We noted that AURO had secured the franchise for fast-growing ‘HEYTEA’ brand in Malaysia, which represents a game-changing event for the company, with potential of significant profit contribution going forward.

Established Brand Presence. HEYTEA is a well-known brand with a strong presence in China, Singapore, and the United Kingdom, boasting over 4,000 stores globally. The brand's popularity and established reputation provide a robust foundation for AURO’s F&B venture in Malaysia. 

Initial Success and Expansion Plans. AURO’s successful launch of the first HEYTEA store at The Exchange TRX Mall in December 2023, followed by additional stores in prime locations like Mid Valley Megamall, Sunway Pyramid, and 1 Utama, demonstrates the positive market reception and growth potential. Future expansion plans include opening new stores in high-traffic locations such as Genting SkyAvenue, Sunway Velocity Mall, and Gurney Plaza, expected to significantly boost net profits and revenue growth.

Promising Industry Outlook. The Malaysian F&B industry is projected to grow by 7.9% in 2024, driven by increasing disposable income and the revival of tourism. This positive industry forecast presents a lucrative opportunity for AURO to capture a larger market share and benefit from the sector’s growth.

Investment Case. We like AURO for their (i) diversification plan into the more stable consumer market with expected growth of 7.9% in 2024, (ii) tapping into younger consumer crowd, and (iii) choosing the rapidly growing HEYTEA, which avoided the overcrowded coffee market in Malaysia, with Zus Coffee capturing stronger market share and expected competition from Lurkin Coffee. Maintain Overweight.