China's forests are losing forestry stocks

Li Hanchun, the former chief executive, was arrested on the alleged misappropriation of 30 million yuan in public funds. China Forest (00930.HK), which has been suspended since January 26 this year, has issued a profit warning recently. It is expected that the interim results as of the end of June will be a loss. The non-compliance of the former management, the negative impact on the company's business operations and finances, and the interest expense on the senior notes.
According to the Hong Kong Stock Exchange's announcement, on January 12 this year, Li Hanchun made a grand sale of 9 million shares of China Forest, with a placing price of 3.35 Hong Kong dollars per share, and cashed in around HK$30.15 million. Afterwards, on January 26, China's forestry application was suspended, and the price was reported to be 2.95 Hong Kong dollars before the suspension. In February this year, Li Hanchun was arrested by the mainland police.
China Forest later announced that Li Hanchun, former associate financial controller Wu Xiaofen and former resource director Zhang Hongyu, etc., were exposed by KPMG Certified Public Accountants for concealing cash records and forging documents and accounts. Li Hanchun was allegedly misappropriating RMB 30 million in public funds. Form an independent board committee to investigate.
China Forest can be said to be the first "bad apple" that emerged in this round of general stock crisis. Despite the company’s loss of HK$2,711 million last year, the company’s private equity fund Carlyle’s 11.18% shareholding has caused China’s forestry to become a new star in the market and has caused the capital market to start focusing on forestry stocks.
The subsequent scandals and the Jiahan forestry, which was overwhelmed by the "sloppy waters," made investors frightened by the forestry stocks. Zeng Junhua, the Financial Secretary of the Hong Kong Special Administrative Region Government, who rarely commented on individual companies, had recently stated during his visit to Canada that Sino-Forest Forestry should clarify issues and reassure investors.
A large European fund manager told the First Financial Daily that even if there was no Sino-Forest forestry and China forest incident, the fund would never consider investing because the forestry stocks were too difficult to conduct due diligence.
There are only a handful of forestry stocks listed in Hong Kong, and the stock price is sluggish across the board. The transaction is also quite deserted. Yesterday, Sino-Forest Hong Kong-listed subsidiary Lucent Group (00094.HK) closed at HK$1.15, down 4.9%, and closed 100; Sanlin Global (03938.HK) fell 3.37% to close at HK$0.86, closing 53 cases. Yongbao Forestry (00723.HK) closed at HK$0.39 and completed 82 transactions.
It is worth mentioning that, except for Yongbao Forestry and Sanlin Global, most forestry companies are at a loss. Sanlin Worldwide's mid-term profit as of the end of December last year was US$23.21 million, and its P/E ratio was 38 times.
Zhengbao Yong, a wealthy businessman, has a stake of 8% in Yongbao Forestry, and the P/E ratio is only 4 times. Thanks to its ownership of the Brazilian Amazon’s virgin forest resources, thanks to the timber direct sales to the Chinese market, its profit for the full year increased by 24.9% to HK$340 million last year, and it distributed its final dividend to investors for the first time.

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