Risk Factors

5. RISK FACTORS 5. RISK FACTORS Before investing in our Shares, you should pay particular attentiou to the fact that we, and to a large extent our activities, are subject to the legal and regulatory requirements and business environment in Malaysia as well as certain international standards governing our business. OUf business is subject to a number of factors, many of which are outside our control. Prior to making an investment decision, you should carefully consider, along with the other matters in this Prospectus, the risks and investment considerations set out below. The risks and investment considerations set out below are not an exhaustive nor exclusive list of the challenges that we currently face or may develop in the future that may have a significant impact on the current and future performance of our Group. Additional risks, whether known or unknown, may in the future have a material adverse effect on us or our Shares. 5.1 Risks Relating to the Industry that We Operate In 5.1.1 Level of Activities of the Oil and Gas Industry Our offshore support services are very much dependent on the level of activities of the oil and gas industry such as exploration, development and production of oil and natural gas. These activities are in turn affected by factors such as fluctuations in oil and natural gas prices and changes in capital investment in the oil and gas industry. Low prices on oil and gas tend to reduce the spending budgets in activities such as drilling, exploration and development as it is less economical for oil and gas producers to do so. Consequently, the demand for our offshore support services may also decline in tandem. In addition, the level of the E&P activities is also correlated with the availability of crude oil and natural gas reserves in the country where we operate. Investments in this sector could be significantly reduced should the oil and natural gas reserves deplete and are no longer economical to extract. Consequently, the demand for related offshore support vessels and services is expected to reduce. As at January 2005, Malaysia’s crude oil reserves and gas reserves are approximately

