer, or solicitation of an offer to sell or buy securities referred herein.
The use of this material does not absolve you of your responsibility for your own investment decisions. We accept no liability for any direct or indirect loss arising from the use of this research material.
We, our associates, directors and/or employees may have an interest in the securities and/or companies mentioned herein. This research material may not be reproduced, distributed or published for any purpose by anyone without our specific prior consent.
Always remember, your investment is your own decision. Research reports, however inaccurate and bad, are forever protected by disclaimers.
Typifies condition in China that many businessman mentality keep two set of account and are not able to separate interest of company from personal.
I guess, what Mr Lin did was to pledge his personal stake to borrow from SHK and the money is exit via Eratat. Once the cash is in the Co. - guess what? He probably see eratat as zero while the cash is real. Not sure how much of the bond money has been drawn?
Not sure what is happening now. The CEO (ex cfo) now has to fully account for what is going on. Meanwhile lets wait and see what good could SGX be arranging - another RTO candidate.
Thanks to those who suspect a rat on high interest bond issue. How many conviction will there be - BOD, Auditor, CFO?
http://www.eratatgroup.com/v2/files/rele..._final.pdf
http://nextinsight.net/index.php/story-a...s-briefing
(25-02-2014, 01:32 AM)momoeagle Wrote: [ -> ]SIAS Research has changed to Voyage Research
The update on Eratat is merely:
Eratat Lifestyle Limited has suspended the trading of its shares pending further developments. Due to the circumstances, we suspend coverage until the company is able to provide us updates and insights on the situation.
It would be useful to note the disclaimer:
Please note that all reports in this website comes with the following disclaimer. Please read before further action.
All research reports are based on information which we believe to be reliable. Any opinions expressed reflect our judgment at report date and are subject to change without notice. These research materials are for information only.
They do not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive or access these research material. It is not to be construed as an offer, or solicitation of an offer to sell or buy securities referred herein.
The use of this material does not absolve you of your responsibility for your own investment decisions. We accept no liability for any direct or indirect loss arising from the use of this research material.
We, our associates, directors and/or employees may have an interest in the securities and/or companies mentioned herein. This research material may not be reproduced, distributed or published for any purpose by anyone without our specific prior consent.
Always remember, your investment is your own decision. Research reports, however inaccurate and bad, are forever protected by disclaimers.