Merchant West Investments’ Post

Transcript

With how can the boxer provide value for the customer? Because that's initially what this customer wants. The customer wants a lower price point and they want to feel like they're getting value for money. I think everyone can resonate with us. And what Foxit does is, and I think this is a very clever business model is they have that they sort of pushed through these combo deals where you've got sort of a tomato sauce and a mayonnaise being sold together as one and. The customer feels like they are getting a higher value product because they are receiving 2 products. But what makes boxes special is they are combining a well known brand with a private label product. So this is their business model of private label and and a well known brand. So they current penetration on their private label is about 20%. So it is very similar to ShopRite. ShopRite also sitting at about a 20% private label penetration but they are pushing this through. They combo deals and what makes it special is that the customer is becoming so well acquainted with these private label products that they suddenly don't realise that this is actually a boxer product. They actually, the customer starts to see this product as a actual sort of standalone product from a Unilever or not a, not a private label product, but a a yeah. The other product, so I think this is really interesting what Box is doing and that's how they sort of getting good growth and private label is sort of a really strong growth aspect for them and it is a strong growth aspect for South Africa as well. Our private label penetration is quite low and you have better margins on the private label because you are able to sort of negotiate more with suppliers. You can change your suppliers easily without the customer knowing. So your margins are a lot. Layer on the private label and Boxer has done really well with this. I don't know if anyone knows Waves Laundry. They've done very well, sort of. In the Boxer brand and this is a private label box of product. So when we look at sort of the unit economics of Boxer, and I did mention this, so on a trading density side, Boxer actually has lower trading densities versus ShopRite, but this is mostly due to mixed. So ShopRite has all of the detergents and higher, higher sort of. Margin, gross margin products, but what makes boxes special is that the OpEx per store is a lot lower. So the boxer optics per saw when you look at the orange line is about sitting at like 13 million per year per store. We shoprites is about 14 and a half million. So there is this variation between the boxer office we saw on what sort of does this translate into a? Translates into your trading margins on your boxes are actually higher than the than a ShopRite. Because you do have this simpler store format, you've got this simpler model. And you've got sort of more operating leverage in Boxer. So about half of boxes are operating costs are actually fixed. So there is that operating leverage that they can play with. So you've got these higher margins, trading margins in Boxer even though your GP margins might be a bit lower. And that all stems from this decreased SKU. So I think we are all looking forward to the Boxer trade tomorrow. We're very excited. And I hope everyone elses. Thanks Alissa. We actually had some questions coming through on the on boxer while you were talking. The first if I compose it to you is around organic growth. So do you have some sense of? How successful Boxer has been in generating same store growth versus, you know, new store openings and do you have a sense of what what that looks like going forward? Yeah, so the state, the so boxer. The forecast and how we think that they need to sort of grow is Boxer thrives on opening new stores. So on a like for like store basis, they've got about a 7.7% CAGAR for the last three years. So this is quite high. This is higher than a sharp rise, but the management team are targeting doubling their store counts in the next six to seven years and this might seem like quite high sort of. Aspirations, but they have actually been able to to do this for the last they they have done this in the last 10 years. So I don't think that opening 60 to 70 stores a year is sort of unmanageable for Boxer. So what we are sort of forecasting is around about a 15% CAGAR on sales until about 2027. Have they been able to do this? Definitely they have like I said. The whole growth from box that came from decreasing that SKU count and that has sort of really benefited them in being able to roll out new stores. And so on a sort of opening new stores, they've on a CAGAR basis. They've been able to open a bar on a 10% CAGAR for the last five years. So definitely manageable growth prospects and very exciting growth prospects. I think that's what makes this exciting is the growth that's embedded in Boxer. Even though you might be paying, you know it is it is sort of IPO ING at. Like I said, at 54 was the sort of the book called price your growth that's embedded in sort of this multiple is more attractive in my opinion than a ShopRite. OK. And I think that talks to the second question we got. And I think Ray, if you could come online now we do have a couple of questions that I think could be could be thrown to you as well. But yeah, I think you, you, you Alyssa, you've kind of answered the the second question around the what price range would be reasonable to enter box. I think the short answer would be we think that dependent on on on strategy and philosophy, the 54 and kind of clearing price at the IPO is a reasonable one considering the growth prospects of the business and the other opportunities. That exist in the market including ShopRite comparable opportunities. Would you say that's correct, Lisa? Yeah, definitely because so the boxer team when they were doing the book build, they mentioned a range of 42 to 54 on the book bold and within the first two hours the book was filled. So I think there is definitely a you know, the market is hungry for for growth and we are going to see that from box. It does seem that way. So I can't see boxes sort of coming in tomorrow at anything lower than 54 because that's how the book has been built. Right. If you think we have a question for you, if you could turn your camera on.