5.29 billion barrels aud 85.20 tscf respectively. Under the current pace of development and production rate, the crude oil and natural gas reserves are expected to last for approximately 19 years and 33 years respectively. Furthermore, based on the report from Petronas for the financial year ended March 2005, investments in the E&P sector alone attracted RMl2 billion in 200412005. Approximately half was made by Petronas Carigali Sdn Bhd, the E&P subsidiary of Petronas. whilst the other 50% was invested by foreign oil companies. In June 2004, Petronas announced plans to increase oil and gas production by 3% per annum over the next five (5) years. During the same period, around 40 offshore platforms are planoed to be installed and Petronas estimated that approximately RM25.1 billion would be spent over the next five (5) years. We are optimistic that there will be more than adequate crude oil and gas reserves available as well as sufficient capital expenditure in the oil and gas industry, at present and in the future, which would encourage high levels of activities in the E&P sector. We also expect that there will be a corresponding increase in the demand for offshore support vessels and services in light of these developments. However, there can be no assurance that the aforementioned plans will take place as scheduled or at all or any continuous reduction in the level of activity in the oil and gas industry will not affect our activities. 5.1.2 Volatility in Oil Prices The price of oil bad been very volatile, surging from below USD30 per barrel in 2003 to a high of above USD65 per barrel in 2006. The fluctuation in crude oil prices are very much related to the fundamentals of demand and supply conditions of the global crude oil market. In tum, the level of volatility will affect the level of capital spending by companies operating in the oil and gas industry. 5. RISKFACfORS(Cont’J) 5.1.3 Any major and sustained decline in the price of oil and gas could result in a lower investment in the E&P sector. Despite the volatility of oil prices, the level of investment and activity in the oil and gas industry is not expected to fluctuate in tandem with the oil price as the oil price is expected to remain fairly attractive in the long tenn. Although prices of oil are volatile, it has increased to above USD45 per barrel since 2004 and industry specialist does not foresee the price to drop below USD45 per barrel in the near future. High oil and natural gas prices tend to increase the profitability of oil and gas producers. Accordingly, we believe that when this happens, major oil and gas operators will generally increase their investment budgets for E&P activities which in turn translate to increase in demand for our offshore support services. In the event of a reduction in the level of investment budgets, offshore support services are still required to sustain the on-going activities in the exploration, development and production before the demand for offshore support services diminishes. However, no assurance can be given that our activities will not be materially affected in the event of sustained depression in oil prices. Imbalance of Demand and Supply The offshore support vessels and services, as an industry, is governed by the forces of demand and supply and will accordingly be cyclical in nature and has traditionally experienced fluctuations in freight and charter rates and vessel value, which are dependent on factors including the respective demand for and supply of vessels and shipping capacity. These factors may contribute to the volatility of our financial performance. vis-a.-vis where a decrease in demand of vessels or an increase in supply of vessels, may result in us charging lower charter hire rates to our customers, which would consequently lower our revenue, and may result in an adverse impact on our financial perfonnance. Furthennore, a decrease in the availability of third party vessels for us to charter or a decrease in the availability of suitable vessels for us to acquire (with limited space for the construction of new vessels) or any factors that may result in us incurring higher charter hire expenses from our suppliers, would consequently increase our costs. and may likewise result in an adverse impact on our financial perfonnance. There is also no assurance that the type of vessels invested by us will continue to be in demand. in view of the dynamics in the E&P sector. The demand factors would depend on, inter-alia, trade activities on the upstream and downstream of the oil and gas industry, changes in seaborne, seasonal and weather conditions, and political uncertainties. The supply