- Sime Darby’s subsidiary Sime Darby Engineering Sdn Bhd (SDE) has been issued a court order to pay damages totalling AED41.05mil (RM36mil) to a former business agent, Emirates International Energy Services (EMAS).

- Sime Darby said yesterday that SDE had been informed by its external legal counsel that the Court of First Instance in the UAE had issued a written judgment awarding the sum against SDE, which intends to appeal the decision.

- EMAS and SDE had inked an exclusive agency agreement in September 2006, for the former to identify suitable projects in which the latter could participate.

- EMAS first filed its legal suit in March 2011 to seek compensation from SDE as the latter had not taken up any of its job recommendations. It had sought damages comprising US$128.2mil and US$50mil for “commissions” and “moral compensation”, respectively.

- SDE had countered-claimed for AED100mil (RM88mil) for damages. It claimed that as with such agency agreements, it was under no obligation to accept EMAS' recommendations, and neither was there a time-bound requirement to decline the recommendations.

- SDE also claimed that before it filed the legal suit, EMAS had written in August 2010 to claim a US$20mil compensation for its failure to accept several projects EMAS had identified. SDE had refuted the claim and countered that that such a claim was ground to treat the agreement as being repudiated and a ground for termination.

- The eventual outcome of the long-running legal battle would not have a significant impact on Sime Darby’s financials. Furthermore, the decision of the lower court is still subject to appeals.

- We maintain our BUY call for the stock, with a fair value of RM11.20/share – a 10% discount to our SOP value of RM12.44/share. Sime Darby is scheduled to release its 3QFY14F results today. 

Source: AmeSecurities