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Tesco considers sale of Thai and Malaysian stores

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The UK's biggest retailer, Tesco, is considering the sale of its stores in Thailand and Malaysia.

Analysts say the 2,000 stores, which operate under the Tesco Lotus brand, could be worth more than £7bn.

If a deal is agreed it would mean an almost complete retreat from international markets for the supermarket giant.

The company's only other overseas stores, other than Ireland, are in its loss-making European unit.

On its website the company said it had started a review of the Asian businesses "following inbound interest" but did not name the potential buyer or buyers. The operation employs about 60,000 people.

The statement also said the review was at an early stage, and "no decisions concerning the future of Tesco Thailand or Malaysia have been taken".

The businesses had combined revenues of £4.9bn in the year ending in February, making a profit of £286m - about a fifth of Tesco's total global profits.

Clive Black, an analyst at Shore Capital, said the Asian operation was a "trophy asset", and was likely to achieve a knock-out price.

Bruno Monteyne, analyst at Bernstein, said a valuation of £6.5bn to £7.2bn seemed "fair".

The announcement signals another potential pullback by Tesco from its once-ambitious global expansion.

If a sale does go ahead it would mean the company would be left with stores in the UK and Ireland, and an unprofitable division in central Europe. That unit covers the Czech Republic, Hungary, Poland and Slovakia.

Shrinking empire

Tesco has been shifting its focus as part of a turnaround programme launched five years ago.

The plan was in response to an accounting scandal, and in the face of competition from rival supermarket chains and online competitors.

The retail giant has shed several businesses across the world in recent years.

In 2015 it sold its South Korean unit for $6.1bn, and a year later offloaded its Kipa business in Turkey, the country's largest supermarket chain.

At the same time it sold the Giraffe restaurant chain in the UK, just three years after buying it for £49m.

Tesco had previously withdrawn from the US, Japan, and China.

In October this year, Tesco chief executive Dave Lewis surprised investors by saying he would stand down "in the summer of 2020".

He took over the top job at the company in 2014, shortly before it was revealed that the retailer had overstated its profits.

Source - BBC News

About the author

Philip Scott

Head of Equities, Director

Philip has worked as a Private Client Stockbroker for nearly 20 years, commencing his career in Operations with Rensburg Sheppards (now part of Investec plc) before spending 9 years with Killik & Co advising on and directly managing portfolios. He joined SI Capital in 2006 to head up the Private Client Advisory desk.

Philip is a regular contributor to local media commenting on stock market dynamics and is a Chartered Member of the Chartered Institute for Securities & Investment (MCSI). His RDR qualification gained special recognitionfrom the CISI for achieving the highest combined pass mark in the country for the Investment Advice Diploma in 2012.

“At SI Capital I enjoy being part of a talented team who collectively share the same desire to provide excellence in service.  My focus is to ensure that each client receives effective and optimal management of their assets.”

Philip lives locally, is married with 2 daughters and is an avid sports fan (if now predominantly from the sidelines).  His other interests include music and film.

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