factors would include the total number of vessels in operating condition, that are in compliance with governmental and industry regulations ofthe maritime industry, as well as the building and delivery of new vessels. In view of Petronas’ intention to increase production, it is anticipated that more platfonns will be built and hence, an increase in the demand of offshore support services, in particular, the services of offshore support vessels. In addition, the current shortage of vessels to service the existing oil fields would also contribute to the continuing demand for such vessels. In this respect, we have over the last few years adopted a fleet expansion strategy which is expected to mitigate our reliance on third party vessels. 5. RISK FACTORS (Cont’tI) 5.1.4 5.1.5 Increased Competition The offshore support vessels and services is a competitive industry and our Group will continue to face competition from other local and international offshore support companies. Competitive factors include price and quality of services as well as the quality and availability of vessels. The players in this industry are diversified ranging from large MNCs to large local companies to SMEs. Although there is always competition between local licensed service providers, the threat from new entrants is relatively low due to the high barriers of entry such as the high investment cost of vessels, the availability of the necessary technical expertise, skilled workforce and the various requirements for licenses and registrations with Petronas and MOF. We also face competition from foreign vessels suppliers which have jointMventure arrangements with local licensed vessel suppliers that provide various maritime services to oil field operators in Malaysia. Notwithstanding the high level of competition, we are well positioned to face the competition as we have developed a long established clientele base and have developed a good track record for our services over the years. In addition, our Group has received delivery of six (6) new vessels in 2005, and has contracted to acquire two (2) new vessels in 2006, one (I) of which has been delivered to us in March 2006 whilst the other vessel is expected to be delivered to us in July 2006. We are also in the process of identifying four (4) additional suitable vessels, which we plan to acquire at the end of 2006 or in 2007, to further increase our fleet size. These vessels are designed and equipped with integrated technological capabilities and larger capacities which will give us a competitive edge in terms of versatility and wide range of usability in meeting our customers’ demands. Licenses, Registration and Certification Requirements The oil and gas industry in general is a highly regulated industry. From Malaysia’s perspective, the authority is vested with PetTonas, whereby operators or service providers are required to possess the relevant licences issued by Petronas in order to provide services to Petronas or other operators. Without the requisite licence, we are not allowed to participate in the bidding! tendering process. In addition, the MOF also regulates the industry through the issuance of relevant licence. Further, our Group must also adhere and conform to the Malaysian legislations and international standards for safety management, operation as well as pollution controls. In addition, all vessels are required to hold various certifications classed by the international classification societies prior to operations. All of these licenses, registrations and certifications are valid for certain periods of time with the renewal based on our Group’s compliance with those requirements imposed by the relevant authorities. TIlere is no assurance that these licenses, registration and certification will be renewed when they expire. However, we will continue in ensuring that we comply with all requirements imposed by the authorities at all time and is confident about the on·going renewals. Further, we have not experienced any failure in obtaining the renewals of our licences, registration and certificates in the past. 5. RISK FACTORS (Cont’d) 5.1.6 5.1.7 Economic Costs of Regulatory Compliance The ship owning and managing industry is highly regulated and the vessels have to operate within the rules of the intematioual conventions sel out by Assembly of the Intemalional Marilime Organisation (“IMO”) such as: (i) the SOLAS Convention;
(ii) the International Convention for the Prevention of Pollution from Ships (“MARl’OL”);

(iii) the International Convention for the Seafarers; Training, Certification and Watchkeeping (“STCW”); (iv) the ISM Code 2002; and
(v) the ISPS Code.

