Would you take over the operations of 20 Kopitiams for RM 880 million?
That is the key question to ask before subscribing to Oriental Kopi Holdings Bhd’s IPO shares at 44 sen each. The application to its IPO shares was opened on 6 January 2025 and is scheduled to close on 10 January 2025. Its shares shall be listed on the ACE Market on 23 January 2025.
Source: Oriental Kopi’s IPO Prospectus
Here, I’ll summarise 8 key findings from reading Oriental Kopi’s IPO Prospectus. Of which, you’ll be able to make a more informed decision on subscribing its IPO shares. They are as follows:
1. Kopitiam Network
Oriental Kopi opened its first Kopitiam in December 2020 in Johor Jaya, Johor. It commenced its in-store sales of packaged coffee, tea, and food products in its Kopitiam. Ever since, it increased its number of Kopitiams to 20 on 9 December 2024, its latest practicable date of the prospectus.
Source: Oriental Kopi’s IPO Prospectus
2. Revenue
Oriental Kopi derives revenue mostly from diners at its Kopitiams. Diners are offered a variety of delicious local delicacies namely, egg tarts, polo buns, nasi lemak, Char Kuey Teow, Laksa mee, chicken hor fun, mee siam, rojak, kaya toast, cendol, and local coffee.
In line with its Kopitiam expansion, dine-in revenues increased from RM 4.9 million in 2021 to as much as RM 224.9 million in 2024. In 2024, dine-in revenue contributed 81.11% of total revenue of Oriental Kopi.
In addition, Oriental Kopi distributes and sells packaged products: coffee, tea, spreads, pastries, instant noodles and seasonal products such as mooncakes in its Kopitiams and other third-party distributors such as supermarkets, hypermarkets, minimarkets, and other retailers. Oriental Kopi had increased sales of these products at its Kopitiams from RM 85 thousand in 2021 to as much as RM 36.0 million in 2024. As for sales through third-party retailers, Oriental Kopi increased the sales from RM 52 thousand in 2021 to RM 11.5 million in 2024.
Source: Oriental Kopi’s Product Website
Source: Oriental Kopi’s IPO Prospectus
In total, Oriental Kopi’s total revenues increased from RM 5.0 million in 2021 to RM 277.3 million in 2024.
3. Profitability
Oriental Kopi maintained a gross margin of 29+% and a net profit margin of 15+% in 2023-2024. Overall, it reversed a loss of RM 490 thousand in 2021 to earn RM 43.1 million in 2024. Upon its listing, Oriental Kopi would have 2.0 billion shares in issue. This works out to be an earnings per share (EPS) of 2.16 sen in 2024.
Source: Oriental Kopi’s IPO Prospectus
4. Balance Sheet
Oriental Kopi maintained above 1 in current ratio in 2022-2024. For that period, the gearing ratio it had was relatively negligible.
Source: Oriental Kopi’s IPO Prospectus
5. Major Shareholders
Upon listing, United Gomax shall remain as Oriental Kopi’s main shareholder with 73.35% direct shareholdings. United Gomax is owned by the following shareholders:
Source: Oriental Kopi’s IPO Prospectus
6. Utilisation of IPO Proceeds
Oriental Kopi intends to raise RM 184.0 million in gross proceeds. Of which, it intends to utilise it on the following manner (after excluding RM 7.6 million in listing fees):
Source: Oriental Kopi’s IPO Prospectus
a. Set Up a New Head Office, Central Kitchen and Warehouse
Oriental Kopi intends to set up a new 3-storey operational facility on a 3-acre land in Puchong. It would serve as its new head office, central kitchen and warehouse. Its total costs, which include: land cost, building construction cost, office renovation, kitchen equipment, temperature control & storage equipment, would amount to RM 53.7 million.
b. Kopitiam Expansion
In 2024-2026, Oriental Kopi intends to open 14 new Kopitiams. 12 of these Kopitiams are based in Peninsula Malaysia while 2 are to be opened in East Malaysia. It allocates RM 36.4 million for the expansion of its Kopitiams. This shall lift its number of Kopitiams from 20 currently to 36 by 2026.
Source: Oriental Kopi’s IPO Prospectus
c. Expansion of Packaged Food Segment
Oriental Kopi allocates RM 2.0 million to set up 4 specialty retail stores to sell packaged foods. It also allocates RM 3.0 million on various marketing activities to enhance its brand awareness.
d. Marketing Activities in Foreign Countries
Oriental Kopi allocates a budget of RM 1.5 million to participate in F&B exhibitions, trade shows, and events to promote its packaged food products in Singapore. In addition, Oriental Kopi would allocate RM 4.0 million to promote its packaged food products in foreign nations in Asia such as Hong Kong.
e. Working Capital
Oriental Kopi sets aside RM 75.8 million as working capital to support its growth initiatives. Such would include staff costs, rent, utilities and purchase of materials for its Kopitiam operations.
7. Dividend Policy
Oriental Kopi intends to distribute 30% of profits attributable to owners as dividends to reward its shareholders.
8. Valuation
At 44 sen, its IPO shares are valued at P/E Ratio of 20.37 of its EPS 2024 of 2.16 sen.
Conclusion:
“To subscribe or not to subscribe?”. That is the question you should answer yourself. Overall, for a business to be founded four years ago and now fetching a huge market cap of RM 880 million, it is remarkable. Before coming to your conclusion, it is best for you to dine in as a customer and have your personal take on Oriental Kopi. Just like what I did with my wife for breakfast this morning.
You can study its IPO Prospectus more in-depthly and evaluate its pros and cons as an investment to your own stock portfolio. At the end of the day, investing is like food taste, what is suitable for one isn’t suitable for another.
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IPO Prospectus:
Oriental Kopi – Part 1
Oriental Kopi – Part 2
Oriental Kopi – Part 3
