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Malaysia’s top drinks stock Power Root eyes China for rainforest herbs coffee

KUALA LUMPUR (Sept 5): To rebound in earnings this year, the best-performing beverage stock in Malaysia, Power Root Bhd plans to sell more of its rainforest herbs-infused coffee in China.

Managing Director Wong Tak Keong said in an interview that the company will sell its products online, focusing on suppliers, flagship and specialty stores in the world’s second-largest economy. It was projected by Euromonitor that the ready-to-drink coffee market will be hitting US$1.47 billion by 2023.

Compared with a 5.3% drop in the benchmark FTSE Bursa Malaysia KLCI index, the shares have rallied 51% this year. Wong said that the net income is set to reach up to 50 million ringgit (US$12 million) in the current financial year. That is as much as an 80% jump from the period ended March, after earnings slided to a 13-year low in the 2018 fiscal year.

 “Our earnings should recover to the good old days,” Wong said, adding cost-cutting measures and rising demand for the company’s products as among the reasons.

One of the Power Root’s products is “Tongkat Ali”, a coffee infused with an herb which is believed to have health benefits, including as an aphrodisiac. It’s the only home-grown company to rank in the top five for Malaysian retail sales of ready-to-drink coffee, alongside units of Nestle SA and Asahi Group Holdings Ltd, according to Euromonitor International.

Wong said that Malaysia currently holds 50% of the company’s revenue, while Middle East taking up 40%. Revenue is expected to increase by the “mid-teens”, as it seeks other markets and introduces more products Analyst Soong Wei Siang wrote “We believe the run still has legs”, as RHB Investment Bank raised Power Root’s target price to 2.49 ringgit, a 20% increase from Wednesday’s close at 2.08 ringgit, on sustainable earnings recovery and low valuation, compared to peers.

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