Shares in South African discount grocer Boxer rose 16% on their trading debut on the Johannesburg Stock Exchange on 28 November, as investors bet on the growth of discounters after leading last week's 8.5 billion rand ($471 million) 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 province and has grown to take a 68% share of the discount grocery retail market with over 500 stores in South Africa and neighbouring Eswatini.
Boxer's shares opened at 63.01 rand, compared with a pre-listing subscription price of 54 rand. By 11:04 GMT on 28 November they were trading at 63.67 rand after hitting a session high of 64.79 rand.
At 64 rand, the price-to-earnings (P/E) ratio has risen to around 20 times, which is closer to the country's biggest grocer Shoprite's multiple, Nedbank senior equity research analyst Paul Steegers said.
Sasfin Wealth senior equity analyst Alec Abraham said that was fair "considering that 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 that its order book was multiple times oversubscribed at the top end of the offer price range.
This implies a market capitalisation of 24.7 billion rand for Boxer.
Increased 'Profile And Visibility'
"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 store rollout plan, expanding its private label offering and offering of fresh produce such as vegetables and meat, he told Reuters after the listing.
Boxer aims to double its store footprint in the next six to seven years, with 60 to 70 new stores per year.
"This is a business that still have 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.
