A MEMBER OF THE TA GROUP
Thursday, July 31, 2025
FBMKLCI: 1,524.50
Sector: Property
Paramount Corporation Bhd
Strategic Stake in Envictus Adds Long-Term Value
Tel: +603-2167 9615
cwthiam@ta.com.my
www.taonline.com.my
Paramount hosted an investor and media briefing yesterday to explain the rationale behind its proposed 28% stake acquisition in Envictus and to address key questions from stakeholders. Several concerns were clarified during the Q&A session, including the strategic fit, valuation, and potential impact on financials. Key highlights are summarised below.
Key Q&A Highlights from the Briefing
1. Why invest in Envictus now?
Management views this as a timely opportunity to acquire a strategic stake in a profitable and listed F&B platform at an attractive valuation. Envictus has delivered a strong turnaround in FY24, and its integrated business model complements Paramount’s strategy to diversify beyond property into a scalable and higher-return businesses. The acquisition also aligns with the group’s objective to improve long-term ROE. The 28% premium paid over the 5-day VWAP reflects the illiquidity of the stock and the size of the block acquired. Management believes that P/E is a more appropriate valuation lens for this transaction, given the company’s earnings recovery and positive forward trajectory.
2. How was the acquisition price determined?
The acquisition price of SGD0.45 per share implies a valuation of ~11x P/E based on adjusted FY24 PAT, and ~14x P/E based on annualised 1HFY25 earnings – see Appendix I. However, during the briefing, management explained that 1HFY25 included Ramadan, a seasonally low-revenue month with fixed costs unchanged, which weighed on margins. This effectively compressed 2-3 months’ profitability. As such, they expect a significantly stronger 2HFY25 to normalise earnings, bringing the full-year implied P/E closer to 9x, or around 4x on an EBITDA basis. This makes the acquisition entry point even more compelling, especially when benchmarked against peers like Oriental Kopi, which is currently trading at a forward P/E of 21x.
3. Is this the start of more F&B acquisitions?
No. Paramount clarified that it has no plans to pursue additional F&B acquisitions. The group will focus on scaling Envictus, particularly expanding Texas Chicken and turning around San Francisco Coffee. Property will remain Paramount’s core business, contributing ~70% of long-term earnings.
4. What is Paramount’s strategic intent for the Envictus stake?
Paramount views its 28% stake as a strategic investment and intends to play an active role through board representation, contributing to governance and long-term growth oversight. While day-to-day operations will remain under Envictus’s existing management, Paramount aims to support key strategic decisions. The group retains flexibility over the investment horizon, with the potential to hold for the long term or exit depending on market conditions and value realisation opportunities.
5. What led to confidence in Envictus despite past losses?
Envictus incurred losses from FY21 to FY23 due to pandemic-related disruptions and cost pressures. However, its strong recovery in FY24, delivering RM50.6mn in PAT (or RM40.3mn on an adjusted basis after excluding one-off gains and losses) was driven by outlet expansion and improved operating leverage. This turnaround has given management greater confidence in the sustainability of Envictus’s earnings trajectory.
6. Why acquire only 28% when the seller owned 29.6%?
Management clarified that Paramount did not pursue full control to avoid sending the wrong signal to the market, as it has no intention of taking over Envictus. The founder, Dato’ Jaya JB Tan, remains the largest shareholder with a 28.3% stake. Tan Boon Seng, a major shareholder of Dragon-i Restaurant Group, is the third largest shareholder with a 12% stake.
7. How confident is Paramount about working with Dato’ Jaya Tan?
Management cited a prior business relationship with Dato’ Jaya through the 2016 joint venture to develop the Mercure Hotel at Utropolis Glenmarie. Although Lasseters International (Dato’ Jaya’s group) eventually exited the JV, the process was conducted professionally and amicably. This experience gives Paramount confidence in working together at board level.
8. How can Paramount add value beyond being a shareholder?
Paramount plans to strengthen governance by proposing to chair the audit and remuneration committees, allowing greater oversight of service contracts, remuneration structures, and cost controls. On the operational front, Paramount aims to create synergies by integrating Envictus’s F&B brands into its ecosystem, featuring them at property sales galleries, Co-labs events, and positioning them as key tenants within its commercial developments. This would not only enhance brand visibility for Envictus but also drive footfall and vibrancy across Paramount’s real estate portfolio.
