Oriental Kopi Holdings Berhad Launches IPO, Subscription Ends on 10 Jan

Oriental Kopi Holdings Berhad is mainly a cafe chain operator primarily involved in providing non-alcoholic food and beverage (F&B) services in Malaysia with a core focus on operating a chain of coffee shops and distributing consumer-branded packaged foods.

Through its subsidiaries, the company owns and operates coffee shops throughout Peninsular Malaysia under the "Oriental Kopi" brand, which contributes over 90% of the company's total revenue. In addition to the cafe operations, the company is involved in the distribution and retail of consumer-branded packaged foods, accounting for a small percentage of the total revenue.

The company primarily operates in Peninsular Malaysia, with its head office located in Puchong, Selangor. As of 9 December 2024, it owns and operates a total of 19 cafes in Malaysia. Additionally, the company has a jointly owned and operated cafe in Singapore and manages one specialty retail store under its Oriental Kopi brand. The cafes are strategically located in high-traffic areas such as shopping malls, storefronts, and airport retail malls. From 2025 to 2026, the company plans to progressively open a combined total of 13 new owned-operated cafes across all states in Malaysia.

Oriental Coffee International sells directly to customers through in-store dining, takeout, online platforms, its website, and a specialty retail store. It also uses wholesalers and retailers to distribute its products more widely.

The company’s business model is depicted in the following diagram:

1. New Head Office, Central Kitchen, and Warehouse: The company will use a portion of the IPO proceeds to establish a new operational facility in Selangor, serving as the head office, central kitchen, and warehouse.

2. Cafe Chain Expansion: A portion of the proceeds will be used to expand the cafe chain across Malaysia, enhancing market presence and customer reach.

3. Consumer-Branded Packaged Foods Growth: The company plans to expand its packaged foods segment, including additional retail stores and potential exports.

4. International Marketing: Funds will be allocated to marketing activities abroad to boost brand awareness and market penetration.

5. Working Capital: The IPO proceeds will also support the company's working capital needs for purchasing materials and expanding operations.

Oriental Kopi Holdings Berhad has exhibited a strong financial trajectory, with revenues escalating from RM5.0 million in Financial Year End (FYE) 2021 to RM277.3 million in FYE 2024. This upward trend is largely due to the aggressive expansion of its cafe chain operations and the robust distribution and retail network for its packaged food products. The company's Gross Profit has similarly seen a significant increase, moving from a modest RM0.3 million in FYE 2021 to a substantial RM82.8 million in FYE 2024.

Oriental Kopi Holdings Berhad's profitability has surged, with Profit Before Tax (PBT) and Profit After Tax (PAT) rebounding from a FYE 2021 deficit to reach RM57.5 million and RM43.1 million by FYE 2024. The PAT margin has also jumped from -9.8% to a positive 15.6% over the same period, marking a clear sign of the company's financial strength and management efficiency.

However, despite the overall surge in Gross Profit, there has been a marginal dip in the Gross Profit margin, descending from 32.3% in FYE 2022 to 29.9% in FYE 2024. This reduction is primarily due to the escalation in material costs propelled by global food inflation and the increased labor costs that stem from the reduction in maximum working hours and the necessity to recruit additional staff to support the company's growth initiatives.

Based on the historical combined statements of profit or loss and other comprehensive income of Group for the FYE 2024, they recorded a PAT of RM43.13 million representing an EPS of 2.73 sen (based on the existing number of issued shares of 1,581,899,000 Shares) and 2.16 sen (based on the enlarged number of issued shares of 2,000,000,000 Shares upon Listing) resulting in PE Multiple of 16.12 times and 20.37 times, respectively. Upon successful listing, Oriental Kopi Holdings Berhad’s market capitalisation will reach RM880 million.

Oriental Kopi Group is a major player in Malaysia's Food and Beverage (F&B) Services and Consumer-Branded Packaged Foods industries. The company runs a chain of cafes, offering a wide selection of non-alcoholic drinks and food. It also acts as both a wholesaler and retailer, selling various packaged foods under its own labels.

The F&B Services Industry is a dynamic sector that includes cafes, coffee shops, restaurants, fast-food outlets, bars, and catering services. It experienced a significant Compound Annual Growth Rate (CAGR) of 11.9% in real GDP from 2021 to 2023. This growth momentum has persisted into the first nine months of (9M) 2024, with a 3.7% increase in real GDP compared to 9M 2023.

The Distribution and Retailing part of the Consumer-Branded Packaged Foods Industry is key to the overall consumer goods market. It helps branded food items move from makers to buyers. This includes many steps like selling in bulk, running stores, and handling the details of getting food to shops. It also covers making, packing, and moving food to places like supermarkets and small stores. The vitality of the industry is reflected in its sales figures. Between 2021 and 2023, the sales value of the wholesale and retail trade of food, beverages, and tobacco experienced a compound annual growth rate (CAGR) of 7.3% and 14.3%, respectively. Furthermore, this growth continued with rates of 6.3% and 7.6%, respectively, in 9M 2024 compared to 9M 2023.

The Initial Public Offering (IPO) of Oriental Kopi Holdings Berhad comprises the public issuance of 418,101,000 new ordinary shares as detailed below:

– 60,000,000 new Oriental Kopi shares made available for application by the Malaysian public;

– 20,000,000 new Oriental Kopi shares made available for application by eligible directors, employees, and persons who have contributed to the success of Oriental Kopi;

– 88,101,000 new Oriental Kopi shares made available by way of private placement to selected investors;and

– 250,000,000 new Oriental Kopi shares made available by way of private placement to selected Bumiputera investors approved by the Ministry of Investment, Trade, and Industry of Malaysia.

As one of Malaysia's most beloved local brands, Oriental Kopi Group not only nurtures a dedicated team for crafting food recipes but also manages a thriving network of over 20 outlets, with an astounding revenue growth exceeding 50 times in the past three years.

Despite its many strengths, Oriental Kopi Group also faces numerous risks that could potentially impact its future performance. These risks include supply chain vulnerabilities due to the dependence on third-party suppliers for ingredients, the possibility of shifts in consumer behavior and preferences, and the difficulties in maintaining growth rates in the face of inflationary pressures and rising costs. Additionally, there are some other risks that could affect the company.

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