Fox Oversubscribed on Institutional Offer

The Fox fashion retail chain's institutional flotation offer yesterday was oversubscribed by NIS 30 million.

The Fox fashion retail chain's institutional flotation offer yesterday was oversubscribed by NIS 30 million. Insurance companies, mutual funds, pension and provident funds all took part in the final stage of Fox's launch on the market.

At the minimum price for the offered shares, which represented a market value for the fashion company of NIS 220 million, Fox will allocate 65 percent of the quantity ordered by each party bidding, due to the oversubscription. Those that offered a higher price will get their full allocation. Fox will be offering its shares to the general public next week.

This market value for the company is likely to send Fox straight into the Tel Aviv 100 index, which will add to the share's drawing power as index funds will consequently need to hold a stake. There are currently four listed firms on the TA100 which are trading at market values less than Fox's expected value after flotation of NIS 268 million, which makes Fox's entry onto the index a reasonable expectation. The four are Priortech (trading at NIS 199 million) Miloumor (NIS 200 million), Shrem, Fudim, and Kelner and Mul-T-Lock. Fox's high street fashion rival, Castro, currently trades at around NIS 142 million and is not listed on the TA100.

Fairly or unfairly, as Fox positions itself for its flotation, investors compare the finances with Castro, a retail chain that has managed to report a profitable 2001 despite the economic downturn. Castro has lost 23 percent of its value since the beginning of the year and currently trades at an earnings multiplier of 5.5. Fox will launch itself on the exchange with an earnings multiplier of 5.1 before a cash injection of NIS 24 million signed with Bank Leumi two weeks ago.

Both Fox and Castro sell clothing to the private consumer and deal less with the actual manufacturing process, which in both cases is concentrated in the Far East. The two chains are similarly spread among the country's shopping malls and both focus on building a trademark and the design of their individual stores.

Though revenues for the two were similar last year - Fox earned NIS 273 million, while Castro saw turnover of NIS 291 million - Fox was significantly more profitable: NIS 38 million compared to Castro's net profits of NIS 23.8 million.