PETALING JAYA: There is scope for Oriental Kopi Holdings Bhd to grow further, given the locations of the company’s modern kopitiam-style cafes and the expansion of the fast-moving consumer goods (FMCG) business.
CGS International Research, which initiated coverage on the stock with an “add” call and target price (TP) of RM1.37, viewed the company’s business model favourably given its halal-certified modern kopitiam format, strong and growing brand presence, and integrated FMCG business, which provides an additional avenue for earnings growth beyond its cafe operations.
“We also see scope for further growth from tourism-related demand, given the company’s strategic focus on high footfall locations and destinations frequented by both domestic and international visitors,” it said.
The brokerage’s TP implies 21.5 times financial year ending Sept 30, 2028 (FY28) price-earnings (PE), representing a discount to its historical one-year mean PE of 30.8 times (the company was listed in January 2025).
It believes the tourism tailwind would boost the company’s business, and projects 31.1% a compounded annual growth rate (CAGR) of 31.1% over FY25 to FY28, driven by 23 new outlets (in line with historical additions over FY23 to FY25), rising outlet productivity, and continued expansion of its FMCG business.
“We also expect core net profit to register a 27.8% three-year CAGR in FY25 to FY28.
“We believe FY26 was a trough year for margins as earnings were weighed down by elevated raw material costs and higher packaging costs due to the Middle East conflict,” it said.
It added that margins should recover on the maturation of newly opened outlets, normalisation of pre-operating expenses, stabilising commodity prices, lower fuel-related logistics costs, and benefits from the planned central kitchen.
“The brand’s halal proposition and presence in key tourist hotspots enhance its appeal to international visitors, particularly those from Singapore, Indonesia, Thailand, India and China,” it noted.
Although the FMCG segment of the business remains a relatively small contributor, it has expanded rapidly in recent years accounting for 6.5% of FY25 revenue (up from around 4.2% in FY24 and 2.3% in FY23).
“We project revenue from its FMCG business to register a 30% three-year CAGR over FY25 to FY28, increasing from RM29mil in FY25 to RM64mil in FY28,” it said, viewing the segment as one of the company’s key medium-term growth drivers, supported by an expanding product portfolio and broader distribution reach.
It pointed out that the planned central kitchen, to be funded through its initial public offering proceeds, could lift the company’s gross profit margin by two percentage points to 24% versus 22% in FY26.