Timber companies vulnerable to price drop-Barron's

NEW YORK Aug 9 (Reuters) - U.S. timberland prices are overvalued and timber prices could drop by as much as 50 percent in coming years, severely hurting wood and paper companies, business weekly Barron's reported on Sunday.

It said real estate investment trusts (REITs) focused on timber, such as Plum Creek Timber Co (PCL.N), Potlatch Corp PCH.N and Weyerhaeuser Co (WY.N), could see their shares fall.

Analysts at Off Wall Street Consulting wrote that Plum Creek "increasingly looks like a self-liquidating entity rather than an ongoing business concern," Barron's said in its latest edition.

Plum Creek shares are flat so far this year and closed on Friday at $34.06. The company is expected to generate most of its profits this year through land sales, Barron's said.

But "U.S. timberlands may be one of the world's most overvalued asset classes," it added. Last year, when the U.S. stock market shed 35 percent, timberland prices rose 9 percent on top of a 17-percent increase in 2007.

"Timber prices could be vulnerable to a decline of as much as 50 percent in coming years," Barron's wrote. If timber prices crash, not only would the forest-products REITs be hurt, but also university endowments and other institutional investors that plowed an estimated $40 billion into timber in the past decade as part of a shift toward so-called alternative investments, the magazine said.