The public offer for the retail outfit Choppies is expected to close this week with analysts likening the group to giant international supermarkets that made that move, from private to public companies.
According to an Initial Public Offering (IPO) analysis prepared by sponsoring brokers, Motswedi Securities, the public offer opened on Wednesday 23 November 2011, closes on Wednesday 11 January 2012 and the expected listing date being Thursday 26 January 2012.
Choppies Enterprises Limited (CEL) wanted to raise P300 million through a private placement and P50 million through a public offer.
Independent research analyst Kudzani Pickup said the listing will make Choppies Botswana’s very ‘own home grown listed retail chain’.
“I am persuaded to think that this moment might be the embodiment for us of Marks and Spencer in the UK, Carrefour in France, Wal-Mart in the USA and Shoprite and Spar in South Africa,” Pickup said.
All these giant retailers are listed in respective stock exchanges where they operate.
Ramachandran Ottapathu and Farouk Ismail are the founders of this chain that originated in Lobatse.
“This reminds one of the well-known Warren Buffet and his partner Charles Munger. Similar, indeed to Michael Marks and Tom Spencer of Marks and Spencer.”
Choppies Enterprises Limited, the listing company, now owns all the Choppies stores. That is 49 stores across Botswana, with another 20 odd to come over the next 5 years.
Pickup said while the sheer size in the number of branches might signal maturity in the business cycle, the developments in-store tells of abundant growth opportunities.
He added that gross profit margins at 18 percent for nationwide chain compares very favourably with other regional chains.
“Notwithstanding this, Choppies is making forays into the higher profit margin business of in-store butcheries, in-store bakeries, fruit and veg stores and take-aways,” he said.
“ These ought to whet many an investor’s appetite. Success here is, however, dependent on how well Choppies manages in this new world of food waste control.”
“Perhaps, the single largest upside opportunity is the groups desire to open 30 Choppies stores in South Africa in the next two years and one hundred and fifty over the long term.”
According to Motswedi Securities, with turnover of P2.4 billion and NPAT of P103 million, (FY 2011), Choppies has a competitive gross profit margin of 18.7 percent (FY 2011).
The group is said to handle more than 50,000 different products and on average complete more than 4 million transactions per month at an average basket of P50 and have in excess of 53,000m2 of retail trading space in Botswana and 14,500m2 in South Africa.
“It speaks volumes of the power of the Choppies brand in Botswana,” Pickup noted.
“The average amount spent was 50 pula, suggesting that there is room for growth even if the number of transactions were considered to have stabilised. With the right brand management this strength can also be developed into other areas of the customer spending,” he said.