KUALA LUMPUR (Jan 6): Oriental Kopi Holdings Bhd, a cafe chain operator en route to the ACE Market, said it is not spared from rising cost pressure and plans to raise prices to mitigate the impact.
The company regularly reviews its menu prices every six months, executive director Callie Chan Yen Min said at a press conference after launching its listing prospectus on Monday. Rising costs, including that of coffee beans and vegetables, have affected the company, she noted.
WATCH: Oriental Kopi talks menu price hikes
Oriental Kopi has locked in the supply of coffee beans, which have seen record-high prices, thanks to its high volume. “Our suppliers are also supportive enough as our volume for the coffee powder is big for them,” she said. “They are giving us really good pricing.”
Coffee futures have hit record highs, driven by supply shortage and adverse weather conditions in key coffee-producing regions like Brazil and Vietnam. Prices breached the previous all-time high set in 1977 when the market was rattled by Brazil’s devastating frost that shrivelled crops.
Oriental Kopi, which launched its initial public offering (IPO) on Monday, has more than doubled its net profit to RM43.13 million in the financial year ended Sept 30, 2024 (FY2024) thanks to its rapid expansion of its cafe network.
Competitive strength
Chan highlighted that Oriental Kopi’s strong growth was due to its competitive strength, including strong brand, signature products such as egg tarts, polo buns, and coffee as well as halal-certified outlets that set it apart from competitors.
Established in December 2020, the company now has 20 cafes across Malaysia and one in Singapore. Gross margins have been stable around 30% over the past three years.
Oriental Kopi also managed to open at good locations in several shopping malls, she said. “You can see that our locations are quite good,” she continued, “so that also differentiates [us] from the other competitors.”
All of its cafes are owned by Oriental Kopi, which allows the company to have full control over the outlets, she added.
IPO to raise RM184 million
Oriental Kopi set its IPO price at 44 sen apiece in a share sale that would raise RM183.96 million ahead of its listing on the ACE Market.
At the IPO price, Oriental Kopi is expected to have a market capitalisation of RM880 million upon listing and value the company at about 20 times its earnings for FY2024.
Applications will close on Jan 10, and listing has been scheduled for Jan 23.
Oriental Kopi has earmarked RM75.78 million of the IPO proceeds for working capital and RM53.68 million to set up a new head office, central kitchen and warehouse. The company will also use RM36.4 million for the expansion of cafes within Malaysia.
The rest has been allocated to marketing activities in foreign countries, expansion of its brands of packaged food segment, and to defray listing expenses.
The IPO comprises a public issue of 418.1 million new shares. There is no separate tranche for the sale of existing shares.
Under the IPO, the company has set aside 60 million new shares for the public and 20 million shares for eligible persons. Oriental Kopi will also sell 88.1 million new shares to select investors and 250 million shares to Bumiputera investors, both through private placement.