ORIENTAL Kopi Holdings Bhd’s 1HFY25 gross profit margins contracted by 4.6% percentage-points compared to FY24 due to volatile raw material costs, prompting management to seek cost-reducing supplier solutions. Central Kitchen plan for 2026 faces delays as the initially earmarked Puchong land was found untenable, requiring them to seek a new location. Oriental Kopi is now categorised as Shariah-compliant, potentially attracting new funds. Upcoming 2025 expansions include a NEX Singapore store by June 2025 and 4QFY25 domestic openings at Aeon Malacca, Sunway Putra, and Sunway Carnival. Oriental Kopi aims for 12 new cafes by 2026, with 7 remaining after recent and upcoming openings, while also increasing Singapore’s target to 5-8 total cafes. We believe the recent price has factored in much of the positive catalyst. Consequently, we downgrade to Hold with an unchanged target price of 81 sen, pegged to a 20.0x price-to-earnings multiple on FY26F earnings per share of 4.0sen, ascribed with a three-star ESG rating. — APEX Securities (May 30, 2025)
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