Recently, just before Chinese New Year holidays, Eratat requested for a trading halt and subsequently suspension. It was a company I have been suspicious about since March 2011. Much of my analysis (with some calculations probably off) can be found here.
Note that this isn't an exercise or pure blog post done specially to ride on a S-chip suspension bandwagon, but to consolidate the lessons and what has been posted before since 2011.
I might well be wrong, and everything turns out fine eventually. But I highly doubt so.
Let us first recap the pretty obvious red flags that were brought up over the course of time in different forums.
1) High percentage of receivables as part of assets.
2) The receivables would have been even higher had some of it not be written off as sales incentive and renovation subsidies.
3) Despite high cash levels, Eratat had "no choice" but to borrow at an effective interest rate of 32%.
4) As Greenrookie has pointed out in NextInsight forum, Eratat's subsidiary did not appear in the tax reports of top 100 corporate tax payers, which means it paid less than 3 mil RMB in taxes. The maths does not work out.
5) The director sold all his shares at a "deep discount" in Aug 2013 due to personal reasons that were never revealed. Now we know his "personal reasons".
I have also pointed out earlier that the NAV after netting off receivables looks constant after 2 years of being listed.