Overseas expansion important strategic milestone for Oriental Kopi

PETALING JAYA: Oriental Kopi Holdings Bhd’s expansion into Indonesia and Mauritius is a significant step toward becoming a regional brand, even if immediate earnings contributions remain minimal.

However, according to Apex Securities Research, the overseas expansion represents an important strategic milestone in Oriental Kopi’s evolution from a domestic café operator into a regional consumer brand.

“Indonesia remains the more meaningful medium-term opportunity, given its sizeable consumer market and the group’s equity participation in the joint venture (JV), while the Mauritius franchise serves as a lower-risk avenue to monetise its brand through recurring franchise and royalty income,” the research house said.

Apex Securities Research highlighted that investors are likely to remain focused on the pace of outlet rollout and the financial performance of the initial overseas stores before assigning meaningful value to the Oriental Kopi’s international expansion.

“Successful execution could nonetheless strengthen management’s confidence to replicate its dual-track expansion strategy across additional overseas markets over time,” it added.

The food and beverage services café chain operator announced its expansion into Indonesia via the 40:60 JV with PT Era Boga Nusantara, while separately granting an exclusive territory franchise for Mauritius to Coffee Time Ltd.

Apex Securities Research said it maintained its “hold” call and unchanged target price (TP) of RM1.04, as it does not expect the proposed overseas expansion to materially impact earnings in the near term.

“This is based on an unchanged target price-to-earnings multiple of 27 times applied to its financial year 2027 (FY27) forecast core earnings per share of 3.82 sen.

“While the proposed overseas expansion reinforces Oriental Kopi’s longer-term regional growth strategy, investors are unlikely to assign meaningful valuation upside until overseas operations begin contributing measurable earnings and management provides greater visibility on the pace of outlet expansion,” Apex Securities explained.

Meanwhile, MBSB Research maintains its “buy” call on Oriental Kopi with a higher TP of RM1.15 from RM1.06, after raising its target price earnings ratio (PER) to 32.5 times from 30 times, pegged to unchanged FY26 earnings per share forecast of 3.5 sen.

“The revised multiple sits between our previous 30 times peg and the stock’s post-listing mean PER of about 35 times, which we view as a reasonable midpoint to reflect Oriental Kopi’s strengthening regional expansion narrative following its proposed Indonesia JV and Mauritius franchise arrangement,” MBSB Research explained.

“We make no changes to earnings forecasts at this juncture, as both ventures are not expected to materially impact FY26 earnings, but the announcements improve longer-term growth optionality and support a modest re-rating,” it said.

MBSB Research said it continues to view Oriental Kopi as a strong consumer brand with healthy topline momentum, attractive store economics and meaningful medium-term growth optionality from café expansion, fast moving consumer goods distribution, Singapore and broader overseas expansion.