Having a hard time seeing Sino-Forest for the trees
Analysts have been thrown into disarray by the sensational claims against Hong Kong- and Canadian-listed Sino-Forest Corp by Carson Block's company Muddy Waters. The company's stock traded at about C$20 (HK$160) for most of last month when Credit Suisse, for example, reaffirmed its 'outperform' C$28 target for the company.
After Block's accusations that Sino-Forest had been inflating its assets the share price fell 95 per cent to C$5.23 on Friday. On Monday, Credit Suisse presumably without having time to check the veracity of Muddy Waters' claims downgraded the stock to 'neutral' and a target price of C$6.
However, Sino-Forest's management reacted to the claims by publishing bank statements and land agreements to show its assets are legitimate.
The stock has bounced back 18 per cent to C$6.16. So does Credit Suisse now believe the stock is overvalued? Maybe it's time to start counting those trees. It's hard work but somebody ought to do it.
Failure to find value