KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) is positive of the modification made by the United States Customs and Border Protection (US CBP) on its forced labour finding against Sime Darby Plantation (SDP).
"This indicates that the Withhold Release Order (WRO) imposed by US CBP since January 2022 will soon be lifted, hence allowing SDP to resume exports of its palm oil products to the US," the bank-backed research firm said in a note.
US CBP had on February 3 modified its forced labour finding against SDP, following the custom's statement that the company's palm oil products are no longer produced through forced labour.
To recap, on December 16, 2020, US CBP issued a WRO on palm oil products produced by SDP and its subsidiaries based on information that reasonably indicated the presence of all 11 of the International Labour Organisation's forced labour indicators in the SDP production process.
US CBP subsequently issued a notice of finding on January 28, 2022, in which it had determined that certain SDP's palm oil products are produced using convict, forced or indentured labour, and the finding is primarily aimed at SDP's Malaysian operations.
"In response, SDP introduced several strategies as part of its renewed commitments to safeguard the welfare of its employees.
"These include, amongst others, reimbursement of recruitment fees that current and eligible former workers may have paid to secure employment with SDP, the introduction of stricter expectations within its enhance Migrant Worker Responsible Recruitment Procedure, conducting regular due diligence on contractors to ensure that they strictly adhere to SDP's contractor vendor management policies and guidelines (when managing workers), and creation of social dialogue platforms."
HLIB Research maintained its forecasts on SDP as it believed the WRO's impact on SDP's earnings had been minimal in the past two years.
HLIB Research also maintained a 'Hold' on the company with a target price of RM4.49.