12 May 2015 New food retailer to list on JSE
The imminent foray of Botswana-based grocery retailer Choppies Enterprises on the JSE has few convinced that the company might be a game changer for the already over traded retail market in South Africa, reports Moneyweb.
Choppies is eyeing a secondary listing on the main board on May 27 with a view of raising capital to fund its growth ambitions across Southern and East African markets.
Choppies – with a primary listing on the Botswana Stock Exchange and a market capitalisation of about R5.7 billion – plans to raise about R600 million locally by placing 277 million shares on the market.
It will issue 117.4 million shares and a further 160 million shares will be extended to existing shareholders. The offer price for the shares will be determined by way of a bookbuild process managed by Rand Merchant Bank.
Botswana’s biggest food retailer will deploy the proceeds from its capital raise to settle existing debt of about R200 million, roll out new stores and grow its exposure to other markets.
Group CEO Ramachandran Ottapathu says Choppies is a strong cash generating business that has traditionally supported “organic growth of new store openings”.
It is looking to grow its exposure to Kenya, Namibia, Tanzania and Zambia – with a target of having over 200 stores by 2016.
Choppies currently operates 125 retail outlets in Southern Africa servicing lower- to middle-income consumers. It has 72 stores in Botswana, 35 stores in South Africa and 18 stores in Zimbabwe.
The retailer has aggressive expansion plans. In Botswana it plans to open five more stores by December hoping to operate 90 stores over the medium term. In Zimbabwe, Choppies is targeting 12 more stores by the end of this year and in future looks to manage 50.
South African market
After making its debut in the South African market in 2008, Choppies has identified over 30 locations suitable for store expansion. But for now it is earmarking ten stores by December and planning to operate a total of 80 stores in small towns, largely in Mpumalanga, Limpopo, the northern Free State and the North West province.
On the targeted market share in South Africa Ottapathu told Moneyweb: “With 35 stores we can’t say what is our targeted market share but we are one of the recognised retailers in the towns we operate in.”
Choppies has two distribution centres in Rustenburg supporting its current store base. The distribution centres allow the company to service up to 100 stores, but currently utilises only about 35% of its capacity.
While the local retail market is competitive with food counters all vying for market share and growth in a constrained environment, Choppies promises to put forth a compelling value proposition…..