Power Root Bhd is banking on regulatory changes in the Middle East and ongoing trade expansion efforts to sustain growth, even as some of its brands face headwinds.
The group’s flagship brands — Alicafé, Ah Huat and Per’l — continued to chart steady growth in recent months, though sales for Oligo softened. Management has trimmed Oligo’s FY25 sales target to around RM20 million, from RM23 million previously, as the earlier boost from boycotts of certain Western brands faded.
Despite this, PWROOT is stepping up efforts to widen its market reach. Since mid-2025, the company has increased participation in trade expos to a monthly pace, compared to just one or two times a year in the past.
UAE Sugar Tax Shift Could Provide a Lift
A major catalyst for overseas sales could come from the United Arab Emirates’ (UAE) planned sugar tax reform. Starting early 2026, the UAE will replace its current blanket excise tax — 50% on sweetened drinks and 100% on energy drinks — with a tiered system based on sugar content.
As most PWROOT products have already been reformulated to contain less than 5g of sugar per 100ml, management believes they could qualify for exemption, potentially halving shelf prices in the UAE. This, the group says, would significantly improve competitiveness and boost sales volumes.
Saudi Arabia, however, still imposes a flat 50% excise tax on sugar-sweetened beverages and 100% on energy drinks, which continues to weigh on PWROOT’s performance in that market. Even so, management remains hopeful that other Gulf Cooperation Council (GCC) states may eventually follow the UAE’s lead.
Managing Costs and Securing Supply
Global coffee prices remain elevated due to supply disruptions and weather risks, but PWROOT has moved to lock in most of its bean costs until the end of FY26. It also implemented an average 6% price increase in March 2025 to offset input cost pressures, while benefiting from easing sugar and creamer prices.
The group’s upstream venture into coffee farming and processing is still in its infancy, with land clearing scheduled to begin in October 2025.
Analyst Outlook
Research house projections maintain a target price of RM1.20 for PWROOT, pegged at 15 times FY26F earnings, reflecting a discount against industry peers due to its narrower product range. Analysts upgraded the stock to Market Perform from Underperform, citing balanced risk-reward after recent share price corrections.
A sustained rebound in domestic and overseas sales — particularly if regulatory reforms in the Middle East materialise — could serve as a re-rating catalyst, they added.
Still, risks linger, including softer consumer spending amid inflation, a weaker ringgit raising import costs, and potential spikes in food commodity prices.
