PETALING JAYA: Oriental Kopi Holdings Bhd
is expected to see stronger earnings visibility in the coming quarters as expansion-related costs begin to ease.
Its growing café network and sustained sales momentum are also expected to support performance.
Against this backdrop, MBSB Research upgraded its recommendation on the coffee chain operator to “buy” from “hold”, while maintaining its target price (TP) for the counter.
“We upgrade our call to ‘buy’, following a recent pullback in share price which has brought valuations to more attractive levels, with an unchanged TP of RM1.06, based on 30 times estimated earnings of 3.5 sen per share for the financial year ending Sept 30, 2026 (FY26),” the brokerage said after attending Oriental Kopi’s second-quarter (2Q) FY26 analyst briefing.
MBSB Research said the management had reiterated that FY26 would remain an investment and expansion year, with near-term profitability intentionally moderated to support growth initiatives across its café network, fast-moving consumer goods (FMCG) business and future overseas ventures.
Despite margin pressures, it maintained its earnings forecasts and valuation, citing confidence in the group’s long-term growth prospects.
“We continue to view Oriental Kopi as a strong consumer brand with healthy topline momentum, attractive store economics and meaningful medium-term growth optionality from café expansion, FMCG distribution, Singapore and broader overseas expansion,” it said.
The group has opened six new cafés so far in FY26, bringing its network to 34 outlets – 31 in Malaysia and three in Singapore.
New locations include Queensbay Mall, KLIA2 Boarding Hall, KLIA Terminal 1, Sunway Velocity, Suria Sabah and Dataran Merdeka.
According to the research house, the management expects to launch another four to six cafés during the remainder of FY26, while expansion plans for FY27 are expected to focus on northern Peninsular Malaysia, the east coast, Selangor, the southern region, and Sabah and Sarawak.
According to MBSB Research, store economics remain compelling with a typical payback period of about 10 to 12 months, although breakeven timelines may vary depending on the location.
Newly-opened cafés generally require five to six months to reach maturity.
Same-store sales growth (SSSG) remained robust at 14.7% in the first half of FY26, compared with 15.5% a year earlier.
Kuala Lumpur was the strongest-performing region, recording SSSG of 21.8%, while Johor and Selangor saw slower growth due to outlet-specific factors.
The management also indicated that future expansion would increasingly prioritise high-traffic sites such as shopping malls and airports, while untapped markets including Ipoh, Kedah, Kelantan and the east coast offer additional growth opportunities.
Airport outlets, Pavilion Kuala Lumpur, Kuala Lumpur City Centre and Johor City Square were identified as among the company’s top-performing locations, supported by resilient tourist arrivals and stronger sales during recent holiday periods.
MBSB Research noted that margins were currently weighed down by higher staff costs, foreign worker levies, pre-opening expenses, marketing expenditure, FMCG listing fees and elevated logistics costs.
However, the management expects profitability to improve as the year progresses, with 3Q and 4Q being traditionally stronger periods for the business.
