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Anyone else crazy?

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rosszar
Contributor
I have been buying this on its way down, bought more at R3.10. Anybody else have a view. I am investing for the long term so do not mind volatility and not too worried about further losses, in the short term. Botswana still very profitable for them, SA and Zim should turn around at some point. Any views?
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8 REPLIES 8
Regular Contributor
Why would be a sucky little Botswana retailer on a 30x PE when you can buy Shoprite on a 21x PE?
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rosszar
Contributor
It on a 30 P/E because they spending huge amounts to expand and making initial losses in new markets, that is the cost of expansion. My local Checkers could not be worse run, it is dirty and badly managed, I know SHP the biggest and best etc. but think there is a big market for a new entrant to steal some market share. SHP has not been able to steal market share from them in Botswana for over 20 years despite their best efforts..
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Valued Contributor
PIK can't beat SHP, why do you think CHP will ?? CHP doesn;t even have the benefits of national foot print .. it a bust
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rosszar
Contributor
Nobody starts with the benefit of a national footprint. Small caps are the best performers because some have exponential growth. Not saying CHP will be one, but it could, there is nothing great about a SHP store and based on my experience they getting worse, especially the staff. Question to you is - why do you think CHP cant compete with SHP?, given enough time (10 years plus).
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Highlighted
Regular Contributor
Perhaps, but I prefer to buy stocks with high ROE's. It all depends how CHP would increase the ROE (by expansion?) We'll have to wait and see. For now,I prefer shp compared to CHP as it is cheaper and the ROE is over 15. SHP ROE is about 21% vs CHP's mediocre 5%.
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Valued Contributor
CHP cant compete with SHP? coz they don't get benefit of bulk buying .. they can't effectively use DCs .. they don't have the margins to compete .. don't have the experience at senior management level .. will struggle to get good locations as majors have them all sorted .. etc. .. sure every large player was once small, but not every small becomes large and the Q is do some players have such a tight grip on the industry that new players simple can't get scale ? I say yes and that low income food sales is one of those industries .. heck even walmart couldn't make it work here ..
but best of luck to them and you as investor .. I own SHP for +10 years and very happy shareholder ..
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New Contributor

SimonPB, I don't think Choppies wants to compete for space in major shopping malls, like Sandton and Mall of Africa. Choppies is more the lower income spectrum areas.

You have to look at who you are going into business with and whether you trust them, Farouk Ismail and Ramachandran Ottapathu, they own 34% of the company, and their shares are worth R1.3billion at R3 per share.

I worry about risks, ethics and corporate governance, and dodgy issues will always occur when dealing in Zimbabwe, Zambia, Mozambique, Kenya, and Tanzania.

It's not easy doing business in Africa.

Botswana's president from 1998 to 2008, Festus Mogae, owned 4.8% of Choppies in 2014, 1.48% in 2015, and 1.49% in 2016 (19m shares x R3 per share = R57m)

It definitely benefited Choppies by having the president of Botswana as a major shareholder.

With Choppies expanding into Zimbabwe, I wonder if they will make Mugabe or other politicians a major shareholder.  

The current share price is R3, at 24-Jan-2016.

When Choppies listed on the JSE in 2015 at R4.90 per share,

the bookbuild raised R1 359 million, of which R575m was from the issue of new shares, Mogae sold R49m of his shares, Ismail and Ottapathu each sold R367.5m of thier shares.

Mogae, Ismail and Ottapathu cashed out at the right time, at R4.90 instead of R3.

Botswana's currency is the Pula, and BWP 1 = RAND 1.27

"RMB and FNB Botswana collaborated to fund Choppies Enterprises Limited’s executive jet" for BWP 80 million. Reference: http://www.rmb.co.bw/dealsDone.asp

I refuse to invest in Choppies when they spend BWP 80 million on a jet and their profit for the year is BWP 85m.

The purchase of a jet is not a once-off cost.

I know from experience that the running costs of a jet are more expensive than the purchase price of the jet.

Fuel, pilots, maintenance, airport taxes, courier fees and import taxes for parts from US that cost USD$, and insurance at least 10% per year of the purchase price.

Director's often use company aircraft for personal travel.

There is no way of knowing if the Choppies directors use the jet for personal travel and holidays. I don't want to pay for them to fly around in a jet.

I saw photos on Facebook of the Shoprite jet at Sun City airport when the Wiese family took the grannies to the Palace hotel.

I saw the Choppies Cessna Citation Jet parked at Waterkloof airforce base, during the AAD expo/airshow (Africa Aerospace and Defence expo).

I doubt whether the Choppies jet being parked at Waterkloof airforce base was business related or had anything to do with selling groceries.

Shoprite owns 2 Falcon 2000 jets, but thier profit is R4.8 billion, not BWP 80 million.

Interestingly, the registration chosen for the Shoprite jets was ZS-CCW and ZS-JCC, the initials of the family members, parents CCW(Christo & Caro Wiese), and children JCC(Jacob, Clare, Christina)

I would not have known that Choppies owns a jet if I didn't see it at Waterkloof airforce base. Who knows what other aircraft they own?

It's annoying that company financial statements disclose nothing about how many jets/helicopters they own. The aircraft are usually held in a separate subsidiary.

Choppies "Profit and total comprehensive income for the year" for the group decreased -53% to BWP 85m (2016) from 181m (2015),

yet 2 director's remuneration was BWP 14,8m (2016) and 16,4m (2015) for Farouk Ismail and Ramachandran Ottapathu.

The 2 directors took 17% of 2016's profit as remuneration. (14,8m / 85m).

The shareholders were given a 41% decrease in dividends but those director's pay only decreased 10% in 2016.

And in 2016 the 2 directors received dividends of BWP 12,4m. (7,1m + 5,3m), (188 068 920 and 252 080 152 x 2.8266 Thebe per share)

Choppies Total Liabilities increased 111%, to BWP 1 382 542 (2016), from BWP 654 729 (2015).

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rosszar
Contributor
Thanks for your analysis Simon. I take your points, there is a lot of truth to what you say, and SHP is certainly a great share to own. I do however believe they can leverage their strong position in Botswana and (slowly) build scale in SA and elsewhere. With over 200 stores they will have some sway with suppliers and already have a large private label range. It will likely be painful at times, but I am willing to take a punt on this one being a multi-bagger.
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