Sunday, March 3, 2024

Choppies brightens the markets

Choppies Enterprises Limited, the dominant retail player in Botswana, saw its gross profits leaping-up by 34 percent to P 405 million in a move that even bewildered its investors in its six month unaudited results to December 31, 2013.

Choppies, which is the “gorilla ” in mass grocery retail in Botswana and also the leading in fast moving goods and general merchandise, said apart from the exceptionally good results, it is aggressively engaged in an expansionist mood.

In total, nine stores are expected to be opened in the last six months of the year that ends at the end of June this year.

“As part of our further expansion plan, five stores are nearing completion in South Africa and four in Botswana,” the company said in its half-year results.

Apples against apples, total revenue bubbled up by 24 percent to P 2 billion while the key driving figure the Net Assets Value hit the roof at a speed of 54 percent.

During the period, it opened four new stores in Botswana to lift up its retail floor space in the country to 6.682 square metres or moving it to 53 stores in the country.

In South Africa, its new key market with a population of around 60 million, it said that it had 17 stores at the close of its half year books by end of December.

It said its profit after tax was 22 percent up to P 77.7 million beating its original expectations.
The margins were far above the 10 percent set margin under the listing requirements leading to a profit warning announcement a fortnight ago.

However, it stated that its cost of sale was slightly up to almost P 1.6 billion as against P 1.3 billion in the comparable period last year. The driving factor in the retail industry is the volumes and rebates that you get from your suppliers in return, but it looks like they were very much in control.

Botswana contributes about 83 percent of its total revenue estimated at P 3.3 billion with South African contributing the rest. But this year, the figure looks like it will be more than double thanks to its strategic Rustenburg warehouse and the opening of new stores with the next one billed for Tonota Village.

“Going forward, a thrust of growth can be expected to emerge out of South African operations where fully fledged operations were commenced by the end of the calendar year, as well as the distribution centre in Rustenburg having an upbeat on the bottom-line.

“Domestic prospects will continue, driven by the group’s competitive advantage over the industry, given its inherent successful business model and market focus,” Stockbrokers Botswana said in its research note posted earlier in the year.

Choppies controls 30 percent of the national markets share, followed by Spar at a distant 21 percent, Pick’n’ Pay 14 percent, Shoprite at 10 and the rest at 25 percent.

Some of the products include household goods, fruit and vegetables, meat and other consumables.
As part of its strategy, it maintained more convenient shopping hours, which saw it declaring a full year dividend of 3.6743 thebe per share or 31.32 percent during last year.

The company is currently trading at a higher rate of 17.4 times against the market average of 11 times historic earnings – indicating a higher appetite for the stock.

It joined the BSE open-cry market through Initial Public Offer window early last year at 100 thebe per share but its share price has since surged up.

The announcement by the chain store defied that tough trading conditions that saw a rising household debtness, squeezed salary adjustments and high interest rates in the market. The tough trading conditions affected the stock during the past year.

According to the researches, the company had a stock turnover ratio of 13.76 times as compared to 14.13 times for 2011. That showed that the stock was staying longer in the shelves than in the previous year.

It closed the week at 266 thebe per share on Friday but added that it will not declare dividend until full year results at the end of June 2013.


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