Industry Overview

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)-‘—­
1 DEFINITION AND SEGMENTATION Extra Low Voltage (“ELV”), Structured Cabling and Information and Communication Technology Industries ELV in electricity supply refers to systems that operate on voltages that do not exceed 50 alternating current (AC) voltages. ELV can comprise mUltiple systems either operating at a standalone or fUlly integrated level, and ELV is used in bUildings or facilities to provide security and surveillance, public address, video, voice and data communication. When integrated with a building or facility’s information technology (“IT”) system, ELV forms a part of building management solutions. Industry players that provide ELV systems services are trade specialists. For buildings or facilities, ELV systems specialists are involved in the design and/or installation and/or commissioning and/or repair and maintenance of structured cabling and ELV systems that comprise, among others, structured cabling, fire protection systems, telecommunications systems, security and surveillance systems and lighting systems. Structured cabling are building telecommunications cable infrastructure comprising of numerous standardised smaller elements known as subsystems. Structured cabling is used in bUildings and/or facilities for telecommunication and data transfer. Structured cabling integrates building automation systems, IT systems and communication systems within one (1) cabling infrastructure. This helps eliminate the costly process of installing and operating multiple wiring networks to separately accommodate each individual system. In Malaysia, structured cabling is often part of electrical services work packages in building construction projects. Electrical services in building construction is also known as electrical works and involves the technology of power distribution in buildings. Electrical services refers to electrical wiring and fitting, ELV and structured cabling works. Electrical services may be employed in the installation of new electrical components and systems or the maintenance and repair of existing electrical infrastructure. Building management solutions refers to technologies that provide access to information utilising information and communication technologies CICT”). ICT is thus an extended form of IT that focuses on unified communications and the integration of telecommunications (i.e. telephones lines and wireless signals), computers, enterprise software, middleware, storage as well as audio-visual systems that allow users to access, store, transmit and manipulate information. Structured cabling is a part of building management solutions, and is used as a conduit to connect telecommunications devices to computers and associated peripherals for the purposes of voice, data and multimedia communication.
any No. 1121987-0 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Components of building construction and building management solutions a
–.——–.—-_.–.–.-.—_.–,:1 Building construction

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I. iIII II Computer and I Telecommunication iI··_·r~~;o~f;:~~~~;~~~:1 –associated pe.rlpherals I services I “m.~ ::::::: I -:~;;;;;,:::;u! 4~;;;;;;;,-;;;;~;, I:: ~'”,’—r—..<:J.e.’J:i~es __.J.iIL
.1 ”'”dT”i:~~mo”””,.”, Low:voltage Data transfer electricalworks Aie’!eco’mm’u’nTcati’o’rl’
II.sy~t”rn~ . , Security and : I Leqend’:~~::~~::c:::;::~rn~ iI L –:-~ Principal activities of Cabnet Holdings Berhad mm~ systems !i.-.–.-.-.-.-.-‘-‘-‘-‘-‘-‘-‘-.-.-._-._._. _.-._.-.-.-‘-1 The examples above are not exhaustive “,\:·:\·;.x;;’},:,:o;.,;;,:~,~ ·,~c:;;,~x;,”,,~~..”~·’ ‘>··’·.iSS;~;:,;>’CJ:.U;’::i.;:;&:~i:’;,’;· ,;-:’X.I.j,,;;~’;;;,;:;,,;;~,.,:;,·;;·c;oYJI1;’Si.”iAX,.,,~,,;;::!.T;:’;J,A'” S.’:”s.~;”-·,J};V::.;’· ….·• .’;~’&-m~’J.,”O~{;;;.’,’lS!~’jJ:.~.:.:c;·.<_::.”‘t!!1′.\;=””;;·;;;·,;:i!-:SJS’:·(“‘::{0’:,W;Ic;….”‘:>;.'”–:.·;;;;’,’,.;..;;h::,..-;’j=~'<.’:0-~.’·;;,’i1~i3.W,):§$,:;,·.\·,,-;;;’-·;.,’i;mn);”‘X;<:;;J<t-:i’;:”,,–o’;’;’:;·.’~’J.’-i;;’;;;:!Js.-,; ..£·; :’-;{‘:’·”;””;'”‘;1.,-:t~&’iSi:~·:0.’·/:’·~’X’.;;;!.:·;’:I’J:;;’·~·{‘·–“·~”,X2;;;'”C;,;,-,;·,,,,,< __:~= 140
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Description of selected ELV systems, leT components and structured cabling Description ELV systems
1—————-..——. -­Security and surveillance systems

…._–_…._——–­I Access control systems Security systems are designed to detect intrusion or unauthorised entry into a bUilding and area, as well as personal protection against intruders. Surveillance systems  are  designed  to  monitor  behavior,  activities  or  other  changing  information typically by means of electronic equipment, s uch  as  closed-circuit  television  (“CCTV”)  cameras.  Security  systems  may  be  combined  with
surveillance systems to automatically record the activities of intruders, and may be integrated with access control systems for electronically locked doors.
——-_. –. .-‘—–­System that allows selective restriction of access to a place or resource through the authorisation of valid personnel.
Building automation solutions A combination of various building management systems and services to reduce energy consumption, lower operating costs, improve safety and reliability, and increase user comfort and productivity.1—.  —­ Building management solutions  Hardware  The  application of physical computers  and  telecommunication  equipment  to  ._.­ ..­ store, retrieve, transmit and alter data. -­ .­
The application of machine-readable instructions that direct physical computers and telecommunication equipment to perform specific operations. Services Software Components of services include telecommunication entailing fixed and mobile telephony services, Internet access, satellite and data communication services; computer services comprise hardware and software wholesaling, retailing and consulting, programming as well as repair and maintenance activities; publishing activities entail both traditional and online printing; motion picture, video and television programmes and information services activities such as data processing, hosting data, web portals that are considered as content activities. Infrastructure
A collection of physical and/or virtual resources that support the overall building management solution platform. Equipment / systems A computer-based system comprising telephony and computer hardware, software, databases and networks that collectively form a technology platform.
. _..­Structured cabling1————–­1—_.. …_–_.., ….-..—–­A computer-based system comprising telephony and computer hardware,I Voice software, databases and networks that collectively form a technology platform, and allows voice communication. A computer-based system comprising telephony and computer hardware, software, databases and networks that collectively form a technology platform, and allows data transfer. A computer-based system compnslng telephony and computer hardware, I software, databases and networks that collectively form a technology platform, and allows multimedia connection.

 

I The integration of telecommunications cabling and building management systems has led to the creation of “intelligent” or “smart” buildings where a common network and cabling infrastructure is established to accommodate voice and data as well as fire alarm; heating, ventilation, and air conditioning (“HVAC”); security and access control; and energy management systems. Systems integration also makes it possible to consolidate pathways and equipment spaces, allowing a single group to maintain all of these low-voltage systems. The evolving integration of building automation systems is similar to the merging of voice and data systems during the 1980s. Before then, voice and data systems were cabled separately. Data systems required many different cable types such as twinaxial, coaxial, and tWisted-pair cable; and did not use a structured approach with common cabling elements. In the recent decade, the use of a common telecommunications cabling infrastructure has been globally accepted as standard practice. According to traditional construction 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
practices, each bUilding automation system is designed and installed separately under various electrical and mechanical divisions of a specification. Each system typically uses many different cable types and, until recently, most of these systems have not used mainstream data protocols such as Ethernet to transmit and receive data. Although building automation systems and devices still use proprietary transmission schemes that require protocol conversion between systems and vendors, strong customer demand has driven the industry to adopt open protocols. These protocols, which are being developed to work with other standardised protocols, enable building automation systems to communicate over a variety of networks. In order to fast-track project delivery, some developers may opt to equip modern structures with traditionally designed systems that operate on proprietary networks for various building management systems, as well as separate telephony, data and multimedia networks. This has led to complex network management issues and the installation of multiple systems at exorbitant costs, but with limited functionality and automation. The integration of ELV systems is a solution that deviates from the traditional construction process which separately installs low voltage, voice and data systems and thus leads to the creation of multiple cabling systems and pathways. Integrated ELV systems support the installation of common cabling and pathways instead of separate individual systems, thus resulting in improved total system monitoring and management and significant cost reductions. The installation of common cabling and pathways requires planning of the containment systems at the early stages of the project so that optimum routes can be designed by experienced network architects, thereby reducing cable runs while maintaining performance standards. A fUlly integrated ELV system operates on a common platform for the purposes of collecting, exchanging and archiving data. An integrated ELV system facilitates a common web interface for monitoring display, archiving, reporting and controlling, thereby providing value added tenancy services such as online billing, building performance displays and maintenance requests. The integrated ELV system may include ELV systems such as fire detection and alarm, voice evacuation, voice and data communications, public address, access controls, intrusion detection, CCTV, audio-visual, cell phone and wireless distribution, as well as other auxiliary systems. The Institute of Electrical and Electronics Engineers is a technical organisation that publishes technical literature on electrical engineering, computer science and electronics, and developer of industry standards for telecommunications, information technology and power-generation products and services. Structured cabling designed according to the Institute of Electrical and Electronics Engineers standards supports the core internet protocol (“IP”) network and provides interconnectivity between such systems. ELV integration provides many benefits that result in minimising the total cost of ownership and maximising the return on investment of a bUilding. A single installation offers major advantages as it greatly simplifies procurement, project and site management and reduces the risks of delay. This results in savings on commissioning time and shorter overall system installation. It can also add to bottom line savings as the building can be occupied earlier, thus resulting in earlier inflow of revenue. The tangible benefits that a fully integrated software system offers building owners or facility managers is a total solution that delivers ease of operation, a high level of operator accountability and optimum control. This ensures a seamless system for responding to events quickly and effectively. Other components of building construction include civil and structural works as well as mechanical works. A key component of civil and structural works is foundation and geotechnical works. Foundation and geotechnical works pertain to the groundwork and foundation building based on a study of the geological structure and earth materials on the construction site and its influence on foundation and geotechnical works, and the study of ground-water regime and its influence on wall stability and integrity of the foundation and geotechnical works. Foundations are designed and constructed for structures of various sizes, including high-rise buildings, bridges, and medium to large commercial buildings. Shallow and deep foundations are built for above-ground structures depending on load bearing capacity, soil settlement and ground movement beneath the foundations. Retaining structures include earth-filled dams and retaining walls. Mechanical works are carried out by trade specialists that are involved in the design and/or installation of systems including HVAC. 4
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Construction Sector The construction sector is largely influenced by the nation’s economic development as the construction of buildings and infrastructure are essential for national development and progress. The construction sector contributed to 4.2% of Malaysia’s gross domestic production (“GOP”) in 2015. The construction sector, can be divided into four (4) property segments, namely the residential, commercial, industrial and infrastructure property segments, whereby: • The residential segment consists of properties intended for dwelling purposes, and include landed as well as non-landed or multi-storey buildings;
• The commercial segment consists of properties which are used for profit-driven business purposes and includes office buildings, warehouses, hotels and retail outlets;
• The industrial segment consists of buildings or structures where industrial activities are carried out, and includes factories and production plants; and
• The infrastructure segment refers to public assets which are vital to a country’s economic development, and are used for purposes such as transportation, utilities management and communication, recreation and community use. This includes airports, highways and dams.

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7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Segmentation of the construction sector in Malaysia a Construction sector

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a The examples above are not exhaustive b Mixed development is classified under the residential segment as typically, the construction of shop houses and shop offices is to complement the intended residential project Typically, activities in the construction sector consists of civil and structural works as well as mechanical and electrical works. Civil and structural works comprises bUilding and infrastructure works as well as foundation and geotechnical works while mechanical and electrical works involves the design and/or installation of heating, ventilation and air conditioning; lift and escalator systems; fire protection systems; gas piping systems; as well as high, medium, low and ELV electrical works. Cabnet Holdings Berhad is involved in the ELV and structured cabling industry and the ICT industry in Malaysia, which is the focus of this IMR report. The construction sector is the end user market for Cabnet Holdings Berhad’s solutions and services, where these solutions and services serve the residential, commercial, industrial and infrastructure segments. [The rest of this page is intentionally left blank]
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

2 ANALYSIS OF THE EXTRA Low VOLTAGE AND STRUCTURED CABLING INDUSTRY IN MALAYSIA Industry Performance, Outlook and Prospects Electrical services in Malaysia, measured in terms of value of awarded electrical wiring and fittings projects, ELV and structured cabling for residential, commercial, industrial and infrastructure development, increased from RM1.9 billion in 2006 to RM7.1 billion in 2014 at a compound annual growth rate (“CAGR”) of 17.9%. In 2015, electrical services dipped to RM4.6 billion in terms of value of projects awarded, mirroring the construction sector that was affected by the slowdown in demand in the property market. During the period between 2006 and 2015, electrical services for new development projects increased from RM1.7 billion to RM3.8 billion at a CAGR of 9.3%. New development projects formed approximately 90.8% of total electrical services in 2006 and gradually decreased to 81.6% in 2015. Nonetheless, new development projects, based on the value of awarded projects, continue to comprise a significant percentage of total electrical services. During the same period, other electrical services, comprising upgrading, expansion, maintenance, repairs and renovation projects, increased from RM173.6 million to RM854.9 million at a CAGR of 19.4%. The ELV and structured cabling industry in lVlalaysia is measured in terms of value of awarded projects for residential, commercial, industrial and infrastructure development. In Malaysia, ELV and structured cabling projects involve the design and/or installation and/or commissioning and/or repair and maintenance of structured cabling and ELV systems, and are classified under electrical services. Based on SMITH ZANDER’s research, the value of awarded ELV and structured cabling projects comprise approximately 20.0% of the value of awarded electrical services works. Based on this, ELV and structured cabling projects were valued at RM378.7 million in 2006 and increased to RM1.4 billion in 2014 at a CAGR of 18.0%. The value of awarded ELV and structured cabling projects subsequently dipped to RM926.8 million in 2015, in line with a decline in the construction sector in the same year. Nevertheless, SMITH ZAI\JDER projects the ELV and structured cabling works industry to recover and grow from RM926.8 million in 2015 to RM1.1 billion in 2018, based on awarded project value, at a CAGR of 5.9%. Growth in ELV and structured cabling is anticipated to be driven by recovery in construction activities as a result of private investments and Government policies to spur growth in the construction sector and socio­economic development. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)

ELV and structured cabling industry in Malaysia -value of awarded electrical services projects a
a Latest available as at 14 April 2017 Source: Gonstruction Industry Development Board (“GlOB’) Electrical services is specialised construction work that is performed during the erection or reconstruction of buildings or structures, and entails the design, installation, commissioning and maintenance of electrical wiring and fittings and ELV systems. The growth in electrical services and consequently ELV and structured cabling, correlate closely to the growth of residential, commercial, industrial and infrastructure construction activities, where residential, commercial, industrial and infrastructure property segments serve as end-users of electrical services. Between 2006 and 2014, the construction sector in Malaysia, as measured by the value of projects awarded, grew from RM60.9 billion to RM178.8 billion and recorded a CAGR of 14.4%. In 2015, the construction sector in Malaysia experienced a year-on-year dip of 21.9%, to an awarded project value of RM139.7 billion. Subsequently in 2016, the awarded construction project value was registered at RM125.0 billion. Residential construction activities registered a CAGR of 13.8%, increasing from RM16.6 billion in 2006 to RM52.8 billion in 2015 in terms of awarded project value. In 2016, the awarded value of residential construction projects dipped to RM29.2 billion. Between 2006 and 2016, residential construction activities registered  its  highest year-on-year growth of 35.0%  in 2012  arising from major developments such  as  Hampshire  Place,  The  Troika,  Brunsfield  Embassy View,  Gaya  Bangsar,  11  Mont’  Kiara,  Twins  @  Damansara Heights, Sunway Vivaldi and Damas Serviced Suites.
Commercial and industrial construction witnessed a growth rate of 11.3% between 2006 and 2015 in line with an increase in supply of commercial office space with the completion and launching of office towers such as KL Pavilion Office Tower, G-Tower, The Icon, One Mont Kiara, Petaling Jaya Exchange, Empire Subang and Menara Worldwide. Several hotels were also completed, contributing to commercial construction growth, and this includes the completion of Aloft Kuala Lumpur Sentral Hotel, WOLO Bukit Bintang Hotel, One @ Bukit Ceylon Hotel Suites in Klang Valley, Renaissance Hotel, Traders Hotel and Legoland Hotel in Johor, and Victory Annexe of E&O Hotel and Four Points by Sheraton in Penang. Several prime commercial developments, most notably the Tun Razak Exchange and Warisan Merdeka are currently being planned in the Klang Valley especially in areas close to the on-going Klang Valley Mass Rapid Transit CMRT”) project route. 8
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZAI’-TDER
The infrastructure development segment of the construction sector is typically reliant on public funding from the Government of Malaysia. In terms of awarded project value, this segment increased at a CAGR of 2.2% from RM22.2 billion in 2006 to RM29.0 billion in 2015. In 2016, the awarded value of infrastructure projects increased to RM57.5 billion. Infrastructure and social amenities construction activities are largely focused on projects identified under the Tenth Malaysia Plan (“10MP”) (2011 -2015), Eleventh Malaysia Plan (“11 MP”) (2016 -2020) and the Economic Transformation Programme (“ETP”) (2011 -2020), in which the Government of Malaysia was largely focused on seeing through several of the transportation-related infrastructure projects.
The construction sector in Malaysia is expected to recover over the long-term, as witnessed by several major infrastructure construction projects highlighted in the ETP, 11MP, economic corridors, Budget 2015 and Budget 2016, including the Klang Valley MRT System Line 2, the extension of the Light Rail Transit lines (“LRr), KL -Singapore High Speed Rail project, East Coast Rail Line, and the Penang Transport Master Plan. Furthermore, there are also several new and upcoming residential and commercial developments, including several prime commercial developments in the Klang Valley such as the development of three (3) Kuala Lumpur City Centre (“KLCC”) towers for additional office, hotel and retail space, Bukit Bintang Commercial Centre, KL118 Tower, redevelopment of Angkasapuri Complex to Media City, Project MX-1 and Tun Razak Exchange; the development of IKEA store, IKANO Shopping mall and mixed development of offices and residences, and Penang Premium Outlet in Penang; Genting Integrated Tourism Plan in Genting Highlands, Pahang; the Port Dickson Waterfront Development in Negeri Sembilan and the Residential North Project in Johor. Malaysia’s industrial segment continues to grow at a healthy pace spurred by strong levels of foreign and domestic investments. SMITH ZANDER expects that the construction sector will experience a decline in terms of awarded construction project values in the short­term, in line with the slower economic growth. Nevertheless, the construction sector expected to rebound in the long-term as economic conditions improve in the country.
The fall in awarded project values in 2015 and 2016 was largely due to economic slowdown in Malaysia as a result of the depreciating Ringgit against the United States Dollar and falling crude oil prices (USD50.75 per barrel and USD42.81 per barrel in 2015 and 2016 respectively compared to USD96.24 per barrel in 2014). These factors have adversely impacted the construction sector in Malaysia as there was a cutback in private and public expenditure on construction activities. Nevertheless, the construction sector in Malaysia has proven to be resilient in the past, having recovered from troughs that occured during the global financial crisis in 2008 and 2009, and thus the construction sector in Malaysia is expected to recover over the long term.
Moving forward, infrastructure and social amenities construction is expected to continue to be strongly driven by public expenditure. The 10MP identifies 52 high impact projects worth RM63.0 billion which include the Pahang-Selangor Raw Water Transfer Project with an estimated project value of RM9.0 billion, the LRT extension from Kelana Jaya to Putra Heights, Subang Jaya with a maximum contract value of RM7.0 billion and the construction of the new Low-Cost Carrier Terminal with a gross development value (“GDV”) of RM2.0 billion.
With the aim of further developing the country, the Government of Malaysia also announced future development plans under the ETP in January 2011. These plans include the construction of the Klang Valley MRT system, which is estimated to cost about RM55.0 billion and KL International Financial District Development which has a GDV of RM26.0 billion. Other plans under the ETP include the development of the Pengerang Independent Deepwater Petroleum Terminal and the Refinery and Petrochemical Integrated Development (“RAPID”) in Johor, with an estimated cost of over RM60.0 billion, as well as several power utilities plant developments in Pahang, Perak and Terengganu which have an estimated combined total project value of RM500.0 million.
The Government has further approved six (6) toll highways for Selangor, namely Kinrara -Damansara Expressway (“KIDEX”), East Klang Valley Expressway CEKVE”), Sungai Besi -Ulu Klang Expressway (“SUKE”), Damansara -Shah Alam Highway, Serdang Kinrara Putrajaya Expressway (“SKIP”) and West Coast Highway (“LPB”), which collectively will require an investment of RM20.5 billion.
9
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
200 178.8

