Top Glove’s experience gives Sime Plantation hope of resolving its WRO woes

THE successful lifting of Top Glove Corp Bhd’s Withhold Release Order (WRO) by the US Customs and Border Protection (CBP) in September 2021 has raised hope that Sime Darby Plantation Bhd can replicate a similar feat.

According to Maybank IB Research, Sime Plantation has set an internal target for its US CBP submission by end-1Q 2022 although “realistically, a finding report by the US CBP may still be 12 months away”.

“Meanwhile, we are comforted that the financial impact on Sime Plantation has been relatively muted thus far largely because its annual exports to US was just US$5 mil prior to the WRO,” opined analyst Ong Chee Ting in a company update.

“From the experience of Top Glove (“sell”; target price: RM1.68), the review process took circa eight months before US CBP published its finding report and another five months thereafter before the export ban to the US was finally lifted on Sept 9.”

The planter had staged a virtual briefing session to provide updates on the developments with regard to the WRO issued by the US CBP to market analysts last Friday (Oct 22).

Following its last update in August, Sime Plantation highlighted that while inter-state travel restrictions have been eased, it is still waiting for the Impactt team to fly into Malaysia at the consultant’s convenience to complete the necessary audit field works once the Malaysian borders reopen and the quarantine requirements eases up.

“Only after that can Impactt prepare its comprehensive evaluation of Sime Plantation’s labour practices in Malaysia,” explained Maybank IB Research. “In the meantime, Sime Plantation continues to improve on its labour practices such as improving grievance mechanism to ensure more efficient and effective response and investigation.”

Although the research house retained its “hold” rating on Sime Plantation, it raised the company’s RNAV (revised net asset value)-based target price to RM4.58 (from RM4.07 previously) as it reduced its discount rate on Sime Plantation to 55% (from 60% but still above the pre-WRO discount of 50%).

“Sime Plantation has continued to engage and provide periodic updates to its key customers on its development. Thus far, no clients have dropped the company since the last update in Augut,” added Maybank IB Research.

At the close of today’s mid-day trading, Sime Plantation was up 4 sen or 0.93% to RM4.32 with 523,000 shares traded, thus valuing the company at RM29.88 bil. – Oct 25, 2021

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