9. What is the growth and earnings potential for Texas Chicken under Envictus?
Texas Chicken is the core earnings driver for Envictus, with the food services segment contributing RM41.7mn in PBT in FY24. The group aims to expand its Texas Chicken network to 200 outlets by 2030, up from 100 currently, with an average capex of RM1.5 – 2mn per outlet. Based on a simple extrapolation, and assuming modest 5% annual growth from the trading, frozen food, and dairies segments, group net profit could potentially double to around RM100mn by 2030. This could translate into an estimated RM28mn in annual contribution to Paramount, based on its 28% equity interest.
10. What’s next for San Francisco Coffee?
Paramount is reassessing the brand as part of a turnaround plan. Rather than maintaining a premium café model, San Francisco Coffee may pivot to a light fast-food/snack format more aligned with current consumer trends. The group also sees opportunities to leverage underutilised commercial space within its portfolio for cost-efficient expansion.
11. What are the key risks associated with the acquisition?
The main risks include the potential that the anticipated benefits may not fully materialise or that returns may not sufficiently offset the investment cost. As Envictus is listed in Singapore, any future changes to foreign investment regulations could impact Paramount’s rights or ability to repatriate profits, although no such restrictions currently exist. Additionally, with only a 28% stake, Paramount will not have operational control over Envictus but plans to mitigate this by nominating board representatives to safeguard its interests.
Comfort Gained Post Briefing
We came away from the briefing feeling more confident in the strategic rationale and valuation of the Envictus deal. Management addressed key concerns candidly, including earnings quality, post-acquisition integration, and capital impact. Clarity around Envictus’s turnaround trajectory, the attractive entry valuation (~4× EBITDA), and Paramount’s disciplined stance on not pursuing further F&B acquisitions strengthened our conviction in the long-term value of the transaction. The proposed acquisition enhances Paramount’s growth profile by providing exposure to a resilient, cash-generative F&B business at a compelling entry multiple.
Management Turns Cautious
Elsewhere, management struck a cautious tone, flagging a softer property market in 2H25 due to external trade uncertainties, cost pressures from fuel subsidy rationalisation and SST expansion. With only RM600mn in sales achieved against its RM1.5bn full-year target, there’s a possibility of downward revision. That said, we believe there is still room for a pickup in sales in the second half, especially once there is greater clarity on SST and tariff developments. The potential rollout of pro-homeownership measures or demand-side incentives could also spur recovery. Historically, Paramount recorded a similar IH sales base in FY24 but ended the year with RM1.4bn in sales, suggesting a stronger 2H is still achievable. Importantly, about 50% of the RM1.4bn planned launches are scheduled for 2H25, which could support a rebound in booking momentum.
Forecast
We maintain our FY25-27 earnings forecasts at this juncture.
Recommendation and Valuation
No change to our target price of RM1.48/share, based on CY26 P/Bk multiple of 0.6x. The stock remains deeply undervalued, trading at just 6.4x CY26 P/E and 0.4x P/Bk, significantly below the developer sector average of 13.9x P/E and 0.8x P/Bk under our coverage. With a superior >7% dividend yield, significantly outperforming the sector average of 3.7%, we see limited downside risk to its share price. Maintain Buy.
Appendix 1: Envictus – 5 Years Financials
| Metric | 2021 | 2022 | 2023 | 2024 | 1H2025 |
|---|---|---|---|---|---|
| Revenue (RM’m) | 382.1 | 515.6 | 566.1 | 686.8 | 369.8 |
| PAT/(LAT) (RM’m) | (48.4) | (6.4) | (32.9) | 50.6 | 16.1 |
| Net operating cashflow (RM’m) | 34.2 | 6.3 | 45.4 | 70.2 | 29.9 |
| Net Gearing (times) | 1.5 | 1.1 | 0.9 | 0.3 | 0.3 |
| Net Assets Per Share (RM) | 0.7 | 0.6 | 0.5 | 0.6 | 0.6 |
| Return on Equity (%) | (23.2) | (4) | (20.7) | 32.8 | 16.1 |
Note: For valuation purposes, we have adjusted Envictus’s FY24 reported profit to exclude non-recurring items. The reported PAT of RM50.6mn included several one-off gains and losses which may not reflect the group’s core operating performance. After excluding these items, adjusted PAT is estimated at RM40.3mn.
