Boxer – Getting in the ring

PIK will separately list Boxer on the JSE towards the end of 2024. Management expects the Boxer IPO to raise capital of between R6bn and R8bn, and PIK intends to maintain a majority stake in the company. In this note, we review the Boxer business and formulate our valuation of the company.

We review the history of the Boxer chain since PIK acquired it in 2002. Its footprint expanded rapidly from 2010, after the closure of PIK’s Score chain. We note, though, that in recent years, space growth was mostly driven by its Liquor business, which now accounts for 11% of Boxer’s total space.

We assess competitors in the lower-income segment and identify SHP’s Usave and Shoprite chains as the main competition. Boxer’s space growth largely tracked that of Usave until 2019, after which Boxer outpaced Usave. Boxer’s space is now 1.4x that of Usave.

We conducted store visits to Boxer and Usave stores and include video clips of these visits. Our price comparisons suggest that Boxer does not have a discernible price advantage, and that there may be other reasons for its rapid growth. These include a more compelling shopping experience, a better cold-chain offering and a large range of bulk pack products.

Our location analysis shows that Boxer stores are likely to be in closer proximity to Shoprite than Usave stores. Boxer seems to be targeting the same catchment areas as Shoprite, and we think there could be a significant runway of c. 475 additional Boxer stores.

We assess Boxer’s financial metrics and argue that its trading margin of 5.2% could reset lower to c. 4.3%, as it will have to provide for additional costs for previously shared services.