Oriental Kopi’s stretched valuation calls for caution

PETALING JAYA: Cafe operator Oriental Kopi Holdings Bhd’s outlook continues to be supported by resilient consumer spending but stretched valuations amid share price volatility have analysts turning cautious on the stock.

Analysts believe upside potential for the stock has been capped by the stretched valuations despite the company’s outlook supported by increased visitor footfall in malls where its cafes are usually located.

Apex Securities has downgraded the stock to a “hold” from “buy” but maintained the share target price (TP) at RM1.26 following the company’s fourth quarter ended Sept 30 (4Q) results that came in within market expectations.

The company also declared an interim single-tier dividend of one sen per share for the financial year ended Sept 30, 2025 (FY25).

“We expect Oriental Kopi’s cafe segment to remain the key earnings driver in FY26, supported by resilient domestic consumption and rising household spending across urban and suburban areas.

“Tourism momentum is also strengthening, with international arrivals projected to reach 35.6 million by 2026 under the Visit Malaysia 2026 campaign, which should lift footfall in malls where Oriental Kopi’s cafes are typically located,” it added.

MBSB Research, which has maintained a “sell” call with a TP of RM1.03, noted that the recent share price surge has stretched valuations at 31.35 times price-to-earnings ratio, and above multiples of larger regional peers.

“Oriental Kopi’s growth prospects remain supported by its ongoing cafe expansion and the continued contribution from its fast-moving consumer goods segment,” it said.

It added that the rollout of new outlets should allow the company to tap into domestic demand and tourism.

It said the company’s packaged food portfolio, including seasonal items such as mooncakes, and early-stage overseas distribution efforts, provide additional growth avenues expected to support revenue momentum.

Hong Leong Investment Bank Research remains constructive on the company’s medium-term prospects and has revised FY26 and FY27 earnings forecasts upward by 8% and 6% respectively to reflect the stronger than expected revenue trajectory from new outlets and improving consumer throughput.

It has maintained a “hold” call on the stock but lifted the TP to RM1.22 from RM1.13.

It said the recent share price rise has stretched valuations, resulting in a more balanced risk-reward at current levels.

Besides domestic expansion plans, the research house said the company “is also progressing on its international ambitions, engaging overseas distributors to seed its brand beyond Malaysia.

“Product diversification remains another lever for growth, with new menu items and packaged goods expected to broaden consumption occasions and deepen customer engagement”.