All of these convenlions have been ratified by the majority of maritime lIations, including Malaysia, and apply to all vessels registered in these countries or calling in the waters of these countries. Any non-compliance with any of these regulations can have dire consequences which include heavy fmes and possible detention ofvessel in the port. Nevertheless, our Directors have many years of working experience and in-depth knowledge in the maritime industry and this is enhanced by a group of experienced and technically sound key personnel, who have extensive experience operating in the Asia Pacific region. This in tum would mitigate the possibility of infringement! non­compliance with any of these regulations. Further, IMO may from time to time adopt or introduce new regulatiolls requiring compliance by our Group’s vessels which will inevitably increase our cost of operations and subsequently may have an adverse effect on the profitability of our Group. OUf Directors feel that these costs are part of our ordinary course of business in the maritime industry. Environmental, Health and Safety Laws and Regulations OUf business involves the transporting! handling substances and compounds that may be considered toxic or hazardous within the meaning of environmental laws. As a result, our Group is subject to stringent environmental, health and safety laws and regulations addressing air pollutant emissions, discharge of waste and solid waste management and other aspects of its operations. Typically, these laws provide for
substantial fines and potential criminal sanction for violations. Further, as we envisage, deepwater and ultra-deepwater explorations would be the next impetus for growth in the oil and gas industry. In such environments, the field architecture, technology and concept options are more complex and diverse and hence present a greater risks (in terms of health and safety) and demands greater diligent risk mitigation vis-a-vis greater investment of expertise by both the operators and contractors. We have established a health, safety and environment management system (“HSEMS”) The Safety and Health Committee’s task to making and maintaining health, safety and environment management arrangements, ensuring effective co­operation between employer and employees, developing measures to ensure the safety and health at the workplace and prevention of environmental breach, and in monitoring the effectiveness of such measures. Our subsidiaries have obtained Contractor Safety Award and Excellent HSE Performance “Gold Award” which are

reflective of our good and sound health. safety and environment management. 5. RlSK FACTORS (Col/I’d) 5.1.8 5.1.9 Please refer to Section 11.12 of this Prospectus for further details of the awards that we have received. In addition, we may face liability for alleged personal injury or property damage. Although we have not experienced such claims to date, claims of this nature can be substantial and could in the future materially adversely affect our business, financial condition, profitabihty or cash flows, if it is not adequately covered by insurance. Nevertheless, we believe that our membership with a reputable P&l Club will mitigate this as P&I Club, which provides mutual coverage and allows member to claim any damages due to identified perils. We also incur and expect to continue to incur capital and operating costs to comply with environmental, health and safety laws and regulations. In addition, new laws and regulations, stricter enforcement of or changes to, existing laws and regulations, or the imposition of new clean~up requirements could in the future require us to incur additional costs. No assurance can be given that material capital expenditures, costs or operating expenses beyond those currently anticipated will not be required under applicable environmental, health, and safety laws and regulations, or that developments with respect to such laws and regulations will not adversely affect our revenue. Inherent Risk Associated with Offshore Support Vessels Typical of ti,e offshore support vessels business, our Group is exposed to the inherent risks of damage to and! or loss of vessels and cargoes sustained in collisions, interruptions to operations caused by adverse weather conditions and mechanical failures. In the event of accidents, our Group may incur liability for c1ean·up and salvage costs and other damages sustained in collisions as well as wreck removal charges. In addition, accidents may lead to the exposure of claims from third parties. In this respect, all OUf vessels are insured in accordance with standard industry practices that consist of Hull and Machinery Insurance policy and P&I Club and Loss of Hire insurance. Nonetheless, any major claim might adversely affect the claims record of OUf Group’s fleet and result in an increase in our insurance coverage rates and premium paid. Economic and Market Factors That Are Outside Our Control External factors beyond our control can cause volatility in, and adversely affect, prices and demand for our services and operating margins. Examples of such external factors include: • general economic conditions;
• the level of business activity in the industries that require our services and the markets in which such industry participants operate~
• competitors’ actions, including significant increases in services provided from competitors;
• currency fluctuations;
• international events and circumstances such as wars, terrorist attacks and

political instability, including continued hostilities in the Middle East; and • changes in legal regimes and governmental regulations, such as taxatioll, duties and tariffs, in Malaysia and abroad. 5. RISK FACTORS (Cont’d)

