PETALING JAYA: The appointment of Elevate, an international independent auditing firm, to undertake an assessment on FGV Holdings Bhd’s operations is seen as a positive move by the plantation group, says MIDF Research.
The auditing process is expected to commence this month, said the research house in its latest report.
“We believe that Elevate’s expertise will help to accelerate the auditing process and eventually revoke the Withhold Release Order (WRO) by the United States Customs and Border Protection (CBP) imposed on FGV’s palm oil and palm oil products,” it added.
On Sept 30, 2020, the US banned imports of palm oil and palm products from FGV following an investigation into allegations that it uses forced labour by the US CBP agency.
This news came as a surprise to FGV as the group has been communicating on the initiatives to enhance its labour practices since 2019. To note, the US CBP did not disclose further information on the investigations such as the nature of its findings and locations with regards to the 11 indicators of forced labour.
Furthermore, the research house noted that FGV already had discussions with its US-based legal counsel and Elevate on the audit design and plan.
FGV head of group sustainability division Nurul Hasanah Ahamed Hassain Malim was recently reported as saying that the independent auditor would produce an audit report that will be used to petition for the revocation of the WRO issued by the US CBP.
“What we need to demonstrate in the report is that FGV has taken all the necessary initiatives.
“And this needs to be verified by the auditor to close gaps against all 11 indicators of forced labour,” she added.
Meanwhile, MIDF Research said Hong Kong-based Elevate is an industry leader in sustainability and supply chain services globally.
The company designs, build and manages data-driven sustainability linked programmes with assessment, advisory, programme management and analytics. It conducts over 18,000 assessments and audits per year with the geographic reach to over 100 countries.
“Looking at Elevate’s experience and data-driven insights, we believe that it can conduct 11 International Labour Organisation or ILO forced labour indicators assessment efficiently and diligently,” noted the research house.
All factors considered, MIDF Research is maintaining a “buy” recommendation on FGV with an unchanged target price of RM2.36 per share.
“We have made no adjustments to our financial year 2021 (FY21), FY22 and FY23 earnings forecasts at this juncture,” it added.
Moving forward, MIDF Research anticipates favourable crude palm oil prices coupled with modest fresh fruit bunch productions to help generate a better financial performance for the FGV group.
On top of that, the anticipated higher average selling price of refined sugar and increase in the sales volume should enable FGV’s listed subsidiary, MSM Holdings Bhd, to achieve a higher profit margin in the coming quarters, added the research outfit.