RHB Research has initiated coverage of Oriental Kopi with a BUY call and RM1.30 target price, implying 24% upside, saying the Malaysian café operator is entering a rapid growth phase backed by store expansion, attractive outlet economics and a growing fast-moving consumer goods (FMCG) business.
The research house forecasts core earnings to grow at a three-year compound annual growth rate of about 26%, compared with around 15% for peers. It believes Oriental Kopi’s halal-certified Malaysian brand and presence in high-footfall locations such as KLIA, KLCC, Pavilion KL and TRX should support customer traffic, including potential spending linked to Visit Malaysia Year 2026.
Café revenue is expected to grow at around 29% annually between FY25 and FY28, driven by new outlets and single-digit same-store sales growth. Selective menu repricing, new offerings and higher takeaway and delivery sales are also expected to support growth.
Meanwhile, the FMCG segment, which accounted for about 6% of FY25 revenue, is forecast to grow at a 45.8% CAGR through FY28 as distribution expands across supermarkets, minimarkets, e-commerce and overseas markets. Its revenue contribution is expected to rise to around 9%, with gross margins remaining above 40%.
RHB Research’s DCF-based target price implies a FY27 forward P/E of 26 times, above the roughly 22 times peer average. The premium is justified by the stronger earnings growth profile and margins, it said.
Key downside risks include weaker consumer sentiment, delays to expansion plans and higher-than-expected costs.
The stock price is flat at RM1.06 as of 2.34 pm.
