Botswana supermarket chain Choppies Enterprises Limited has launched a roadshow this week to raise $48 million and dual-list on the main board of the JSE Ltd on 27 May. It is offering to sell 117.4m new shares and 160m shares from existing investors.
Choppies was founded in 1986 and now operates 125 stores in Botswana, South Africa and Zimbabwe and employs over 11,000 people. It hopes to expand in Tanzania and Zambia, while Kenya and Namibia have also come up in reports.
The listing will be a secondary inward listing, so far only a few African companies have taken advantage of this opportunity offered by the JSE. The share price will be finalized after a roadshow which began on 11 May and a book-build run by Rand Merchant Bank. The offer should raise about R574m based on the current share price on the Botswana Stock Exchange.
Mr. Ramachandran Ottapathu, Group CEO said in a press release: “This is a really exciting moment in the life of the company. The listing on the JSE gives us further impetus for our ambitious growth plans. We are on track to have over 200 stores by the end of next year and we will be opening our first stores in Zambia and Tanzania by mid-2015. Choppies is a strong cash-generating business that has traditionally supported our organic growth of new store openings. The listing will allow us to fast-track the continued roll-out of new stores, unlock opportunities in new markets and fund acquisitions where opportunities arise.” Full details of the offer are available at their investor portal.
Media coverage on Reuters, Bloomberg and Business Day highlights the growth but adds that South African retailers Shoprite and Spar Group are also going after middle-income consumers in African markets. Bloomberg says it trades at 24x estimated earnings, compared to 21.4x for Shoprite and quotes Sasfin senior equity analyst Alec Abraham: “If Choppies can raise money at this price-to-earnings ratio, good for them. But it’s a very competitive space and companies are having to really invest to keep their market share.”
According to the company, Choppies has seen superior growth over recent years with a compound annual growth rate of 27% in total revenues from BWP2.4 billion for the year to 30 June 2011 to BWP5.0bn for the year to June 2014. Earnings before interest, tax, depreciation and amortisation (EBITDA) have grown at a CAGR of 19% to BWP352m in 2014, from BWP207m in 2011.
Mr. Ottapathu said: “We continue to establish ourselves in areas where we see great potential with the transition to branded convenience. We have the benefit of many years of experience identifying the right places to start up new stores for our target market. Our differentiated approach of partnering with local operators and sourcing from local suppliers provides us many advantages as we expand into new markets”.
Choppies locates its stores near taxi ranks and bus routes and is not in large shopping centres, Ottapathu told Bloomberg it has not experienced “significant pressure” on sales in South Africa. “We see growth opportunities in the current markets in which we operate and the retail penetration of the markets we are going into is low,” he said.