PETALING JAYA: Oriental Kopi Holdings Bhd
’s earnings growth trajectory is expected to be driven by top-line growth from outlet expansion, a widening fast-moving consumer goods (FMCG) segment, and improved operating leverage.
Phillip Capital Research, which initiated coverage on the stock with a “buy” call, projected a core earnings compound annual growth rate (CAGR) of 22% over financial year 2025 (FY25) to FY28.
The research house noted that Oriental Kopi has delivered a strong historical profit CAGR of 88% over FY22–FY25, despite its relatively short operating history, reflecting rapid expansion. Over this period, gross profit margin declined from 32.3% in FY22 to 25.9% in FY25.
“Looking ahead, we project a further moderation to 25.3% in FY26, reflecting more conservative assumptions amid continued cost pressures and aggressive store rollout,” it said.
“Nonetheless, we expect margins to gradually recover from FY27 onwards, supported by the maturing of outlet openings in FY26.”
Phillip Capital Research views the growth of the group’s FMCG segment as a potential margin re-rating catalyst, offering upside to earnings and margins.
It expects FMCG revenue contribution to rise by 11%–13% over FY26-FY28 on the back of product range expansion and the launch of more festive-themed products.
Malaysia’s favourable macroeconomic backdrop, supported by resilient growth and sustained consumption, also bodes well for the group’s cafe expansion strategy and broader consumer product demand, Phillip Capital Research said.
Oriental Kopi is also poised to benefit from tourism growth, supported by the Visit Malaysia 2026 campaign.
The research house noted that food and beverage (F&B) spending remained the largest portion of domestic tourism expenditure.
Phillip Capital Research added that the company’s fully owner-operated structure serves as a key differentiator from domestic F&B peers, enabling it to maintain consistency in product quality, service, and dining experience across outlets.
“We believe this model provides greater control over execution and the preservation of brand equity, particularly as Oriental Kopi enters a more accelerated phase of outlet expansion,” it said.
With net cash standing at RM54mil as at the second quarter of FY26, the research house said the group should be able to comfortably finance its forecast annual capital expenditure of RM22mil to RM29mil over FY26 to FY28.
It also predicts an annual dividend per share of 1.1 sen to 1.7 sen over FY26 to FY28, implying a payout ratio of 30% of net profit.
“Given Oriental Kopi’s strong cash flow generation and healthy balance sheet, we believe there is upside to our current dividend estimates should earnings and cash flow exceed expectations.”
Phillip Capital Research has set a target price of RM1.26 on the stock, based on a multiple of 26 times target FY27 price-to-earnings ratio (PER).
It opined that the premium multiple is warranted, given the group’s strong operational execution, healthy earnings trajectory, superior margin relative to peers, scarcity position as a halal operator, and growing brand equity.
Additionally, it noted that the company’s valuation remains undemanding, trading at 19 times 2027 PER, which is below its historical mean of 30 times and at a 47% discount to the peer weighted average of 28 times.
