HLIB: Oriental Kopi's growth driven by brand, expansion

New Straits Times

26-05-2025

KUALA LUMPUR: Oriental Kopi Holdings Bhd's long-term growth prospects remain intact, driven by a strong brand presence, an expanding outlet network, and rising consumer demand.
Hong Leong Investment Bank Bhd (HLIB Research) believes that current valuations fairly reflect these positives.
"Key strategic initiatives, including the development of a new head office, central kitchen, and warehouse, as well as expansion into domestic and overseas markets, are promising but will take time to fully materialise.
"The upcoming operational facility in Selangor, targeted for completion by the fourth quarter of 2026 (4Q26), is expected to enhance operational efficiency and support product innovation," it said in a note.
HLIB Research also highlighted that the group is diversifying its product offerings, with upcoming launches of new menu items and packaged goods, aimed at expanding its customer base and deepening engagement.
It noted that in parallel, Oriental Kopi is also engaging overseas distributors to introduce its brand beyond Malaysia.
"Its disciplined, location-focused expansion strategy, prioritising high-traffic sites, continues to differentiate it from peers and reinforces its commitment to quality, positioning the group for sustained long-term growth," it said.
As such, HLIB Research has maintained a "Hold" call on Oriental Kopi with a lower target price of RM0.76 from RM0.81.
The firm noted that a near-term catalyst for the group could stem from the potential Shariah-compliant status, which may enhance liquidity and investor interest.
Meanwhile, Oriental Kopi reported a revenue of RM103.2 million and a core profit after tax (PAT) of RM14.7 million in 2Q25, which brought the first half of the financial year 2025 (1H25) sum to RM28.2 million.
HLIB Research said the results fell short of both the firm's and consensus' expectations, making up 44 per cent and 46 per cent of full-year forecasts, respectively.
"The variance was primarily due to softer-than-anticipated sales. 1H25 core PAT was adjusted to exclude RM1.3 million in listing expenses," it noted.
Sequentially, the group's revenue grew six per cent quarter-on-quarter (QoQ) to RM103.2 million, driven by stronger performance from both the café chain segment and distribution & retail of packaged foods.
This was largely attributable to increased footfall during the Chinese New Year festive period and contributions from newly opened outlets.
The café chain remained the key revenue driver, contributing RM96.4 million (93 per cent), followed by packaged food sales at RM6.4 million (six per cent) and other revenue streams at RM0.4 million (0.4 per cent).
On the back of this, core PAT rose nine per cent QoQ to RM14.7 million.