Botswana-based retailer Choppies Enterprises was 2025’s surprise 10-bagger, shifting from under 80c to nearly 800c. Investors will no doubt be wondering what 2026 holds for the group, especially with the first few weeks showing extreme volatility in the share price.
The Choppies rally in 2025 is best understood not as a reassessment of intrinsic earning power, but as the predictable outcome of narrative momentum colliding with an extraordinarily constrained free float.
The shareholding structure is unusually concentrated: the top 10 shareholders own close to 90% of the outstanding shares, with directors alone accounting for roughly 46%, leaving only a sliver of stock available for meaningful price discovery. Trading volumes on both the Botswana Stock Exchange and the JSE are therefore thin, creating an environment in which relatively small shifts in buying or selling pressure can translate into disproportionately large price movements.
This volatility has shown up repeatedly in the company’s trading history. In September 2018, the share price fell more than 70% in a single session on limited volume following governance-related disclosures. The same mechanics reasserted themselves in reverse during 2025.
A series of incremental, confidence-enhancing developments — such as the resumption of dividends, senior executive appointments, dematerialisation into the central securities depository and disclosed director and subsidiary transactions under long-term incentive schemes — improved tradability and strengthened the turnaround narrative, even as the company’s underlying earnings capacity remained largely unchanged.
In a market with such a limited float, these signals were sufficient to trigger a reflexive rerating that ran well ahead of fundamentals. The January 2026 reversal drives the point home with uncomfortable clarity. After closing 2025 near 800c, the share price dropped as much as 57% intraday on January 8, with trading volumes approaching 10 times the 52-week daily average, despite the absence of any negative news. What looked like a sudden destruction of value was, in truth, the mirror image of the earlier ascent: liquidity finally surfaced, sentiment reversed and prices adjusted abruptly.
In this kind of situation, valuation becomes subordinate to trading flows rather than cash flows, and price discovery oscillates between scarcity-driven exuberance and liquidity-induced air pockets. Choppies is a stark reminder that in thinly traded equities, momentum can create extraordinary gains — and can unwind them just as quickly when the marginal buyer steps away.
Fundamentally, there are challenges. Choppies exhibits the characteristics of a mature, necessity-driven retailer rather than a growth company. In Botswana alone, the group operates more than 90 stores serving a population of roughly 2.4-million — about one store per 25,000-26,000 people — indicating dense market penetration and limited scope for geographic expansion. Botswana’s De Beers-dependent economy has been under strain recently as prices of natural diamonds fell sharply.
In a market with such a limited float, these signals were sufficient to trigger a reflexive rerating that ran well ahead of fundamentals
This stands in sharp contrast to the mid-2010s expansion phase, when annual capital expenditure regularly exceeded P450m, representing 8%–10% of revenue, as the group expanded into seven countries and grew its store base beyond 200 outlets. That expansion ultimately proved value-destructive, diluting returns and straining working capital, and culminated in the 2019 balance sheet and governance crisis.
Post-turnaround, capital allocation shifted decisively from expansion to optimisation. Capital expenditure was cut back to maintenance levels during the stabilisation phase and only later normalised as selective investment resumed, while store growth became modest and tightly controlled. Importantly, the improvement in return metrics over this period reflects capital discipline and asset rationalisation rather than margin expansion. Return on net assets rose from 22% in financial 2021 to 27% in 2022, 25.8% in 2023 and 26.7% in 2024, before moderating to 23.2% in 2025. Over the same period, the group’s pre-tax weighted average cost of capital (WACC) remained broadly stable at nearly 16%, meaning returns on net assets consistently exceeded the cost of capital from 2022 through 2025.
A similar pattern is evident in return on invested capital. This improved from 5.8% in financial 2021 to 14.3% in 2022, 14.1% in 2023 and 15.6% in 2024 — exceeding the post-tax WACC benchmark of just over 12% in each of those years before declining to 11% in 2025, marginally below the cost of capital. This highlights the limits of further optimisation in a structurally low-margin grocery model once the benefits of deleveraging and asset exits have been realised.
Taken together, these figures indicate that Choppies’s recovery has been driven by the removal of underperforming assets, a smaller and more efficient capital base and restrained reinvestment — not by structurally higher margins or a renewed growth engine. Management’s current emphasis on refurbishments, supply chain efficiency and selective expansion only where returns are clearly justified is therefore consistent with a business operating in the maturity and optimisation phase of its life cycle, rather than one transitioning back into a high-growth trajectory.
At current prices, Choppies is no longer valued as a deep-value recovery or distressed turnaround; it is being priced as a business with materially higher growth, durability and return sustainability than its financials currently support. With a share price of 625c and 1.82-billion shares outstanding, the company carries a market capitalisation of R8.9bn and net debt of about R226m. Against this valuation, Choppies generated ebitda of about R788m, implying an enterprise value (EV)/ebitda multiple of 11.5, while reported earnings translate into a trailing earnings multiple of 40.
The stock also trades at about 0.8 times EV/sales on revenues of R11.6bn and 11.6 times price-to-cash-flow. Income support remains modest, with a dividend of 2.9c a share. These multiples embed expectations of sustained earnings growth and improving capital efficiency that sit uncomfortably with the company’s underlying economics: ebit margins of 3%–4%, gross margins below 20% and a business profile that remains highly exposed to price-sensitive consumers, informal competition and frontier-market risks.
In this context, the valuation reflects optimism not only about operational stability but also about a durability and growth trajectory that the current cash-flow profile has yet to demonstrate, leaving limited margin for error should earnings fail to compound at the pace implied by today’s pricing.
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