‘Not guilty’ verdict will do little for SDP share price, say analysts

‘Not guilty’ verdict will do little for SDP share price, say analysts

Analysts expect negligible impact on oil palm producer's share price even after it is cleared of forced labour allegations.

Analysts see insignificant impact on Sime Darby Plantation after the US changed its verdict on forced labour allegations, but maintain a ‘hold’ call on its share price
KUALA LUMPUR:
While being cleared of forced labour allegations will enable Sime Darby Plantation Bhd (SDP) to resume exports of its palm oil products to the US, the impact on its earnings and share price is likely to be insignificant, according to a research house.

Hong Leong Investment Bank, which is maintaining its “hold” call on the SDP stock, said this was a positive development nonetheless.

“We maintain our earnings forecasts on SDP as well as the ‘hold’ call and target price (TP) of RM4.49,” it said in a note today.

The US Customs and Border Protection had, on Feb 3, permitted the importation of palm oil from SDP into the US with immediate effect as it had modified its forced labour finding against the company.

Meanwhile, Maybank Investment Bank Bhd expects SDP to turn in a better quarter-on-quarter (q-o-q) core net profit at RM597 million for the fourth quarter of 2022 (Q4 2022), which would be on track to meet the consensus financial year 2022 forecasts of RM2.271 billion/RM2.25 billion, respectively.

“Its performance will be underpinned by higher sales volume — especially in Papua New Guinea and Indonesia — owing to the huge inventory on its balance sheet as of end-September 2022.

“Additionally, its performance will also be driven by the forward sales locked in earlier at higher than crude palm oil (CPO) spot average selling price in Q4, and lower unit cost of production owing to a slowdown in manuring activities in Q4 due to wet weather,” it added.

Hence, Maybank maintained its “hold” call on SDP, with a TP of RM4.43.

At 11.36am, Sime Darby Plantation added six sen to RM4.49 with 477,100 shares traded.

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