5.2 Risks Relating to Our Group and Operations 5.2.1 Continued Employment and Performance of our Directors and Key Management Our performance and growth to date have been achieved primarily with the involvement of certain members of our Board and the services of our key members of management. In particular our founders namely, En Azmi bin Ahmad, En Shaharuddin bin Warno @ Rahmad, En Mohd Abd Rahman bin Mohd Hashim and En Ab Razak bin Hashim, are also our Managing Director, Finance Director, Technical and Operation Director and Project Director respectively who have many years of relevant working experience and in-depth knowledge of the offshore support

 

 

services industry. In 2004, En Alunad Hassanudin bin Ahmad Kamaluddin joined AMSB as the advisor to the Board of Directors. He is currently the Advisor to the Board of AMRB, primarily due to his vast experience of over thirty (30) years in the oil and gas industry, mainly through his career with Petronas and its group of companies. Please refer to Section 13.2.1 of this Prospectus for further details on En Ahmad Hassanudin’s responsibilities as the advisor to the Board of Directors of AMRB. Our continued success depends to a significant extent upon the continued employment and perfonnance of OUI persormel, in particular of our founders and advisor. The loss of key management personnel could have a material adverse effect on our operations and performance. Moving forward, we have appointed three (3) new Directors to our Board, namely Dato’ Capt Ahmad Sufian @ Qurnain bin Abdul Rashid, Dato’ Mohamad Idris bin Mansor and YB Haji Ab Wahab bin Haji Ibrahim, who collectively have more than ninety (90) years of experience, generally in the corporate sector and in particular, in the oil and gas sector as welt as in the national and intemational maritime industry. In addition to their wealth of experience and expertise which will contribute to the continued success of our Group, the presence of these new Directors would serve to mitigate the adverse effects to our Group in the event of the departure of any existing Directors and/or key management personnel of our Group. Please refer to Section 13.1.1 of this Prospectus for further details on the experiences of our Board of Directors. Furthermore, we also have in place our Nomination and Remuneration Conunittee whose responsibilities include, amongst others, to recommend candidates for appointments to our Board of Directors, board committees, consultative panels, regulatory committees and key management positions. The work carried out by our Remuneration and Nomination Committee, i.e. by continuously identifying and recommending suitable candidates as Director or key management of our Group, will significantly mitigate the adverse effects to our Group in the event of the departure of any existing Directors and/or key management personnel of our Group. Please refer to Section 13.1.7 of this Prospectus for further details on our Nomination and Remuneration Committee.
Our future success will, to a large extent, depend on our ability to retain our key management personnel and also our ability to attract and retain highly skilled teelmical, managerial and marketing personnel. Competition for such skilled! specialised personnel is intense. There can be no assurance that we will be successful in retaining or attracting the personnel we require. Accordingly, there is no assurance that any loss of key members of management may not have an adverse effect on our business. Notwithstanding the above, we have a management succession plan in place which would facilitate the continuity of our management with the appropriate experience, expertise and calibre in the event of the departure of any of our key management personnel. Please refer to Section 13.2.5 of this
Prospectus for further details on our Management Succession Plans. 5. RISK FACTORS (COtlt’d) 5.2.2 Level of Borrowings and Inlerest Cover In general, the oil and gas support services industry and in particular, the provision of offshore support vessels and services, i.e., the segment of business which we operate, is capital intensive by nature. This is mainly due to the high costs associated with the acquisition of vessels and equipment. In addition, our business strategy of neet expansion has resulted in significant acquisition of vessels especially in the current year and during these past three (3) financial years. Our level of borrowings has increased steadily over the years primarily due to our business strategy for neet expansion. As at the Latest Practicable Date, our Group had total borrowings of approximately RM245.74 million of which RM225.58 million or 91.8% consisted of borrowings which are related to the financing of our vessels. In tandem with our higher level of borrowings, our finance costs have also increased significantly. For the [mancial year ended 3I December 2005, our Group generated an interest cover of approximately 6.3 times whilst for the current financial year ending 31 December 2006, we expect to register an interest cover of approximately 4.7 times. Based on the prospectuses (for listing on the Main Board/Second Board of Bursa Securities) of companies comparable to us, such as Scomi Group Bhd (“Scomi”), Coastal Contracts Berhad (“Coastal”), Petra Perdana Berhad (“Petra”) and Tanjung Offshore Berhad (“Tanjung”), their interest cover for the financial year immediately preceding their Listing were 22.0, 8.6, 73.6 and 92.3 times respectively, and are generally higher than our interest cover. Whilst interest cover is a general indicator of the ability of a company to service its interests, our ability to make payments on our loan principal and to service our interest will depend on our ability to generate sufficient cash in the future, which is subject to many factors beyond our control. Our failure to repay our borrowings or service our interest in the future may have a material adverse effect on us. In addition, a portion of our borrowings are on noating rates and are subject to the inherent risk of interest ratc fluctuations. Consequently, in the event of increases in the noating rates, we would incur higher finance costs which would have an adverse effect on our bottom line. Whilst no absolute assurance can be given that we will be able to repay all our borrowings and service all our interest in the future when they fall due, we are of the opinion that our high level of borrowings and the corresponding high finance costs are justifiable as we believe that our vessels are self-financing, i.e. we expect that the charter hire revenue to be generated by each vessel to be more than adequate to repay the related loan principal and to service the corresponding interest charges. In addition, approximately RM125.91 million or 51.2% of our total borrowings as at the Latest Practicable Date, are fixed-rated, and therefore, partially mitigating our exposure to increase in interest rates. Furthennore, our Group has never defaulted on any principal or interest payment in the past and we have also never restructured any of our borrowings to adjust the repayment schedule due to insufficient funds. We attribute these to our sound cash management practice and the close review of our finaneials by our management. Moving forward, our Risk Management Committee will also ensure that our Group’s risk management strategies are continuously aligned with our business strategies and risk tolerance, whereby risks, which include, inter-alia, our level of borrowings, the corresponding finance costs and interest cover, are considered in our Group’s Jong-tenn plans and investment or capital allocations/decisions. 5. RISK FACTORS (Conl’tl) 5.2.3
5.2.4 5.2.5 Short Term Project-Based Contracts and Early Termination of Contracts Generally, it is the nature of the offshore support services industry that contracts for charter and provision of services are usually not longer than three (3) years. This is due to a number of reasons such as: (i) the charterer would only hire a vessel for a particular project; and (ii) restrictive policy on the length of contract by customers. Once the term of the project is completed, the support services companies would

