KUALA LUMPUR (Jan 23): Nanyang-style coffeehouse chain operator Oriental Kopi Holdings Bhd (KL:KOPI) concluded its maiden trading day on the ACE Market of Bursa Malaysia with its share price almost doubled, following strong demand during its initial public offering (IPO).

Shares of the kopitiam chain operator opened at 75 sen on Thursday — a 71% or 31 sen premium to its IPO price of 44 sen — and surged as much as 123.86% to an intraday high of 98.5 sen, before paring gains to close at 87.5 sen.

At the closing price, Oriental Kopi, which currently operates 20 cafés across Malaysia and one in Singapore, boasted a market capitalisation of RM1.75 billion. A total of 828.72 million shares changed hands.

In comparison, its closest peer, Berjaya Food Bhd (KL:BJFOOD), which holds the exclusive rights to operate over 320 Starbucks outlets in Malaysia, has a market capitalisation of RM760.95 million.

Thursday’s rally followed robust investor interest in Oriental Kopi’s IPO that raised RM183.96 million, with demand from individual retail investors overwhelming the amount of shares available by about 60 times.

At the last price of 87.5 sen, Oriental Kopi was valued at a price-earnings ratio of 40 times based on a profit after tax of RM43.13 million for the financial year ended Dec 31, 2024 (FY2024).

Oriental Kopi’s debut marks the third listing on Bursa this year, following electrical services firm CBH Engineering Holding Bhd (KL:CBHB), which gained nearly 20%, and industrial services firm Swift Energy Technology Bhd (KL:SET), which surged 41%, on their ACE Market debuts. 

Oriental Kopi also ranks as the sixth-best performing IPO over the past year, narrowly trailing oil and gas services provider Keyfield International Bhd (KL:KEYFIELD), which debuted on April 22, 2024, with a 114.44% gain. 

“The funds raised from the IPO exercise will provide us with the much-needed resources to significantly increase our operational efficiency, bringing our headquarters, central kitchen and warehouse all under one roof,” Oriental Kopi managing director Datuk Calvin Chan Jian Chern said during the listing ceremony. 

Of the proceeds raised, RM75.78 million has been earmarked for working capital, followed by RM53.68 million going to the establishment of a new head office, central kitchen and warehouse. Meanwhile, RM36.4 million has been allocated to support the expansion of the company's café network within Malaysia.

“This strategic move will streamline our operations and pave the way for even greater growth,” Chan added. 

The remaining funds has been designated for marketing activities in foreign markets, expanding the company’s packaged food segment and covering listing expenses.

Established in December 2020, Oriental Kopi also offers in-store packaged coffee and tea, along with other food items such as spreads, pastries, instant noodles, and seasonal specialties like mooncakes.

“Looking ahead, we are well positioned to capture the growth potential presented by economic expansion, rising household spending, and increasing tourism," Chan said.

"Our dedication to serving authentic, high-quality Malaysian cuisine, coupled with targeted strategic initiatives, will drive sustainable long-term value for our shareholders while reinforcing Oriental Kopi’s position in the Malaysia food and beverages industry,” he added. 

Alliance Islamic Bank served as the IPO’s principal adviser, sponsor, sole underwriter and placement agent.

At the intraday high of 98.5 sen, Oriental Kopi had surpassed analysts’ consensus target price of 77 sen. Analysts project strong earnings growth for the company, driven by its rapid café expansion and fast-moving consumer goods (FMCG) segment.

Oriental Kopi is expected to report a 32% year-on-year increase in earnings from FY2024-FY2027, with its packaged food sales slightly outpacing new café openings to account for the contribution from new specialty retail stores, AmInvestment Bank said in a note. 

The company also has a "highly free cash flow generative business" due to its minimal working capital requirements and high return on equity. Its modular and scalable business model enables efficient expansion with a short payback period of 10-12 months, the research house noted.

Meanwhile, Hong Leong Investment Bank Research highlighted Oriental Kopi's clinical approach to opening a targeted 50 outlets — by prioritising high-foot-traffic locations — which stands in contrast with its competitors like OldTown White Coffee, while maintaining quality and service standards.

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