Boxer Retail Limited: A High-Growth Investment Opportunity

Boxer Retail Limited, a subsidiary of Pick ‘n Pay Stores Limited, was listed on the Johannesburg Stock Exchange in November last year. Shares were offered at R54.00 per share and closed at around R63.00 per share on the first day of trading – a very nice premium of 16% on the issue price. The company’s track record is impressive and has been trading for 47 years.

Boxer Retail Limited competes in the mid to low-income value conscious segment. This is a fiercely competitive area and Boxer Retail Limited is fully focused on their value proposition.

In retail and restaurant stocks the most crucial and telling statistic is for like sales. This is the growth, or decline, in some store sales on a monthly basis compared to the same month a year ago. Boxer Retail Limited same store sales rate of growth is around 5% percent. This is impressive.

Aggressive Expansion and Growth Strategy

Additional growth will come from new store openings. Around 30 new superstores will be opened every year as well as 30 – 40 new liquor stores. The company plans to double its turnover over the next five years. This seems very ambitious but bear in mind that the company has grown from 5 stores in the early 90’s to over 500 stores today. The consistency of turnover growth, robust business model and expansion opportunities should be noted.

How Boxer Retail Limited Rescued Pick n Pay

The listing of Boxer Retail Limited saved Pick ‘n Pay Limited. Pick n’ Pay Limited was on the verge of collapse and needed the capital to fend off the bankers and creditors. Pick ‘n Pay Limited still has a controlling stake but it will be interesting to see when they have to sell more – they have already parted with a big bag of the crown jewels. Thankfully it seems that Pick ‘n Pay Limited will continue to let Boxer Retail Limited operate independently, even converting Pick ‘n Pay Limited stores to the Boxer Retail Limited format – at least these trade profitability. It’s very important that Pick ‘n Pay Limited management leave Boxer Retail Limited alone. They know what they are doing.

Why Boxer Retail Limited is a Strong Investment Opportunity

So, in summary Boxer Retail Limited is a compelling growth story.

It delivers exceptional value for its customers and strong returns on invested capital for its shareholders. The expansion strategy is consistently applied and will result in a doubling in size over the next few years. The last three years has produced 19% annualized sales growth, trading margins of above 5% and return on invested capital of 27%. The next 12 months will see more than 60 new stores opening. This is a quality operation and the shares can be bought on any pull back.

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If you are not happy with your portfolio performance or would like a second opinion, please do not hesitate to contact Fenestra for a free, independent, objective and confidential review of your portfolio.

William Meyer – 0796244031