DLC Clearlease Reports; Sino-Forest (Toronto:TRE.TO) stock is down more than 70 percent since the beginning of June 2011 postpones tour

DLC Clearlease Reports; Sino-Forest (Toronto:TRE.TO) stock is down more than 70 percent since the beginning of June 2011 postpones tour

VANCOUVER, BC (July 7, 2011) Dominion Lending Centres Clearlease Reports Embattled Chinese forestry company Sino-Forest said on Wednesday July 6, 2011 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 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 and were at C$4.61, down 13 percent, at 11:25 (1525 GMT).

“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.

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.

The securities regulator in the province of British Columbia said it is also keeping tabs on developments in the Sino-Forest case.

“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, closed at C$5.29 on Tuesday on the Toronto Stock Exchange . The stock is down more than 70 percent since the beginning of June.

($1=$0.97 Canadian)

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