Source: Paramount
Appendix 2: Texas Chicken revenue & No. of outlets (FY 2021 – 31 Mar 2025)
| Period | Revenue (RM’m) | No. of outlets |
|---|---|---|
| 1H2021 | 195.6 | 78 |
| 2H2021 | 186.5 | 80 |
| 1H2022 | 238.7 | 85 |
| 2H2022 | 276.9 | 88 |
| 1H2023 | 280.1 | 93 |
| 2H2023 | 286.0 | 92 |
| 1H2024 | 314.1 | 92 |
| 2H2024 | 372.7 | 95 |
| 1H2025 | 369.8 | 100 |
Source: Paramount, Acquiree’s condensed interim financial statements
Earnings Summary
Profit & Loss (RMm)
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Revenue | 1,012.3 | 1,040.2 | 1,088.9 | 1,230.2 | 1,403.8 |
| EBITDA | 187.4 | 223.1 | 207.6 | 231.8 | 260.7 |
| Dep. & amortisation | (27.3) | (23.3) | (26.9) | (21.9) | (18.0) |
| Net finance cost | (27.3) | (37.1) | (40.6) | (44.0) | (51.4) |
| EI | 8.4 | 16.3 | 0.0 | 0.0 | 0.0 |
| PBT | 130.2 | 156.9 | 137.5 | 163.3 | 188.7 |
| Normalised PBT | 121.9 | 140.6 | 137.5 | 163.3 | 188.7 |
| Taxation | (35.1) | (42.0) | (48.1) | (57.2) | (66.1) |
| Profit after tax | 95.1 | 114.9 | 89.4 | 106.2 | 122.7 |
| Profit from discontinued operations | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| MI & Holders of PDS | 12.2 | 12.5 | 1.9 | 0.3 | 0.3 |
| Core net profit | 74.5 | 86.1 | 87.5 | 105.9 | 122.4 |
| Reported EPS (sen) | 13.4 | 16.5 | 14.1 | 17.0 | 19.7 |
| Core EPS (sen) | 12.0 | 13.8 | 14.1 | 17.0 | 19.7 |
| Normalised PER (x) | 9.1 | 7.9 | 7.8 | 6.4 | 5.5 |
| GDPS (sen) | 7.0 | 7.5 | 7.5 | 8.0 | 8.0 |
| Div Yield (%) | 6.4 | 6.9 | 6.9 | 7.3 | 7.3 |
Balance Sheet (RMm)
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Fixed assets | 1,472.9 | 1,064.0 | 1,442.1 | 1,475.2 | 1,512.2 |
| Others | 116.4 | 234.4 | 231.9 | 229.4 | 226.8 |
| Total fixed assets | 1,589.4 | 1,298.4 | 1,674.0 | 1,704.6 | 1,739.0 |
| Cash | 202.7 | 216.1 | 389.9 | 587.2 | 810.3 |
| Others | 1,185.1 | 1,548.8 | 1,361.1 | 1,349.2 | 1,416.8 |
| Total current assets | 1,387.9 | 1,764.9 | 1,751.1 | 1,936.4 | 2,227.1 |
| Asset held for sale | 0.0 | 10.3 | 10.3 | 10.3 | 10.3 |
| Total assets | 2,977.2 | 3,073.6 | 3,435.4 | 3,651.3 | 3,976.5 |
| ST debt | 259.7 | 356.7 | 206.7 | 206.7 | 166.7 |
| Other liabilities | 452.5 | 540.4 | 661.1 | 670.6 | 722.9 |
| Total current liabilities | 712.2 | 897.1 | 867.8 | 877.3 | 889.7 |
| Shareholders’ funds | 1,429.7 | 1,431.0 | 1,472.1 | 1,528.5 | 1,601.3 |
| MI | 1.2 | 1.4 | 1.4 | 1.4 | 1.4 |
| PDS | 199.6 | 50.0 | 50.0 | 0.0 | 0.0 |
| LT borrowings | 568.4 | 633.6 | 983.6 | 1,183.6 | 1,423.6 |
| LT liabilities | 66.1 | 60.5 | 60.5 | 60.5 | 60.5 |
| Total long term Liabilities | 634.6 | 694.1 | 1,044.1 | 1,244.1 | 1,484.1 |
| Total equity and liabilities | 2,977.2 | 3,073.6 | 3,435.4 | 3,651.3 | 3,976.5 |
Cash Flow (RMm)
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| PBT | 130.2 | 156.9 | 137.5 | 163.3 | 188.7 |
| Adjustments | 16.1 | 18.8 | 43.1 | 46.6 | 54.0 |
| Dep. & amortisation | 27.3 | 23.3 | 26.9 | 21.9 | 18.0 |
| Changes in WC | 69.9 | 141.7 | 219.6 | (79.7) | (132.8) |
| Operational cash flow | 243.6 | 340.7 | 427.1 | 152.1 | 127.9 |
| Capex | (53.2) | (67.6) | (405.0) | (55.0) | (55.0) |
| Others | 1.8 | (205.7) | 0.0 | 0.0 | 0.0 |
