The listing of discount grocery chain Boxer Retail this year is likely to be well received by JSE investors and will likely raise up to R8 billion towards the turnaround plans of its parent Pick n Pay, market analysts said yesterday.
Pick n Pay yesterday provided some details of its plans to list Boxer, and although full details around pricing are only expected to be released in a pre-listing statement, the group said the base size of the IPO would likely be towards the upper end of its earlier guidance of between R6bn and R8bn.
Pick n Pay CEO Sean Summers said in a telephone interview that they “are ready to list, and if the markets are good, it should be concluded by the end of the year”.
Pick n Pay plans to list Boxer on the JSE, with a secondary listing on A2X (an alternative South African stock exchange), as part of plans to turnaround its core company-owned loss-making supermarket stores, recapitalise, and repay debt, after incurring losses at group level. The listing offer includes an over-allotment option of up to R500 million.
“The Boxer IPO is pivotal to our strategy, and their remarkable performance continues to prove it is an exceptional business. It will be one of the most exciting listings on the JSE in years,” said Summers.
Nitrogen Fund Managers chief investment officer Rowan Williams said the listing had been well anticipated by the market, there appeared to be strong investor interest and appetite, and the listing of the “vibrant business within Pick n Pay” was particularly welcome in the context of the sharp number of delistings on the JSE.
He said Boxer appeared to be trading in a “sweet spot” in the overall retail market, where sales were resilient, compared with the broader market, supported to some extent by the grant payments system.
Anchor Capital investment analyst Stefan Erasmus said it was currently a good time to list, as the South African market had re-rated since the recent formation of the new coalition government, and it appeared to be in an interest rate-cutting cycle.
He said Pick n Pay would likely place between 30% and 49.9% of Boxer's issued shares in the IPO, and retain ownership of the rest, while the group expected to raise R8bn in proceeds.
Gryphon Asset Management portfolio manager and research analyst Casparus Treurnicht said it would likely be a “good listing” and Boxer, which currently predominantly operates in KwaZulu-Natal and the Eastern Cape, had plenty of runway to gain market share.
He did express some concern that Pick n Pay was moving “crown jewels” with the listing, and he wondered where the growth runway would be for the group, once all the “easy fixes” were done to restore it to profitability, especially considering the market share gains of its competitors such as Checkers, in the meantime.
Pick n Pay said yesterday Boxer was South Africa’s fastest-growing grocery chain, comprising 389 stores. It sells groceries to customers in the lower-to-middle income urban, peri-urban and rural areas, and the stores are in convenience, high footfall areas. It has three store formats: Boxer Supermarkets, Boxer Liquors and Boxer Superstores.
It had reported uninterrupted turnover growth for the last 22 years, with turnover up by a market-leading compound annual growth rate of 18.6% for the three-year period to February 25 (7.7% on a like-for-like basis).
Pretax profit stood at R679m for the first half to end-August 2024, and R1.8bn for the year to February 25, 2024 compared with R1.5bn and R1.2bn for the 52 weeks in the preceding two years.
Over the past financial year, Boxer opened a net 17 new Boxer Superstores. Four more were opened in the first half, and the pace of openings would accelerate in the second half, with a total of 26 new openings anticipated for the full year.
First half turnover was up by 12% to R19.8bn and trading profit increased 11.8% to R809m. It claims a 4.2% market share of the formal grocery market and about 68% of the discount grocery retail market, with the figure based on turnovers for Boxer, Shoprite’s Usave stores and Spar’s Savemor format.
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