have to source for new projects to derive a new source of revenue. We view the industry practice as an advantage where we could explore the best possible deal from time to time. Currently, we also have a good mixture of long, medium and short term contracts. This provides a steady stream of income through the long term contracts and the potential earning growth from the high rate short term contracts. Our Group also faces risk of possible early termination of contracts which could affect our Group’s cash flow and operations. However, charter hire contracts would normally contain compensation clauses that would mitigate this risk. We do not foresee that any of our customers would terminate their contracts as evidenced by the fact that our Group has not encountered any event of early tennination ofcontract since our commencement of business. Seasonality of Services The offshore support vessels and services industry, particularly in Malaysia, would also be subject to the risk of increase in down time or off hires due to adverse weather condition (i.e. monsoon seasons). Two (2) of our smaller-sized vessels, which are under spot contracts and our underwater services would be inevitably affected by the monsoon seasons and this would result in a fluctuation of our earnings over the financial year. Notwithstanding the above, thirteen (13) out of our fifteen (15) vessels are currently under fixed charter contracts. In respect of our vessels which are under fixed charter contracts, we are required to make available the vessels, regardless of the weather condition, which in tum will provide us with a steady stream of income. Unexpected Breakdown of Vessel The operation of providing offshore support vessels is dependent on the quality services and reliability of vessels in tenns of seaworthiness and safety environment. Any unexpected breakdown of our Group’s vessel is difficult to envisage. In the event of downtime occurring, additional costs will be incurred by customers arising from the disruption of their workflow and scheduled activities, if supplies or offshore personnel are not transported from shore to platfonns in time. In such circumstances, customer relationship may also be affected. In mitigating the above factor, we have developed a planned maintenance schedule which stringently adheres to the ISM Code 2002 standards in maintaining or repairing the performance and seaworthiness of all vessels. All our vessels are required to undergo an intermediate survey every two and a half (2.5) years and special survey every five (5) years. Further, all our vessels are insured in accordance with standard industry practices that consist of: (i) Hull and Machinery Insurance policy and P&I Club which would allow us to claim any damages due to insured perils; and (ii) Loss of Hire insurance which would allow us to claim any down time loss due to unexpected breakdown of vessels. 5. RISK FACTORS (Cont’li) 5.2.6 5.2.7 5.2.8 Arrest and Requisition of Vessels In the event our Group is unable to fulfil its financial obligations to suppliers of goods or services to our vessels or other parties that have obtained maritime liens, such parties may be entitled to arrest one or mOTe of our vessels. Similarly, our fleets can be detained or arrested due to any spills or non-compliance with maritime standards. The arrest or detention of one or more of our vessels may result in a loss of earnings for the resulting off-hire period. In this respect, we have not had any incident in the past which resulted in any of our vessels being detained or arrested. We also do not foresee any occurrence of such incident in the future. Funding Calls by P&I Club OUT Group is indemnified for legal liabilities incurred while operating our vessels through membership in P&I Club. P&I Clubs are mutual insurance clubs whose members must contribute to cover loss sustained by other club members. The objective of a P&I Club is to provide mutual coverage based on the aggregate tonnage of a member’s vessels entered into the club. Claims are paid through the aggregate premiums of all members, although members are subject to calls for additional funds if the aggregate premiums are insufficient to cover claims submitted to the club, which other than those submitted by members, include claims from other P&I Clubs which the club has a inter-club agreement. There is a risk, albeit slim, that the P&I Club in which we are a member will call for additional funds from us and other members. Such calls might have an impact on our profitability. Due to the nature of the industry, we believe that the risk of calls is justified if it is weighted against self-insurance. Changes in Foreign Exchange Controls A portion of our revenue, expenses and foreign currency denominated obligations are denominated in, or directly or indirectly linked to benchmarks denominated in USD, while our reporting currency is denominated in Ringgit. While fluctuations in the RMlUSD exchange rate may not have a material impact on our USD denominated cash flow, it may have a material impact on the reporting of our revenue, expenses and foreign currency denominated obligations, as they are required to be stated in Ringgit, as well as on financial and other covenants contained in our indebtedness that are based upon such reported revenues, expenses and obligations. The imposition of currency controls via the pegging of RM to USD at the fixed exchange rate ofUSD1.00 to RM3.80 by BNM on 2 September 1998 had stabilised the risks arising from exchange rate fluctuations. On 21 July 2005, BNM announced that the RM will be allowed to operate in a managed float, with its value being determined by economic fundamentals, vis-a.-vis, monitoring against a basket of currencies to ensure the exchange rate remains close to its fair value. Furthermore, there can be no assurance if any imposition of the currency control will recur and that future exchange rate fluctuations arising from the lifting of the currency controls or any adjustments of the exchange rate of RM to USD will not adversely affect the financial results of our Group. 5. RISK FACTORS (Cont’dj

