* Says tour postponed because analysts have halted coverage
* Says will reschedule tour for as yet undetermined date
* Sino shares close 10 pct lower on the TSX
(Adds investor's comment, updates share price)
By Euan Rocha and Allison Martell
TORONTO, July 6 Embattled Chinese forestry
company Sino-Forest TRE.TO said on Wednesday it has postponed
a tour of its forestry assets because many analysts have halted
coverage of the company.
The value of Sino-Forest shares and bonds collapsed last
month after short-seller Muddy Waters accused the company of
fraudulently exaggerating the size of its forestry assets.
The company has denied the allegations and appointed an
internal committee of its independent directors to investigate
the matter. However a full review is expected to take up to
three months to complete.
Dundee Capital Markets analyst Richard Kelertas and RBC
Capital Markets analyst Paul Quinn, who initially panned the
Muddy Waters allegations, later opted to suspend coverage of
the company. Other analysts have put their ratings and price
targets on Sino-Forest under review.
"Following management's recent conversations with the
analyst community who cover Sino-Forest, it has become apparent
that many of you have been precluded from resuming coverage of
the company and otherwise discussing its affairs publicly until
after the independent committee reports," the company said in
in a letter announcing the postponement.
The move to postpone the tour doesn't help Sino-Forest's
stock, said Barry Schwartz, who is vice president and portfolio
manager at Baskin Financial Services in Toronto.
"The company has not done a great job defending itself," he
said. "There's too much uncertainty until the auditors come and
pick through the company."
Investors reacted negatively to the company's move, driving
Sino-Forest's shares down more than 20 percent to C$4.16 in
early trading on the Toronto Stock Exchange. The shares pared
some of the early losses ended the day down 10.2 percent at
"We do apologize for this change of plans and hope you
understand the circumstances that required this change," said
Sino's chief executive, Allen Chan, in the letter addressed to
analysts and investors.
Sino-Forest had proposed to organize the tour in mid-July,
in an attempt to calm investors who fled the stock in light of
the Muddy Waters report, which was issued on June 2. The
company did not provide a new date for the tour, but indicated
that it does plan to reschedule it.
"We look forward to rescheduling this trip and providing
you with an opportunity to speak with management, customers,
suppliers and forestry bureaus," Chan said.
Chris Damas, an independent analyst and investor, said he
understands why Sino-Forest would decide to postpone the tour.
"The analysts on the street were probably hesitant to go
over to China because at this point they're skeptical about the
degree or granularity of information they'll get in China," he
Damas said the current level of volatility in the stock
indicates that it is trading more on sentiment than on
fundamentals. "I'd be trading it, but I just don't have that
kind of desire to spoil my summer," he said.
The Sino-Forest announcement comes a day after the Ontario
Securities Commission, Canada's main securities regulator, said
it is conducting a targeted review of companies listed on
markets it covers that have a major portion of their business
operations in emerging markets.
The OSC has stated that it is investigating the Sino-Forest
matter specifically, but it has declined to provide further
details. [ID:nN1E7641Q1] [ID:nN1E75M0K0]
The securities regulator in the province of British
Columbia said it is also keeping tabs on developments in the
"I can say that on the controversy related to Sino-Forest,
we've had a look at some of our existing assessment tools that
we use for looking at companies that are trading to see if
there are any lessons to be learned," said Martin Eady, who is
director of corporate finance at the BC Securities Commission.
"We're certainly open to make adjustments if necessary
based on the outcome of any reviews that happen," he said.
Shares of Sino-Forest, which fell as low as C$1.29 at one
point in June, had closed at C$5.29 on Tuesday on the Toronto
Stock Exchange. The stock is down more than 75 percent since
the beginning of June.
(Reporting by Euan Rocha, Ka Yan Ng and Allison Martell;
editing by Dave Zimmerman and Peter Galloway)