PETALING JAYA: Cafe operator Oriental Kopi Holdings Bhd
remains on track with outlet openings, with customer traffic unchanged despite a controversy over menu language that erupted in early October.
China Galaxy Securities International (CGSI) Research, which recently hosted Oriental Kopi’s management and investors to discuss the menu language controversy, has reiterated an “add” call on the stock with a target price (TP) of RM1.37 a share.
Based on the TP, the stock trades at 21.5 times financial year ending Sept 30, 2028 (FY28) price-to-earnings, which sits at the house’s consumer staples and consumer discretionary stocks’ target multiples of 24 times and 15 times respectively.
“In our view, Oriental Kopi’s valuation does not fully reflect the value of its hybrid business model, combining discretionary-driven cafe operations with a scalable fast moving consumer goods platform,” CGSI Research said.
It added that the company has not seen meaningful changes in traffic or customer mix following the controversy, and that three outlets that opened in the past 10 days in Sunway 163, Aman Central and Merdeka 118 have drawn long queues.
“Management said the matter has been resolved with its trilingual menus introduced in November at a reprinting cost of RM150,000, with no material impact on footfall,” CGSI Research said, adding the revised menu should be rolled out to all outlets by the end of this month.
The research house remained constructive on the company’s outlet roll-out, with 40 to 41 outlets in the country by the end of this year, from 34 as at July. “With six mall locations already secured, its target of eight to 10 new outlets per annum looks achievable, in our view,” it said.
It noted that with the company having secured most high-footfall locations in the country, the focus would be moving into second-tier malls.
“We think this should keep rental costs in check, while average paybacks of 10 to 12 months continue to support returns,” CGSI Research said.
Oriental Kopi’s overseas segment will serve as a second growth engine, with a first outlet in Indonesia set to open by end November or early December this year, followed by Mauritius in early 2027 and another two outlets planned for Singapore in 2027, from three currently.
“We view execution risks as manageable given its measured rollout and potential use of local partners through a capital-light joint venture or franchise model in its overseas expansion,” it said.
“We believe our FY26 core net profit of RM67.4mil is achievable, with a fourth quarter ended Sept 30, 2026, core net profit of RM22mil: plus 50% year-on-year, plus 29.4% quarter-on-quarter, driven by new-store contributions and stabilising gross profit margins, amid steady raw material prices,” CGSI Research added.