 

5.2.9 Changes in Shareholders of our Principal Subsidiary There have been occasions in the past where there have been changes to the shareholders of AMSB, our principal subsidiary. Please refer to Section 12.2 of this Prospectus for details of the changes in the shareholders of AMSB during the past three (3) financial years ended 3 J December 2005. More particularly, Jaya Offshore Pte Ltd (“Jaya Offshore”), a wholly-owned subsidiary of Jaya Holdings Limited, has emerged as a substantial shareholder of AMSB in 2003 and ceased to be one in 2004. Any departure of a substantial shareholder of a company may, to an extent, poses a risk to the company vis·a-vis affecting the performance, management and direction of the company. In view of the departure of Jaya Offshore in 2004 with the execution of the sale and purchase agreement. AMSB’s performance, management and direction may have been affected, especially when the principal activities of Jaya Offshore are similar 10 that of AMSB. However, since the departure of Jaya Offshore, there has been no adverse impact of the performance of AMSB group. SAR Venture, the ultimate substantial shareholder of AMSB, since its incorporation, has managed to grow/steer the company from strength to strength and a stronger fmancial footing. This can be evidenced by the historical performance of AMSB in 2004 and 2005. Moreover, AMSB believes that it has not been dependent on Jaya Offshore or any other companies within the Jaya Holdings Limited group of companies for securing contracts/revenue in the past. Moving forward and immediately upon our Listing, we will have two (2) substantial shareholders namely, SAR Venture and FVSB. As a listed company, any change in our substantial shareholders may be construed as a sell down by our then substantial shareholder and perceived negatively by the public and consequently, may adversely effect our Share price. Nevertheless, the existing substantial shareholders’ shareholdings in our Company are subject to the moratorium conditions imposed by the SC wherein the Shares under moratorium will not be allowed to be sold, transferred or assigned during the moratorium period. The imposition of the moratorium conditions by the SC will mitigate, to a certain extent, the sale of our existing substantial shareholders’ Shares in our Company and consequently, mitigate the possibility of a change in our substantial shareholders. Please refer to Section 4.13 of this Prospectus for further details on the moratorium conditions imposed by the SC. However, there is no assurance that our existing shareholders will not sell their Shares, either upon listing or after the expiry of the moratorium period (as the case may be), which may result in a change in our Company’s shareholders. 5.3 Risks Relating 10 Our Sbares Our Shares comprise a new issue of securities for which there is currently no public market. There can be no assurance as to the liquidity of any market that may develop for the Shares, the abiliry of holders to sell their Shares or the prices at which bolders would be able to sell their Shares. Application has been made and approval-in-principle has been obtained from Bursa Securities for the listing of the entire enlarged share capital of AMRB on the Main Board of Bursa Securities. However, there can be no assurance that the Shares will be accepted for quotation and trading. In the event that the Shares are not admitted to the Official List within six (6) weeks from the date of the Prospectus, we will return the monies paid in respect of any application for Shares 10 applicants without interest, within fourteen (14) days after the Company becomes liable to do so. 5. RlSK FACTORS (Collt'<lj 53.1 53.2 5.33 No Prior Trading Market for Our Shares There is currently no prior trading market for our Shares within or outside Malaysia. There can be no assurance as to the liquidity of any market that may develop for our Shares, the ability of holders to sell their Shares or the prices at which holders would be able to sell their Shares. While the SC has approved the IPO and given approval for our Listing, there can be no assurance that our Shares will be accepted for listing and quotation on the anticipated date. We will make an application to Bursa Securities for the quotation of the Shares on the Main Board of Bursa Securities. In the event that our Shares are not admitted to the Official List, we will return the
monies paid in respect of any application for Shares without interest. Our Shares could also trade at prices that may be lower than the IPO Price depending on many factors, including prevailing economic, political and financial conditions in Malaysia, our operating results and the markets for similar securities. Neither we nor the Underwriter have any obligation to make a market in our Shares. There can be
no assurance that we will be able to maintain our Listing. The Volatility of the Market Price of Our Shares The market price of our Shares could be affected by numerous factors, including: (i) general market, political and economic conditions:
(ii) changes in earnings estimates and recommendations by financial analysts;

(iii) changes in market valuations of listed shares in general and other securities exchanges’ shares in particular; (iv) changes in government policy, legislation or regulation; and
(v) general operational and business risks.

In addition, many of the risks described elsewhere in this Prospectus could materially
and adversely affect the market price ofour Shares. The Malaysian, regional and global equity markets have experienced price and volume volatility that have affected the share prices of many companies. Share prices of many companies have experienced wide fluctuations that have often been unrelated to the operating perfomlllnce of those companies. Such fluctuations may adversely affect the market price of our Shares. The Sale or Possible Sale of a Substantial Number of Our Shares Immediately after our Listing, we will have 162,336,082 issued and paid-up Shares, of which 37,871,800 Shares, or approximately 23.33%, will be held by investors participating in the IPO and 124,464,282 Shares, or approximately 76.67%, will be held by our existing shareholders. The Shares offered in the !PO will be tradeable on the Main Board of Bursa Securities without restriction following our Listing, save for the moratorium conditions imposed by the SC on our existing shareholders. If our existing shareholders sell or are perceived as intending to sell a substantial amowlt of Shares, the market price for our Shares could be adversely affected. 5. RISK FACTORS (Con/’d)

 

5.3.4 Delay or Failure in Our Listing The occurrence of certain events. including the following, may cause a delay in or termination of our Listing: (i) the identified investors failing to subscribe to the portion of Shares intended to be placed to them; or
(ii) the Underwriter exercising their rights pursuant to the underwriting agreement to discharge themselves from their obligations thereunder; or

