Credit Suisse has a Neutral rating and $6 target price onSino-Forest Corporation (TRE.TO) ahead of its Q1 earnings andconference call.
Earnings preview: "Sino-Forest is scheduled to report Q1 2011earnings on June 14th before 7am (eastern)/7pm HKT. We areforecasting Q1 EPS of US
.18. From our perspective, there are noreliable consensus numbers as virtually the entire Street recentlysuspended coverage. Arguably, the recent market developmentsovershadow the quarterly financial results along with the IFRStransition and make the quarter potentially even less meaningful.Given the long-cycle nature of most of our coverage universe andspecific timberland issues, we do not place undue emphasis onquarterly results."
Selected issues: "Given recent events, the most significantquarterly issue on the quarter will be the actual reporting offinancials on June 14th. In terms of risk management, we would notbe surprised if TRE's auditors issued a qualification statementrelating to the recently appointed independent committee and otheractivities. With TRE's partially pre-announced results, figureslike gross margins, cash flow generation, capex goals and anoverall update will be critical for the tone and direction of thestock."
Conference call details: "Sino-Forest will hold a conferencecall at 8:30am EST/8:30pm HKT on June 14th."
Valuation: "We believe TRE's shares face a long road toredemption, but the process is fluid and subject to change as newinformation becomes known. Our financial model remains unchangedsince the start of recent share price volatility; however, we applyan 80% discount to our C$28 NAV to obtain our C$6.00 target. Thediscount compares to TRE's shares trading at roughly 35% of areasonable NAV during the global financial crisis and is supportedby a number of other approaches. We remain Neutral."