Tesco

Company Update:

The proceeds could be reinvested in the UK, where ROIs are likely to be better. A return to shareholders is also a nice possibility.

We view this disposal as a potentially interesting deal for Jeronimo Martins that seeks to expand besides Poland its core market in the region. Slovakia and the Czech Republic would fit this strategy nicely.  

Expert Opinion:
The disposal and refocusing on its core territories would be good news, especially if the price obtained for the business in Eastern Europe is good. It seems that the price competition in the UK is getting fiercer, notably from the hard discounters and part of the proceeds could be used to maintain Tesco's relative pricing positioning in the UK.  

We still think Tesco is fairly valued. JMT is probably more attractive, especially of its structurally better organic growth. But there is a short-term risk that the group overpays for assets from Tesco. And despite the recent run, we still think Carrefour has more potential as it still trades at a significant discount to its peers. 


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