SDP has provided individual cabinets to all its estate workers to keep their passports
by AMIR AIMAN / pic by TMR FILE
SIME Darby Plantation Bhd (SDP) continues to improve its governance amid the completion of Withhold Release Order (WRO) assessment issued by US Custom and Border Protection (CBP) as the planter expects the independent assessment study by Impactt on its Malaysian operation would be completed in early 2022.
Public Investment Bank Bhd (PublicInvest) stated that in addressing previous issues regarding the condition of its foreign workers, SDP has provided individual cabinets to all its estate workers to keep their passports which are located within the workers living space.
“Using passport lockers in a centralised location is no longer the only option as the passports are deemed to be under the control of the company. This is because the passport lockers are far away from the worker accommodation and there are cameras in the building where the passport lockers are placed,” the statement said.
Previously, the audit field works by Impactt was affected as the organisation was unable to reach the site visits in East Malaysia due to Movement Control 3.0 and inter-state ban.
“Unannounced site visits are a requirement by the US CBP as certain data collection such as child labour, recruitment process and sexual harassment require physical interviews. We understand the audit field assessment would require a month to complete under normal circumstances,” the investment bank report on Monday stated.
Upon the assessment submission to US CBP, SDP will undergo internal reviews and a period of Q&A sessions before coming to the decisions on their WRO status.
The research body also noted that although SDP’s sale exposure to the US is insignificant as the sales only valued at US$5 million (RM20.75 million) in 2020, the prolonged status of WRO could raise concerns on the group’s sustainability policy on their other multinational customers over the source of sustainable CPO products.
SDP is also affected by the shortage of foreign workers on its estate amounting to 6,000 vacancies which is 19% less of the requirement, despite being supported by the new recruitment of some local workers to be placed in areas like chemical spraying and fertiliser spraying, the acute shortage of harvesters has significantly affected its second and third quarter group palm oil fresh fruit bunch (FFB).
“The third quarter of the group’s FFB production was down by 2.1% year-on-year and 4.6% quarter-on-quarter.
“Following the government announcement of approving 32,000 foreign plantation workers who have completed their Covid-19 vaccination to be brought into Malaysia in stages, the group expects to see the recruitment of Indonesian workers by year-end,” PublicInvest said.
Nevertheless, PublicInvest had maintained its ‘Neutral’ call with an unchanged target price (TP) of RM4.90 based on 28 times of its 2022 earning per share due to stronger than expected crude palm oil (CPO) prices.
MIDF Amanah Investment Bank Bhd Research (MIDF Research) is also optimistic with SDP’s plans to implement the necessary improvements and specific action plans upon the completion of the assessment report in early 2022.
“SDP will be deploying the new recruitment procedure, where the group is currently working with Andy Hall, the migrant rights activist. Hall will work together with the group step by step to ensure the procedure is being implemented correctly.
“It is worthwhile to note that SDP is working on continuous improvement programmes in Malaysia, namely in improving the group’s grievance mechanism, raising further awareness among the workers and social dialogue as a platform for the workers to raise any issues and concerns.
Based on the outlook, MIDF maintained its ‘Buy’ call on SDP with an unchanged TP of RM6.22 implying a total return of 47.01% with all factors considered regarding the shortage of labour and strong CPO price.
“We expect the group’s earnings to continue to be supported by favourable CPO prices. We remain concerned about the possible impact on the group’s FFB production in view of the shortage of foreign labour which may interrupt bunch pollination.
“On the latest development of WRO against the groups, we believe that interstate travel relaxation will help to accelerate the completion of the assessment,” MIDF Research noted.