Oriental Kopi Holdings Berhad - Within expectation
Mon, 24-Feb-2025 07:29 am
by Chelsea Chew • Apex Research

Counter

KOPI (0338)

Target Price (RM)

0.810

Recommendation

Hold

Summary

  • Oriental Kopi’s (KOPI) 1QFY25 core net profit of RM13.1m came within our and market’s expectations, accounting to 24.0% and 20.3% of full-year figures respectively.

  • Currently operates 22 café outlets, including five new cafés outlets in 1QFY25, with plans to open five more by CY25. We are projecting a 44.4% revenue growth rate in FY26F, driven by (i) Increasing number of café outlets are receiving halal certification, (ii) New central kitchen and warehouse operational by mid-FY26, and (iii) exploring to add one (1) new café outlet located in Singapore that yields better profit margins and growth potential for its FMCG revenue stream.

  • Downgrade to HOLD recommendation with an unchanged target price of RM0.81, pegged to 22.0x PE multiple on FY26F EPS of 4.0 sen, ascribed with three-star ESG rating as the spike in share price during IPO debut has reflected fundamentals prospects.

 

Results within expectations. Oriental Kopi’s (KOPI) 1QFY25 core net profit reached RM13.1m, which aligns with our and the market’s FY25F expectations, representing 24.0% and 20.3% of full year expectations, respectively.

 

QoQ. KOPI was newly listed last month, there is no qoq comparison is available.

 

YoY. Since KOPI was recently listed last month, a yoy comparison is also unavailable.

 

Outlook. KOPI currently operates 22 café outlets, with five cafés outlets opened in 1QFY25. KOPI intends to open a total of ten café outlets by CY25. KOPI is also actively working to obtain halal certification for cafés outlets that are not yet certified. In addition, a new central kitchen and warehouse are slated to open in mid-FY26. As a result, we foresee KOPI experiencing a growth rate of revenue of 44.4% in FY26. (Refer to Table 1 for KOPI’s current market presence.) Furthermore, KOPI is contemplating a café outlet opening in Singapore, given the location’s better profit margins and growth potential for its FMCG revenue stream.

 

Earnings Revision. No change, given that reported earnings came within expectations.

 

Valuation. Downgrade KOPI to HOLD (from BUY) at unchanged target price of RM0.81, pegged to a 20.0x PE multiple on FY26F EPS of 4.0 sen and ascribed with 0% ESG factored premium/discount based on three-star ESG rating. We reckon the spike in share price during IPO debut has reflected fundamentals prospects.

 

Risk. (i) Maintaining food quality consistency across all café outlets (ii) Labour shortages (iii) Overreliance on third-party suppliers.

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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