KUALA LUMPUR: Shares in Sime Darby Plantation Bhd rebounded on Monday after news that a major confectionery firm would no longer source for palm oil from the planter sent its stock plunging in the previous session.

       At 9.45am, Sime Darby Plantation was up eight sen or 1.58% to RM5.15 a share, paring losses from last Friday when the counter lost 4.3% of its value.

       According to a Reuters report, Italian confectionary giant Ferrero had last week announced it would stop sourcing palm oil from Sime Darby Plantation as US authorities alleged that it used forced labour in its production processes.

       Sime Darby Plantation later clarified that Ferrero was not a customer and had not been for a while.

       However, it also confirmed that US food group Cargill, which revealed that it had also suspended purchases of palm oil from Sime Darby Plantation, was a direct customer.

       Weighing in on the issue, Hong Leong Investment Bank (HLIB) research said the negative impact on the share price was likely a knee-jerk reaction given that the plantation group would likely be able to divert its products elsewhere amid the tight supply of vegetable oils.

       In addition, it said the group had already taken the necessary steps to address the environmental, social and governance concerns given its recent implementation of a continuous improvement plan to address the 11 International Labour Organisation indicators of forced labour.

       "We understand that the independent assessment report by Impactt is due to be released soon, as SDPL is currently going through its internal process of approval of such report," it added.

       HLIB maintained its forecasts pending the release of 1Q33 results in May, with a target price of RM5.95.

       "SDPL remains one of our top picks for the sector, due to its high operating leverage to CPO price," it said.