l 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 _________-_c_om_m_e_rC_ia_1a_n_d_in_d_u_st_ri_al__B>”’_’_1R~e_s_id_e”nl”iac-l__lnfrastruclu_r_e_-_T_ol_a_1 ~ Value of construction projects awarded in Malaysia a, b a Figures may not add up due to rounding b Latest available as at 14 April 2017 Source: CIOB
Demand Conditions -Key Demand Drivers Greater emphasis on safety and security creates demand for electrical services and specifically ELV systems The incidence of crime around the world have influenced government spending on security measures and solutions globally. Video surveillance is increasingly becoming a method to meet the demand for greater levels of safety within the community. The decreasing equipment cost and advancement in the hardware systems and software application technologies have also spurred the adoption of video surveillance ELV systems as a crime prevention tool in private and public spaces. Video surveillance cameras are widely used to monitor, observe and analyse a person, a group, activities or even objects, and assist in deterring and detecting potential offenders and crimes, and aid police in rendering assistance effectively. The end-user customer segments for video surveillance is wide and varied, ranging from the Government sectors to retail, financial, educational and even industrial sectors. Each customer requires surveillance for different use, in turn involving different systems requirements and equipment according to the environment it operates in. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Application of selected ELV systems Customer segment Functional use Government Public safety and facilities, prisons and correctional facilities, military operations .-J ——-_.–~-~,~–_._—-­
Manufacturing facilities Communication infrastructure, utility plants, oil and gas facilities, mining areas 1——–..·….-..·..—–+-::-:-‘C’:””‘-:—c.•.-….–..———..Retail Shopping malls, business centres and shops, carpark basements Transportation Airports, train stations, ports, bus terminals Financial serv’–ic-es—–+–S-a-nk-s-,a’C;to-m-a-ti-c’tei-Ie-rm-achi-ne-s——….-..–..··..—…—–..-­—._—-_.._——–­
Education Schools, university campuses, carparks –:–:———.——1Accommodation Apartments, condominiums, hotels, carpark basements ……_-_…_——­
Offices Purpose-built offices, carpark basements 1-=——,——–j———————­Technology facilities Data centers L…… . .1-._….__.. . .. … . ….J A video surveillance system typically comprises a CCTV together with digital video recorders (“DVRs”). In recent years, technological advancement and product innovation have led to: • the conversion of CCTV cameras and digital products to IP cameras and networked or IP networked products;
• the adoption of network video recorders (“NVRs”) as opposed to full DVRs and moving towards IP-based;
• the use of smart and intelligent applications such as video content analytics software; and
• improvements in storage technology in terms of capacity and scalability throwgh the development of storage area networks.

The video surveillance system architecture today goes beyond a simple system of analogue cameras and CCTVs. Digitisation of images and transmission has opened the surveillance system to NVRs and IP systems on network, supported by a full range of hardware and software solutions such as digital and IP smart cameras, with pan tilt and zoom capabilities, time stamping, video analytics, to a range of transmission systems over wired and wireless options in network. While video surveillance has been used widely and in public areas as a crime prevention measure in the West since early 1980s and 1990s, the adoption of video surveillance in public spaces in Malaysia is still at an early phase. In Malaysia, CCTV was first implemented by the Kuala Lumpur City Hall (DBKL) in 2002 with the purpose of monitoring traffic in the city centre using black and white cameras connected with direct cables and leased lines. Subsequently in 2003, the Ministry of Housing and Local Government issued a directive requiring all public buildings to install CCTV cameras at the car park areas. A Safe City Programme was then initiated by the Government in 2004 that included the installation of CCTV cameras as part of the 23 measures to be taken, specifically under Strategy 2 of Target Hardening. 1 Therein, the number of CCTV systems implemented by the local authorities in Malaysia increased state-wide. The acquisition or leasing of surveillance ELV systems by local authorities is dependent upon funding provided by respective Government Ministries and also the cost of overall implementation. In Malaysia, there is a mixed or combination of approaches in the deployment and implementation of public video surveillance systems and services by the local authorities, Whereby some acquire the systems while others prefer a leasing approach, depending on which is more cost effective in the long run. As funding is dependent on the sum of monies awarded by the Ministry, the number of systems deployed is usually in phases. In Malaysia, the use of video surveillance in public spaces is poised to expand. The wider implementation plan by local authorities will encourage the overall growth of electrical services in Malaysia. 1 The strategy outlines guidelines for installation of police posts, crime prevention signages, safety mirrors and alarms, cleaning and management of unkempt areas, motorcycle locking facilities, lighting and also the installation of CCTV. 11
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Greater adoption of intelligent building automation systems and integrated building automation solutions generate demand for electrical services Rapid changes in ICT are dominating the way people conduct their business and have also influenced daily lifestyles such as attitudes, expectations and behaviours. The demand for ICT facilities in buildings and structures has also increased dramatically to accommodate such lifestyles. In response, intelligent buildings or smart buildings have become a popular trend as building owners attempt to accommodate their building design with modern lifestyle characteristics. In lVIalaysia, several intelligent buildings have been built over the years since the Multimedia Super Corridor (“MSC”) was introduced by the Government of Malaysia in 1996. Today, intelligent buildings are those that incorporate the best available concepts, materials, systems and technologies. Intelligent building automation systems and integrated building automated solutions have the ability to monitor and control various facilities within a building so as to offer its users or occupants effective security, improved productivity, human comfort, and efficient energy management. The main intelligent building automation subsystems include HVAC, lighting systems, electrical power, life and safety systems and access control. By integrating all factors in intelligent building systems, the performance requirements of building stakeholders can be achieved as well as exceeded. Thus, intelligent buildings, intelligent building automation systems and integrated building management solutions are sustainable and technologically aware, able to meet the needs of its occupants and businesses, and flexible and adaptable to deal with changes. Among the systems installed in most intelligent commercial buildings are: • HVAC to provide thermal comfort, humidity control and adequate ventilation;
• lighting systems to provide overall illumination for all tenants and adequate lighting for public areas;
• life safety systems to provide smoke and fire detection, control and fighting;
• security systems to provide controlling access and detecting unauthorised entry;
• people movers that include elevators, escalators, travellators and automatic doors; and
• electrical power for the supply and distribution of electrical energy.

Automatic operations in intelligent buildings is made possible by sensors and controllers that are integrated in various forms in intelligent building operating systems, and can be effectively used to: • optimise start-up and performance, and control/monitor systems; • reduce the risk of breakdown of building services;
• increase the interaction of mechanical subsystems within a building;
• prevent deterioration of the internal environment provided by building services;
• increase reliability of system and services; and
• minimise energy, time and operating costs.

Greater awareness of the benefits of intelligent buildings, intelligent building automation systems and integrated building automated solutions and its subsequent adoption will create greater demand for the delivery of electrical services as structured cabling and ELV systems are key components of intelligent building systems. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Greater demand for residential, commercial and industrial properties result in demand for electrical services and consequently, ELV systems The demand for electrical services, particularly that in new development projects, is dependent on construction activities undertaken to erect residential, commercial and industrial properties. Construction activities are largely economic-driven, whereby economic growth has the potential to contribute to increased disposable incomes among the population arising from higher employment and increased earnings for businesses and companies due to greater operating scale and wider market reach, consequently leading to increased demand for residential, commercial and industrial properties, consequently leading to higher demand for electrical services. Economic growth is a catalyst for development and growth in construction activities and demand for electrical services. Between 2006 and 2015, Malaysia’s wealth, as depicted by its real GOP” increased from R1V1573.9 billion to RM876.4 billion. Total property transaction value increased from RM47.0 billion to RM111.8 billion between 2006 and 2015, where the residential as well as commercial and industrial property segments registered CAGRs of 10.7% and 9.7% respectively. Between the period of 2006 and 2015, the residential property segment increased from RM29.4 billion to RM73.5 billion while the commercial and industrial property segment increased from RM11.5 billion to RM26.4 billion. The total value of property transactions was registered at RM49.7 billion for the period of January to June 2016, of which residential, commercial and industrial property transactions comprised RM32.7 billion, RM11.3 billion and RM5.6 billion respectively. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

Economic impact on property transactions in Malaysia a, b 1,000 180 C876.4900 160 ~ 800 140 ~ tJ)700 120.§’2 0 o ro600:0 100 ~ :;:;:
500 82.1 ~ e=­73.5 80 >,
t 0 o.. (I)400 0.CJ :260 0.rn (I) 4­300 00:: (I)35.6 31.8 40 :J200 23.8 27:6 27 ~ ;j> ••••••• ….. <Y •••• …… 26.4 rn ro • .. 20 ;§ >
100 1$;’••••.•• , •••••••• f.:.”J•••• , ••••••••• ,$………••….e.•..

• • •• 9.8 11.5 12.0 12.3 14.5 12.00 6.0 7.1 7.9 6.8 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 —Real GOP -,,-Total value of property transactions ‘ -.-Totalvalue ofresidentialpropertytransactions ….,..Totalvalue ofcommercialpropertytransactions I –Total value of industrial property transactions la Total value of property transactions was registered at RM49.7 billion for the period of January to June 2016, of which residential, commercial and industrial property transactions comprised RM32. 7 billion, RM11.3 billion and RM5.6 billion respectively b Latest available as at 14 April 2017 Source: Department of Statistics Malaysia, Ministry of Finance Malaysia, National Property Information Centre (“NAPIC’) Commercial property supply is expected to witness growth over the period of 2017 and 2018, thereby indicating growth opportunities for the ELV and structured cabling industry. Ongoing decentralisation of office developments, scarcity of land and plans to improve the public transportation system in Malaysia via the construction of the Klang Valley MRT System will be among the key factors that are expected to lead to a reduction in the share of office space in major city centres as new townships and business centres emerge outside these areas. Commercial retail space is expected to witness growth in the next three (3) to five (5) years as several mixed development projects that are expected to come onstream by 2017 have incorporated retail centres as key components. Mixed development projects refer to development projects that serve more than (1) use of purpose, such as mixed development projects that have residential and commercial property components to serve both residential and commercial purposes. From a geographical perspective, the property market in the Central region, and specifically Kuala Lumpur, is expected to be rejuvenated following the Government’s move to construct the Klang Valley MRT System which will have structural impact on Kuala Lumpur’s property market. The high multiplier impact from the RM43.0 billion investment in the Klang Valley MRT project to improve the city rail network for better connectivity and integration, as well as sustained demand will drive opportunities in high density mixed developments and new suburban townships. Among the major upcoming commercial and mixed development projects that have been announced are the Tun Razak Exchange, MATRADE, redevelopment of Rubber Research Institute Malaysia (“RRIM”) Sungai Buloh, Bandar Malaysia Sungai Besi and Kampung Baru. 14
115 16.4. 16.6 16.4 $ “”,,..”‘ -41.. “. I!l 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Selected upcoming major property developments in the Central region of Malaysia
• a_.
… Estimated gross Type of development … ~” development . .. . value (RM bil ion) .. . 26.0 I 2028 (Phase 1 by 2017)

Source: 10MP, ETP, Budget 2015
Specific to the state of Johor, the Comprehensive Development Plan (“COP”) (2006 -2025) was launched for Iskandar Malaysia, encompassing the districts of Johor Bahru, Kulai (formerly known as Kulaijaya), Pontian and Kota Tinggi. Over the period of 2011 and 2015, Iskandar Malaysia intends to achieve the creation of 55,730 employment opportunities. This target is in line with the commencement of several catalyst projects under various flagship development zones to spur Johor’s development. Nine (9) major economic clusters have been identified to spearhead the growth of Iskandar Malaysia and these clusters are electrical and electronics, petrochemicals and oleochemicals, food and agro-processing, logistics and related services, tourism, health services, educational services, financial services and creative industries. The implementation of these economic plans and targeted strategies under the respective plans, including infrastructure and transportation improvement, have great impact on socio-economic developments in Johor, and the anticipated business opportunities arising from these economic plans will have positive impact on commercial property supply and demand in Johor, and consequently the demand for electrical services including ELV systems. Growth prospects of end-user sectors drive demand for electrical services including ELV systems Malaysia’s economy registered a 4.2% growth in 2016 supported by the continued expansion of domestic demand, which was primarily driven by the private sector. Private consumption year-on-year growth moderated to 6.1 % in 2016 as households adjusted their spending due to the increasing cost of living, arising from fiscal reform measures such as the implementation of Goods and Services Tax (GST) and administrative price adjustments, and the depreciation of the Ringgit against the United States Dollar. Private investment registered a growth of 4.4% in 2016. The services sector remains the driver of growth, contributing 54_2% to GOP in 2016. Given its importance, the Government formulated the Services Sector Blueprint 2014 to further develop the sector and strengthen its competitiveness_ In this respect, the Services Sector Blueprint 2014 focuses on four (4) areas, namely internationalisation which includes liberalisation and services exports; providing efficient tax and non-tax incentives; developing human capital; and implementing regulatory reform in the services sector With the 15
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
implementation of the Services Sector Blueprint 2014, the services sector is targeted to achieve approximately 60.0% share of GOP by 2020, on par with that of developed economies. A positive growth is also expected for the outlook for the manufacturing sector led by the export-oriented industries, which are expected to record higher growth in line with the improvement in external demand. The continued implementation of various construction projects in Malaysia will support growth in the construction-related cluster. The construction sector is expected to witness recovery over the longer term, as the completion of several large civil engineering projects will more than offset the progress in existing projects in the transport, utility, and oil and gas sectors. The positive growth recorded in Malaysia’s economy and the manufacturing sector would lead to an increase in the demand for commercial and industrial properties, and sUbsequently, the demand for electrical services and the installation of mUltiple ELV systems. The ETP (2011 -2020) was launched in 2010 with a goal to promote Malaysia into an inclusive and sustainable high-income country by the year 2020. To achieve this, rapid urbanisation is required, and subsequently, the demand for supporting infrastructure is expected to increase in tandem to support economic growth targets. Economic growth of end-user sectors in Malaysia
Services I 54.2 5.1 5.6 -.——-t””———-.————–­~;~~~;;i~~arryi~ ._ ~:~t . 2,’,Om .1. ~;mrm…. :~ …. Agriculture I 8.1 1.2 I .._——_..__
._._—-_._———–~ –~~~~——~-~~—~~—-.<–­flConstruction l 4.5 ==i==~2 I 7.4 _Real GOP 100.0 5.0 _-l 4.~__ T Figures may not necessarily add up due to rounding and exclusion of import duties component p Preliminary Source: Ministry of Finance Malaysia Availability of investments drive overall economic growth, and subsequently, demand for electrical services Malaysia witnessed two (2)-way capital flows, where foreign inflows were strong as a result of resilient growth prospects. In 2016, Malaysia attracted RM207.9 billion in approved direct investments in mostly high quality private investments, bearing testament to the resilience of Malaysia’s economy amid external challenges, the plunge in demand and prices for hydrocarbons and other commodities, as well as the weakening Ringgit against the United States Dollar. Of the total investments approved in 2016, domestic investments accounted for RM148. 9 billion or 71.6%, while foreign direct investments CFOI”) accounted for the remaining RM59.0 billion or 28.4%. Between 2006 and 2016, FOI inflows into Malaysia increased from RM26.2 billion to RM59.0 billion at a CAGR of 8.5%. The ETP has a defined structure for the manufacturing and services sectors to contribute to Malaysia’s continued growth through high impact projects and business opportunities across the economy. Malaysia’s investment performance in 2015 supports the nation’s goal in fulfilling the objectives of the ETP where it attracted a total of RM186.7 billion worth of investments, with RM113.8 billion under ETP projects (60.9% of total investments in 2015) and the remaining RM72.9 billion under non-ETP related projects. The services sector received investments of RM141.2 billion or 67.9% of total investments in 2016 from 4,199 projects, of which domestic investments accounted for RM112.9 billion (80.0%) and foreign investments accounted for RM28.3 billion (20.0%). The real estate segment was the main contributor of approved investments worth RM64.1 billion, followed by the global establishment segment (RM14.1 billlion), financial services segment (RM13.7 billion), utilities (RM10.6 billion) and distributive trade segment (RM9.7 billion). The global establishment segment refers to establishments set up by global companies in Malaysia 16
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
comprising among others, representative offices, regional offices, operational headquarters, global operation hubs, regional distribution centres, international procurement centres, treasury management centres and principal hubs. The distributive trade segment comprises among other, wholesale and retail trade; hypermarkets/supermarkets, department stores and direct selling; franchising; and the marketing and distribution of petroleum. The manufacturing sector attracted RM58.5 billion of investments in the same period from 733 projects, of which RM27.4 billion was foreign investments compared to RM31.1 billion worth of domestic investments. In 2016, the primary sector received RM8.2 billion of investments where foreign investments comprised RM3.3 billion and domestic investments comprised the remaining RM4.9 billion. The mining segment, plantation and commodities segment and agriculture segment received RM7.6 billion, RMO.5 billion and RMO.1 billion respectively in 2016. As the nation strives to position itself as an ideal destination for investments into high value-added, high technology, knowledge-intensive and innovation-based industries, businesses and companies will need to grow in terms of current business practices and infrastructure in order to expand in scale and reach. This signifies positively for the commercial and industrial property segments, and the infrastructure and social amenities development segments in Malaysia, where increased investments in business facilities are expected to witness growth resulting from increased total investments. Growth in commercial, industrial as well as infrastructure development indicate potential growth opportunities for electrical services, where multiple ELV systems and corresponding structured cabling infrastructure will be required by these developments Government expenditure to drive infrastructure development generates demand for construction services, and consequently electrical services In addition to the 1OMP and ETP, the Government of Malaysia in the Budget 2015 announced the launch of the 11 MP commencing May 2015, and the formulation of the Malaysian National Development Strategy (“Myl’JDS”). MyNDS will be the vehicle for planning and preparation of programmes and projects under 11 MP, with an emphasis on using limited resources optimally, with focus on high impact projects and programmes at low cost as well as efficient and rapid implementation. Budget 2016 was announced in the second half of 2015 and marked the start of the final five (5) years of Malaysia’s progression towards achieving high-income advanced economy status by 2020. In October 2015, the Government of Malaysia announced the Budget 2016, whereby the Government will take measures to ensure that the country will achieve sustainable economic growth. Under Budget 2016, the Government announced several infrastructure projects that will result in greater demand for construction services. Infrastructure projects announced under Budget 2016 in Malaysia Committed
. .. investment (RM billion) ImprOVing
Implementation of the JalanTun Razak Traffic Dispersal prOjec~t. …. 0.9 infrastructu re through a strategic public and private partnership ConstrUCtion of lVlukah Airport, Sarawak as well as the upgrading —.—-0.04 of airports in Kuantan and Kota Bharu . .__ __.__. . _ Implementation of the Mass Rapid Transit II project from Sungai 28.0 Buloh -Serdang -Putr~j§’la spanning 52 kilometres (“k~__I ‘Implementation of the LRT 3 project from Bandar Utama, 10.0 Damansara.-Johan Setia, Klang spanning 36km__ . . _Im_plem_e.~tation of the. Ra~_id_T_ransit Bus prOject ~~——–~.5 Implementation of the Kota Kinabalu Rapid Transit Bus project -1~ __—-‘-R~~~dprojects which will resUitTriafourfol~.~e in —–~ 17
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

