“We view the allegation negatively but do not think that there will be a major impact on KLK’s share price.
“The allegation is a reminder that the plantation sector will always face allegations of labour abuse or unethical recruitment practices,” the bank said in a research note today.
It noted that the plantation group is investigating the allegations made against the sub-agents of SOS Manpower Service, KLK’s appointed agent to recruit Nepalese workers. The allegations were made by Sajha Sabal Media, a news portal in Nepal.
“We take the allegations seriously and have immediately launched an investigation with all the relevant parties to determine and verify the facts of the matter,” KLK said in a statement on Friday.
AmInvest also said it did not think the matter will be escalated to the US Customs and Border Protection (US CBP).
It reminded that Sime Darby Plantation Bhd’s (SDP) palm products in Malaysia were banned by the US CBP from late-2020 to early-2023 due to allegations of labour abuse.
“In spite of the ban, SDP was not significantly affected as US is not a major market for the group.
“We do not think that the RSPO would be involved as it appears the allegations involve workers in the glove industry and not palm oil,” AmInvest said.
RSPO is the Roundtable on Sustainable Palm Oil, a global body promoting the growth and use of sustainable palm oil products.
AmInvest maintains ‘buy’ call
Despite the controversy, the bank maintained its “buy” call on KLK with an unchanged fair value of RM25.20 per share. It said this is based on a FY2025F price-earnings (PE) ratio of 18 times, the five-year average of big-cap planters.
KLK said it has a strict no recruitment fee policy, implemented since 2018 and further enhanced in 2022, to ensure no recruitment and related fees are imposed on workers at any stage during the recruitment process.
“KLK absorbs all employer-related statutory recruitment and related fees, including but not limited to the cost of transportation, visas, work permits, medical checks, and training/orientation costs in the countries of origin,” KLK said in its statement.
However, the group also said it had completed the “reimbursement of all recruitment and related fees” to its foreign workers.
KLK, along with Batu Kawan Bhd, are controlled by the family of the late Lee Loy Seng, a prominent miner and plantation owner from Ipoh, Perak. Lee’s eldest son, Oi Hian, 72, is KLK’s executive chairman while another son Hau Hian, 70, is a director. Oi Hian’s son, Jia Zhang, 40, is also a board member as well as the group chief operating officer.
During the Emergency years in post-war Malaya, many British plantation owners sold off their rubber estates. The Lee family capitalised on this by buying a few estates. Loy Seng subsequently purchased the assets of one of the largest plantation companies and renamed it Kuala Lumpur Kepong, transforming it into one of the country’s largest listed plantation groups.
Oi Hian and Hau Hian are in Forbes “Malaysia’s 50 Richest” list with a net worth of US$1.2 billion (RM5.73 billion), as of April 15, 2024.
KLK’s shares ended 20 sen or 0.87% higher, giving the group a market capitalisation of RM25.5 billion.