BOTSWANA – Choppies, the Botswana-based grocer, will use its planned JSE listing on May 27 to grow in SA, but more importantly as a springboard into Africa’s faster-growing economies.

Fundamentals for a listing are hardly favourable with consumer confidence in SA muted as living cost pressures and debt slash household budgets.

Choppies plans to raise R574m through the issue of 117-million new shares, which will be used to fast-track the continued roll-out of new stores, unlock opportunities in new markets and fund acquisitions.

“It is important for us to have greater liquidity and sources of capital to pursue these opportunities now,” CEO Ramachandran Ottapathu said on Monday. “Most of our business — 75% — is outside SA. We believe we have competitive fundamentals … that will see us through bumps in the economy.”

With 125 stores, Choppies is listed on the Botswana Stock Exchange with a market capitalisation of about 4.5-billion pula ($0.4bn). The price of the shares will be determined after a road show to selected investors.

While metrics such as its operating margin and return on equity were much in line with Shoprite and SA’s other food players, Choppie’s price-earnings ratio was too “rich”, Sasfin Securities senior retail analyst Alec Abraham said.

“I’m basing it purely on what’s going on in Botswana at the moment, they’re on 28 … not a bargain at all. Within that LSM (living standards measure) 3-6 space, they have a lot of competition. Shoprite is strong there, Massmart through Cambridge and Pick n Pay with Boxer are trying to get in there.

“No macro-economic factors — gross domestic product growth or real wages — suggest to me that those consumers are going to be any better off than they were in the last two years. It’s just a very tough space,” Mr Abraham said.

Choppies is aiming for 200 stores by the end of next year and will be opening its first stores in Zambia and Tanzania by the middle of this year.

“They have the two DCs (distribution centres) in SA, but it’s going to take them a long time to grow into capacity, also to leverage their margin they say they want to get to 25% private label here. I don’t think they can because the supplier base is limited, maybe in Botswana but its doubtful here,” he said.

May 13, 2015;

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