Project

Internet speed from five (5) megabytes per second to 20 megabytes per second, National Fibre Backbone Infrastructure,
-lJi9.h-speed broadbanj.c.and undersea .c::able SXste!:!l–:–I National broadcasting digitilisation project to enhance audio visual quality and provide value-add to television content as well as interactive data transactions .. ._-_.._—–_…..-:——::–. Building and upgrading 700 km of rural roads nationwide Upgrading of roads in Federal Land Development Authority settlements ._..:-::–:-::–+Implementation of the Rural Electrification Project covering 10,000 houses Implementation of the Rural Water Supply Project to benefit 3,000 houses Implementation of the Social Amenities Programme for drainage .~ects to JIlJ!lfLate floods __. .. . .__+__ Continuation of the Rural Business Challenge and Sustainable Rural rogrammes Majlis Amanah Rakyat Bus Transport Project for operating buses on uneconomical routes in rural areas–,…..–“..-,….,
Sarawak Pan-Borneo Highway spanning 1,090 km .
Construction of the 706 km highway from Sindumin to Tawau Implementation of infrastructure projects and soft loan programmes for residents in Chinese New Villages for land premium payment and r.epairi’29…bouses Development of Integrated Villages inclUding those in Sungai Siput, Perak which involves the construction of connecting roads,
.-J…..L..:…;roc…v_is.”-i0c…n_o….;f_el~.£tricityand treated water . 0.3 ._–+_.._._-_._-­1.4 .—:–:—:—:—–+———=-=-1 0.7 0.9 0.6 0.06 007 0.07 16.1 -~—-+——::-:–1 12.8 0.04 ..–:-::c:–.-,-J!——–­0.08 -::–_-‘-~..,…….-_:_=_-_-~

Intensifying development in Sabah and Sarawak Increasing quality of life for Bottom 40% (“B40”) households ‘-­Source: Ministry of Finance Malaysia
In January 2016, the Government announced a revision to the Budget 2016 following the global economic slowdown, and the continued decline in global crude oil prices. Despite a revenue shortfall resulting from lower crude oil prices, the Government will take measures to ensure that economic growth remains on a strong trajectory. Specific to the construction sector, the Government is committed to ensuring that the developmental expenditure allocated under Budget 2016 will be spent on projects and programmes that are rakyat-centric, as well as with high mUltiplier effect and low import content. Physical projects that will be prioritised include construction of affordable houses, hospitals, schools, roads and public transport as well as security. However, non-physical projects that are still under stUdy will be rescheduled, and thus, is expected to result in a RM5.0 billion reduction in cash flow commitments. In May 2015, the Government tabled the 11 MP which outlined the nation’s development expenditure until 2020. The 11 MP is significant as it is the final five (5)-year phase before Vision 2020 is achieved, and it provides a crucial platform to ensure that Malaysia transitions into an advanced economy and inclusive nation. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CaNTO)
Initiatives announced under 11MP, specific to the construction sector in Malaysia Focus area .. .. Revisiting regional economic corridor priorities and industry-focus growth for better Accelerating regional The Border Economic Transformation Programme will enhance outcomes from geographic balance regional economic development by bringing inclusive development and prosperity to the border regions of Malaysia. A range of large-scale economic growth projects and local income-generating opportunities will be developed including the development of Lembah Chuping and Perlis Inland Port in Perlis, rubber-based downstream processing in Rubber City in Kedah, the construction of Plaza IMT-GT which is a retail plaza in Bukit Bunga, as well as the redevelopment of Kampung Laut in Tumpat, Kelantan. Improving connectivity and mobility Transportation networks will be improved to enhance connectivity and mobility in regional economic corridors. This includes the construction and upgrading of roads and highways such as the Pan Borneo Highway to link Sarawak Corridor of Renewable Energy (“SCORE”) and Sabah Development Corridor (“SOC”); Central Spine Road and Kota Bharu -Kuala Krai Highway to increase connectivity in East Coast Economic Region (“ECER”). The completion of Mukah Airport is expected to accelerate development in Mukah and the surrounding areas within SCORE, with Mukah to be developed as a smart city as well as one of the growth nodes in SCORE.
Encouraging widespread adoption of green buildings criteria sustainable
Adopting the
New government buildings will adopt green features and designs, and use green consumption and building materials as per the Skim Penarafan Hijau Jabatan Kerja Raya Malaysia. production concept Existing government buildings will be gradually retrofitted. Industry players will also be encouraged to obtain green certification for private buildings such as GreenPASS and the Green Building Index.
Prioritising regional connectivity for new highways need-based transport
Building an integrated
To achieve a balanced economic development, highway development will be system focused outside the Klang Valley and other urban areas. The 11 MP will therefore focus on rural and rural-urban connectivity. The Pan Borneo Highway will promote better connectivity in Sabah and Sarawak. Further development of the Central Spine Road, Kota Bharu -Kuala Krai Highway, and the East Coast Expressway will improve connectivity in Peninsular Malaysia and catalyse growth in the east coast region. The completion of the West Coast Expressway in 2019 will also provide better access to the west coast of Perak and Selangor. Increasing public transport modal share in cities Improving urban public transport remains critical for Malaysia as 75% of its population will be living in cities by 2020. The Klang Valley MRT system will become operational during the 11 MP. The Klang Valley MRT Line 1 will traverse 51 km between Sungai Buloh and Kajang, through 31 stations serving about 1.2 million people with a daily expected ridership of 400,000. Construction on the Klang Valley MRT Line 2 will also start in 2016 and is estimated to become operational by 2022. Additionally, construction on a LRT Line 3 connecting Bandar Utama to Klang, running over 36 km and serving 25 stations will start in 2016 with expected completion in 2020. Deploying roads and public transport to increase rural and rural-urban connectivity Rural roads linking the main road networks will continue to be given focus. These roads provide access to basic social amenities such as health, education, and other public services. Rural roads will also create economic opportunities for the residents and further alleviate poverty among the rural households.
The Government will continue to enhance connectivity and safety of rural air _____________.J services by improving short take-off and landing airstrips (“STOL ports”). The–_. —_.–.
19
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Description construction of a new airport in Mukah will be completed in 2018 and the relocation 1 of Lawas STOL port in Sarawak to a suitable site will be carried out. Upgrading air navigation system and airport infrastructure A new Kuala Lumpur Air Traffic Control Centre will be built at Kuala Lumpur International Airport (“KLlA”) to replace the National Control Centre at Subang, Selangor to improve aircraft movement capacity. In addition, the Communication, Navigation and Surveillance as well as the Air Traffic Management systems will be upgraded to improve efficiency of air navigation services. The Langkawi International Airport, Kedah and the Sultan Ismail Petra Airport, KeJantan will be upgraded to cater for the expected increase in passengers.
Supporting the development of Pengerang Integrated Petroleum Complex sustainable energy use Encouraging (“PIPC”) to support growth
The RAPID within PIPC is a major development that will add 300,000 barrels per day of oil refining capacity in Malaysia during the 11MP. The facility will be able to produce EURO 41\/1 and EURO 5 grade petrol, in addition to 7.7 metric tonnes per annum of various grades of specialised products such as synthetic rubber and high grade polymer by 2020. In addition, the complex will have a 1,220 megawatt (“MW’) co-generation power plant of which 620 MW will be utilised by RAPID and the remaining 600 MW exported to the grid. The Government will provide support to construct essential infrastructure such as roads, drainage, and utilities for this development. Another investment in PIPC will be secured by the Johor Petroleum Development Corporation during the 11 MP to complement existing investments by DIALOG-Vopak and PETRONAS.
Enhancing knowledge content construction
Transforming The strategies to enhance knowledge content in the construction industry include increasing the quality of human capital, accelerating capacity and capability building of small and medium enterprises (“SMEs”) and Bumiputera contractors, and reducing the mismatch between labour demand and supply. Key initiatives include fostering greater collaboration between CIDB, the respective professional boards, and training institutions to develop industry-relevant training modules. A structured skilled trade apprenticeship programme for specific courses such as safety supervisors, crane operators, and rotary drill operators will also be introduced to produce a highly skilled workforce. SME capabilities will be enhanced, particularly Bumiputera contractors, with the support of key partners and the establishment of productivity centres of excellence for sharing of best practices. Regular manpower planning will be undertaken to reduce the mismatch between labour demand and supply. The proportion of skilled foreign labour will be increased by streamlining entry requirements and introducing a new levy system. Driving productivity The strategies to increase productivity in the construction sector will focus on increasing technology adoption and modernisation of construction methods as well as reducing dependency on low-skilled labour. The labour productivity of the sector is targeted to increase by about 1.6 times, from RM39, 116 per worker in 2015 to RM61,939 per worker by 2020. A number of initiatives will be introduced to drive productivity, including expediting the adoption of the industrial building systems by the industry through the revision of the public procurement policy and Uniform Building By-Laws and improving existing regulations to ease construction-related business processes. This effort, which started with Kuala Lumpur City Hall, will be expanded to other local authorities. The use of ICT will be enhanced by providing a common platform to use building information modeling (“BIM”) on a pay-per-use basis. Fostering sustainable practices In line with the growing need for green construction practices, strategies will be c…..__._.. . •..~ared t~’:”.~ds increasing th~sustainability of built infrastructure. This will inciude J
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

Description inculcating green practices in the construction value chain and developing legislation that supports sustainable construction activities. Three (3) initiatives to foster environmental sustainability in the sector are: mandating compliance to sustainable waste management practices through the environment management system (“EMS”) ISO 14001 certification; enhancing the current rating systems for bUildings and developing new standards for infrastructure to promote sustainability; and enhancing the awareness and accountability of health, safety and environment (“HSE”), where HSE good practices will be made obligatory. The minimum level of construction workers’ amenities will be raised in the code of practice and further mandated within standard contracts Increasing the internationalisation of construction firms The strategies to increase the internationalisation of firms will focus on bUilding capability and scale of firms by encouraging high performing SMEs to forge partnerships with larger corporations or form multidisciplinary consortia when bidding for international projects. The pUblic procurement policy will be reviewed to facilitate the formation of such consortia. In addition, firms will be encouraged to leverage free trade agreements and mutual recognition agreements, and provide feedback to the Government on challenges faced when venturing abroad to enable issues to be addressed at government-to-government level. The Services Export Fund (“SEF”), which covers activities such as tendering, negotiating, and conducting feasibility studies for international projects as well as export promotion activities, will assist construction firms to secure opportunities abroad. Sourc·e: Economic Planning Unit Malaysia
In October 2016, the Government of Malaysia announced the BUdget 2017, whereby the Government will take measures to ensure that the country will achieve sustainable economic growth. Upon the conclusion of the BUdget 2017, the Government will launch the 2050 National Transformation which will be branded as TN50. TN50 will chart the nation’s development and will be spearheaded by the Ministry of Youth and
Sports. Under Budget 2017, the Government announced several social amenities and infrastructure projects that will result in greater demand for construction services.
Construction projects announced under BUdget 2017 in Malaysia, specific to social amenities and infrastructu re
..
Measure Project Implementation of Installation of 97,000 street lights and 3,000 light emitting diode
Not available lights at crossroadsrakyat-centric projects /-=——-_._—­and programmes Building and upgrading 616 km of village roads and bridges 1.2
-.. …..,….-t———-.
Maintenance of state roads under the Malaysian Road Records 4.6 Information System I…..,….–·–=–‘~–..,——c—::-::-::-::–~—:—-­Increase of clean water supply to 5,200 houses, including the 0.732 upgrade of FELDA water supply system –~. _…_—-_. . ….._­~ —_.~——-~
Establishment of a Water Supply Fund to address water supply 0.5 issues throughout Malaysia I ProVisio-n of electricity ·supply to·To,oOO hous;5iflfurai·-a-reas –~=.-. 0.46 Implem”t,Uop of People-Friepdly Pm;ect” which ;pcl”de,t 0.8 upgrading and building surau, small bridges, drainages, community IL ~~n::;~~tso~:~~::69fIO~~_ mitiga~On plans na~ion~ide·—–~~==~.495j 21
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
. …
Sports development -,—-_..-..—_.­Improve healthcare  -Increase food production with competitive prices f——­Flood mitigation  Stimulate private investment  f–. Increase exports  Primary and secondary education Public transport …J Welfare of Orang Asli Security and public order
Construction of Football Academy Phase II in Gambang, Pahang f–..———–.._._-_._.—-_._-_.-.._—-­Construction and upgrading of sports facilities including States Youth and Sports Complex, 1Malaysia Futsal Complex and Community Sports Complex 1-…_———_.._—-..–. BUilding and upgrading new hospitals and clinic in Perlis, Kuching, Mukah, Jempol, Muar and Johor Bahru _.
Upgrading hospital facilities f-.——.—..-.. -…_–_._–_. _..­Allocation for the operations of 340 1Malaysia clinics, 11 1Malaysia mobile clinics, 959 health clinics and more than 1,800 existing rural clinics .._—_.­
Development of agricultural infrastructure such as drainage and irrigation, farm roads and marketing of agricultural products Upgrading drainage system and construction of two (2) Overhead Motorcycle Ramps at the Federal Highway in Selangor Implementation of major infrastructure projects Which includes the upgrade of Jalan Lok Kawi -Pengalat -Papar, Sabah; upgrade of Jalan Kampung Keruak -Gua lVIusang -Kuala Berang; construction of batang Lupar Bridge, Sri Aman; and the reconstruction of Sandakan Power Station Project Infrastructure and socioeconomic development of the five (5) economic corridors, namely Iskandar Malaysia, Northern Corridor Economic Region (“NCER”), ECER, SOC and SCORE Upgrading estate roads Reconstruction of 120 destitute schools, comprising 60 in Peninsular Malaysia, 30 in Sabah and 30 in Sarawak using industrial building systems as well as upgrade of 1,800 science laboratories Completion of the construction of 227 primary and secondary schools throughout Malaysia, including eight (8) new schools Allocation to Special Fund for Improvement and Maintenance of Schools1———_.._-_.-1———–_..-.————…. … Implementation of the new East Coast Rail Line (600 km) project connecting Klang Valley to the East Coast .._—–_._._–.­”-‘
Restoration of the East Coast railway line along Gua Musang -Tumpat Implementation of treated water supply projects at 42 Orang Asli villages, entrepreneurship and economic development programmes, village resettlement, among others at Sungai Ruli, Cameron Highlands I—-.–.-.—–…-L:..—–……—.—.—–….—–…….——-.—–‘-‘-‘–‘0.114I Building and upgrading roads under the Jiwa Murni Programme in
the interiors of Sarawak

 

—_._—–_._—_._.__.”. .~~——-­SMITH ZANDER
Committed investment (RM billion)
0.05 ._-_._._._—_.. 0.122 _.._—_.._. Not available ._—-­0.536 -“-­4.5 1.3 0.029 2.1 0.02 0.57 0,478 0.6 ..—–_..­55.0 ..-….­0.1 0.222 -Not avail._. able
. ——.–“”:””C
Source: Ministry of Fmance Malaysia
The spillover effect from the implementation of these infrastructure projects will benefit the ELV and structured cabling industry, creating opportunities for the installation of electrical wiring, electrical equipment and ELV systems. I
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Key Supply Conditions Availability of skilled technical professionals to deliver electrical services Skilled technical professionals are involved in the design and/or installation and/or commissioning and/or repair and maintenance of structured cabling and ELV systems that comprise, among others, structured cabling, telecommunications systems, security and surveillance systems and access control systems. Skilled personnel are also required for the design phase of electrical wiring, electrical equipment and ELV systems, as an integrated approach to design, installation and maintenance can enhance their inherent relationship and prevent mistakes from the lack of understanding and communication; facilitate practical functions such as the consideration of maintenance in the early design stage; and fulfil its design intention in the maintenance process by taking the right procedures for the problems encountered. The performance of bUildings is largely dependent on the quality of their design and the operation and maintenance of their internal systems. Conventionally, these two (2) phases of building development take place independently of each other. However, each individual process involved in building development, from building design, construction, to the operation and maintenance, is related and dependent on each other, and the degrees of their interaction significantly influences the end result. An experienced and skilled professional will be able to propose a design that is effective, efficient, easily installed with minimal maintenance needs, and fulfills the functional and intrinsic needs of property stakeholders. Rapid technological changes in product development, network and systems integration create new products and systems and/or enhanced features for existing products and systems Rapid technological changes and evolution on multiple fronts have enhanced the ELV and structured cabling industry in that it has led to the development of new products and systems and/or enhanced features for existing products and systems. In the safety and surveillance ELV system, CCTV technology has developed over the last three (3) decades as a result of changing end-user demands as well as evolving technologies. End-user demands for CCTV include the need for enhanced image quality, simplified installation and maintenance, secure and reliable technology, longer retention of recorded video, reduction in costs, size and scalability, remote monitoring capabilities, integration with other systems, as well as greater integrated system intelligence. To meet these requirements, video surveillance has experienced a number of technology shifts, from analog CCTV surveillance to fUlly digital, network-based video surveillance systems. The video surveillance system architecture today goes beyond a simple system of analogue cameras and CCTVs. Digitisation of images and transmission has opened the surveillance system to digital video recorders, NVRs and IP systems on network, supported by a full range of hardware and software solutions such as digital, IP and smart cameras, with pan, tilt and zoom capabilities, time stamping, video analytics, to a range of transmission systems over wired and wireless options in network. Moving forward, surveillance systems are expected to further improve over the coming years especially in the areas of product development, network, investments and systems integration as a result of technological advancement. Product/Service Substitution The delivery of electrical services pertains to the design and/or installation and/or commissioning and/or repair and maintenance of structured cabling and ELV systems that comprise, among others, structured cabling, telecommunications systems, security and surveillance systems and access control systems. Thus, there is no comparable substitute for electrical services. However, industry players differentiate themselves through specialisation in the type of electrical service (i.e. structured cabling and ELV systems), price points (luxury, high cost, medium cost and low cost properties), service specialisation (i.e. design versus installation versus repair and maintenance) and regional presence. 23
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Many industry players are able to straddle mUltiple segments, in that they have wide service specialisations across mUltiple electrical services and price points in the different regions and/or states in Malaysia. Reliance and Vulnerability to Imports The delivery of electrical services in Malaysia is not dependent on imports as electrical services is a service that is primarily provided by local ELV and structured cabling industry players, with the exception of selected large projects where foreign companies may be involved. Nevertheless, SMITH ZANDER notes that industry players may be dependent on the imports of electrical components and parts for the installation of ELV systems.
Competitive Landscape The ELV and structured cabling industry in Malaysia is competitive owing to the large pool of industry players that compete for public and private residential, commercial and industrial, and infrastructure electrical services projects in the country. The ELV and structured cabling industry comprises industry players that are • distributors who are also installers of electrical wiring and fittings, electrical equipment, ELV systems, components and parts comprising industry players who are brand and/or product distributors that also secure contracts to install ELV systems and structured cabling;
• installers of electrical wiring, electrical equipment and ELV systems comprising industry players that secure contracts to install ELV systems and structured cabling; and
• system integrators who deploy ELV systems.

