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Gold/Mining/Energy : Sino-Forest (TSE: TRE.A) A STOCK FOR THE FUTURE!! -- Ignore unavailable to you. Want to Upgrade?

To: David Michaud who wrote (247)	5/16/2000 9:16:00 AM
From: Robert Raymond	Read Replies (1) \| Respond to of 265

The following is from stockformation.com Stockformation Commentary By S. Miles Sino-Forest Corp. -- China trees a long-term growth story 16/05/2000 A growing earnings and revenue platform plus a promise of bigger profits down the road is driving the shares of integrated forest products company Sino-Forest Corp. TREa.TO to new highs. The Toronto-based firm is the largest licencee of China's forests. It grows and harvests eucalyptus, aspen and pine trees from 603,000 hectares of long-term plantations then sells logs, wood chips and other wood products to industry. Sino-Forest last week announced that it would expand its operations in southern China by building a US$28-million particle board plant -- the first in the country capable of producing international quality board. The plant will employ technology imported from Finland and have the capacity to turn out more than 100,000 cubic metres of board a year. It is expected to be up and running by the end of the second quarter. The mill will be upgraded for lamination next year, which will result in additional capacity of about six million square metres of laminated board annually. Located in Gaoyao City, the new plant will have a ready-made market. It is just 120 kilometres away from Guangzhou, a major furniture manufacturing centre for the region. The proximity of the plant to the market would provide Sino-Forest with "a significant cost advantage" over rival firms, the company says. "The utilization of international technology, combined with quality wood fibre source means we will be able to produce a superior product compared to other Chinese producers," says Allen Chan, chief executive. The announcement came just two days after Sino-Forest released solid results for its fourth quarter ended Dec. 31, 1999. Net income in the period jumped 34% to US$9.9-million, or US $0.11 a share, from US$7.4-million (US $0.09) in the same period a year earlier. Revenue soared 48% to US$58.4-million, from US$39.5-million in the fourth quarter of 1998. The positive developments saw Sino-Forest shares jump more than 12% to $1.80. Analysts who follow Sino-Forest see it as a long-term growth story. The company has a huge potential market and it holds the rights to operate and manage the China plantations for the next 50 years. Profits would continue to grow as trees reach maturity. Herve Carreau and Don Roberts, analysts at CIBC World Markets Inc., are bullish on Sino-Forest stock. They have a "strong buy" rating on the shares and a 12-month target price of $4 (Can) -- up more than 120% from recent trading levels. The analysts are calling for the company to grow earnings to US $0.55 a share in 2000 and US $0.65 a share in 2001. Built into their calculations is a discount rate of 25% to reflect the risk associated with operating in China. Mr. Carreau and Mr. Roberts told investors in a recent research note that the construction of the new particle board plant had been initiated in 1997. After spending US $10-million to purchase equipment from Finland, it was deferred when the company was unable to obtain the required capital. However, better forest products\ prices and the recovery of Asian economies has sparked the project back to life. The new plant would have a significant impact on the company's ability to generate revenue, the analysts say. Particle board sales are expected to be $10-million in 2000 but would grow 250% to US$35-million in 2001. The firm's wood chip shipments are growing, too. They climbed from 1.6 million tonnes in 1998 to just over 2 million tonnes last year and are expected to reach 2.5 million tonnes in 2000 as capacity is increased. "Production from trees grown by the company will increase slowly over the next year, but will accelerate rapidly from 2001 as more of its trees reach maturity," Mr. Carreau and Mr. Roberts say. "Profitability and cash flow will then increase significantly given that the cost of wood from the plantations is 20% lower than the cost of logs purchased from forestry bureaus." The analysts say the additional would chip shipments would help fill growing internal demand for the product in China, where 95% of the firm's sales are made. "The growth in demand will result from higher paper consumption, which will continue to increase due to population growth, increasing literacy rates and the conversion of polluting non-wood capacity to pulp wood," they say.