Boxer’s bumper listing

Boxer is set to list on the JSE with a market cap higher than that of its current owner, Pick n Pay.

Pick n Pay confirmed on Monday that Boxer’s initial public offering (IPO) closed on 22 November, with the company set to list on the JSE on 28 November.

The IPO concluded with 157.4 million shares being allocated to qualifying investors at a share price of R54 per Boxer share.

This raised R8.5 billion for Pick n Pay, which will be enough to cover its interest-bearing debt that stood at around R7.2 billion after it concluded its rights offer earlier this year.

Over the past few years, Pick n Pay’s financials have floundered, as poor strategic decisions and poor execution of these strategies saw the retailer struggle with poor capital allocation, bloated costs and lost customers.

This skyrocketed the retailer’s debt and led to significant losses.

To turn this situation around, Pick n Pay brought in stalwart Sean Summers, who was the retailer’s CEO for 11 years until 2007.

Now, Summers has been at the helm since October 2023 and has devised and started implementing a new strategy to revive the struggling retailer.

A large part of this turnaround plan includes a capital raise, with which the retailer plans to clear its debt and better position itself to compete against the current market leader, Shoprite.

This plan is two-pronged. The first step was a R4 billion Rights Offer, and the second is Boxer’s upcoming JSE listing.

The Rights Offer, which took place in August this year, was a big success for the retailer. Over 98% of shareholders followed their rights, and the retailer received R4.3 billion in excess applications.

Now, the retailer is days away from the second part of its plan – Boxer’s listing.

Boxer Superstores is a leading discount grocery retailer in South Africa with an annual turnover of R37.4 billion, a trading profit of R2.1 billion, and 489 stores.

Boxer is one of Pick n Pay’s most profitable and fastest-growing segments, and therefore, there is great excitement surrounding its listing.

Pick n Pay announced on Monday that, with Boxer’s total issued shares being 457,407,408, Boxer’s IPO concluded with a market cap of R24.7 billion.

This represents a market cap that is greater than the market cap of the entire Pick n Pay group – including Boxer – which stands at R22 billion.

This means that Pick n Pay stores are discounted to a negative market cap of -2.7 billion within the Pick n Pay group.

Therefore, Boxer has a greater value separately than as part of Pick n Pay. This can be seen below.

In addition, the resulting market cap of the Boxer IPO priced the company at a price-to-sales ratio of 0.65 times.

This puts Boxer’s value at a price-to-earnings of 17.6 times and its equity is valued at a price-to-book value of 13.4.

For perspective, Shoprite is currently South Africa’s largest and most successful food retailer, with a market cap of around R180 billion. 

Shoprite has two brands competing directly against Boxer in the discount supermarket segment – Shoprite and Usave.

Shoprite and USave cover a significant portion of this market and currently own 75% of the value market share. Boxer holds the remaining 25% of the value food market space.

Shoprite and USave’s combined turnover experienced an average annual growth rate of 12% per annum measured on a 6-monthly basis.

Boxer’s turnover grew at a compound annual growth rate of 18.6% between FY2022 and FY2024, with like-for-like growth of 7.7%.

In their latest reports, USave and Shoprite reported having 1,252 retail store outlets. This is significantly greater than the number of Boxer stores, which stands at 489.

However, Boxer is putting up a formidable fight, having added an average of one new store weekly for the last three financial years. 

It expects to add 65 new stores by the end of this financial year.

In the medium to long term, Boxer aims to double its store footprint by opening 60 to 70 stores yearly for the next six to seven years.

It will be interesting to see how Boxer competes as a standalone company, although it should be noted that Pick n Pay will retain a significant shareholding in the retailer.

Investors are already excited about the upcoming IPO, which is set to be the most exciting new listing on the JSE for a long time.

Boxer’s listing is especially exciting since it is a growing company, and new listings on the JSE are few and far between.

The comparison between Shoprite and Boxer can be seen below.

2024	Boxer	Shoprite
Price-to-sales	0.65	0.73
Price-to-earnings	17.64	29.10
Price-to-book value	13.42	6.51