The nature of the ELV and structured cabling industry in Malaysia is dynamic, whereby end customers have the option to award contracts for the supply of hardware and provision of services and solutions directly to distributors, or engage installers and/or system integrators: In the instance where end customers award contracts directly to distributors, brand owners and/or product distributors deliver hardware, services and solutions directly to building developers, building contractors and/or building owners; In the instance where end customers award contracts to installers and/or system integrators, services and solution providers such as Cabnet Holdings Berhad, deliver hardware, services and solutions to building developers, building contractors and/or building owners. These installers and/or system integrators procure the necessary hardware for ELV and structured cabling from brand owners and/or product distributors. In these instances, installers and/or system integrators act as solution providers to building developers, building contractors and/or building owners, where they are engaged to deliver services inclUding design, supply, installation, testing, commissioning and end user training for ELV systems and structure cabling. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Dynamics of the ELV and structured cabling industry in Malaysia Installers and system
Dlslllbulors End customersIntegrators Award contract for the wpply or hardware and provision or,.,olu(ioIlS
I Brand owner~ and/or product ( C.m.’….,, ·· >,mo. Jmm..-……__.__. \ 1,·”mmmm”” ..nm1. “1 -~Istnbutors(ror brands such I Solulionproviders (Uldustry l Building developers J._ ..-.­_ as Bosch and Schneider) Defiverhamv,’are ; players suctl as Cabnet 1\ Deliver solutions conlractors and/or own’ers +-! I Eleclrt~ L–HOldingsBertmd) ‘-‘J ! I -~ ===r-II ! Procure hardware ~ !L._._._._._._._._._._._. __._._._._._. ._._._._._._._._._._._._._._._._._._._._._._._._._,_._._._._._._._._._._._._._. ._._._._.J ~ I Award contrBct for tile supply of hardwBre Bnd prov;s(on of solutions 1L-.~o_ -O~_””‘:_ ~ .~. -._.~._. ._. —~.~. •• –~’ ~ ._.-·-·-_·-·;;~fiv~~h~~~;~~”d~~;~~~s_._.-._._0__.-.–_.-._._.–._-_.–._._-_. .__0_._._.-._.._.­>—_ In 2015, electrical services in Malaysia, measured by the total value of projects awarded, was registered at RM4.6 billion, where ELV and structured cabling projects were valued at RM926.8 million. During this same period, Cabnet Holdings Berhad was awarded projects amounting to RM29.08 million and thereby garnered a market share of 3.1 % in Malaysia based on the total value of ELV and structured cabling projects awarded. There are over 100 industry players in Malaysia’s ELV and structured cabling industry that comprise industry players that are distributors who are also installers of electrical wiring and fittings, electrical equipment, ELV systems, components and parts; installers of electrical Wiring, electrical equipment and ELV systems; and system integrators who deploy ELV systems. Nevertheless, there are barriers to entry in large private and public projects, where key determining criteria for the appointment of ELV and structured cabling contractors include historical track record, financial strength and ownership of the Certification of Registration issued by the CIDB. The Certification of Registration issued by the CIDB can be classified into seven (7) grades with each grade having different tendering capacity. Cabnet Holdings Berhad’s subsidiares, namely Cabnet Systems (M) Sdn Bhd and Cabnet Systems (Penang) Sdn Bhd are registered as Grade 7 and Grade 3 contractor companies respectively with the CIDB. As at 31 December 2016, there were a total of 6,868 Grade 7 registered contractors in Malaysia, comprising contractors registered under the categories of building construction civil engineering as well as mechanical and electrical respectively. Based on publicly available information, industry players in Malaysia’s ELV and structured cabling industry include, but are not limited to Cabnet Holdings Berhad, Advantis Network & Systems Sdn Bhd, AF.S. Engineering (Malaysia) Sdn Bhd, Bond M&E Sdn Bhd, Cyberlan Integral Sdn Bhd, EV-Dynamic Sdn Bhd, VADS Lyfe Sdn Bhd (formerly known as GTC Global Sdn Bhd), GSF Solutions Sdn Bhd, KUB Telekomunikasi Sdn Bhd, MCC Technique Sdn Bhd, Methods Alliance Engineering Sdn Bhd, Metronic Global Berhad, SAS. Eitel Sdn Bhd, SKLA Engineering Sdn Bhd and System Communication Engineering Sdn Bhd. [The rest of this page is intentionally left blank]
[company No. 1121987-0 II 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
ELV and structured cabling industry in Malaysia -profiles of selected identified industry players 164 1,650,306 “I’ 2015 I’I I III ‘, ~I 31 March 3,460,610 -670,841 !I -676,841 2016 I I II’ ,.

 

Company No. 1121987-0 II 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
and commissioning; maintenance and
support rmptech M&E I Construction of I 30 June -258,197 -246,949High voltage and low 2016electrical installation voltage electrical
ISdn Bhd I II I i j I I I I

i Blitecon Engineering Sdn
i BhdI I Selangor, G6 ,Business as Sarawak, Icontractors and Perak I Isubcontractors in I construction of house and buildings Ii 165 L§i~pany No. 1121987-0 II
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
CCTV and multiple  access television  Bond M&E Sdn Bhd  Kuala Lumpur, IJohor, \ Singapore  G7  , Designing, supervision and installation of  services Mechanical engineering, high voltage and ELV  : 1  30 June 2016  I  87,834,308 I I  12’027’697  1  9,013,308  electrical and  electrical  mechanical works  engineering,  electrical services,  air conditioning and mechanical ventilation systems  I I  and mechanical  Brite Lite  Kuala Lumpur  G7  Electrical  works, fire safety, control and troubleshooting Electrical  31  I 3,867,117  -149,636  I I  I I -165,387l  Electrical Engineering Sdn Bhd  engineering and installation contract works  [ engineering works and telecommunication  December 2015  I  I I i  systems for industrial 1 and residential  I  buildings and  .  security systems  Cabnet Holdings Berhad a  Johor, Kuala Lumpur,  G3 and G7  Building management  Building management  I 31IDecember  I  50’844,014  1  6,747,241  I  6,410,838  Penang  solutions comprising  solutions comprising  2016  structured cabling and ELV systems for buildings and other  structured cabling and ELV systems for I buildings and other  !  I !  I

-,,~.~”””>}”,”, ;·’-·…;.·,;·”s,:~””’-,;~,:,.\~\~J:,.;_,,\.:’;.’,Si:;.·,!:’Ii,,’ ‘i::~-,;;’·~~:>,;;~·:,~;;mi:JXiS:”’;;;”i,:_”,”…;.;c:,>::;i:!i:~11>;’:’: :;’~:’.:;C:i”<~:,’1i,\/I:!~”fJ·.:JJS,’~T:r:.,V,,”,,” :’·;:;:;·.>:””~’I;·Ii;o)}’1O”‘i,,,·r”‘;;;\·,K:I>1’iJ;’!’i;t”Sj”~”‘:·)l!’·~·;~'”··,:l),};”‘..,,:;””, … ··:’t:,’X’Yi,,=’ES.·:02i.~;·)-~i:.,,”:i:::,:£;I”‘$,:/;’;.-s;,~..,,.’:>i., CJ.~””;.).l~’.,:”‘1<:l7l7\001~·:·:’.;;i>:’;,~ ..·~{,:J:i:t::.”i.r;;,s),.’:1:i:.,.,=· ~’I.-~,)·N’:j~;’:c….”0S,.l::.’~,’:iii:,YS·,:;,:,)”x:,. ;Vi:;;j.’.i’i/~;_’:c ‘!’.’:”O’·0I,.’.’:””X’,<;””‘2>:.””’:”;’·’ 166
~mpany No, 1121987-D II 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
services  Cyberlan  Selangor  G7  Engaged in the  Integral Sdn  supply and  Bhd  installation of  surveillance system,  integrated security  system and the  I provIsion ot  engineering services  EV-Dynamic  I Selangor  G7  Electrical  Sdn Bhd  engineering and  I  installation contract  works
I, —-l-Fulloop Sdn Bhd ISelangor  I I  G7  1 Supplies of material  and devices in  i  I  electricity control including instrument,  mechanical and  piping installation in  I  I  petrochemical, petroleum and other
167 services  I I I  I 99,485,435 39,464,182 1 I  I ! 8,708,480 6,515,210 J__ 451,0821 235,683 I I I I I  leT structured cabling systems, ICT and telecommunication II’ infrastructure design and construction, enterprise and small business products supplies and networking services, security surveillance systems (CCTY) cabling and installation services Intelligent transport system solutions, security solutions, railway solutions, engineering solutions Electrical power distribution systems, ‘ LV and ELV electrical services, explosion protected equipment and systems, control and instrumentation  31 December 2015 I I I 31 December 2015 31 October 2015  29

pany No. 1121987-0 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)

supply and project management servicesI Selangor I G4 Information
I IJana Atur Sdn technology works and information technology consultancy IBhd I I KUB Selangor G7 Assembling, Telekomunikasi commissioning and Sdn Bhd maintenance of I information tech nology and telecommunication equipment Letrik P.J. Union I Selangor G7 IElectrical contractor Sdn Bhd I I and investment in properties leT infrastructure consultation, network design and implementation, maintenance and technical support, training Telecommunications and network installation, testing and commissioning; maintenance Supply, installation, testing and commissioning ofIhigh tension and low tension power systems, electrical equipment, light fittings, cable laying, street lighting, telephone works, sound systems, air conditioning works, II  31 January 2015  I  I 11,062,403 I I  l 51,120 i I  I  31 December 2015  31,532,000 I I 1  I 8,157,000 I i  I 31 December 2015  48,929,219  i, -318,430 I I  I  i
I 10,486 i I

 

6,900,000~ I I I -387,2581 I

 

_J I ·,’s”,”,,”;;:;;’-,·, .’~” :’;Yi.”,,;·’m:r,w;;””·.·i_-·.’~\”~ ~Si~·:;;.;W3fl”f.”K;;..:_·;r.. “:”-;),;i-,”‘-“;’~’~'”,”~O-~’:’·~’S”-_;~!)”~X”t·;··.”;:’ ‘.;”;;;>·,”ii’.’-“~”-“”’J::0·”,””:.r.’.’;’;)-‘;~;;H:;’i;i;;:0\’~;o;i:~·’ .’N:i’.~~;il”)Y”‘;;J:.,,:;;x,:,;;<>,.:~;;’?ii¥::!>.”B1;}~·>. ,~”,,’-S;’~~’;;H,;’!=~;”·””;’:;;:~>A’iJ'”Cj).’:i:;~-.-:”·.’-;;,;~:’::;’N}(r>”·..,;r;.’M”;;;’,”i~’·'”iStWiS!..’ii:i;;’,N;):,1;;;…\:~ ….n,,”~””ii.,~·::.\:; -.::-i.:·:G.-‘:·r..”‘)J.’i..V””Sii:;(&a<:;i–‘·-‘.~i;.;;);~&ioii·””) ‘i1t”,-‘.;;::i;:’;;\Si””.~.;i”;;”~’:’\·”””:i;.’!l·)”,”,;’!J,;’l:..S;C;;,’ 168 r~=pany No. 11219 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

I
I Mechanical and ISdn Bhd Iand distributi;n of electrical contracting, i electrical switch mechanical and boards and electncal service and
_ 1,656,347 December 2012 31 I electronic products maintenance, ELV systems, LV I i I Ii i switchboard I! II I ~~~ 31 6,532,344 137,131 62,664 Alliance Sabah and technology, audio Methods IKuala Lumpur, ‘ G5 I Trading in electrical Telecommunications October Engineering Sdn I’ telecommunication and visual
2015 Bhd equipment and the technology, security provision of related technology, engineering and broadcast electronic contract technology, IT
I services Selangor, G7 Investment holding Integration of 31 36,335,423 3,503,162 4,060,678 -I”I Metronic Global Berhad b Penang, bUilding December Johor, management
2015 Sarawak, systems, integration Putrajaya, of security People’s management
! IRepublic of systems, industrial ” China, India I automation, ICT . Isupport systems, ELV systems
I fILSKLA~hor, Sabah -I 31 I 36,335,4231 3,503,162 I 3,260,741 Ii G3 Electrical and Supply and 31 ·;;PX;”,:<Y,:M’;;· _’::’c-‘;”,-;” ,’\’>””‘i>:.W:;”‘J.·::,..:,1(“~~’;””‘~’J’V~,\;i·’ r’;”,;·”,~,.:,,;.·.’:;’;;, ~~’~Y:&’~’,~,:.’:;;’S:,,!:’ “);’;.f(~:,n’-,~i:(; .. “‘i;”‘·.’:;«;’;;;,’~K;;,,,:,,~’; ; ‘;”;-‘•.'”””;’).;’):;,’.””.”-“,,o;’C”i,·;, 1’··;’,”·;,;,?;·;”W·i~’~:·;;~”,:j.{“‘i:;’K?’;””””~~:’;·:·;’:’\ ‘J.’,\l’J[,’;;'”-~i:i~;~;·~;;,·”,:,;·;;;”,;(:l::>:’J.’:i”~i’!_’JZ;’JiX~’iJ’iih~’:;”·:”;;·~-,~;,;m.’ii;;’\(:;;;,’·;.’0..’>’;’-‘;·,;”,,,, ‘1:0:i:’;\)’1-.;:;”,’·:-‘ 169 ~ Company No. 1121987-D II 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
I 30 June 11,160,185 1,445,513 i Communication contractor for ELV systems, ISystem Johor G5 IDealers and Security systems. 2015 ,Engineering Sdn telecommunication integrated audio Bhd and electrical visual systems, equipment lighting and II draperies

r’JA5SLYfe Sdn Kuala Lumpur G7 Trading, leasing and CCTV and 31 50,392,308 -18,034,9971 -17,980,606 I Bhd (formerly installing cellular and surveillance December I Iknown as GTC telecommunication systems, building 2015 I’ Global Sdn Bhd) equipment and management ‘1 trading in related systems, network , i products accessories and broadband I
-46,066,556 I .;,’:”,T;:;””’i:;C;);;;”:;:G~’;·” ;.1′-“”~·”~:o·C·~;”‘~:,;’:.’::S;i’ ;;g;,.;;;.,y ,’i”‘;;;’,tc; ••W::;;ii:;·;\”;”iii;.’in”>’i,·;.:~,,·,:;,:;;·:ce;·d”‘;:’I:”M~””:t’~’;~’,’Sij)’,~:’i'” ”::;·H~~;”k’~0.i”.J;:;X”\’;”’~.;~1\-”’iiX!i!3.1.’i£>’::.;ti’ii.~~.r,;;;:’i;,-f,m:;J””,”F·”·;;,·~;;:,”$’k:1:;;J”!iJ:i.~;;’?~’~:;;,~”,-‘ii.it;.$.;;i’liiJ:k’ ;’;~’·;·”;;;”·.l=~~’i!ii:t_iC;.~W~=l”””’C:~”‘:;·,,’llil::F”’=m{;,·.,;,.’:~·,~’.~'”‘1′:>’.>’;;’;,,,,,”‘;;;)\l’~~:~J:i~=:”‘J,;2.1~’)I;..’,,”‘··””·’;’;.”i.W;~:’f,-;,:’:”,:;·”,-·.·’;;”;:,,”lo~’U.””·;:;b:;;;:·;,;; ;’;;o.i:>~””‘;:;:”.””””~).J.,”..:;.,”,;:l 170 Company No. 1121987-0 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)
a The G3 and G7 CIOB construction registrations for Cabnet Holdings Berhad are held under its wholly-owned subsidiaries Cabnet Systems (M) Sdn Bhd (G7) and Cabnet Systems (Penang) Sdn Bhd (G3) respectively b The G7 CIOB construction registration for Metronic Global Berhad is held under its wholly-owned subsidiary Metronic Engineering Sdn Bhd c The G7 CIOB construction registrations for YFG Berhad are held under its wholly-owned subsidiaries YFG Engineering Sdn Bhd (G7) and YFG Troika Sdn Bhd (G7) respectively d The revenue, profit before tax and profit after tax of YFG Berhad in the financial year ended 30 September 20 15 is for a 15-month period i. e. from 1 July 2014 to 30 September 2015 Latest available as at 14 April 2017 Source: CIOB, Companies Commission of Malaysia, Cabnet Holdings Berhad, Metronic Global Berhad, YFG Berhad, Company websites ··:{d,’1′.’~”:,A:’)’~’·:·i(~~’iW ;’:(“,)c··.:::,”g;i!iii;;,:i’X’~”‘;-;’·”::’_;>~·”:’.v;;x:;’:;;”’·;:'”,’;~’1y’;’i;’}#’\~’\:;;(;:’;::;”‘.;·:;1~”{\\1;'”!:;CJ.1W”)·:””’:;.\.·NS>:,’.\;W””~’,;,.,.-,~~~:;;:;;:~;J;i,W;’.:(i-“S.,,”;Ii’·:Si£:'(;):i;:..~·;’;’j:i.J:.··’J;ZiS”””’· .1~1;:!i.ii.\li;;’;’:’;.’W’\)”i’;;:;’:!J;i~~””W!i.f;;w”,::~,;),’,””<~J.:l’:·~)l’i”;.).j/W: “‘;d..,;;””:,,-:·::.·,,;c.;,,,;:'<;iJ::”‘:.:A’;;;J;s.;;~’Ji;”‘:”.”’;’5.’iNiKij-:>!;;” ~W~iK’:””1′;Z;’!H.C.::;’£.::;’;l;’~””;’.~””i..·’:;’iJ,1:;I;;,.:iXGitf”,,;iiIJtli.i.\.”J{;..’;;’:=~.’J:i::;;’;;”if¥.(= c.’~·:’-“;’~·:-!S:.;$X!zJ.”..’,.~aiii.”””’;L’J;·~~?~;,,<~;””;:”’::;;i’;”;;L”~~’ 171 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZANDER Relevant Laws and Regulations The relevant laws and regulations pertaining to the delivery of electrical services in new development projects relates closely to the laws and regulations that govern construction activities in Malaysia, which include, but are not limited to, the following: Construction Industry Development Board Act 1994 (also known as Act 520) The CIOB was established under the Construction Industry Development Board Act 1994 to promote, stimulate, regulate and standardise the construction industry, where specifically CIOB is granted power to accredit and register contractors and to cancel, suspend or reinstate the registration of any registered contractor. Under the Construction Industry Development Board Act 1994, no person is allowed to carry out and complete any construction works unless he is registered with the CIOB and holds a valid certification license issued by the CIOB. A penalty not exceeding RM50,OOO shall be imposed on persons carrying out construction works without being registered by the CI DB. Persons that are carrying out construction works for the purpose of bUilding a residence for his own use or who employs less than three (3) workers is exempt from registration with the CIOB. Persons/individuals, sole proprietors, partnerships, private limited companies, public limited companies and/or cooperatives must comply to and fulfil criteria prior to registration with CIOB. The Certification of Registration issued by the CIOB is valid for a minimum period of one (1) year and a maximum term not exceeding three (3) years, unless cancelled, suspended or revoked earlier by the CIOB. There are three (3) categories of registrations, namely building construction, civil engineering construction and mechanical and electrical. The scope of registration can be further classified into seven (7) grades with each grade having different tendering capacity. CIDB construction registration criteria in Malaysia Paid-up …. .G d Tendering capitall net .Category .. ra e capacity capital worth .. (RM)
g  I’  . Course certificate in  Civil  20  50  IRM200,000  I  construction-related fields! experience  engineering construction,  ~-.—.—-r–.–­G2 Not exceeding i 25,000 RM500000 I ,  • Course certificate in . constructlon~related  building t t” cons ruc Ion,J mechanical  I -­–­. G3 Not exceeding  fields! expenence and electrical ‘—-….—–r—.——-.­I 50,000 I • Course certificate in I  RM1,OOO,OOO __………,.,-.  I  -J  construction-related fields! experience  I I  G4  Not exceedln9i  150,000  \. One (1) diploma  1  RM3,000,000  !’  ,  holder in  I  construction-related  I  I  fields! degree holder  G5Note;Ceed;og~-250~OOo-I. ~¥:;c:~:::c~’-_ 1 __ RM50000~c_I_ …. l~~~g:~i~:tedJ  ———700~ __ _________L I_  _  , I
34 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)
…  . .. …  .. . . .  ..  ..  Category  a  •  ~ ..  •  ..  construction-related  fields/ degree holder  with minimum five  I l,_L-.G6 Not exceeding RM10,000,000  500,000  (5) years of experience in construction works • One (1) degree holder in  1-­1,000  construction-related  fields and one (1)  diploma holder in  construction-related  fields/ degree  holder, where one  (1) must possess  minimum three (3)  years of experience  in construction  LG7  No limit  750,000  works • One (1) degree  holder in  construction-related  fields and one (1)  diploma holder in  I  construction-related  fields/ degree holder  where both must  possess minimum  five (5) years of  experience in  construction works;  or  • Two (2) degree  holders in  construction-related  fields, where one (1)  I  must possess  minimum five (5)  I  I 1__ _.  .  I  ….  years of experieo:ceeJ in construction works–‘._____  1–___  ….J  Source’ Construction Industry Development Board Act 1994
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D) SMITH ZANDER List of specialisations for contractor registration under CIDB construction registration criteria in Malaysia . . . Description~,.
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZANDER
Category Specialisation Description CE25 Rock blasting works—-_._-_._.._–_._-_._—_.—–­CE26 Sculptured structures —_.._———-_..,..——–;-­CE27 Heat insulation/refractory works -~—“~——-_.~—,~———-~————-_._-­CE28 Special cast system _.._—_._—-.._._._—~._-~—,——-~ …~—_._—-.­CE29 Scaffolding installation ~”.._.~ .~ ._~.~.~_._w_·~·__· .• ·_~ ·_· .~ …..~~__.__._ ..__. ._.. . CE30 Soil stabilisation, subterranean drainage——–.._—–_._—-­CE31 Telecommunications civil engineering works ——-_._–_._———jCE32 Civil engineering maintenance works ——–~–_.._——–_.._—-~._——-­CE33 Drilling for underground water——_.-._—–_.._———-._———_._—-­CE34 Pre-cast concrete installation work—_._.._–_._.._———\ CE35 Concrete test .__ _——–_. . -_ –._._–_._ _-_.._..-_._—_.._—-__. CE36 Earthworks ~-…._—-_._.._.~—_.-….-.-._-_..~.–_._–_. __….._.._——–_. _._…._…•._…_.~_._–_ …_-_..__._———_._._–­CE37 Power station funnel work _.. -.—-­CE38 Se~~age sy~tem maintenance jCE39 Water supply system maintenance -~——-_… …. ——————_..” ..__…_——–­CE40 Excavation ~ _____-.0.-~_. ~~,, CE41 Breeding pond construction –+-::-:c::-:——–.IMeCh,n;o” ,nd M01 Air-conditioning system–_ _—-_ _—_—-_._——_._-_._..-._I electrical M02 “_ -“”-irepre,e,!;o,,.nd protecti0rl._~stem __ M03 Lifts and escalators————_..__.._—_._._–­M04 Building automation system——–_. _._-_._-_M05 System for workshop, plant, quarry etc—-…_-_…_._–­M06 Medical equipment M07 Kitchen appliances M08 Heat restoration system—–..—-.–.——.—–.—-.-­M09 Mechanical based compression and generation _._—~..~…_~~—~-~.. M1 Coolant for power generationM11 Construction and special treatmentM12 Special plant._–­M13 Drill maintenance

