Forests rallies as pulp and paper prices head higher

By NZPA

Tuesday 14th January 2003

Fletcher Forests chalked up an almost 9 percent gain today, as the stock played catch-up with fellow forestry companies in response to rising pulp and paper prices.

Its head shares rose as much as 9 cents to $1.10 before easing to trade up 6 cents at $1.07 by mid afternoon, while the preference shares were trading up 7 cents at $1.08. Fletcher Forest's 17.6 percent owner, Rubicon Ltd, added 5 cents to 74c.

First NZ Capital broker James Snell said the stock had lagged the gains made by other forestry stocks, which have been buoyed by rising pulp and paper prices.

Fellow forester Carter Holt Harvey yesterday touched a six-month high of $1.92, but eased 6 cents to $1.85 today as profit hawks set in. Fletcher Forests said in November it was looking at joining Carter Holt and the Central North Island Forestry Partnership (CNI) receivers to set up an independent log exporter.

Another unnamed broker said Forests' shares were being buoyed by a number of factors, including the pulp prices and a pending share buyback.

The company is set to release details of a $50 million onmarket share buyback next month.

Brokers said a potential resolution of the CNI ownership saga and a court battle between US-based Perry Corp and Rubicon and Forests shareholder Guinness Peat Group (GPG) appeared to be on the backburner.

"One day that's going to erupt again and it's going to get resolved, but I've not heard of a rumour saying it's going to be resolved right now," ASB Securities broker Stephen Wright said.

"It's a strange time for that sort of thing to be done, when it's our summer holiday period."

GPG alleged in a high court case before Christmas that Perry hid a 16 percent shareholding in forestry and biotech company Rubicon through equity swaps with two merchant banks, UBS Warburg and Deutsche.

The corporate raider said Perry breached securities laws that require disclosure of stakes bigger than 5 percent.

Justice Judith Potter reserved her decision on the case.

Mr Wright said Fletcher Forests was seen as undervalued by many brokers, but today's rise merely put the stock on a par with the price tag it was attracting before a five-for-one consolidation in November.

"It's only equivalent to 22c which it was at for a long, long, time (before the consolidation)," he said.

Brokers say the stock is worth about $1.60.

Mr Wright said today's movement could be put down to offshore buying.

"It was firm in the US market overnight and then two brokers mainly have bid for reasonable amounts -- Salomon Smith Barney and JB Were.

"The rest looks like it's just follow-on buying by others."

The broader sharemarket today stretched out the two-month peaks touched yesterday, and was up 1.48 points at 2007.65 by mid afternoon.

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