Investment Highlights 

• Strong track record. Total revenue grew 280.9% CAGR from FY21 to FY24, driven by cafe chain expansion and robust sales of packaged foods, with preliminary discussion for regional expansion. 

• Diversified revenue streams: Expansion of market reach via a dual business model with cafe food and beverage (F&B) services and packaged food distribution. 

• New operational facility. The Group plans to set up a c.108,448 sqft, 3-storey operational facility in Puchong, Selangor, by 4QCY26, featuring a central kitchen aimed to optimise costs, consistency, and food safety.

Company Background 

• Cafe chain operator. Oriental Kopi Holdings Bhd (OKH) is primarily engaged in operating a cafe chain under the Oriental Kopi brand, offering non-alcoholic F&B services. In addition, the Group is involved in the distribution and retail of its branded packaged foods. As at 9 Dec 2024, the Group has established 12 cafes in Klang Valley, 6 in Johor, 1 in Penang and 1 in Singapore, located in shopping malls, shop lots and airport retail mall, with a total gross floor area (GFA) of approximately 80,066 sqft. Additionally, the Group operates a specialty retail store in St. Giles Southkey Hotel, Johor, with a GFA of about 620 sqft, which opened in April 2024. The specialty retail store offers a full range of packaged foods and ready-to-eat items such as 'Oriental egg tart', which is one of its signature products.

Industry Landscape 

• Robust growth in F&B sector. Between 2021 and 2023, the real gross domestic product (GDP) of F&B services grew at a CAGR of 11.9%. It continued to grow by 3.7% YoY in 9MCY24. The sales value of the wholesale and retail trade of food, beverages and tobacco recorded CAGRs of 7.3% and 14.3%, respectively, between 2021 and 2023, and grew further by 6.3% and 7.6% YoY, respectively, in 9MCY24. (Source: Vital Factor Consulting S/B, from company prospectus)

Valuation 

• We derive a fair value of RM0.70, pegging to a 17x PE multiple, in-line with average PE of its closest F&B related peers based on its CY26F EPS of 4.1sen. We believe the valuation justified, backed by the earnings growth from the opening of new cafes and launching of new products for in-store, as well as distribution and retail of packaged food.

 Key Risks 

• Key downside risks, among others, include: i) competition, ii) changes in consumer behaviour, iii) inflationary pressures, iv) fluctuation in coffee beans’ price, and v) reliance on third-party suppliers for production of ingredients.