AEON Stores (Hong Kong) Announces Discloseable Transaction: Supplemental Lease Agreement for Major Retail Premises in Guangdong
Key Highlights for Investors
- AEON Stores (Hong Kong) Co., Limited (“AEON Stores”) has entered into a Supplemental Lease Agreement on 28 July 2026 for its major retail premises in Foshan, Guangdong Province, PRC.
- The lease modification includes an extension of the fixed term and a significant reduction of the monthly rent and management fee for the period from 20 October 2026 to 19 July 2037.
- This lease modification has resulted in the derecognition of a right-of-use asset of approximately RMB11.39 million, constituting a discloseable transaction under Hong Kong Listing Rules.
- The transaction is viewed as price-sensitive due to its potential impact on AEON Stores’ rental expenses and long-term cost structure.
Details of the Transaction
Original Lease Background
The original lease was entered into on 19 May 2017 between AEON (Guangdong) Co., Ltd. (“AEON GD”, a wholly-owned subsidiary of AEON Stores) and Foshan Shi Corporate Management Service Co., Ltd. as landlord. The lease covers Basement 1, 1st, 2nd, and 3rd Floors at No. 13 Jiaokou Road, Dali Town, Nanhai District, Foshan City, Guangdong Province, PRC. The premises have been used by AEON GD for retail operations since 1995.
- Lease Term: 20 years, with no early termination permitted before 19 October 2026 (unless otherwise specified by law or the agreement). After this date, AEON GD could terminate with six months’ notice.
- Rent and Management Fee (Original):
- For the period ending 19 October 2026: Rent RMB47.6 million, Management Fee RMB25.6 million.
- For 20 October 2026 to 19 July 2037: Rent RMB95.2 million, Management Fee RMB51.3 million.
- Deposit: RMB2.23 million
- Sub-letting: Up to 15% of leased area permitted.
- Right of First Refusal: To renew for two further terms of five years each.
Supplemental Lease Agreement (Signed 28 July 2026)
- Extended No-Termination Period: The no-termination period is extended to 19 October 2029 (previously 2026). From 20 October 2029 onwards, AEON GD can terminate with six months’ notice.
- Reduced Rent and Management Fee:
- For 20 October 2026 to 19 July 2037, rent is reduced to RMB77.9 million (from RMB95.2 million) and management fee is reduced to RMB42.0 million (from RMB51.3 million).
- No changes to rent or fees for the period ending 19 October 2026.
- Market-Based Terms: The terms were determined after arm’s length negotiations and benchmarked against prevailing market prices for similar properties.
- Internal Funding: All payments will be satisfied using AEON’s internal resources.
- No other material amendments: All other terms of the Original Lease Agreement remain unchanged.
Implications Under Listing Rules & Financial Impact
- Under HKFRS 16, the modification is treated as a lease modification, requiring remeasurement of the lease liability and right-of-use asset. This led to the derecognition of approximately RMB11.39 million in right-of-use assets.
- As the derecognized asset exceeds 5% but is less than 25% of the applicable percentage ratios, this is a discloseable transaction and subject to announcement and reporting requirements under Chapter 14 of the Hong Kong Listing Rules.
Strategic Rationale and Benefits for Shareholders
The transaction supports AEON Stores’ overall strategy to maintain large-scale retail operations in the PRC. The extension and rent reduction will significantly lower future rental expenses, enhancing cost competitiveness and supporting long-term profitability.
- Lower Operating Costs: The revised lease terms will decrease rental and management fee expenses, positively impacting margins.
- Enhanced Negotiating Power: Maintaining sizable retail premises helps AEON GD negotiate better terms with suppliers and business partners, consolidating market position.
- Ordinary Course of Business: The group regularly enters into tenancy agreements for large-scale retail premises as part of its core business operations.
Potential Price-Sensitive Information
- The substantial reduction in lease-related expenses (rent and management fee) for a flagship property may have a positive impact on future earnings, depending on overall market conditions and operational performance.
- The transaction’s treatment as a discloseable transaction signals its materiality; investors should monitor subsequent disclosures and financial statements for further impact.
- The Board considers the agreement fair, reasonable, and in the best interest of shareholders and the Company as a whole.
Corporate Information
- Landlord: Foshan Shi Corporate Management Service Co., Ltd., owned by Guangdong Guangfo Zhicheng Group and other PRC investors. The landlord and its ultimate beneficial owners are independent third parties.
- AEON GD: AEON (Guangdong) Co., Ltd., a wholly-owned subsidiary of AEON Stores (Hong Kong) Co., Limited, primarily engaged in retail business in Guangdong Province, PRC.
Board of Directors
- Executive Directors: Mr. Takenori Nagashima, Mr. Shinya Hisanaga
- Non-executive Directors: Mr. Tsukasa Konno, Mr. Wei Aiguo, Mr. Yasutoshi Yokochi
- Independent Non-executive Directors: Mr. Hideto Mizuno, Ms. Shum Wing Ting, Ms. Wong Mei Ling
Disclaimer
This article is for informational purposes only and does not constitute investment advice. Investors are advised to review official company announcements and consult financial advisors before making investment decisions. The impact of the disclosed transaction on share price will depend on market perception and future business developments.