 

-~t~::: —:=f~!:::~f~,::~~”‘~:~~~~ca’eq”;pme’t ­—-_.._ .._–_ _._—_._._-_—-_ _–_M17 Laundry equipment -_._———_. ._-_._———._—–­M18 Hot water system ._-,,–,,-…..——-_..~M19 Plant equipment installation-.-..­M20 General mechanical maintenance E01 ~–­—–_._—–_._—_._-_._-_.­E02 Monitoring and security system,-_……._._~_.,., …._-.-._-_…._–,—–.–_..__.•._…..—….._-~~_._.’.-.-._-, ….-..~—. …­~_——_._.~_._._—~_._ ….E03 Building automation system—-_._._.­E04 ..__ 1 LOw….’lOltag~~rl.sta~lat:~rl. __._. . 1_.~05 I High voltage install,~.!L0..rl .__… ~ Special lighting system ….._ .._.__ E07 Internal telecommunications system .~~~~ I E09 ~ Various special equipment I E10 —–.—-. I Special contro(panei——–·-··—–­

~~i==~~=~—-:::f~~~(~~2i~:i~~;;:~”y::=-“—-~—-·-1 .,·_.§1~~-·_ -~·=-1~;;~pu_t~~ 6~I0~r~.~~~.bl.~ ~=~~-._=~~=~===~~-=====-==J Source: Construction Industry Development Board Act 1994

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D) The Government had implemented the Sistem Satu Pendaftaran Kontraktor CSSPK”) with immediate effect from 15 October 2012. SSPK is a method that combines the registration procedures of CIDB and Construction Services Centre CPKK”). Under the new system, all contractor licences issued by PKK in relation to participation in tenders called by the Malaysian government authorities, statutory bodies, regulatory authorities or an entity that is otherwise regarded to be in the public sector are cancelled and replaced with Siji! Pero!ehan Kerja Kerajaan CSPKK”) issued by the CIDB. Nevertheless, the issuance of Siji! Taraf Bumiputera for the identification of Bumiputera status has remained under the control and supervision of PKK. The scope of registration for SPKK can be further classified into two (2) categories, namely civil engineering, building or mechanical and electrical with six (6) grades for each category. Each grade has different tendering capacity. The Construction Industry Payment and Adjudication Act 2012 The Construction Industry Payment and AdjUdication Act 2012 was enacted to facilitate regular and timely payment, provide a mechanism for speedy dispute resolution through adjudication, prOVide remedies for the recovery of payment in the construction industry, and prOVide for connected and incidental matters. The Construction Industry Payment and Adjudication Act 2012 is applicable to all written construction contracts relating to construction works carried out wholly or partly in Malaysia, including construction contracts entered into by the Government. The Construction Industry Payment and Adjudication Act 2012 does not apply to construction contracts entered into by persons for construction works in respect of buildings less than four (4) storeys high and which is wholly intended for his occupation. Employment Act 1955 The Employment Act 1955 and its regulations stipulate the benefits and entitlements that employees are entitled to, and which all employers are required to comply with. These include the need to ensure that the benefits and entitlements of employees are fulfilled in terms of their wages, hours of work, rest days, and sick and annual leaves. The Employment (Restriction) Act 1968 also states that an employer is required to obtain a permit to employ legal foreign workers under contracts of services, and ensure their welfare and rights are fulfilled in terms of their wages, hours of work, rest days, and sick and annual leaves. The Ministry of Human Resources is responsible for monitoring and ensuring that companies are in compliance with the employment laws. [The rest of this page is intentionally left blank]
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D) 3 OVERVIEW OF THE INFORMATION AND COMMUNICATION TECHNOLOGY INDUSTRY IN MALAYSIA Industry Performance, Outlook and Prospects In Malaysia, the ICT industry is a high performing industry that contributes to enhancing overall national productivity, where it has evolved beyond technological tools to become a socio-economic enabler and key driver of business. The ICT industry is able to improve the efficiency and effectiveness of product and/or service delivery, and the extensive features and characteristics of ICT are continually impacting the way individuals work, play and learn. The development of ICT services in Malaysia has been promoted by MSC Malaysia, the country’s national ICT initiative, under the banner of Malaysia Digital Economy Corporation CMDEC”, formerly known as Multimedia Development Corporation Sdn Bhd). The main focus areas for ICT services include application software, mobility embedded software and hardware, shared services and outsourcing, creative multimedia, internet-based business with research as well as development incubators established by institutes of higher learning. The ICT industry in Malaysia, comprising telecommunication services and computer services, has witnessed positive growth historically. Telecommunication services refers to fixed and mobile telephony services, internet access, satellite and data communication services. Computer services comprise hardware and software wholesaling, retailing and consulting, programming as well as repair and maintenance activities. The ICT industry in Malaysia, measured by value added services for telecommunication services and computer services, increased from RM22.4 billion in 2006 to RM60.2 billion in 2015 at a CAGR of 11.6%. Telecommunications services comprised 68.8% of ICT services in 2015, and registered a CAGR of 8.8% having increased from RI\II19.3 billion in 2006 to RM41.4 billion in 2015. Computer services comprised the remaining 31.2% of ICT services in 2015, and witnessed a CAGR of 22.2% between the period of 2006 and 2015. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
ICT industry in Malaysia -value added services for ICT a 70 CAGR ICT services : 11.6% 60.2Telecommunication services : 8.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
l’liiilTelecommunication services -Computer services -ICT services a Latest available as at 14 April 2017 Source: National leT Association of Malaysia Since the introduction of the internet in the early 1990s, Malaysia has continuously promoted the deployment of ICT as a major development thrust in achieving a knowledge-based economy. Malaysia’s New Economic Model that was announced in 2010 identified ICT as a strategy to alleviate the nation from the middle income trap. ICT investments in Malaysia are largely targeted at sources of new growth areas such as hybrid of wired and wireless telecommunications, multimedia content development, packaged software, software and hardware consultancy as a service, exports and imports of ICT services, e-commerce, mobile and online banking, e-government and outsourcing. On the technology front, the country has also witnessed growth in technological advancements pertaining to nanotechnology, micro-electro-mechanical systems, semantic technology, wireless communication, grid-computing, biometrics and biotechnology. SMITH ZANDER believes that Malaysia will experience four (4) major trends that will change the manner in which business and companies operate, and consequently contribute to economic growth. These factors are: big data analytics -big data analytics are implemented in numerous industries to improve customer service by incorporating insights and predictions from the analysis of massive volumes of data. This can contribute to improved firm profitability through better risk analysis and/or data supported decision making processes; m cloud computing -cloud computing is a fast growing technology segment which enables firms to structure, organise and store large volumes of data with minimal investments in hardware and software tools. More importantly, employees can remain connected and complete work tasks through the usage of smartphones and tablets regardless of location and proximity to the office; mobile device usage -the adoption of smartphones and tablets increases mobility and allows the flexibility of completing tasks away from the office; and 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
• social media -social media, when used productively, can be a powerful tool for customer engagement, relationship bUilding, networking, information sharing, and advertising and promotional as well as branding activities. The future of the ICT industry is promising on the back of on-going capital intensive economic transformation programmes and mega projects that have been stimulating domestic demand for ICT services, including the MRT project in Klang Valley; Petronas RAPID project in Pengerang, Johor; Tun Razak Exchange in Kuala Lumpur, River of Life in Klang Valley, Bandar Malaysia at Sungai Besi, Kuala Lumpur, as well as the regional economic corridors comprising Iskandar Malaysia, Northern Corridor Economic Region (“NCER”), ECER, SDC and SCORE. Demand Conditions -Key Demand Drivers Growth in the number of companies and businesses continues to create demand for ICT services The end-user market for office automation systems and equipment are business and companies registered and operating in Malaysia. According to latest available data from the Companies Commission of Malaysia, a total of 6.0 million businesses and 1.2 million companies were registered in Malaysia as at the end of 2015. Total businesses increased by 6.9% in end-2015 compared to the 3.3 million registered businesses in end-2006 while total companies increased by 4.9% in end-2015 compared to the 0.8 million registered companies in end-2006. The growth in businesses and companies has been a significant driver that directly impacts the ICT services industry and will continue to greatly influence the future growth of this industry. Factors that lend to the growth in businesses and companies include supporting Government plans, policies and incentives, and the increase in total investments. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Growth in businesses and companies in Malaysia a ~ber of businesses and companies, Malaysia 7,000,000 6,000,000
en ill’c euEt 5,000,000 o (j E’ ~ 4,000,000 ill en en ill ,~ 3,000,000 ::J ..a ro
0l()~ 2,000,000 Nl()
0o!Xl l()v Nl()N N­…..a)to r­1,000,000 vl() •Ol Ol!Xlr­.. r-o 2006 2007 2008 2009 2010 2011 III Businesses 1’1 Companies Growth in businesses and companies, Malaysia l()N….. to to Ol v N v r-: “<f M­(,0 ………. …..00 .. ….. …:…….

 

2012  2013  2014  2015  M  o  N  a)  v  2012  2013  2014  ~~201~  I I
400,000 350,000
en 300,000 c o ~ Ui 250,000 ‘0, ~ -g 200,000 >e 0. g-150,000 ~ ill Z 100,000 r-M M (,O_ N M ….. -ri v o v50,000 2006 2007 N N
M !Xl oM N ‘<t­(,0 to ………. .. v v.:v 2008 2009 2010 2011 III Businesses ~J Companies a Latest available as at 14 April 2017 Source: Companies Commission of Malaysia 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)

SMITH ZANDER Availability of investments drive growth in new companies and businesses Malaysia witnessed two (2)-way capital flows, where foreign inflows were strong as a result of resilient growth prospects. In 2016, Malaysia attracted RM207.9 billion in approved direct investments in mostly high quality private investments, bearing testament to the resilience of Malaysia’s economy amid external challenges, the plunge in demand and prices for hydrocarbons and other commodities, as well as the weakening Ringgit against the United States Dollar. Of the total investments approved in 2016, domestic investments accounted for RM148.9 billion or 71.6%, while FDI accounted for the remaining RM59.0 billion or 28.4%. The ETP has a defined structure for the manufacturing and services sectors to contribute to Malaysia’s continued growth through high impact projects and business opportunities across the economy. Malaysia’s investment performance in 2015 supports the nation’s goal in fulfilling the objectives of the ETP where it attracted a total of RM186. 7 billion worth of investments, with RM 113. 8 billion under ETP projects (60.9% of total investments in 2015) and the remaining RM72.9 billion under non-ETP related projects. The services sector received investments of RM141.2 billion or 67.9% of total investments in 2016 from 4,199 projects, of which domestic investments accounted for RM 112.9 billion (80.0%) and foreign investments accounted for RM18.3 billion (20.0%). The real estate segment was the main contributor of approved investments worth RM64.1 billion, followed by the global establishment segment (RM14.1 bill lion), financial services segment (RM13.7 billion), utilities (RM10.6 billion) and distributive trade segment (RM9.7 billion). The manufacturing sector attracted RM58.5 billion of investments in the same period from 733 projects, of which RM27.4 billion was foreign investments compared to RM31.1 billion worth of domestic investments. In 2016, the primary sector received RM8.2 billion of investments where foreign investments comprised RM3.3 billion and domestic investments comprised the remaining RM4.9 billion. The mining segment, plantation and commodities segment and agriculture segment received RM7.6 billion, RMO.5 billion and RMO.1 billion respectively in 2016. As the nation strives to position itself as an ideal destination for investments into high value-added, high technology, knowledge-intensive and innovation-based industries, businesses and companies will need to transform in terms of current business practices and infrastructure in order to expand in scale and reach. This signifies positively for the leT services industry in Malaysia, where investments in telecommunications, computer services and information services are expected to witness growth. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Total investments and FDI inflows into Malaysia 250 200 c ~ 150 :0
:2a::  (f)  ~  100  E  ill  ~  50  N cD N  m ..; _N  N ai N  ……  -.0  o  WI;]
M ,…: M
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 II Total investments iii FDI Source: Department of Statistics Malaysia Supporting Government plans, policies and incentives drive overall economic growth The ETP (2011 -2020) was launched in 2010 with a goal to promote Malaysia into an inclusive and sustainable high-income country by the year 2020. Through the ETP, Malaysia will focus on developing a large and thriving services sector to supplement the nation’s historical strengths in oil and gas, agriculture and manufacturing; a balanced economy with significant contributions from private consumption and investment as well as from Government spending and exports; and productivity levels similar to those of other leading Asian economies through developing an economy that is more heavily driven by skills, innovation and knowledge. The transformation of Malaysia’s economy will require improvements in private investments and investments in human capital. The Government targets to achieve a 6.0% growth rate in private investments and enhance investments in human capital to support an economy based on high-skilled labour, knowledge and innovation. The ETP further identifies 12 drivers of economic growth of focus, namely Greater Kuala Lumpur/Klang Valley; oil, gas and energy; financial services; wholesale and retail; palm oil; tourism; electronics and electrical; business services; communications content and infrastructure; education; agriculture; and healthcare, each with identified high impact projects that have potential to contribute to gross national income and employment. The ETP’s transformation of Malaysia’s economy will be led by the private sector, where 92.0% of over RM1.4 trillion investments will be funded by the private sector. FDI inflows are expected to account for RM358.0 billion, or 25.6% of private investments. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZANDER
The ETP presents opportunities for companies and businesses in Malaysia as it targets to grow a number of new national and regional champions by 2020 that will drive long-term growth in areas including financial services, business services and healthcare services. SMEs are expected to playa more significant role across the economy, where in education, agriculture, electronics and electrical and palm oil sectors, SME participation will be actively encouraged through the provision of financial support and better access to research and technologies as well as from improvements to infrastructure. The Government also introduced the Limited Liability Partnership Act to the public in 2011 as an alternative option for new businesses. The Limited Liability Partnership Act helps to promote entrepreneurship among the younger generation in Malaysia and protects the rights of entrepreneurs. In May 2015, the Government tabled the 11 MP (2016 -2020) which outlined the nation’s development expenditure until 2020. The development of the 11 MP was guided by MyNOS which focuses on rapidly delivering high impact on both the capital and people economies at low cost to the Government. The capital economy focuses on GOP growth, big businesses, large investment projects, and financial markets, while the people economy focuses on with what matters most to the people, businesses, the cost of living, family wellbeing, and social inclusion. The expected to benefit from the ICT-specific strategies and initiatives outlined in the  which ICT ind11 MP.  includes ustry in  jobs, Malaysia  small is  Initiatives announced under 11MP, specific to the leT industry in Malaysia
Focus area Uplifting B40 households towards a middle-class society Achieving universal access to quality health care • &•• • Enhancing adoption of ICT
• The adoption of ICT will be accelerated to increase access to information on agriculture, business, education and health, and expand business and income earning opportunities to improve wellbeing. In this regard, the eRezeki programme for B40 households will be expanded to enable the use of ICT to generate additional income. Basic ICT training will be provided before matching participants of the eRezeki programme with relevant jobs such as data entry, price monitoring, and document translation. These micro-tasks can be accomplished from homes or telecentres.
• Business support through digital platforms for micro-enterprises will be expanded to enhance outreach and market access. To further expand the e-payment platform for micro-enterprises, affordable terminals and readers that are integrated with e-commerce solutions will be provided. In addition, online business-matching services to local entrepreneurs will be introduced in telecentres.
• Improving system delivery for better health outcomes
• The Government will review and formulate health legislations and intensify enforcement through strengthened coordination between government agencies and the private sector. For example, the Government will consolidate health­related enforcement units in areas such as pharmaceutical, disease control, food safety, hygiene, and cleanliness, as well as medical practice and professionalism. Healthcare services will adopt lean management practices to streamline work processes and procedures in order to enhance effectiveness and efficiency. This includes optimising efforts in bed management, robust operation theatre scheduling, and best practice treatment. Expected outcomes include the release of latent capacity or bed days, shortened patient waiting times, improved patient outcomes and satisfaction, and optimised use of healthcare resources. The Government will also implement the hospital cluster concept in selected locations, where hospitals within the same geographical location will work as one (1) unit, sharing resources such as assets, amenities, and human resource.
• The Government will implement the eHealth strategy, which incorporates existing ICT systems into one (1) system-wide model to enhance health data management, and support research, development and commercialisation

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Focus area Description initiatives. The Government will also work with the private sector to increase information sharing and strengthen the role of the private sector in service delivery. To drive innovation through research, development and commercialisation activities, partnerships across the quadruple helix of government, industry, universities, and research institutions will be promoted. • Initiatives will also focus on improving pre-hospital care such as ambulance services, as well as accident and emergency services. Collaboration among agencies that provide ambulance services, private healthcare providers, and non­governmental organisations will be strengthened to improve response time and better utilise resources. —-..–….-……..,.—-;—-1–,—:—–:-:—,——–:—:-;-.
Transforming services • Accelerating human capital development
• Key structural challenges in human capital development will be addressed while developing soft skills needed by the services sector. Initiatives will focus on delivering the skills most critical to industries through existing graduate employability programmes. Greater collaboration between industries and higher education institutions will also be fostered, including the provision of more structured internship programmes. A co-funded scholarship programme between the Government and SMEs will be developed to enable the latter to tap on high­quality talent. Within the ICT industry, a professional body to govern professional competencies and ethics in ICT will be considered to ensure ICT professionals’ competencies are on par with global standards. This professional body will enhance the value of the profession, raise professional standards, review qualifications, provide assurance of quality, and serve as the central repository database of registered ICT professionals. It will also enable Malaysia to be a signatory to the Seoul Accord, a multilateral agreement among agencies responsible for the accreditation of tertiary level computing and IT-related qualifications to ensure that Malaysian ICT qualifications are internationally recognised. In addition, ICT will be offered as a compulsory subject at the lower secondary level and as an elective at the upper secondary level to ensure students have a sound ICT background prior to enrolling in higher education. The ICT SUbject will also be strengthened to integrate computational thinking into learning modules, in addition to programming languages, hardware and software design, databases and information retrieval.

Enhancing access to technology and research and development • The utilisation of technology, particularly ICT, will be enhanced among services firms through the Embed ICT programme to reduce dependence on low-skilled foreign workers and to boost productivity. In addition, the funding mechanism for research, development and commercialisation that is mainly supply-driven today will be replaced with a mechanism that is demand-driven and private sector-led.
• The Research Incentive Scheme for Enterprises will be expanded to enhance technology absorption and allow companies to hire experienced research and development researchers by partially funding the monthly wages of researchers for a specified period. This incentive is expected to attract technology leaders to set up research and development centres or centres of excellence in prioritised technology focus areas, such as big data analytics, cloud computing, and the Internet of Things. In addition, access to digital infrastructure, particularly in Sabah and Sarawak, will be further improved to spur the growth of knowledge-intensive services.

