Boxer's shares jump 16% on market debut

Shares in discount grocer Boxer rose 16% on their trading debut on the JSE on Thursday as investors bet on the growth of discounters after leading last week's R8.5bn initial public offering.

Parent Pick n Pay floated a 34.4% stake in Boxer, which started off as a small-town operator in KwaZulu-Natal and has grown to take a 68% share of the discount grocery retail market with more than 500 shops in South Africa and neighbouring Eswatini.

Boxer's shares opened at R63.01, compared with a prelisting subscription price of R54. By 11.04am GMT (1pm, SA time) they were trading at R63.67 after hitting a session high of R64.79.

At R64, the price-to-earnings (P/E) ratio has risen to about 20 times, which is closer to the country's biggest grocer Shoprite's P/E multiple, Nedbank senior equity research analyst Paul Steegers said.

Sasfin Wealth senior equity analyst Alec Abraham said that was fair “considering Boxer's medium-term earnings growth rate is likely to be higher than Shoprite”.

Pick n Pay said on Monday it had sold 157.4-million shares in Boxer and its order book was multiple times oversubscribed at the top end of the offer price range.

This implies a market capitalisation of R24.7bn for Boxer.

“The listing on the JSE will increase our profile and visibility and provide Boxer with access to a large pool of capital for growth,” Boxer CEO Marek Masojada said before blowing a kudu horn to signal the first trade.

“The support from investors was overwhelming, clearly demonstrating the worth of the Boxer business.”

Masojada's list of priorities includes ramping up the retailer's new shop rollout plan, expanding its private label offering and offering fresh produce such as vegetables and meat, he told Reuters after the listing.

Boxer aims to double its shop footprint in the next six to seven years, with 60 to 70 new shops per year.

“This is a business that still has good growth potential in the South African food retail space, so certainly something that will attract a lot of interest given the mediocre state of the consumer,” said Casparus Treurnicht, portfolio manager at Gryphon Asset Management.

Pick n Pay, the country's third-biggest grocery retailer by market capitalisation, will retain a 65.6% stake in Boxer. The listing also completes Pick n Pay's two-step recapitalisation plan, significantly strengthening its balance sheet.

Reuters