Boxer listing lifts its shares

PURCHASE: THOSE WHO BOUGHT THEM AT R54 MAY RECEIVE A NEAR-INSTANT RETURN OF 20%

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Shares of retailer Boxer are up strongly since its listing last Thursday. Investors who were able to get their hands on shares in the offer (at the price of R54) will be smiling, as the current share price of around R65 means a near-instant return of 20%. However, demand for the shares before the listing was very strong, resulting in applicants, either institutions or brokers (on behalf of clients), receiving only a percentage of their allocations. This no doubt explains the strong retail interest in the stock, which has consistently ticked higher for a week. At the offer price, the share was on a reasonable, if somewhat demanding, trailing price-earnings ratio of 18. At current levels, that's up to 21. This is high but still below the 24 level of Shoprite Holdings.

Investors are clearly willing to pay for growth in a market, especially one with fewer and fewer opportunities. Boxer management is confident it will be able to maintain a trading margin of 5% and grow turnover by "mid-teens" over the next three to five years. This ought to translate into headline earnings growth of a similar level. Over three years that'll mean headline earnings that are 50% higher than the current level.