Could Tesco’s 10% bounce boost these funds?

SINGAPORE (Oct 6): As many as 22 funds available for sale (see table below) in Singapore hold Tesco Plc, the UK’s largest grocery retailer. Shares of Tesco closed nearly 10% higher at GBP207.10 ($361.05) per share on Wednesday after reporting a third successive quarter of improving sales. This indicates the company’s turnaround plans continue to bear fruit. Tesco shares are up 38.5% this year, easily beating the 16.4% gains of the UK’s benchmark FTSE 100 Index.

For 1HFY2017, Tesco reported a 1% increase in like-for-like sales, which excludes the impact of new store openings. Operating profits also jumped 60.2% to GBP596 million before exceptional items. The company said it is on track to make GBP1.2 billion in full year operating profits while aiming to boost its operating margin to between 3.5% and 4.0% by FY2020.

The fund with the largest exposure to Tesco is the $1.8 billion Schroder ISF European Dividend Maximiser fund, according to data from Morningstar Direct. In the Europe Equity Income investment category, Tesco is the Schroder fund’s fourth largest holding with a 4.4% weighting (at Aug 31). The fund is down 6.2% this year (in Singapore dollar terms). Notably the fund’s bet on another British grocery operator, Wm Morrison Supermarkets Plc, has paid off this year with the stock surging 54.4% (in sterling pound terms). Morrison’s is the Schroder fund’s eighth largest holding with a 3.8% weighting.

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