Sino-Forest Corp Up 12% as Credit Suisse Previews Q1 Earnings

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Credit Suisse has a Neutral rating and $6 target price on Sino-Forest Corporation (TRE.TO) ahead of its Q1 earnings and conference call next week.

Earnings preview: "Sino-Forest is scheduled to report Q1 2011 earnings on June 14th before 7am (eastern)/7pm HKT. We are forecasting Q1 EPS of US$0.18. From our perspective, there are no reliable consensus numbers as virtually the entire Street recently suspended coverage. Arguably, the recent market developments overshadow the quarterly financial results along with the IFRS transition and make the quarter potentially even less meaningful. Given the long-cycle nature of most of our coverage universe and specific timberland issues, we do not place undue emphasis on quarterly results."

Selected issues: "Given recent events, the most significant quarterly issue on the quarter will be the actual reporting of financials on June 14th. In terms of risk management, we would not be surprised if TRE's auditors issued a qualification statement relating to the recently appointed independent committee and other activities. With TRE's partially pre-announced results, figures like gross margins, cash flow generation, capex goals and an overall update will be critical for the tone and direction of the stock."

Conference call details: "Sino-Forest will hold a conference call at 8:30am EST/8:30pm HKT on June 14th."

Valuation: "We believe TRE's shares face a long road to redemption, but the process is fluid and subject to change as new information becomes known. Our financial model remains unchanged since the start of recent share price volatility; however, we apply an 80% discount to our C$28 NAV to obtain our C$6.00 target. The discount compares to TRE's shares trading at roughly 35% of a reasonable NAV during the global financial crisis and is supported by a number of other approaches. We remain Neutral."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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