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By David Berman

Anyone betting that the recent sharp downturn in Sino-Forest Corp. (OTC:SNOFF) shares is a buying opportunity has at least one ally: RBC Capital Markets analyst Paul Quinn.

In a research note published on Friday, Mr. Quinn stuck to his “outperform” recommendation on the stock, arguing that the evidence is mounting in Sino-Forest’s favor that allegations made against the company by Muddy Waters will be proven wrong. Last week, Muddy Waters published allegations that the Chinese-based and forestry firm had overstated its assets, decimating the share price and sending it to five-year lows.

Mr. Quinn noted that Muddy Waters had said in an analysts’ call on Monday that it had been unable to find any business registration records for a Sino-Forest subsidiary called Greenheart for its operations in Suriname. However, Greenheart issued a press release on Thursday morning denying those allegations.

“We spoke with the Chamber of Commerce & Industry in Suriname and confirmed the registration information provided by Greenheart,” Mr. Quinn said in his note.

At the same time, he challenged Muddy Waters’ claim that Sino-Forest could not have harvested as much timber in Yunnan province as it has claimed because it would have exceeded the annual quota. Mr. Quinn said that by selling the trees as standing timber – as opposed to harvested timber – the company was not limited by the quota.

In coming out in defense of the embattled company, Mr. Quinn is the only analyst tracked by Bloomberg that has a bullish recommendation on the stock. Most other analysts have dropped their target prices. Credit Suisse has cut its target to $6 from $28 previously. According to Bloomberg, Mr. Quinn is sticking to his $27 target. Sino-Forest shares traded at $4.72 on Friday in late morning trading.

Disclosure: None

Source: RBC Sticks by Sino-Forest