Żabka’s debut on the Warsaw Stock Exchange will be the fourth largest IPO in the history of the Polish capital market. The value of the free float share package will amount to PLN 6.4 billion (according to the issue price at PLN 21.5), and including the additional allotment even PLN 7.4 billion. This price means that the market capitalization of the entire company will reach PLN 21.5 billion, which implies that Żabka will become the 11th largest company listed on the Polish stock exchange.
The potential demand from institutional investors may create upward pressure in the first sessions after the debut. A reduction above 90% level can encourage individual investors to purchase shares after the debut. What are the company’s prospects in the short and long term? Can we expect a similar situation to that four years ago after Allegro’s debut?
Żabka is a leader among “convenience” stores. The Polish retail market in the food segment is strongly under the pressure of a “price war” of the leading discounters operating in Poland. The fight for customers weakened by strong inflation in the country combined with a high-interest-rate environment has weakened the margins of leading companies operating in the Polish market. However, Żabka is not so severely affected by current trends in this sector.
Żabka’s activity is based on a slightly different target customer and a different shopping scheme. Żabka stores fall primarily into the so-called “convenience” store segment, offering their clients greater convenience due to a close location and more favorable opening hours in exchange for higher product prices. Data published by the company shows that 76% of customers make purchases for consumption on the same day. This means that Żabka’s customers are less sensitive to higher prices, which has allowed the company to improve both revenues and margins over the last half year.
Apart from retail business, the Company is also developing a segment of services for customers, including pickup of packages, bill payments, telephone services and top-ups. At the same time, the company is putting emphasis on the delivery of catering services, cooperation in the field of rapid online grocery shopping, and is extending its activity in the segment of autonomous Nano stores.
In the case of Żabka, such a scenario would be a dream come true for shareholders, but not necessarily likely. However, if on the day of the debut it would comply with the conditions for entry into the WIG20, then the next sessions would be a fight about how much institutional investors are able to overpay for holding the shares. If added to the index, a significant demand would appear from passively managed funds, which would be forced to purchase the shares regardless of the price.
In a completely different direction, Dino’s price went, which exceeded the issue price more than 10 times. However, it is worth remembering that Dino offered its shares at a different stage of the Company’s development than Żabka is now.
Żabka Group plans to expand its network of stores significantly, both in Poland and abroad. In the country, the company sees the potential for about 19,500 outlets, which prompts it to carry out an ambitious plan to open about 4,500 new stores in the years 2024-2028. Simultaneously, Żabka has launched a testing phase in the Romanian market, where it intends to open about 50 stores by the end of the current year.
When it comes to the risks and benefits associated with investing in Żabka, one key aspect is the issue of a lock-up. Like in the case of Allegro, the Żabka’s issue prospectus contains information on a 180-day period for a lock-up for the main shareholder (CVC), and a yearly lock-up for the management team.
Another risk factor is the fact that, similarly to Allegro, Żabka is registered as a Luxembourg law company. To assuage these fears, Żabka has announced that it will introduce provisions into its statutes (that will be in force after the IPO) to protect minority shareholders, modeled on regulations applied to companies registered in Poland.
Furthermore, investing in Żabka provides an opportunity to participate in the further development of a brand that many potential investors are already benefiting from. After its potential inclusion in the WIG20 index and foreign indices, Żabka could become a significant player on the Warsaw Stock Exchange, which could contribute to boosting its value and investment attractiveness.
Author: Maksymilian Kuch, XTB Analyst.
Source: https://ceo.com.pl/debiut-zabki-czwarte-najwieksze-ipo-w-historii-polskiego-rynku-kapitalowego-z-potencjalem-na-rewolucje-na-gpw-43380
