Greenheart Group, the Hong Kong-listed unit of beleaguered logging company Sino-Forest, lost a third of its value yesterday after a trading halt on its shares was lifted and investors shrugged off its attempts to distance itself from its scandal-ridden parent.
The stock has now plunged 80 per cent since Toronto-traded Sino- Forest was accused on June 2 by US short seller Muddy Waters of exaggerating assets and sales. The company denied the allegations but was last month accused of fraud by the Ontario Securities Commission.
Greenheart - which says it holds timber concessions in Suriname, South America - announced late on Monday that 'the group's operations are independent of Sino-Forest'.
However, it also admitted that an ongoing investigation into its business by Hong Kong's Securities and Futures Commission had not yet been completed.
'[Greenheart] may be operationally independent in part, but Sino-Forest owns a majority stake. There are common board members and the two companies are major customers of each other,' said Richard Segal, an emerging markets analyst at Jefferies International.
Greenheart chief executive Judson Martin is Sino-Forest's chairman. He took on the role when it was vacated by the commercial forest plantation operator's founder, Allen Chan, late last month.
Former Hutchison Whampoa director Simon Murray is on both companies' board of directors.
The SFC halted trading in Greenheart's shares on August 29 upon realising the firm had not disclosed that one of its logging concessions had already expired. The licence, which covered about 10 per cent of Greenheart's harvesting rights in Suriname, had since been renewed, the firm said yesterday.
The loss-making company recorded sales of just HK$16.7 million last year.
It has ambitious output targets for Suriname, but Segal argued in June that its goals appeared too large for the country's small and undeveloped timber industry.
Greenheart said in May that it planned to harvest 300,000 cubic metres of timber annually. But according to Segal, Suriname exported just 30,000 cubic metres of timber in 2008 - the latest available figure.
For Greenheart to meet its sales target, the markets analyst wrote: 'This would virtually require a global scale timber export sector to be created from scratch.'
A spokesman for Greenheart declined to comment.Topics: Republics Liberal Democracies Business Sino-Forest Corporation