ICT product and services In the ICT industry, niche areas will be further promoted and export capabilities enhanced to ensure that Malaysia captures a bigger export market for ICT products and services. Within the identified niche areas -digital content, Internet of Things, data centres and cloud services, cyber security, software development and testing, and big data analytics -the ICT ecosystem will be strengthened, including the capacity of start-ups, talent, infrastructure, research, development7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Focus area Description and commercialisation, and governance. • The quality of local digital content will be improved to further strengthen the export potential of local digital content. The number of registered digital content IPs will be increased and exploited as collateral for loan financing, product line expansion, and licensing and merchandising. Emphasis will be given to animation, gaming, simulation, and virtual reality in the areas of education, entertainment, and healthcare. Three (3) main initiatives that will be implemented are attracting anchor companies to serve as industry drivers, building local capacity and capability, and raising global market access through a better understanding of global technology trends towards greater adoption of digital distribution and new business models. -_..-.-.-+—,~-c-~-,—- -. -:-~~~~~~~-~~-Modernising agriculture • Accelerating adoption of ICT and farming technology
• The use of smart farming technologies and ICT in plantation, farming, livestock, and fishing activities will be intensified to improve production efficiency and reduce dependency on labour. ICT-based applications to support farm and plantation management, precision farming, and monitoring and surveillance will be expanded to increase productivity and reduce the cost of production. Mobile phone applications and portals will be used to disseminate real-time information on market demand and prices, early detection and warning alerts on disease outbreaks as well as provide interactive platforms for technical advice.

1-=—–;–_.._.._—­Transforming • Driving productivity construction

• The strategies to increase productivity in the construction sector will focus on increasing technology adoption and modernisation of construction methods as well as reducing dependency on low-skilled labour. The labour productivity of the sector is targeted to increase by about 1.6 times, from RM39,116 per worker in 2015 to RM61 ,939 per worker by 2020. A number of initiatives will be introduced to drive productivity, including expediting the adoption of the Industrialised Building System by the industry through the revision of the public procurement policy and Uniform Building By-Laws and improving existing regulations to ease construction-related business processes. This effort, which started with Kuala Lumpur City Hall, will be expanded to other local authorities. The use of ICT will be enhanced by providing a common platform to use bUilding information modeling on a pay-per-use basis.
• Enhancing productivity through automation and innovation SIVIEs

 

GrOWing dynamic • SMEs will be encouraged to adopt greater automation in production processes and business services. Greater ICT utilisation will be promoted, mainly in business operations, supply chain management, and delivery systems. Two (2) eXisting high-impact programmes, namely Technology Commercialisation Platform and Inclusive Innovation will be continued. The Technology Commercialisation Platform links innovation initiatives under one (1) platform and aims to remove market and financing barriers to innovation. This end-to-end facilitation enables SMEs to use technology as well as acquire IPs and early stage financing. In this regard, PlaTCOM, established in 2014, will continue to implement the Technology Commercialisation Platform to assist SMEs to innovate and commercialise products and services. The Inclusive Innovation programme aims to empower microenterprises in rural areas and the B40 households to L leverage innovation. The programme will provide technical, financial, and management support to the target groups and encourage grassroot innovation . ._–. -_._——-­Source.-Economic Planning Unit Malaysia 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

SMITH ZANDER These supporting plans, policies and incentives by the Government of Malaysia bode well for the economic and entrepreneurial environment in Malaysia, leading to new and improved opportunities for new and existing business and companies. Such positive developments are expected to also positively impact the ICT services industry in Malaysia over the short to medium term. As businesses and companies expand in reach and scale, ICT services becomes a vital component of capital investment. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZANDER 4 OVERVIEW OF THE CONSTRUCTION SECTOR IN MALAYSIA Performance, Outlook and Prospects Economic Contribution The construction sector in Malaysia ;s largely influenced by the nation’s economic development as the construction of buildings and infrastructure are essential for national development and progress. With economic development comes an increase in demand for residential, commercial and industrial properties due to the increase in the average income of the population as well as the increase in business activities. As the construction of property sub-segments (i.e. residential, commercial and industrial) develops, the infrastructure and social amenities supporting these developments must be likewise built or improved. The mark of a country’s economic development is reflected by its GOP and employment rate achievements. From 2006 to 2016, the GOP for construction activities in Malaysia increased from about RM 16.0 billion to about RM50.1 billion. Between 2006 and 2016, construction activities contributed to between 2.5% and 4.5% of Malaysia’s total GOP, increasing from 2.8% in 2006 to 4.5% in 2016, signifying its importance to overall economic development. Key economic statistics of the construction sector in Malaysia a, b Year •• •• 2006 573,936 16,022 2.8 I————~—–.-. ..-1——_._._–_._–­2007 610,087 17,391 2.9 2008 639,565 18,151 2.8 I———+————-i—.———-+———-…j2009 629,885 19,270 3.1 —….——…..—–.–..–“—‘-“—‘–1—‘ —–.–­2010 821,434 28,213 3.4 1—-2011 .___ 864,920. –1-‘–29,524 ..__+~___ 3.4 _ 2012 912,261 34,880 3.8
1——.—-.—-.—..———-“‘1 2013 955,080 38,590 40 l–2-~0~-1~6~P——–~..:~~~::~: .—–.–..-..—~~ I ~~—-­_ 1,107,8~5 50,091 l__. 4.5 a National GOP a-n””‘d–c’-on-s”:”tr’u-c””‘t,:-on-se-c””‘to-r-:::GDP for the penod of 2006 to 2009 are at constant 2005 pnces, whtle nationatGi5P and construction sector GOP for the period of 2010 onwards are at constant 2010 prices b Latest available as at 14 April 2017 p Preliminary Source: Department of Statistics Malaysia, Ministry ofFinance Malaysia Construction activities are a vital building block for the development of other economic activities in the country, including manufacturing, finance and business services as well as wholesale and retail trade, hotels and restaurants. In 2016, the manufacturing sector contributed approximately 23.0% to Malaysia’s total GOP, while wholesale trade, retail trade, accommodation and restaurants collectively contributed approximately 17.7%, and finance, insurance, real estate and business services collectively contributed approximately 11.2%. In order for these economic activities to operate and thrive, properties and structures such as industrial parks, office buildings, retail malls, hotels and restaurants must be developed. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Employment In addition, construction activities have also contributed to the socio-economic development of Malaysia in terms of employment. Latest available statistics indicate that employees in the construction sector increased from about 0.9 million persons in 2006 to an estimated 1.3 million persons in 2016, indicating a growing construction sector that is in line with a developing country’s manpower requirements. The percentage of employment in the construction sector hovered between 8.5% and 9.5% of total employment in Malaysia over the period of 2006 to 2016. Employment indicators of the construction sector in Malaysia a ..  ~  ..  .,,  Employment in the construction sector  Percentage employment of the construction sector  (‘000)  (%)  2006  10,628.9  908.9  8.6  2007  10,889.5  922.5  8.5  2008  11,028.1  9980  9.0  – I  2009  11,315.3  1,015.9  9.0  2010  12,303.9  1,082.7  8.8  1—­ 2011  12,284.4  1,133.6  9.2  – – 2012  12,723.2  1,163.7  9.1  2013  13,210.0  1,244.1  9.4  2014  13,532.1  1,226.4  9.1  2015  14,067.7  1,309.9  9.3  I  2016p  14,1  1,262.0  8.9  CAGR  2.9%  3.3%  Not applicable
a Latest available as at 14 April 2017 p Preliminary Source: Department of Statistics Malaysia Value of Projects Awarded The vibrancy of the construction sector and the property development segment reflect the growth of a country’s economy. The growth of property development and construction are typically cyclical as it follows relatively closely to the GDP growth of a country. A common measure of the construction sector and the property development segment is based on value of projects awarded during a certain period. From 2006 to 2016, property development and construction activities in Malaysia, as measured by the value of projects awarded, grew from RM60.9 billion to RM125.0 billion at a CAGR of 7.4%. Residential property development activities witnessed a CAGR of 5.8%, increasing from RM16.6 billion in 2006 to RM29.2 billion in 2016. Residential property development activities also registered a 35.0% year-on-year growth in 2012 arising from major developments in the Klang Valley such as Hampshire Place, The Troika, Brinsfield Embassy View, Gaya Bangsar, 11 Mont’ Kiara, Twins @ Damansara Heights, Sunway Vivaldi and Damas Serviced Suites. The construction sector experienced a slowdown in 2008 and 2009 as public and private expenditure on construction activities were tightened due to the global financial crisis which occurred during the period However, the construction sector rebounded in 2010 in a show of resilience as the Government of Malaysia and the private sector resumed construction activities. In 2015, the construction sector in Malaysia experienced a year-on-year contraction of 21.9%, to an awarded project value of RM139.7 billion. Subsequently in 2016, the awarded construction project value was registered at RM125.0 billion. The fall in awarded project values in 2015 and 2016 was largely due to the slowdown in demand in the property 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
market. Nevertheless, the construction sector in Malaysia has proven to be resilient in the past, having recovered from troughs that occurred during the global financial crisis in 2008 and 2009, and thus the construction sector in Malaysia is expected to recover over the long term. SMITH ZANDER expects the value of projects awarded to further grow from RM125.0 billion in 2016 to RM153.9 billion in 2019 at a CAGR of 7.2%. Commercial and industrial construction registered a CAGR of 11.3%, increasing from RM22.1 billion in 2006 to RM38.2 billion in 2016 on the back of an increase in the supply of commercial office space with the completion and launch of office towers in the Klang Valley such as KL Pavilion Office Tower, G-Tower, The Icon, One Mont Kiara, Petaling Jaya Exchange, Empire Subang and Menara Worldwide. Several hotels were also completed, contributing to commercial construction growth, and this includes the completion of Aloft Kuala Lumpur Sentral Hotel, WOLO Bukit Bintang Hotel, One @ Bukit Ceylon Hotel Suites in Klang Valley; Renaissance Hotel, Traders Hotel and Legoland Hotel in Johor; and Victory Annexe of E&O Hotel and Four Points by Sheraton in Penang. Several prime commercial developments, most notably the Tun Razak Exchange and Warisan Merdeka, are currently being planned in the Klang Valley especially in areas close to the on-going Klang Valley MRT project route. Malaysia’s industrial segment continues to grow at a healthy pace spurred by strong levels of foreign and domestic investments. This is likely to maintain a robust growth in demand for industrial development in the country. [The rest of this page is intentionally left blank]

 

~OmpanYNo.1121987-D I]

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D) Value of construction projects awarded in Malaysia a, b,c, 2 200 178.8 180 C 160 o :.a 140 n:: ‘;;; 120
-0 I]) [ 100 u
I]) “E 80 ‘”3= 60.
‘<­'” 600 I]) ‘” 40 22.2 ~ 20 Io
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 …. Commercial and industrial ill”” Residential Infrastructure -Total a Figures may not add up due to rounding b In Malaysia, construction activities are measured based on value of projects awarded during a certain period where this data is col/ated from industry participants by the GlOB. Thus, the value ofprojects awarded is used as a benchmark to measure growth of the construction sector in Malaysia and competitive positioning of industry players. However, information on project completions and payment status of awarded projects are not publicly available from the GlOB C Latest available as at 14 April 2017 Source: GlOB Selected on-going and upcoming major commercial and mixed-development projects in Malaysia .. .. … Project Type of property .. …. Klang Valley Alila Bangsar at The Establishment Hotel _ 2017II Sheraton Petaling Jaya Hotel 2017 The Ruma Hotel and Re-s-:-id-:-e·-n-c-e-s——–Hotel —–.—. 2017
–. – ————_.._——­Four Sea~ons Place Kuala Lumpur Mixed-development 2017 Harrods Hotel & Residences Mixed-development 2018 ._-~~- ~ Project MX-1 Mixed-development 2018f.=—‘—-,—-,-::-:—-~–:-.-,—–=—–+–,::——,–….;….——-_._._——I Three (3) KLCC towers for additional office, Commercial 2019 , hotel and retail space -:-__……,-_–,-_-1—::-. .,-__. . …..__–j Redevelopment of Angkasapuri Complex to Commercial 2020 Media City Warisan Merdeka Commercial 2020——–4—Cyberjaya City Centre Mixed development 2020 onwards (in __ phases)1 Mixed development 2020 onwards (in phases) ….—.——-centr;-·——–I-CommerCial–· 2023_Buki.!-Bintang_?ommerci.~_.__… .._.J • … . ..__ Tun Razak Exchange Commercial 2028 ~-_._-­___…_ Klang River Revitalisation CHootmelmercial …..—-… -=22-=00-;2-=79——-1 1Penang I Angsana Te/uk Bahang ;–:-~_:_–……..,_.—–__+–..——–__{ ~side Resort Condominium Development Mixed-development 2017
2 SMITH ZANDER’s forecast based on historical performance of the construction sector and research on prevailing market drivers 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

SMITH ZANDER Expected… Project Type of property completion date The Light Water Front Project….._—_._–,…_­_._~_._._~._–, ~~~:td-e.~~~~–t–…._~~~ ~ -_._–jCourtyard by Marriot, Penang IKEA integrated shopping complexes and Mixed-development ~–1~-‘–20~-‘–­mixed development of offices and residences ._-_.__._.~_._—­commerc~——r—i01-9-·–·Negeri Port Dickson Waterfront Sembilan Johor -C-a-p’r-ib-y-F-ras-e-r–:-H-,-o-te-c,———–+IHOte-‘–_.=~==—-=_ 2017 …__ Residential North Project  Mixed-development  2018  -S-h-e-raton Nusaj”aya Medini  ——~-+·-Hotel  –~­ 2-0=-1:-:9:—–1 ._—_._­ Pahang  Genting Integrated Tourism Plan  Commercial  2016 onwards (in  phases)  S_abah  ~l2:,,:,.world  Kota Kinab.alu Hotel  ..  Comm~~r_c_ia_1  .  20_1_8._  .  Sarawak .  Tabung Haji Complex …..• .._  …._.  Commercial-.J….. .•  …  2017  _
Source: ETP, various sources Growth of residential, commercial and industrial properties has been strongest in the Central region, comprising the states of Selangor and Negeri Sembi/an as well as the Federal Territory of Kuala Lumpur (“Kuala Lumpur”) and Federal Territory of Putrajaya (“Putrajaya”). Approximately 61.2% of the total value of residential construction projects awarded in 2016 was for the Central region while an additional 16.9% was for the Southern region, comprising the states of Malacca and Johor. Awarded commercial and industrial construction projects were strongest in the Central region (44.6% of total value of commercial and industrial construction), followed by the Southern region (22.7% of total value of commercial and industrial construction) and the East Coast comprising Kelantan, Pahang and Terengganu (13.1 % of total value of commercial and industrial construction) during the same year. [The rest of this page is intentionally left blank] Value of awarded residential construction projects by region in Malaysia a
a Latest available as at 14 April 2017 Source: CIDB
Value of awarded commercial and industrial construction projects by region in Malaysia a, b a Includes development of social amenities b Latest available as at 14 April 2017 Source: CIDB 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
The infrastructure development segment of the construction sector is typically reliant on public funding from the Government of Malaysia. In terms of awarded project value, this segment increased at a CAGR of 1.6% from RM22.2 billion in 2006 to R1V157.5 billion in 2016. The Government has approved five (5) toll highways for Selangor, namely EKVE, SUKE, Damansara -Shah Alam Highway, SKIP and LPB, which collectively will require an investment of RM18.1 billion. In East Malaysia, the Government has committed RM27.0 billion for the construction of the Pan -Borneo Expressway that will benefit residents in Sabah and Sarawak. Selected on-going and upcoming major infrastructure development projects in Malaysia .. . … ….. ..Location .­• A•• Selangor Transportation 1.6 Kuala Lumpur Negeri Sem bilan and Paroi-Sena-w-a-n-g–.-K-u-a-Ia-L-u-m-p-u-r.—-r:rrari-s.–o-rt-at-io-n—-J······—–·-··rrpKuala Lumpur International Airport Expressway “7”.ccc-::-‘——–.i——–::–::-1 Pahang Ulu Jelai Hydropower Project –I–Utility 0.5 .. ——“..———. —-·–:-:c~—·····——· Perak Manjung Extension Development Utility I–:::——.—–~, —c–“–:-:—=.:–:–,….t-~:-c.~—–.-.—-.-. Terengganu Hulu Terengganu Hydroelectnc Project Utility –“::c-…,.–==–……..,.-::::-c—–+–::::c–c——:::=—……..:=——:-:-;—-….::….-+-c~,..:————+-.——_::_::-I
Pahang and Selangor Pahang -Selangor Raw Water Utility 9.0 1–:::–,-..,.”7”-:-._.–j~T-=-r:..:a:.:..n:.::s.:.:fe:.:..r:’_P..’:-r.=.,ojL::e-=c:..t —-..-.—……,—c——–j——–..-­Pahang and Kelantan Central Spine Road Transportation 6.6 –..,.——+–_._—_._­Kota Bharu-Kuala Krai Expressway Transportation 2.0 Pahang, Kelantan and East Cost Rail Line (Tumpat-Kuantan Transportation ~.–_.. 30.0 Kuala Lumpur Port) —–..——.———..———·-=———–·–·1-..—-. Johor Johor Bahru-Pasir Gudang Elevated Transportation 0.5 ~~~=~-=-~ _~~f;e~i~:6~I~aPid ~~~_nsit B~~ ~=~Tr~sporta_~~_. —-=r—–=-~ 10I Sarawak Samalaju Port ~tility 18 Sabah an-dSiirawak-·Pan~eo-Exp;:essway.-.—-2~-n;pc;rtat,on_ ——–~7.ci-
Source: 10MP, 11MP, ETP, Budget 2015, Budget 2016, vanous sources 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

Property Supply Between 2006 and 2015, total supply of residential properties in Malaysia increased from 5.1 million units to 6.5 million units at a CAGR of 2.6%. In 2015, incoming supply comprised 18.1 % of existing stock while planned supply comprised 13.0% of existing stock. This, in comparison to the market scenario in 2006 where incoming supply comprised 16.0% of existing stock while planned supply comprised 16.6% of existing stock, suggests that demand and supply of residential properties are moving towards a state of equilibrium despite pockets of mismatch within the residential property sub-segments. The supply of residential property was registered at 6.3 million units in the first half of 2016. Commercial development in Malaysia, based on the supply of shops, shopping complexes, purpose-built offices and hotels, also registered positive growth between 2006 and 2015. During this period, total supply of shop units increased at a CAGR of 3.9% from 415,149 units to 585,672 units while shopping complexes registered a CAGR of 3.8% from 11.7 million square meters (“m 2,,) to 16.4 million m2 Between 2006 and 2015, hotels and purpose-built offices registered a CAGR of 2.4% from 201,627 rooms to 249,157 rooms and a CAGR of 2.0% from 18.5 million m2 to 22.2 million m2 respectively. In the first half of 2016, the supply of shop units and shopping complexes were registered at 562,543 units and 16.9 million m2 respectively. The saturation of business activities and land scarcity have led to the opening of newer areas away from the city centres. Growth in commercial property also intensified during this period as the Government launched several regional economic corridors including the ECER, NCER, Iskandar Malaysia and SCORE. The industrial property segment registered a CAGR of 0.7% from 117,268 units in 2006 to 125,055 units in 2015. In the first half of 2016, the supply of industrial properties was registered at 123,238 units. In the past, industrial properties have largely been functional and served as manufacturing space. However, new developments in the industrial segment have led to the construction of properties that house the manufacturing, storage and office/showroom areas in one (1) building. Industrial property is also influenced by developments in the regional economic corridors including the ECER, NCER, Iskandar Malaysia and SCORE, albeit at a slower pace, as the Government’s focus is to position Malaysia as an investment destination for high value-added, high technology, knowleqge-intensive and innovation-based industries.
Property Demand Demand for property in Malaysia, measured by value of property transactions, witnessed an increase from RM47.0 billion in 2006 to RM 111.8 billion in 2015 at a CAGR of 10.1 %. A significant 65.7% of total property transactions in 2015 was incurred for residential properties, while the remaining 23.6% and 10.7% were incurred for commercial and industrial properties respectively. The residential property segment witnessed the highest CAGR of 10.7% between 2006 and 2015, recording a rise from RM29.4 billion to RM73.5 billion. Total value of property transactions was registered at RM49.7 billion for the first half of 2016, of which residential, commercial and industrial property transactions comprised RM32.7 billion, RM 11.3 billion and RM5.6 billion respectively. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

