Empire Premium’s rise under scrutiny

THE food business is often a hit-or-miss affair. It is easy to enter, but hard to sustain.

The low barrier to entry is evident in more than 26,000 food outlet premises registered with the Health Ministry in 2024 alone.

However, expansion is where it gets brutal, as many food businesses see product quality and taste slip in the push for growth.

In the case of Empire Sushi’s co-founders, Nicole Lim and her husband Jordan Tan, they previously ran a cafe in Kampar and a Japanese restaurant serving sizzling hotplate dishes in Kuala Lumpur.

Both businesses are no longer in operation.

However, it is a different story with Empire Sushi, which started purely as a consignment-based model in its early days.

From its first owned outlet in 2014, the sushi chain has expanded to 143 outlets by February 2026.

The husband-and-wife team now aim to open another 77 outlets over the next four years.

To pull this off, they are turning to the market.

Empire Premium Food Bhd, the operator of the Empire Sushi chain, is scheduled to be listed on the Main Market of Bursa Malaysia on April 17.

More than half of the proceeds from the upcoming initial public offering (IPO), or RM79.1mil to be exact, will be used to set up the 77 outlets, which are estimated to cost RM98.2mil in total.

In the run-up to the IPO, Empire Premium has attracted media attention partly due to its brand reach.

More importantly, however, the company has come under scrutiny for ramping up revenue through aggressive outlet expansion while same-store sales growth (SSSG) continues to weaken.

From 12.2% in financial year ended March 31, 2023 (FY23), SSSG declined to 9.8% in FY24 and 5.5% in FY25.

Growth was even weaker at 1.6% in the financial period ended Sept 30, 2025.

During this period, SSSG in the central region of Peninsular Malaysia contracted by 2.1%.

The central region is key for Empire Premium, accounting for nearly half of its outlets.

In its IPO prospectus, the company justified the negative SSSG by saying that “sales growth was redistributed to newly opened outlets”.

For investors seeking growth, weak SSSG is surely a key concern, as it points to softer demand at existing outlets.

However, SSSG alone may not fully capture the group’s underlying performance.

A look at Empire Premium’s profit before tax (PBT) relative to its store base suggests improving unit economics.

Measured against the number of outlets at the end of each financial year, average PBT per outlet has shown a steady uptrend – rising from over RM249,000 in FY23 to slightly above RM419,000 by end-FY25.

This indicates that, on average, each outlet is generating higher profitability, potentially reflecting better cost management, improved margins, or stronger contributions from newer stores.

That said, the divergence between weak SSSG and rising PBT per outlet raises a key question: are these gains driven by genuine operational improvements, or by factors such as a shift towards higher-performing outlets or cost efficiencies that may not be sustainable?

A look at operating profit margins may offer further insight.

Empire Premium enjoys a healthy operating profit margin that has improved steadily in recent years, rising from 15.1% in FY23 to 19.3% in FY24 and 21.7% in FY25.

The key question is how long Empire Premium can sustain its expanding operating profit margins, especially post-IPO.

Any margin compression would weigh on profitability, particularly if outlet expansion also begins to slow.

For now, the group has an aggressive expansion plan in place.

Lim, its executive director and chief executive officer, has said that new outlets will span all regions in Malaysia, including high-traffic locations such as shopping malls, airports and transit hubs.

However, it is notable that the company has not made clear its intention to venture abroad.

Empire Sushi remains focused on Peninsular Malaysia, particularly the central region, with only five outlets in Sabah and Sarawak.

While there is still room for domestic growth, especially in Sabah and Sarawak, investors may be looking for a clearer roadmap on regional expansion.

Peers are already moving beyond Malaysia.

Homegrown Zus Coffee is deepening its footprint in South-East Asia with a presence in Malaysia, Singapore, the Philippines, Brunei and Thailand, and plans to enter Indonesia.

In February, it also opened its first outlet outside the region in Pakistan.

Meanwhile, Malaysia’s largest listed cafe-based chain by market capitalisation, Oriental Kopi Holdings Bhd, has three outlets in Singapore and plans further overseas expansion.

TA Research estimates Oriental Kopi’s forward 2027 price-to-earnings ratio at 20.7 times, compared with 12.1 times for Empire Premium.

Looking ahead, TA Research expects Empire Premium to deliver double-digit core earnings growth.

However, this is expected to soften from 31.5% in FY26 to 18.3% in FY27 and 10.8% in FY28.

In a March 27 report, TA Research set a target price of 83 sen for Empire Premium, above its IPO price of 70 sen.

Beyond growth concerns, the RM64mil dividend paid to the co-founders ahead of the Bursa Malaysia debut has also drawn attention from the investing community, although such payouts are not uncommon.

99 Speed Mart Retail Holdings Bhd, prior to its IPO, paid RM1.18bil in dividends between FY21 and the first quarter of FY24, against an aggregate net profit of RM1.28bil over the same period.

Empire Premium’s RM64mil dividend will be on top of the RM101.5mil the promoters are set to receive from the IPO offer for sale.

While pre-IPO dividends reward entrepreneurs for the risks taken, disproportionately large payouts relative to profits warrant closer investor scrutiny.