| Investment cash flow | (51.3) | (273.3) | (405.0) | (55.0) | (55.0) |
| Debt raised/(repaid) | (196.8) | 143.9 | 200.0 | 200.0 | 200.0 |
| Equity raised/(repaid) | 0.0 | (149.9) | 0.0 | 0.0 | 0.0 |
| Dividend | (111.5) | (46.7) | (46.7) | (49.8) | (49.8) |
| Others | (38.8) | (33.6) | (1.6) | 0.0 | 0.0 |
| Financial cash flow | (347.1) | (86.4) | 151.7 | 100.2 | 150.2 |
| Net cash flow | (154.9) | (18.9) | 173.8 | 197.3 | 223.1 |
Ratios
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f |
|---|---|---|---|---|---|
| Profitability ratios | |||||
| Core ROE (%) | 5.1 | 6.0 | 6.0 | 7.1 | 7.8 |
| Core ROA (%) | 2.4 | 2.9 | 2.7 | 3.0 | 3.2 |
| EBITDA Margins (%) | 18.5 | 21.4 | 19.1 | 18.8 | 18.6 |
| PBT Margins (%) | 12.0 | 13.5 | 12.6 | 13.3 | 13.4 |
| Liquidity ratios | |||||
| Current ratio (x) | 1.9 | 2.0 | 2.0 | 2.2 | 2.5 |
| Quick ratio (x) | 1.7 | 1.7 | 1.6 | 1.5 | 1.6 |
| Leverage ratios | |||||
| Total liabilities / equity (x) | 0.9 | 1.1 | 1.3 | 1.4 | 1.5 |
| Net debt / Equity (x) | 0.4 | 0.5 | 0.5 | 0.5 | 0.5 |
| Growth ratios | |||||
| Revenue (%) | 19.4 | 2.8 | 4.7 | 13.0 | 14.1 |
| Pretax Profit (%) | 35.3 | 15.3 | (2.2) | 18.8 | 15.6 |
| Core net earnings (%) | 64.9 | 15.6 | 1.6 | 21.0 | 15.6 |
| Total assets (%) | (4.6) | 2.9 | 11.8 | 6.3 | 8.9 |
Assumptions
| YE Dec 31 | 2023 | 2024 | 2025f | 2026f | 2027f | |
|---|---|---|---|---|---|---|
| New Sales | (RM mn) | 1,120.0 | 1,389.0 | 1,463.0 | 1,550.0 | 1,574.0 |
| Prop Dev PBT Margins | (%) | 14.4 | 14.8 | 12.9 | 13.5 | 13.6 |
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
| BUY : | Total return of the stock exceeds 12%. |
| HOLD : | Total return of the stock is within the range of 7% to 12%. |
| SELL : | Total return of the stock is lower than 7%. |
| Not Rated: | The company is not under coverage. The report is for information only. |
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★ | ★★★ | ★★★ | ★★★ |
| Remark | It has established environmental policies to mitigate the environment impact and minimise pollution. | PCB places great focus on training its employees to ensure safety and it encourages its suppliers, vendors, contractors and other business partners to follow the same standards. | Adequate transparency practices to ensure stakeholder engagement and management efficiency. |
| ★★★★★ (≥80%): | Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. | +5% premium to target price |
| ★★★★ (60-79%): | Above adequate integration of ESG factors into most aspects of operations, management and future directions. | +3% premium to target price |
| ★★★ (40-59%): | Adequate integration of ESG factors into operations, management and future directions. | No changes to target price |
| ★★ (20-39%): | Have some integration of ESG factors in operations and management but are insufficient. | -3% discount to target price |
| ★ (<20%): | Minimal or no integration of ESG factors in operations and management. | -5% discount to target price |
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Thursday, July 31, 2025, the analyst, Thiam Chiann Wen, who prepared this report, has interest in the following securities covered in this report: (a) nil