 

SMITH ZANDER
Demand for residential, commercial and industrial properties in Malaysia a, b 140 128.4 120.0C 120 14.5~ 111.8:.a 2
12.0e:. 100 (J) c 0 “<3 (J) 80′” c ~ >. 59.9 t::: 60OJ “­e 47.0 ….”-6.0a OJ 40 :::J (ij
> (ij ;§ 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
l -Residential W!!0iCommercial ‘Industrial —-Total
a Total value of property transactions was registered at RM49.7 billion for the period of January to June 2016, of which residential, commercial and industrial property transactions comprised RM32. 7 billion, RM11.3 billion and RM5. 6 billion respectively b Latest available as at 14 April 2017 Source! NAPIC Regional growth is strongly driven by growth of property demand in key sub-markets, with the Klang Valley strongly driving growth in the Central region, Johor driving growth in the Southern region and Penang and Perak driving growth in the Northern region. The state of Johor is a key driver for the high commercial property transactions in the Southern region as the launch of the Iskandar Malaysia masterplan in 2006 has resulted in intensified business activities in the state, thus creating strong demand for commercial properties. Apart from the initiatives driven by the Government to further develop infrastructure based on the nation’s socio-economic needs, the Government, through CIDB, intends to further develop the construction sector in Malaysia to maintain its status as a healthy and self-sufficient sector. The CIDB implemented the Construction Industry Master Plan (2006 -2015) in 2006, which includes seven (7) thrusts that aim to increase the sector’s market size by expanding into new and unexplored foreign markets, and improve productivity, efficiency and cost-effectiveness of the domestic construction sector in order to provide comparative advantage to the economy 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
5 OVERVIEW OF THE CONSTRUCTION SECTOR IN JOHOR The state of Johor is located on the southern tip of Peninsular Malaysia, and has played a vital and strategic role in the history and development of Malaysia and the surrounding region. Johor Bahru, the capital city of Johor and its surrounding areas, has developed to become one (1) of the most important urban economic regions in the country. Johor has a diversified economy with several clusters emerging around the electronics, logistics, food and agriculture, tourism and oil and petrochemicals industries. Johor’s strategic geographical location off the Straits of Malacca, one (1) of the world’s busiest shipping routes, its proximity to international hubs as well as large markets such as Singapore, Indonesia, the People’s Republic of China and India, coupled with its wealth of natural resources and human resources, have driven the state’s past successes and will be key pillars for Johor’s future potential. The idea of developing a new economic corridor for Malaysia’s southern region was first mooted in the Ninth Malaysia Plan (“9MP”), where the Federal Government conducted a feasibility study to design a vibrant economic region to propel growth in southern Malaysia in collaboration with Khazanah National Berhad. A special projects team was formed to prepare a CDP (2006 -2025) for the Southern Johor Economic Region (“SJER”). The Iskandar Development Region was launched in November 2006, marking the beginning of South JOhor’s economic development based on strategies identified in the CDP. SJER eventually came to be known as Iskandar Development Region and subsequently Iskandar Malaysia. Metropolitan Johor Bahru, comprising the districts of Johor Bahru, Kulai (formerly known as Kulaijaya), Pontian and Kota Tinggi, is known as Iskandar Malaysia. Iskandar Malaysia spans across approximately 2,217 square kilometers (“km 2,,), offering prospective investors large tracts of competitively priced land. The development of Iskandar Malaysia was modeled after the People’s Republic of China’s Pearl River Delta Economic Zone (2008-2020), and Iskandar Malaysia targets to capitalise on its current synergy with Singapore to complement each other as an economic hub. The Iskandar Malaysia development plan is ambitious and comprehensive, extending beyond collaboration in the manufacturing sector to include tourism, healthcare, education and property sectors. The enhanced connectivity between Iskandar Malaysia and Singapore will allow Singapore service providers to tap into opportunities that arise from the former development, while Johor is expected to gain valuable experience and tap into more advanced expertise and talents from Singapore. Five (5) key economic drivers or flagship development zones have been identified under Iskandar Malaysia: Flagship A: Johor Bahru City Centre Johor Bahru is the southern gateway to Malaysia and plays an integral role as host to several key economic activities, including financial, cultural and urban tourism for the state of Johor. Under Flagship A, Johor Bahru City Centre will be revitalised through the upgrading of its central business district and waterfront to reposition the city as a vibrant, modern and livable city centre. Development activities will be focused on a new financial district, Danga Bay Integrated Waterfront City, upgrading of the central business district, Tebrau Plentong mixed development and enhancement of causeway infrastructure connecting Johor Bahru and Singapore. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
a  Flagship B: Nusajaya  Nusajaya is a key component of the Iskandar Malaysia masterplan and forms one (1) of the largest  property developments in Southeast Asia. Key economic activities under Nusajaya include education  and medical tourism, entertainment and recreation, state administration, finance and biotechnology.  Development activities will be focused on the Johor New Administration Centre at Kota Iskandar,  University Park in Edu-City, international destination resort comprising outdoor and indoor theme parks,  and clean and green factories and warehouses at the Southern Industrial Logistics clusters area.  a  Flagship C: Western Gate Development  Tanjung Pelepas is one (1) of the world’s major container ports and the Tanjung Pelepas economic  cluster houses key economic activities such as logistics, free zone industrial area, regional distribution  and international procurement, and oil storage terminals. The Western Gate will play an important role in  Johor’s industrial segment and provide major infrastructure facilities to Iskandar Malaysia. Development  activities will be focused on the development of the free trade zone at the Port of Tanjung Pelepas,  Petrochemical and Maritime Industrial hub at Tanjung Bin, and Tanjung Bin power plants.  a  Flagship D: Eastern Gate Development  Pasir Gudang is a noted manufacturing hub in the southern region of Malaysia where economic  activities such as manufacturing (including electronics, petrochemicals and oleochemicals) and oil  storage terminals thrive. The Eastern Gate will play an important role in Johor’s industrial segment and  provide major infrastructure facilities to Iskandar Malaysia. Development activities will be focused on a  mixed development with city of knOWledge at Seri Alam, a regional distribution centre in Kim-Kim, Pasir  GUdang Industrial Park, Tanjung Langsat Industrial Park, Pasir GUdang Port and Tanjung Langsat Port.  a  Flagship E: Senai -Skudai  Senai -Skudai is a major township that connects Iskandar Malaysia to the world. This township houses  key economic activities such as logistics, manufacturing (especially in high technology and aerospace­ related sectors), tourism (luxury shopping destination) and Cybercity. Senai -Skudai’s potential is  further strengthened by the RM70 billion investment to development Senai Airport City and the
completion of Senai Hi-Tech Park and MSC Cyberport in 2013 and 2014 respectively. The foundation and infrastructure for Iskandar Malaysia has been laid down between 2006 and 2010, allOWing the second phase of the masterplan to focus on growth and expansion over the period of 2011 to 2015. Iskandar Malaysia’s third phase of development will take place between 2016 and 2025, and shall focus on sustainability and innovation. At the launch of Iskandar Malaysia, RIV111 billion worth of investments were committed to the masterplan. Since its launch, Iskandar Malaysia’s economic potential has gained increased awareness and as of December 2015, has attracted RM190.3 billion in cumulative committed investments with RM98.5 billion worth of investments (51.8% of cumulative committed investments) already realised. Iskandar Malaysia intends to achieve a total investment target of RM383 billion over the 20-year plan duration, and to grow Johor’s GDP by 4.5 times and create up to 817,500 employment opportunities. Iskandar Malaysia has been identified as an exclusive project with access to financing under a Facil itation Fund provided under the 10MP. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)

 

SMITH ZANDER
Flagship development zones under Iskandar Malaysia
KTM Savtce Sl”9″l’O'” • ..,,!’.or Bahru RlOg ROad Setond UNK EXPRESSVi.!t’f ser..l-oesaruUPRESS,’/hY ·CP~rL€>:l2:’)1i coatilal HiglTway PHAsE 2 ~ Cpo::n~1 ZJ12 Eastern oiopma!lint (EOL) ~ Cf~i’1~j :-:.-12 eakat:5aW.-Pa~Gudang coatilalRoad ~ Cf~n€’:1 20:12 Source: Iskandar Development Regional Authority (“IRDA’) Performance, Outlook and Prospects of the Construction Sector Value of Projects Awarded Construction activities in the Southern region of Malaysia have intensified following the launch of Iskandar Malaysia. Between 2006 and 2015, the construction sector in the Southern region of Malaysia, as measured by total project value, grew from RM4.6 billion to RM35.3 billion and recorded a CAGR of 25.5%. Between the period of 2006 and 2015, residential construction projects increased from RI\II2.3 billion to RM14.0 billion at a CAGR of 22.2%, while commercial and industrial construction, termed non­residential construction, increased from R1VI2.2 billion to RM21.3 billion at a CAGR of 28.7%. Construction of non-residential properties formed approximately 60.3% of the total construction value of RM35.5 billion in 2015 while residential properties comprised the remaining 39.7%. In 2016, the total project value of construction projects in the Southern region was registered at RM13.6 billion, of which residential construction projects comprised RM4.9 billion and non-residential construction projects comprised the remaining RM8.7 billion. The fall in awarded project value in the Southern region in 2016 was largely due to economic slowdown in lVIalaysia as a result of the depreciating Ringgit against the United States Dollar and falling crude oil prices (USD50.75 per barrel and USD42.81 per barrel in 2015 and 2016 respectively compared to USD96.24 per barrel in 2014). These factors have adversely impacted the construction sector in the Southern region as there was a cutback in private and public expenditure on construction activities. Notwithstanding this, future growth in the construction sector in the Southern region will be positively impacted by: 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
• the increase in investments under Iskandar Malaysia that will drive future demand for property; and
• Government plans, policies and strategies to drive economic growth in the Southern region.

A significant portion of construction activities that took place in this region over the course of 2006 to 2015 occurred in the state of Johor which houses the Iskandar Malaysia development. Between 2006 and 2015, the construction sector in Johor increased almost six (6)-fold from RIVl3.4 billion to RM26.4 billion and recorded a CAGR of 25.6%. Between the period of 2006 and 2015, residential construction projects increased from RM2.0 billion to RM11.1 billion at a CAGR of 20.6%, while commercial and industrial construction, termed non-residential construction, increased from RM1.3 billion to RM15.3 billion at a CAGR of 31.1 %. Construction of non-residential properties formed approximately 58.0% of the total construction value of RM18.0 billion in 2015 while residential properties comprised the remaining 42.0%. In 2006, construction activities in Johor formed 73.9% of total construction activities of RM4.6 billion in the Southern region and this figure increased to 92.5% of total construction activities of R1VI28.5 billion in 2015. In 2016, the total project value of construction projects in Johor was registered at RM11.3 billion, of which residential construction projects comprised RM4.4 billion and non-residential construction projects comprised the remaining RM6.9 billion. Value of residential construction projects awarded in Johor a 16,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ))Johor ……Southern region ‘oc-~—–‘ 8 Latest available as at 14 April 2017 Source: CIOB

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

SMITH ZANDER
Value of commercial and industrial construction projects awarded in Johor a —————–_.———————-, 50,000  45,000  43,595.4  C  40,000  o  ‘E  35,000  :2 n::
‘;;; 30,000 U ill .[ 25,000 -0 ill’2 20,000 ‘”5 ~ 15,000o ill ::J ~ 10,000 5,000 o 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Johor –Southern region a Latest available as at 14 April 2017 Source: CIOB Property Supply The capital city of Johor Bahru is a significant property market in the state of Johor. Between 2006 and 2015, total supply of residential properties in Johor Bahru increased from 488,833 units to 622,761 units at a CAGR of 2.7%. Property development in Johor Bahru ramped up in 2013 in anticipation of the upcoming demand for residential properties as a result of growth and expansion of commercial and industrial activities in Johor Bahru and its surrounding areas. Within the residential property sub-segment, high-rise condominiums continue to remain popular and are targeted at Singaporeans and Malaysians who work across the Causeway in Singapore. New stock of residential properties will continue to grow in Iskandar Malaysia especially along new transportation lines, and concentration of landed properties will largely be centered in the Nusajaya area. Commercial development in Johor Bahru, based on the supply of shops, shopping complexes, purpose-built offices witnessed mixed growth over the period of 2006 and 2015. Over the same period, commercial shops witnessed a CAGR of of 2.4%, increasing from 43,220 units to 53,436 units while shopping complexes and purpose-built offices witnessed declining CAGRs of 1.3% from 1.8 million m2 to 1.6 million m2, and 2.8% from 1.3 million m2 to 1.0 million m2 Purpose-built offices and shopping complexes witnessed softened year­on-year CAGRs in 2011 and 2012 respectively as construction projects were stalled or postponed arising from uncertainties following the fall of several stock markets globally due to fears of the impact of the European sovereign debt crisis as well as slow economic growth in United States and the downgrading of United States credit rating. Hotel property development witnessed positive historical development in 2010 following the upcoming supply of hotel rooms from the construction of Traders Hotel, Legoland Hotel and KSL Resort Hotel. Nevertheless, shopping complexes and purpose-built offices are showing signs of recovery. Total supply of shopping complexes and purpose-built offices increased from 1.1 million m2 in 2013 to 1.6 million m2 in 2015, while purpose-built offices increased from 0.9 million m2 to 1.0 million m2 over the same period. Furthermore, overall commercial property supply is expected to witness positive overall development over the coming three (3) to five (5) years in anticipation of increasing demand for workspace following the
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

 

SMITH ZANDER progress of Iskandar Malaysia’s COP. In 2013, several integrated developments incorporating purpose-built office building space were announced including Medini Empire, Zikay @ Medini, D’Pristine@Medini, Southkey, Vantage Bay and 18@Medini. Property developers also announced the launch of Austin18 Versatile Business Suites in that year, where the development will comprise a 25-storey freehold commercial building with 319 units of self-contained offices, retail space and a six (6)-storey car park podium, and is anticipated to be completed in 2017. The Austin18 Versatile Business Suites is targeted at young professionals and entrepreneurs.
Retail and hotel property supply are forecast to increase under the Iskandar Malaysia COP following the implementation of specific projects in Flagship A and Flagship B development zones. Several of the announced integrated developments in 2013 are also expected to carry a retail component, including Medini Empire, Zikay @ Medini, D’Pristine@lV1edini, Meridin@Senibong, 18@Medini, Vantage Bay, Sunway Medini, Medini Lakeside and The Suasana. Additionally, the redevelopment of Kompleks Tun Abdul Razak (“KOMTAR”) comprising a new retail podium, purpose-built office space and hotel which was identified as a project under Iskandar Malaysia and ETP will add a gross floor area of 1.4 million ft2 to the commercial space in Johor Bahru.
The property market in Johor Bahru is expected to remain positive in the short and medium term as more Malaysia and Singapore-based developers are anticipated to venture into the Iskandar Malaysia region. Development activities in Iskandar Malaysia will continue to be focused within the city centre, Danga Bay and the Nusajaya locality within Flagship A and Flagship B development zones. The growing demand for prime office space and retail space in the region is expected to fuel the construction of more retail malls and purpose-built offices in Metropolitan Johor Bahru.
Supply of residential and commercial properties in Johor Bahru Existing stock Incoming supply Planned supply 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Property Demand Residential, commercial and industrial development in Johor, based on property transaction value, witnessed positive growth between 2006 and 2015, increasing from RM4.8 billion to R1V115.3 billion at a CAGR of 13.7%. Between 2006 and 2015, growth was witnessed in the transaction values for the residential and commercial property segments that increased from RM2.7 billion to RM9.3 billion and from RM1 A billion to RM3.7 billion respectively. Between 2006 and 2015, the residential and commercial property segments recorded CAGRs of 14.7% and 11 A% respectively. In the first half of 2016, total property transactions in the state of Johor was registered at RM7.0 billion, of which residential, commercial and industrial property transactions comprised RM4.3 billion, RM1.8 billion and RMO.9 billion respectively. In Johor, the greatest residential property transactions were witnessed in the district of Johor Bahru where transactions worth RM6.1 billion took place in 2014 compared to the state total of RM9.3 billion. Terraced properties in Johor and its capital city Johor Bahru continued to sustain strong demand as housing developers offered features such as gated and guarded security facilities to prospective homeowners. High­rise properties in Johor Bahru are especially targeted at Singaporeans and Malaysians working in Singapore. The demand for residential property in Johor is greatly affected by the state’s economic performance. During the period between 20063 and 20144, Johor’s GDP increased by 78.5% (from RM52.5 billion to RM93.7 billion) while its manufacturing GDP increased by 43.3% (from RM20.1 billion to RM28.8 billion). This economic growth, coupled with the Government’s plans to promote Iskandar Malaysia, has led to an increased workforce of 1.6 million persons in 2014 compared to the previous 1.3 million persons in 2006, and created increased demand for residential properties in the state of Johor. These economic developments which largely took place in the capital city of Johor Bahru had positive impact on residential property development in the area. Demand for residential and commercial properties witnessed a dramatic increase of 135.6% in 2013 compared to the previous year demand of RM8.7 billion following the completion of the foundation and infrastructure for Iskandar Malaysia that prepared the way for increased commercial activities in this capital city of Johor Johor Bahru City Centre is also being revitalised through the upgrading of its central business district and waterfront to reposition the city as a vibrant, modern and livable city centre, thus further drawing prospective homeowners and businesses to this city. [The rest of this page is intentionally left blank] 3 Johor’s GOP for the year 2006 is taken at constant 2005 prices 4 Johor’s GOP for the year 2014 is taken at constant 2010 prices 22.8  23.0  20  If)  c  o  n crl If)  15  C  jg  >,  1::  OJ  Q. 2  10  Q.  4­ o  OJ  :::>  ro  > ro ~  5 o  I  2006  20082007  20102009  2011  2012  2013  2014  2015  I11III Residential  “”‘!”Commercial  Industrial  –.-Total
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

SMITH ZANDER
Demand for residential, commercial and industrial properties in Johor a, b ‘–~—~—————–, 25 —~—————–~—~————~–~-­a Total value of properly transactions was registered at RM7.0 billion for the period of January to June 2016, of which residential, commercial and industrial properly transactions comprised RM4.3 billion, RM1.8 billion and RMO.9 billion respectively b Latest available as at 14 April 2017 Source: NAPIC The demand for residential and commercial properties in Johor Bahru, measured by property transaction values, have been growing on an upward trend between 2006 and 2015 as total transaction values increased from RM2.8 billion to RM8.5 billion at a CAGR of 13.1 %. Demand for residential and commercial properties witnessed a dramatic increase of 219.2% in 2013 compared to the previous year demand of RM5.2 billion following the completion of the foundation and infrastructure for Iskandar Malaysia in 2010 that prepared the way for increased commercial activities in this capital city of Johor. Johor Bahru City Centre is also being revitalised through the upgrading of its central business district and waterfront to reposition the city as a vibrant, modern and livable city centre, thus further drawing prospective homeowners and businesses to this city. In 2015, total residential and commercial transactions totaled approximately RM8.5 billion as residential and commercial properties transactions were registered at RM6.1 billion and RM2.4 billion respectively. Growth in 2013 was primarily fueled by the 405.0% year-an-year increase in transaction values in the commercial property segment. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
,–_~ —–_~~_—–_~_——-­18 16.6
-Residential !;;C;,Commercial –II-Total residential and commercial Total value of residential and commercial property transactions in Johor Bahru a a Latest available as at 14 April 2017 Source: NAPIC Johor’s CDP (2006 -2025) was launched for Iskandar Malaysia and encompasses the districts of Johor Bahru, Kulai (formerly known as Kulaijaya), Pontian and Kota Tinggi. Over the period of 2011 and 2015, Iskandar Malaysia intends to achieve the creation of 55,730 employment opportunities. This target is in line with the commencement of several jet catalyst projects under various flagship development zones, including the Danga Bay Integrated Waterfront City, Johor New Administration Centre at Kota Iskandar, Pasir Gudang Industrial Park and the development of Senai Airport City that are anticipated to spur Johor’s socio­economic development. Nine (9) major economic clusters have been identified to spearhead the growth of Iskandar Malaysia and these clusters are electrical and electronics, petrochemicals and oleochemicals, food and agro-processing, logistics and related services, tourism, health services, educational services, financial services and creative industries. The implementation of these economic plans and targeted strategies under the respective plans, including infrastructure and transportation improvement, have great impact on socio­economic developments in Johor, and the anticipated business opportunities arising from these economic plans will have positive impact on commercial property supply and demand in Johor. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)

