Boxer means business

The market is excited and positive about Boxer’s JSE listing on Thursday, as the media sentiment is clearly shown.

Press Pulse’s latest media sentiment report showed that Boxer has reached a sentiment score of 53, the highest it has ever achieved.

What is particularly impressive is that there were no negative articles about Boxer despite receiving extensive media coverage.

This shows that Pick n Pay has done a fantastic job promoting Boxer’s strong points and convincing the market that it is a great stock.

The Boxer initial public offering (IPO) interest confirmed this. It was oversubscribed and will list at a subscription price of R54.00 per offer share.

Pick n Pay initially said it would offer up to 202.4 million shares, around 40% of its total issued share capital, at a price of between R42 and R54 per share.

This means the company received the maximum offer, R54 per share, and will issue 157 million shares to raise R8.5 billion.

This will be enough to cover all of Pick n Pay’s debt, while the retailer will retain 65.6% of Boxer’s total issued share capital.

Boxer CEO Marek Masojada said the interest from the market and media in the business has been a huge compliment.

He thanked the investors for their confidence in Boxer and said his management team are fired up to deliver.

Pick n Pay CEO Sean Summers said Boxer is well positioned to benefit from South Africa’s changing demographics.

He said that following the Boxer listing, Pick n Pay will have the freedom needed to grow the business and make it more sustainable.

“We know that we have adequate funding to achieve what we need to achieve. That is our journey and mission,” he told Biznews in an interview. (https://www.youtube.com/watch?v=rc0BEutiszY)

Pick n Pay will maintain a controlling stake in Boxer and benefit from the retailer’s future growth.

Analyst opinion

Mark du Toit from Oyster Catcher Investments said the Boxer listing makes sense because it gives Pick n Pay the capital it needs to execute its turnaround plan.

However, he warned that Pick n Pay has a difficult road ahead to fix the company, which will consume the capital it raised through the Boxer IPO.

Graeme Körner from Körner Perspective said it is great that Boxer is now flying solo and that Pick n Pay retained a large slice of the business.

This will also ease lenders’ concerns that Pick n Pay’s balance sheet has strengthened and that it can raise cash if needed.

Focussing on Boxer, he cautioned that the retailer will not have it all its own way as its main competitors, Shoprite and Usave, are excellent operators.

“Boxer has captured the imagination, and they are in the right segment of the market. However, they face stiff competition,” he said.

As such, Körner said he would wait before investing in Boxer to see how it plays out and what their future results look like.

Drikus Combrinck from Capicraft Investment Partners warned that the Boxer IPO was overhyped and that investors should exercise caution when buying the stock.

“The first day of trading will be overhyped. I have seen this before. The market is hungry for a growth story and will slap a very high multiply on it when it opens,” he said.

Combrinck said he does not think standard investors who did not enjoy early access will get in at a fair price.

Ricus Reeders from PSG Hole In One Ruimsig said he would also avoid the Boxer IP as most of these listings do not work out. “Let the market find its level and volumes,” he said.

He added that Boxer is a middle-weight champion going up against the heavyweight champion, Shoprite.

“Boxer may get it right or may not. Let’s get a track record and eliminate the hype, after which you can assess the investment case.”

Chantal Marx from FNB Wealth And Investments is more upbeat, saying Boxer’s R54 per share listing price is close to their R52 fair value price.

“If Boxer can push through the growth they expect, persist with their store rollout, and the excitement remains, the stock can trade at R60,” she said.