Tesco Lotus's Sale-And-Leaseback Plan Likely To Prove Value Enhancing

Tesco Lotus, the Thai subsidiary of UK mass grocery retail (MGR) operator Tesco, recently announced plans to issue an initial public offering (IPO) of a Thai property fund, which will consist of its shopping malls and hypermarkets, to be listed on the Stock Exchange of Thailand. While there is the risk that Tesco's investments do not generate the necessary return to cover an increase in rental costs, we are optimistic that the company can generate a greater yield from the new capital given its expansionary ambitions in the high-growth MGR market of Thailand.

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