Aeon Co. (M) Bhd’s confirmed RM18.7 million liability in its long-running legal dispute with Betanaz Properties Sdn Bhd is unlikely to have a material impact on future earnings as the retailer has already made sufficient provisions for the case, according to CIMB Securities.
The research house said the Court of Appeal’s decision on July 22, which upheld the High Court’s earlier ruling in favour of Betanaz, would eventually result in a cash outflow but should not affect Aeon’s profitability because the company had recognised RM26.6 million in litigation-related expenses over FY2024 and FY2025.
Aeon announced on July 23 that it intends to seek leave to appeal the decision at the Federal Court while also applying for a stay of execution.
“The confirmed liability is already substantially covered by existing provisions,” CIMB Securities said in a research note.
The legal dispute stems from a tenancy agreement signed in 2017 under which Betanaz Properties, a 51%-owned subsidiary of Ahmad Zaki Resources Bhd (AZRB), was to develop and lease a shopping complex in Kuantan to Aeon.
Aeon terminated the agreement in 2021, alleging that Betanaz and AZRB had failed to fulfil contractual obligations.
Betanaz subsequently sued Aeon for wrongful termination, initially seeking RM59.3 million in damages or, alternatively, RM18.7 million for wasted development costs.
Aeon responded with a counterclaim seeking a refund of RM30.7 million that it had previously paid under the agreement.
In December 2024, the High Court ruled in favour of Betanaz’s alternative claim of RM18.7 million together with interest, while dismissing Aeon’s counterclaim and Betanaz’s larger RM59.3 million claim.
The Court of Appeal upheld that decision on July 22.
Provisions seen as sufficient
CIMB Securities noted that Aeon had booked RM22.6 million in litigation-related expenses during FY2024 and a further RM4 million in FY2025, bringing total provisions to RM26.6 million.
Based on the confirmed liability of about RM22.4 million, comprising the RM18.7 million judgment sum, RM3.6 million in accrued interest as at Jan 22, 2025, and net legal costs of approximately RM40,000, the research house estimates Aeon still has around RM4.2 million in remaining provisions.
It believes this buffer should be sufficient to absorb additional interest accrued after Jan 23, 2025.
A separate claim involving damages arising from an ex parte injunction linked to a RM174,000 bank guarantee remains before the High Court for assessment.
However, CIMB Securities expects any financial impact from that claim to be immaterial.
Following the court ruling, CIMB Securities maintained its earnings forecasts for FY2025 to FY2028, as well as its “Buy” recommendation on Aeon.
The research house also retained its sum-of-parts target price of RM1.68 per share.
It noted that Aeon continues to trade at attractive valuations, with the stock trading at around 9.5 times CY2026 forward earnings, representing discounts of 31.6% and 68.4% to its five-year and 10-year average forward price-to-earnings multiples, respectively.
CIMB Securities also highlighted Aeon’s healthy balance sheet, with net gearing of just 0.1 times, alongside forecast dividend yields of between 4.7% and 5.6% over FY2026 to FY2028.
