Ted Black: SA’s biggest IPO in ages – what’s Boxer actually worth?

Boxer's IPO on November 28th has generated buzz, with analysts scrutinizing its financials and competitive edge. Investors await to see if it meets optimistic expectations..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..By Ted Black.Much has been written about Boxer and its IPO on 28th November. They include guesses about share price and market cap. ___STEADY_PAYWALL___.In its listing document Pick n Pay says little about the firm itself but gives us three years' financials. It's enough information to go on. Boxer is clearly the market leader where it competes – in the "soft discount" sector of lower to middle income customers. .Management says its narrow range of 3000 products and smaller stores makes it "asset light". They also say their simple business model and market strategy generates lots of cash and high returns on investment. They do..Using six numbers – Stock, Debtors, Total Assets, Sales, Cash Operating Profit and Market Cap – let's see what a few slides tell us about its position in the retail sector today and what it could be when listing..To be "asset light" in Retail, the most critical operating productivity measure is the "Cash-to-Cash Cycle". More than "Turning" stock, you need to "Spin" it through the business. You'll only achieve that if people do the right things right from Buying through to collecting cash from more and more pleased customers..This slide shows how Boxer leads Woolies, Shoprite, and Spar on that score..We don't know how fast rival Shoprite's Userve spins its stock, but Boxer does it eleven times a year – for every R1 in stock it generates R11 in sales..As to its total asset base of R12.7 billion, management generates R3 in Sales for every R1 of assets. Use only "owned" assets, not accounting "Right of Use" ones paid for anyway with landlords' charges for full costs and expenses, then it would be R4 in sales. That's "asset light". Combine it with "Stockspin" and you build the first, key strategic productivity barrier – a "Buffett moat" of high Asset Turn. .The next measure is one of several profit "margins". It's based on operating profit in cash before interest and tax. Here are some Return-on-Sales (ROS%) trends..For the last three years, Boxer and Shoprite have matched each other by rising from 8 to almost 10%. Multiply this measure with Total Asset Turnover and you have Cash Return on Assets Managed (Cash ROAM)..Boxer and Woolies generated a ROAM of 28% and Shoprite's was 29% in 2024. Spar's 4% is based on half-year results. The measure's link to market cap comes next..This slide includes two other retailers – both ROAM exemplars for the last twenty years and more – Mr Price and Truworths. Over that time, they achieved an average Cash ROAM return of 29% and 25%, respectively..The numbers are from the 2024 year-end financials except for Spar's half-year results this year. The correlation of 0.92 between this measure and the market cap multiple of the asset base is almost a perfect 1.0..Mr. Price, with its 35% return, is valued at 3.0 times its asset base. Truworths, with a 25% Cash ROAM, doubles its asset value at 2.2. Shoprite and Woolies multiples are at 1.6 and 1.7, respectively..Using those numbers an estimated multiple of 1.6 gives us a Boxer market value of R20 billion. Some say it could be as high as R28 billion. That would put it on par with Truworths with these examples. .Let's see what happens because its management seems to work like genuine "owners" do. Expectations of them will decide the outcome – a conservative or optimistic one..Read also:.Boxer's growth potential shines as Pick n Pay spins off retail powerhouse – Evan WalkerPick n Pay & Boxer CEOs unpack JSE listing and what the future holdsCEO Summers discusses Pick 'n Pay turnaround, eBucks partnership, and the path forward

Ted Black: SA’s biggest IPO in ages – what’s Boxer actually worth?

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