KOPI's 9MFY25 GP margin contracted 4.4%-pts vs. FY24 on higher FMCG costs and pre-revenue labour expenses from new outlets. SST expansion on commercial rentals could add a further c.1%-pt drag, though KOPI mitigates margin pressure via biannual menu reviews and selective supplier sourcing.
KOPI currently operates 27 cafés and has raised its FY26 outlet target to 8 (vs. our forecast of 6). The Group also rolled out 9 kiosks in CY25, supporting FMCG sales and brand reach.
KOPI expanded FMCG distribution to 99 Speedmart from July 2025, with discussions ongoing with other local retailers, while overseas expansion targets Hong Kong, Australia, and New Zealand.
KOPI continues to innovate with SKUs rising to 35 (from 26 in Dec 2024), while its new CY26 operational facility should enhance efficiency and R&D capabilities, supporting earnings growth.
We maintain our BUY recommendation with an unchanged TP of RM1.26, based on 30x FY26F EPS of 4.2 sen, alongside a three-star ESG rating.
We left KOPI’s briefing with the following key takeaways:
9MFY25 margins contraction. GP margin declined 4.4%-pts in 9MFY25 vs. FY24. The contraction was driven by higher production costs in the FMCG segment, particularly santan, and increased labour expenses from newly opened outlets, where payroll was incurred ahead of revenue contribution. Looking ahead, we expect the SST expansion on commercial rentals to exert an additional c.1%-pt drag on GP margin. To mitigate these pressures, KOPI reviews its café menu every six months to identify loss-making items and leverages a selective supplier strategy to secure more favourable pricing.
Outlet Expansion Updates. KOPI now operates 27 cafés, with 5 new outlets commencing operations in 2HFY25. The Group has lifted its FY26 outlet target to 8 (vs. our forecast of 6). Domestic expansion could extend to Kelantan, Terengganu, and Sabah, while international plans point to up to 8 outlets in Singapore. A new outlet at Westgate, Singapore is confirmed for 4QFY25, with additional openings at KLIA 1, KLIA 2 (Departure Satellite), and Sunway Velocity Mall slated for FY26.
In addition, KOPI has rolled out 9 kiosks in CY25, parked under the café chain operations segment to boost FMCG sales and complement F&B performance. These kiosks contribute up to 15% of café chain operations revenue and act as an additional distribution channel for packaged products, though not recognised under the FMCG distribution segment. This reflects underlying demand for KOPI’s FMCG range, with kiosks also serving as incremental consumer touchpoints.
Wider Distribution Reach. Effective July 2025, KOPI has added 99 Speedmart to its FMCG distribution network, expanding product availability nationwide. The Group is also in discussions with other local retailers to further broaden its reach, while overseas distribution plans are targeting Hong Kong, Australia, and New Zealand, providing a longer-term growth avenue.
R&D and Innovation to Fuel Growth. KOPI continues to drive product innovation, launching new menu items and seasonal FMCG offerings, with SKUs rising to 35 (from 26 in Dec 2024). Its new operational facility which will house a central kitchen, warehouse, and office, is scheduled for completion by CY26. The central kitchen is expected to enhance food preparation efficiency and quality consistency, while also lowering operating costs through economies of scale in procurement and production. Coupled with improved warehousing and R&D capacity, the facility should strengthen product development and support future earnings growth.
Earnings Revision. No change to our earnings forecasts.
Valuation and Recommendation. We maintain our BUY recommendation with an unchanged TP of RM1.26, based on 30x FY26F EPS of 4.2 sen, alongside a three-star ESG rating. We continue to favour KOPI for its (i) strong outlet expansion momentum, (ii) consistent product innovation with expanding menu and SKUs, and (iii) commitment to product quality.
Risks. Quality control, shortage of labour, and supply chain disruptions.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.216494 | 4.249912 |
EUR | 4.923595 | 4.928588 |
CNY | 0.592163 | 0.592763 |
HKD | 0.540426 | 0.544215 |
SGD | 3.273679 | 3.296901 |