(iii) our Company is unable to meet the minimum public spread requirements of the Bursa Securities at the point of listing: or (iv) any force majeure event(s) which are beyond our control before the listing of our Company. After the IPa Shares have been allocated to successful applicants and credited into the applicants’ CDS Accounts, which would occur prior to the anticipated date for our Listing, it may not be possible to recover monies paid in respect of these IPQ Shares from us in the event the admission and the commencement of trading on the Main Board of Bursa Securities do not occur. Delays in the admission and the commencement of trading in shares on the Main Board of Bursa Securities have also occurred previously. In respect of IPQ Shares following their allotment, a return of monies to all holders of Shares could be achieved by way of a cancellation of capital pursuant to the relevant provisions of the Act and the rules made pursuant thereto. Such cancellation would require the sanction of our shareholders by special resolution in general meeting and confirmation of the High Court of Malaya. There can be no assurance that monies can be recovered within a short period of time or at all in such circumstances.
5.3.5 Paymeut of Divideuds We conduct all of our operations through our subsidiaries. Accordingly, an important source of our income, and consequently an important factor in our ability to pay dividends on our Shares, are dividends and other distributions received from our subsidiaries. Our ability to pay dividends or make other distributions to our shareholders may be subject to restrictions contained in our existing and/or future loan agreements which may limit dividend payments without the prior written consent of our lenders, as well as, among other things, to us having profits and sufficient funds which are above our requirement to fund our operations, other obligations or business plans. 5.4 Other Risks 5.4.1 Political, Economic aud Social Developments in Malaysia Given the nature of the industry in which our Group operates. our operations are closely linked to the political and social developments in Malaysia and other countries, where we have interests or intend to set up operations in the future. Any adverse developments or uncertainties in the political and social developments in Malaysia and other countries may adversely affect the performance of our Group. These include, but are not limited to, risk of war. riots. expropriation, nationalisation. renegotiation or nullification of existing contracts and arrangements, global economic downturn and unfavourable changes in governmental policy such as changes in interest rates, inflation rate and methods of taxation, currency exchange controls and 5. RISK FACTORS (Collt’d) 5.4.2 5.4.3 changes in regulations or other legal, administrative, political, economic or social developments. There can be no assurance that any changes to these factors will not have an adverse effect on OUT Group’s business and tinancial performance. The success of the IPQ depends also to a certain extent on the prevailing market conditions which are unpredictable and volatile. Significant Variation in the Profit Forecast Our consolidated profit forecast for the financial year ending 31 December 2006 is set out in Section 6 of this Prospectus. The consolidated profit forecast is based on the assumptions made by our Directors and is presented on a basis consistent with the accounting policies adopted by us. Furthermore, it reflects the current judgement of our Directors regarding expected conditions and our expected course of action, which is subject to change. The profit forecast is based on a number of assumptions which are inherently subject to significant uncertainty due to factors including. but not limited to, those identified in Section 5.4.3 of this Prospectus. Many of these factors are not within our control and some of the assumptions with respect to future business decisions and strategies are subject to change. Our actual results will differ from such forecast and such differences may be material and may affect the market price of our Shares and any dividend that may be contemplated. Under no circumstances should the inclusion of the profit forecast be regarded as a representation, warranty or prediction with respect 10 its accuracy or the accuracy of the underlying assumptions, or that we had or will achieve or are likely to achieve any particular result. We do not intend to provide any updated or otherwise revised profit forel:3SI. Prospective investors in our Shares are cautioned to place no reliance on the profit forecast. The profit forecast should be reviewed in conjunction with the description of the business. the historical financial information and lhe other materials contained in this Prospectus, including Prospectus.  the  information inducted elsewhere  in Section  5 of this  forward-looking Statements  This  Prospectus includes forward-looking  statements.  All  statements  other than
statements of historical facts included in this Prospectus, including, without limitation. those regarding our financial position, business strategy, plans and objectives of the Management for future operations. are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements uf OUf Group, or industry results, to be materially different from any future results. perfonnance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Such far.:tors include, illler-alia, general economic and business conditions. competitions, the impact of new laws and regulations affecting us and the industry, changes in interest rates and changes in foreign exchange rales. In light of these uncertainties, the inclusion of such forward looking slatement in this Prospectus should not be regarded as a representation or warranty by us or ()ur advisers lhat such plans and ubjectives will be achieved.

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