Wednesday, September 30, 2020

Choppies headed to the BSE as public offer opens

At last, Choppies, the local chain giant, will become a public listed company after it opened a public offer ahead of floatation on the local bourse in the New Year to trigger another primary activity on the BSE.

Appetite is expected to be high as the group’s profitability is higher than other listed peers with the brand only comparable to South African retailers.

Motswedi Securities, the sponsoring brokers, said the retailer intends to raise P300 million through a private placement and P50 million.

“With turnover of P2.4bn and NPAT of P103mn, (FY 2011), Choppies has a competitive gross profit margin of 18.7 percent (FY 2011),” said the brokerage firm.

“This compares favourably with South African retailers which have average margins of between 14 percent and 20.3 percent,” the firm headed by Martin Makgatlhe added saying margins are expected to improve further to 19 percent FY 2012 due to improved efficiencies in the business model.

Choppies’ listing has been in the pipeline for years as it moves to be a truly Botswana company.

The business was founded by the Chopdat family in 1986 and the current major shareholders are Ram Ottapathu who is the CEO, Farouk Ismail the Deputy Chairman and Botswana’s former president Festus Mogae who is the Chairman of the Group.

It is offering 43,478,261 shares to the public at the price of P1.15 and a private placement of 260,869,565 has already being allocated to private participants at the price of P1.15.

After listing, a total of 1,174,207,585 shares will be in circulation at the Botswana Stock Exchange on the Domestic Main Board.

The offer will close on the 11th of January 2012 and the listing is expected on the 26th of January 2012.

Choppies is the current leader in the Mass Grocery Retail industry and is a dominant player with a market share of over 30 percent. Its target market is the lower to middle income consumer segment.

The company CEO said last month, the outfit is not afraid of competition, including the highly publicised entry of Wall-Mart into the market.

Choppies has 49 stores in Botswana and 9 in South Africa, giving the group a competitive advantage over its competitors in terms of geographical footprint, market share and customer base.

The group handles more than 50,000 different products and on average completes more than 4 million transactions per month at an average basket of P50 and has in excess of 53,000m2 of retail trading space in Botswana and 14,500m2 in South Africa.

Its shops are often located in centers where other competitors have feared may not produce the financial rewards they expect.

Choppies created a paradigm shift in the Botswana retail market by bringing retail stores closer to the people, thereby providing shopping convenience to the population which didn’t exist before.

The outfit is largely a self sufficient business model with all its warehousing and logistics requirements done in-house.

It has two centralised distribution centres located in Gaborone (10,000m2) and Lobatse (3,000m2) which service all retail outlets. The distribution centres function as a general sourcing and cost centre.

It negotiates prices and enters into agreements with suppliers and every three months, sales are evaluated and the distribution centres apply for rebates.

Another distribution centre being constructed in Rustenburg (SA) will service the outlets in South Africa and is expected to be operational during the current financial year.

Choppies operates two different profile stores, which are Superstores & Hyper stores, and the strategy to focus on the lower to middle consumer group has given it a competitive advantage over peers that target the middle to upper income class.

After the listing, the company will join Sefalana Holdings, which is the other BSE listed company. Sefalana operates Shoppers stores.

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