It’s looking more and more like Canadian hewer of wood Sino-Forest Corp.is the star of China’s forestry sector, after one of its biggestcompetitors has become embroiled in a scandal over its most recentfinancial statements.
China Forestry Holdings Ltd. has suspended some of its employeesafter auditor KPMG found “certain irregularities” in the company’s 2010financial results. China Forestry Holdings has seen its shares plunge18.7% so far in 2011, with trading suspended since Friday.
The company’s woes began on Jan. 12 when chief executive Li Han Chunsold more than half of his stake in the company, or about 119 millionshares, holding on to a 2.7% stake (81 million shares). The next day,China Forestry shares plunge 13%.
Then, on Jan. 28, Standard & Poor’sputs the company’s debt on credit watch while Moody’s puts the companyunder review. The two agencies rate China Forestry a B+ and Ba3respectively. As a result, the company’s bonds drop to a record low of55¢ on the dollar.
The upshot of all this? Sino-Forest comes out smelling like roses.Or, at least that nice fresh pine-tree smell you get with those carfresheners.
“We are confident, now more than ever, that Sino-Forest is the classact in timberland management in China,” Richard Kelertas, analyst withDundee Capital Markets, said in a note. “It is the best positioned totake advantage of the expanding wood fibre shortage in China, and thelowest cost timber plantation manager/owner in the world.”
Mr. Kelertas calls this a “great time” to buy into Sino-Forest, as ithas been underperforming its 15-year seasonal average in December andJanuary.
He maintains a Buy rating and target price of $34 a share.
You would think that if Sino was fraudulent, then they would have seen the writing on the wall here, knowing that with one company in the same business, that people would look at their operation. They have not sold shares, no one has resigned, nothing they have done would give someone an impression of wrong doing. The MW report on the otherhand takes advantage of the perfect storm because of China Forest, and other chinese companies having troubles.
Sino has not run off, they are steadfast in their fight....truely a shame for investors....
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