KUALA LUMPUR: Kuala Lumpur Kepong Bhd's (KLK) failure to resolve allegations of unethical recruitment could pose a risk to its environmental, social and governance (ESG) rating.
Public Investment Bank Bhd (PublicInvest) research said this is given the rising concerns over labour practices.
RAM Sustainability recently affirmed KLK's overall sustainability rating of Gold2 (G2).
The group's Social, Governance and Positive Impact Ratings have also been affirmed at G2, G3 and G2, respectively.
Pending the investigation results, the investment bank has maintained a "Neutral "call on KLK with an unchanged target price of RM21.33.
On Friday, KLK said it is investigating allegations of unethical recruitment practices made by a news portal in Nepal against the sub-agents of SOS Manpower Service.
SOS Manpower is its appointed agent to recruit Nepalese foreign workers for its subsidiary KL-Kepong Rubber Products Sdn Bhd.
According to Nepalise news portal Sajha Sabal Media, sub-agents of SOSManpower company have been demanding NPR260,000 from the workers who want employment with KL Kepong Rubber Products.
"However, the group unveiled that the two Manpower agency, branch (Nepal HR and Kanchan Human) are not authorised to publish an advertisement with regards to the employment without Manpower name and LT Number. "According to workers, the unauthorised agents are controlling the workers' recruitment process and the worker's visa processing fees was not informed by SOS," PublicInvest said in a note today.
KL-Kepong Rubber Products started operations in 1987 as a rubber glove manufacturer based at a new factory in Bercham. Perak.
It specialises in original equipment manufacturing and private label production for reusable gloves.
In 2022, it ventured into examination glove production. It sources direct access from a consistent supply of high-quality raw materials through its parent company and affiliated sister companies such as 26.89 per cent-owned UK-listed Synthomer.
The investment bank also noted that KLK has a strict no-recruitment-fee policy, which has been implemented since 2018 and further enhanced in 2022.
This is to ensure that no recruitment andrelated fees are imposed on workers at any stage during the recruitment process.
Nevertheless, PublicInvest expects better results for KLK's upstream plantation segment in the upcoming short-term results.
During the quarter, the group registered fresh fruit bunches (FFB) production growth of 8.3 per cent YoY to 1.28 million metric tonne.
Meanwhile, average crude palm oil (CPO) price remained steady at RM4,006 per tonne.
KLK's share price was trading 0.52 per cent higher at RM23.12 a share, as at 11.33am.