Eratat Lifestyle[1] reported a sterling set of 1HFY11 results for the period ended 30 June 2011. 1HFY11 sales and net profit surged 25% and 94% respectively to RMB523m and RMB90m. Gross margins have held steady above 30%, in line with management guidance. However, its share price only showed a positive one day response to the results before resuming its precipitous downward decline. Year to date (“ytd”), Eratat share price has declined 44%. To put this in perspective, STI and FTSE China Index’s ytd performance fell about 14% and 27% respectively. Besides the lackluster equity markets and the weak market sentiment on S chips, what had happened to Eratat for this poor performance? Based on my observation, I believe the following two factors (rightfully or wrongfully) contributed to the above average decline in Eratat’s share price. Firstly, its large (and increasing) trade and other receivables Based on its 1HFY11 results...