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Tesco shares jump on review of Asian business

09 Dec 2019 / 17:19 H.

LONDON: Shares in Tesco jumped as much as 5.9% in early trading Monday after Britain's biggest retailer said it was reviewing its remaining Asian businesses, in Thailand and Malaysia, including examining a possible sale.

Tesco said on Sunday the review commenced following "inbound interest" in the businesses that generate about 8% of Tesco's total annual revenue and 10% of its profit.

Tesco said the review was at an early stage and gave no details of the approaches received.

The stock was up 12.3 pence at 244.4 pence at 0825 GMT.

Analysts at Bernstein valued the Asian business at 6.5 billion pounds to 7.2 billion pounds ($8.3 billion to $9.2 billion).

Tesco trades from 1,967 stores in Thailand and 74 in Malaysia. In the six months to August 24 the businesses together generated sales of 2.56 billion pounds ($3.28 billion), up 1% at constant exchange rates, and operating profit of 171 million pounds, up 42.3%.

Bernstein analyst Bruno Monteyne said Tesco's Thai operation was a "high quality business", with 50% of its earnings coming from a mall-rental business and 50% from a food retail market that is much less competitive than the UK. He said the Thai business still had material organic growth opportunities.

He noted that Tesco's main Thai competitor BigC was sold for 16 times enterprise value/earnings before interest, tax, depreciation and amortisation (EBITDA). - Reuters

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