Oriental Kopi’s IPO: Worth the Buzz or Not?

Kopi Holdings Bhd, a café chain operator under the brand Oriental Kopi, is gearing up for its listing on the ACE Market of Bursa Malaysia. The company has garnered a positive valuation from Mercury Securities Sdn Bhd, which has assigned a fair value of 68 sen per share, citing strong earnings growth potential driven by outlet expansions and increasing contributions from fast-moving consumer goods (FMCG) sales.

The companys initial public offering (IPO) is priced at 44 sen per share, with the application period closing on 9 January 2025. The listing is scheduled to take place on 23 January 2025.

Oriental Kopis IPO involves a public issuance of 418.1 million new shares, representing 20.9% of its enlarged issued share capital of two billion shares upon listing. Unlike many IPOs, there will be no sale of existing shares.

Of the new shares, 60 million have been allocated for the Malaysian public through balloting, while 20 million are reserved for eligible directors, employees, and other contributors to the companys success. Additionally, 88.1 million shares are earmarked for selected investors, and 250 million shares are designated for Bumiputera investors through private placements approved by the Ministry of Investment, Trade and Industry.

Established in December 2020, Oriental Kopi has grown rapidly, reaching 19 café outlets in Peninsular Malaysia and one in Sarawak by the end of 2024. The company has also opened two retail specialty stores in Johor. This expansion has not compromised performance, with average daily sales per outlet remaining strong, indicating the popularity of both its food and beverage offerings and its packaged goods.

Management has attributed part of this success to high patronage at its outlets, where many operate at near-full capacity. Sales of packaged foods accounted for 13% of the companys revenue for the financial year 2024, while delivery services through platforms like GrabFood contributed approximately 10% of total food and beverage sales.

Oriental Kopi is primarily engaged in café food and beverage services and the sale of its proprietary packaged foods. The company aims to continue leveraging its dual revenue streams to sustain its growth trajectory.

The companys leadership is anchored by its Managing Director, Datuk Chan Jian Chern, who holds a 42.2% stake. Two executive directors, Chan Yen Min and Koay Song Leng, are also significant shareholders, with stakes of 15.6% and 10.9%, respectively.

Mercury Securities has highlighted the company‘s potential for continued growth as it expands its network of outlets and strengthens its FMCG sales. Oriental Kopi’s ability to sustain high sales levels, even during rapid expansion, underscores its appeal to consumers and its strong market position.

What are your thoughts on Oriental Kopis IPO? Let us know!