* What: Q2 results
* When: Monday, Aug 10
* Seen posting earnings slightly above consensus
By Ashutosh Joshi
BANGALORE, Aug 7 (Reuters) - Canada's Sino-Forest Corp TRE.TO will likely post quarterly profit slightly above consensus estimate, benefiting from its China operations, but analysts see a strong second half for the lumber producer.
"We expect that the second half of this year will be the company's strongest ever, especially as the Chinese economy starts to recover," Dundee Capital Markets analyst Richard Kelertas wrote in a note to clients.
China had earlier announced a 4 trillion yuan ($585 billion) stimulus package, aimed at providing an impetus to its domestic economy. The plan included initiatives such as construction of low-cost houses and rail projects that could boost demand for wooden logs.
Sino-Forest, which is the largest forest operator in China, owns and manages about 347,000 hectares of plantation trees in that country. It gets majority of its revenue from its Chinese operations.
Analyst Kelertas, who has a "buy" rating on the stock, expects domestic Chinese log prices to rise by 2 percent to 3 percent this year and about 5 percent to 6 percent in 2010.
"The Chinese stimulus has a lot more attraction than any other government's stimulus package out there. Lots of data points indicate that short term weakness in log prices in Q4 has recovered. The demand is up. That should out spell good news for Sino," RBC Capital Markets analyst Paul Quinn told Reuters.
According to Reuters Estimates, seven analysts on average expect second-quarter earnings of 22 cents a share, excluding items, while the consensus revenue view of two analysts is $212.3 million.
Kelertas expects earnings of 23 cents a share for the company, which is scheduled to report quarterly results on Monday before the market opens.
Sino-Forest earned 24 cents a share on revenue of $187.1 million in the year-ago period.
Wooden log prices continued to recover during the first half of the year, after they fell about 15 percent by the end of last year, analysts said.
Sino-Forest earns about 70 percent of its annual earnings in the second half of the year, mainly due to its harvesting cycle.
Sino-Forest, which has been acquiring plantations in China's densely forested provinces, is well positioned to take advantage of that country's wood fiber supply-demand imbalance, they said.
"The company also has a clean balance sheet and we believe they will be able to fully fund their planned capital expenditures as well as examine further long-term standing timber acquisition agreements at attractive prices," analyst Kelertas said.
Sino-Forest recently signed a long-term agreement to acquire pine and Chinese fir plantation forests in Jiangxi province, a move that could help the company to lock in costs of future production in that province, analyst Quinn said.
Maison Placements analyst Brian Topp, who has a "buy" rating on Sino-Forest, however, said he remains cautious on most timber stocks in the near term.
The company's shares, which have gained about 25 percent in the last three months, were down 3 Canadian cents at C$15.98 Friday afternoon on the Toronto Stock Exchange. ($1=6.831 Yuan) (Editing by Deepak Kannan)