Demand Conditions -Key Demand Drivers Increase in investments under Iskandar Malaysia will drive future demand for commercial and industrial properties The investment climate in Iskandar Malaysia has been gaining momentum since the launch of the COP in 2006. For Iskandar Malaysia’s first phase of development (2006 -2010), a total of RM69.5 billion cumulative investments were secured, approximately 47.9% above the RM47 billion target that was set for that period. This was an impressive achievement given that the global economy experienced financial distress during the 2008 and 2009 period. During the 2008 and 2009 period alone, Iskandar Malaysia secured committed investments amounting to RM16.0 billion and RM13.8 billion respectively. Committed investments during the first development phase went into various sectors including manufacturing, property development, utilities, leisure and tourism as well as Government spending. The Federal Government allocated a total of RM6.3 billion between 2006 and 2010 for key infrastructure projects in Iskandar Malaysia. Between 2006 and 2015, cumulative investments committed under Iskandar Malaysia totaled RM190.3 billion, of which others, which includes utilities, emerging technologies, tourism, education, healthcare, creative, financial services, logistics, retail properties and industrial properties, comprised RM87.1 billion, followed by manufacturing (RM54.1 billion), property development (RM40.1 billion) and Government (RM9.0 billion). A significant portion of Iskandar Malaysia’s investments were domestically sourced, amounting to approximately 59.7% of cumulative investments, while FDI inflows accounted for the remaining 40.3%. Between 2006 and 2015, approximately RM98.5 billion worth of investments have been realised under Iskandar Malaysia. This has led to the launch of a number of important developments, with several projects completed or approaching completion across all five (5) flagship development zones, and include catalyst projects in the education and leisure and tourism sectors, key infrastructure such as upgrading works on existing roads and new highways, and other projects in sectors such as retail and healthcare. Between January and September 2016, Iskandar Malaysia secured RM28.6 billion in new investments, bringing the total cumulative committed investment secured to RM218.8 billion from 2006 until 30 September 2016. Iskandar Malaysia intends to achieve a total investment target of RM383.0 billion over the 20-year plan duration. Further growth investments under Iskandar Malaysia bodes well for commercial and industrial development in the state as local businesses and companies grow and expand in terms of scale and reach. This signifies positively for the commercial and industrial property segments in Johor, where investments in larger business facilities are expected to witness growth resulting from increased total investments. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Cumulative committed investments under Iskandar Malaysia a, b ~–~–_._-­200 180 160 140 C ~ 120 :0 2′ es 100 (J) C OJ 80 E (jj (1) 60 ~ 40 20 0
I -Manufacturing -Property ~??jGovernmenl :Others ……Total investments J a Between January and September 2016, Iskandar Malaysia secured RM10.9 billion in new investments, bringing the total cumulative committed investment secured to RM218.84 billion from 2006 until 30 September 2016 b Latest available as at 14 April 2017 Source: IRDA Boost in employment as a result of business growth and expansion leads to the need for larger commercial and industrial space The increasing investments in Iskandar Malaysia have generated greater economic activity and hence, demand for human talent. More than 20,000 employment opportunities have been created over 2006 and 2010 in targeted economic sectors ranging from education and healthcare to electrical and electronics as well as leisure and tourism Close to 10,000 employment opportunities were created in the electrical and electronics sector followed by leisure and tourism (6,094) and education (5,910). Significant opportunities have also been recorded in the oil and gas, retail and biotechnology sectors. Over the period of 2011 and 2015, Iskandar Malaysia strove to achieve the creation of 55,730 employment opportunities. This target is in line with the commencement of several jet catalyst projects under various flagship development zones, including the Danga Bay Integrated Waterfront City, Johor New Administration Centre at Kota Iskandar, Pasir GUdang Industrial Park and the development of Senai Airport City that are anticipated to spur Johor’s socio-economic development. The creative sector was expected to be a major employer during this period through the targeted creation of 18,000 jobs following the realisation of projects inclUding MSC Cyberport and Pinewood Iskandar Malaysia Studios. Employment opportunities are also expected to remain strong in the electrical and electronics, leisure and tourism, and education sectors following the launch and commercialisation of several key developments in these respective sectors. Employment growth will positively impact property development, creating demand for larger commercial and industrial properties in Metropolitan Johor Bahru, in line with business growth. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)
Growth and enhancements in overall infrastructure and transportation sectors In addition to business growth, demand for commercial office and retail space in Johor Bahru and the broader Metropolitan Johor Bahru will also be significantly determined by infrastructure and transportation enhancements. One (1) of the largest infrastructure projects that has improved connectivity for Johor Bahru is the construction of the 14.5 km six (6)-lane Coastal Highway in 2011. This highway connects Johor Bahru to Oanga Bay and Nusajaya, reducing travel time between Johor Bahru and Nusajaya from the previous 45 minutes to the current 15 minutes. Several road improvement projects were also implemented under the 9MP to improve traffic flow and dispersal in and around Johor Bahru City Centre and these projects include the upgrading of Jalan Abu Bakar -Jalan Skudai, Jalan Tampoi and Jalan Kolam Ayer, as well as the addition of the new Abu Bakar Interchange and Yahya Awal Interchange. Malaysia and Singapore have also agreed to build the high-speed rail system that connects Kuala Lumpur and Singapore in just 90 minutes, which is slated for completion in 2020. The rapid transit system linking Johor Bahru to Singapore has also been approved and is expected to be completed in 2018. Government plans, policies and strategies to drive economic growth creates growth opportunities for the commercial and industrial property segments Property development in Johor and Iskandar Malaysia will continue to benefit from economic plans launched by the Government of Malaysia with the aim of achieving economic prosperity for the country. The ETP (2011 -2020) was launched with a goal to promote Malaysia into an inclusive and sustainable high-income country by the year 2020. Through the ETP, Malaysia will focus on developing a large and thriving services sector to supplement the nation’s historical strengths in oil and gas, agriculture and manufacturing; a balanced economy with significant contributions from private consumption and investment as well as from Government spending and exports; and productivity levels similar to those of other leading Asian economies through developing an economy that is more heavily driven by skills, innovation and knowledge. The Government targets to achieve a 6.0% growth rate in private investments and enhance investments in human capital to support an economy based on high-skilled labour, knowledge and innovation. The ETP identifies 12 drivers of economic growth focus, namely Greater Kuala Lumpur/Klang Valley; oil, gas and energy; financial services; wholesale and retail; palm oil; tourism; electronics and electrical; business services; communications content and infrastructure; education; agriculture; and healthcare, each with identified high impact projects that have potential to contribute to gross national income and employment. The ETP’s transformation of Malaysia’s economy will be led by the private sector, where 92.0% of over RM1.4 trillion investments will be funded by the private sector. FOI inflows are expected to account for RM358 billion, or 25.6% of private investments. The COP of Iskandar Malaysia is a detailed and comprehensive masterplan for the development of South Johor that aims to address socio-economic development in a holistic and sustainable manner with a vision of creating a developed, sustainable and glorious Johor (“Johor Maju, Lestari dan Gem//ang”) by 2020. Nine (9) major economic clusters have been identified to spearhead the growth of Iskandar Malaysia and these clusters are electrical and electronics, petrochemicals and oleochemicals, food and agro-processing, logistics and related services, tourism, health services, educational services, financial services and creative industries. Johor Bahru City Centre is the most urbanised district under the Iskandar Malaysia masterplan and houses high-density residential, commercial office towers and hotel properties. The state’s Customs, Immigration and Quarantine Complex is also located here, making Johor Bahru City Centre a key gateway to Singapore from Malaysia. Under Iskandar Malaysia’s COP, the Johor Bahru City Centre Master Plan was launched in 2010 to provide a blueprint for the development of the city centre as a place that provides an enabling environment and infrastructure that enhances Johor Bahru’s role as a capital city, thereby strengthening its value proposition as a major urban tourism and cultural centre for Iskandar Malaysia. This masterplan aims to develop a sustainable and vibrant city centre through commercial, retail and cultural growth while encouraging mixed-use outcomes as well as providing 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
residential amenities and encouraging housing choice and affordability. The redevelopment of KOMTAR as Aria Shopping Mall and Plaza Kotaraya as Galleria@Kotaraya have been identified CIS tourism projects for Johor Bahru city rejuvenation and revitalisation. The COP intends to achieve several key socio-economic targets for Iskandar Malaysia: Socio-economic targets under Iskandar Malaysia COP GDP per capita growth rate’–(oC:-:yo””‘)——-t—4.6 3.8 4.7 -~-!m-O~-I:t:-~-tg~-~o-W~-~~~l)—·——t—-~-:~——-~.~ I ~.~ ..-~­~nemPIOyment rate(%’)—–3.0 –2-.-1-4.6 —1 Po_p_u_la_ti_on_g_ro_wt_h_(_%e-) –‘-2._.3 —‘ 4_1._ _ ~__J
Source: IRDA
Projected impact of Iskandar Malaysia on selected socio-economic indicators in South Johor
Population size (million persons) 1.4 3.0 GDP (purchasing power parity) (USD million) 20.0 93.3 GDP per capita (purchasing power parity) (-Ue-S.~D~)~ -+-_ 14,790 It=’ 31-,1-0-0-.-­Labour force (million persons) 0.6 1.5.~————…,..———-+—-=–=———1 —-­Employment (million persons) 0.6 1.4I I Unemployment (%) —–·-··—-t—–iO-4.0-%-·-1.8% QObscr-ea-t-ed-.-..—–l\Jot applicable —-817,500—–= Source: IRDA • In May 2015, the Government tabled the 11 MP (2016 -2020) which outlined the nation’s development expenditure until 2020. The development of the 11MP was guided by MyNDS which focuses on rapidly delivering high impact on both the capital and people economies at low cost to the Government. The capital economy focuses on GOP growth, big businesses, large investment projects, and financial markets, while the people economy focuses on with what matters most to the people, which includes jobs, small businesses, the cost of living, family wellbeing, and social inclusion. The construction sector is expected to benefit from the 111V1P due to higher demand for modern and efficient infrastructure. Under the 11 MP, the construction sector is estimated to expand by 10.3% per annum during the 1-IIVIP period. This is attributed to continued civil engineering works and a growing residential segment to fulfil the demand for housing, particUlarly from the middle-income group. Demand for affordable housing by the low-income group will also remain favourable, which will be supported by several Government initiatives, such as Program Peru mahan Rakyat 1Malaysia, Rumah Idaman Rakyat and Rumah Mesra Rakyat. Other subsectors such as civil engineering and non-residential will remain robust in line with the development of major projects such as the Tun Razak Exchange, KL118 Tower, RAPID and the Pan-Borneo Highway.
• In 2017, the state Government of Johor announced the expansion of the Johor Affordable Housing programme to rural areas to allow more citizens to own their own homes. Affordable homes were initially built within Johor Baru and its surrounding areas due to the high demand in these areas. Nonetheless, several other areas have since been identified inclUding Lenga, Segamat, Tanjong Piai, Yong Peng and Labis.

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
In 2017, the Sultan of Johor announced the launch of the “Rumah Impian Sultan Ibrahim” comprising an initial 1,840 homes, including bungalows and semi-detached houses that would be built in phases at three locations in Johor. Launched under the Sultan Ibrahim Foundation, the project will involve bUilding houses priced under RM100,000 for Johor citizens who cannot afford to buy a house, those who do not own a house and those from the low -income population. Electrical services specialised construction works are performed during the erection or reconstruction of buildings or structures, and entails the design, installation, commissioning and maintenance of electrical wiring and fittings and ELV systems. As such, growth in the construction sector would also result in the growth in electrical services and ELV and structured cabling as the demand for electrical services, particularly in new development projects, is dependent on construction activities undertaken to erect residential, commercial and industrial properties. Initiatives announced under 11 MP, specific to the construction sector in Malaysia Focus area Uplifting B40 households towards a middle-class society Transforming rural areas to uplift wellbeing of rural communities J• •• • Increasing the provision of affordable housing
• The Government will continue to ensure that affordable homes are available to B40 households. Existing low-cost flats and houses will be refurbished as part of a holistic campaign to improve the liVing conditions of the community. For poor households in rural areas, especially Orang Asli in Peninsular Malaysia and those living in Sabah and Sarawak, the Government will continue to provide housing with basic amenities through the construction of integrated selllements under Program Bantuan Rumah. The Program Perumahan Rakyat will be continued for poor households in urban areas.

Increasing access to healthcare services • In rural areas, more community clinics will be built to increase access to basic healthcare services. -..”…..–:-:————-:–:-~ :-,.—…….,–_._-­• Increasing the provision of road, water and electricity supply New roads will be constructed and existing roads, including eX-logging roads, will be upgraded to improve connectivity, particularly in Sabah and Sarawak as well as Orang Asli settlements in Peninsular Malaysia. Priority will be given to the construction of roads connecting villages as well as linking villages with the nearest towns. During the 11 MP, 3,000 km of paved roads will be constructed. The Rural Water Supply programme, to supply clean and treated water directly to each household, will be expanded and this will involve connecting households to the meter stands of the reticulation systems. In addition, alternative systems such as gravity feed, tube wells and rain water harvesting will be used in remote and isolated areas. Under the 11 MP, 99% coverage of access of clean and treated water will be provided to rural houses reaching 90,000 additional houses. The Rural Electricity Supply programme will continue to focus on off-grid _ : generation for remote and isolated areas. The alternative system of solar hybrid and mini hydro will be supported by micro and pico-grid to increase coverage. Under the 11 MP, 99% coverage of access of electricity will be provided to rural houses reaching 36,800 additional houses. .-.—-..——­Accelerating regional  _  _··_-_·_—_·_———————–1• Revisiting regional economic corridor priorities and industry-focus  growth for better  •  The Border Economic Transformation  Programme will enhance outcomes from  geographic balance  regional economic development by bringing inclusive development and prosperity  to  the  border  regions  of  Malaysia.  A  range  of  large-scale  economic  growth  projects and local income-generating opportunities will be developed, including  the development of Lembah Chuping  and  Perlis Inland Port in  Perlis,  rubber­ based downstream processing in Rubber City in Kedah, the construction of Plaza  IMT-GT which is a retail plaza in Bukit Bunga, as well  as the redevelopment of  Kampung Laut in Tumpat, Kelantan.
• Improving connectivity and mobility 7. EXECUTIVE SUIVIMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Description • Transportation networks will be improved to enhance connectivity and mobility in regional economic corridors. This includes the construction and upgrading of roads and highways such as the Pan Borneo Highway to link SCORE and SDC; Central Spine Road and Kota Bharu-Kuala Krai Highway to increase connectivity in the ECER. The completion of Mukah Airport is expected to accelerate development in Mukah and the surrounding areas within SCORE, with Mukah to be developed as a smart city as well as one of the growth nodes in SCORE. r-c:::–,—_._.——!–…,—-,——–.- ‘–,-­Enhancing Bumiputera Strengthening institutional-based programmes for assets ownership 0 Economic Community Institutional-based programmes including Bumiputera real estate investment trust opportunities to will continue to be strengthened to enhance Bumiputera ownership of large increase wealth commercial and residential properties in strategic locations. Yayasan Wakaf ownership Malaysia, state Islamic religious councils, and other Bumiputera-based institutions
will collaborate to develop Malay reserve and waqf land to unlock value while retaining Bumiputera ownership. o Prioritising regional connectivity for new highways need-based transport
Building an integrated To achieve a balanced economic development, highway development will be system
focused outside the Klang Valley and other urban areas. The 11 MP will therefore focus on rural and rural-urban connectivity. The Pan Borneo Highway will promote better connectivity in Sabah and Sarawak. Further development of the Central Spine Road, Kota Bharu-Kuala Krai Highway, and the East Coast Expressway will improve connectivity in Peninsular Malaysia and catalyse growth in the East Coast region. The completion of the West Coast Expressway in 2019 will also provide better access to the west coast of Perak and Selangor. o Increasing public transport modal share in cities • Improving urban public transport remains critical for Malaysia as 75% of its population will be living in cities by 2020. The Klang Valley MRT system will become operational during the 11MP. The Klang Valley MRT Line 1 will traverse 51 km between Sungai Buloh and Kajang, through 31 stations serving about 1.2 million people with a daily expected ridership of 400,000. Construction on the Klang Valley MRT Line 2 will also start in 2016 and is estimated to become operational by 2022. Additionally, construction on a LRT Line 3 connecting Bandar Utama to Klang, running over 36 km and serving 25 stations will start in 2016 with expected completion in 2020. o Deploying roads and public transport to increase rural and rural-urban connectivity Rural roads linking the main road networks will continue to be given focus. These roads provide access to basic social amenities such as health, education, and other public services. Rural roads will also create economic opportunities for the residents and further alleviate poverty among the rural households. • The Government will continue to enhance connectivity and safety of rural air services by improving STOL ports. The construction of a new airport in Mukah will be completed in 2018 and the relocation of the Lawas STOL port in Sarawak to a suitable site will be carried out. o Upgrading air navigation system and airport infrastructure • A new Kuala Lumpur Air Traffic Control Centre will be built at KLiA to replace the National Control Centre at Subang, Selangor to improve aircraft movement capacity. In addition, the Communication, Navigation and Surveillance as well as the Air Traffic Management systems will be upgraded to improve efficiency of air navigation services. The Langkawi International Airport, Kedah, and the Sultan Ismail Petra Airport, Kelantan, will be upgraded to cater for the expected increase in passengers. o Improving port accessibility and capacity • Accessibility to major ports will be improved to cater for bigger vessels through channel deepening works. In addition, port operators will undertake capacity expansion, which includes building additional berths and wharfs. These improvements will attract more international liners and mega vessels with capacity L. .. -L. —‘-_ 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONTD)

Description of 18,000 twenty-footer equivalent units to call at these ports. —–.,.,.-;–.-…,,.–;-_._———_._.Encouraging Ensuring security of supply for gas sustainable energy use
Gas supply security would be ensured through the construction of pipelines from to support growth
the Malaysia-Thailand Joint Development Area to Kerteh, Terengganu; construction of the RGT-2 in Pengerang, Johor; and the commissioning of two (2) floating liquefied natural gas units offshore Sabah and Sarawak with a capacity of 2.7 metric tonnes per annum. Reliability of gas supply in Sabah will be improved with additional pipeline connections from offshore fields to demand centres in Federal Territory Labuan, as well as Kota Kinabalu and Kimanis in Sabah. Platforms will be connected through multiple links to provide alternative bypass options and provide capacity to users in the event of platform shutdowns. Improved connectivity for Federal Territory Labuan will be realized through the establishment of a pipeline connection between the Sabah-Sarawak Gas Pipeline and Federal Territory Labuan. Supporting the development of PIPC • RAPID within PIPC is a major development that will add 300,000 barrels per day of oil refining capacity in Malaysia during the 11 MP. The facility will be able to produce EURO 4M and EURO 5 grade petrol, in addition to 7.7 metric tonnes per annum of various grades of specialised products such as synthetic rubber and high grade polymer by 2020. In addition, the complex will have a 1,220 MW co­generation power plant of which 620 MW will be utilised by RAPID and the remaining 600 MW exported to the grid. The Government will provide support to construct essential infrastructure such as roads, drainage, and utilities for this development. Another investment in PIPC will be secured by the Johor Petroleum Development Corporation during the 11 MP to complement existing investments by DIALOG-Vopak and PETRONAS. Improving efficiency and reliability of electricity supply • Construction of new power plants to produce 7,626 MW will be initiated to replace retiring plants and meet the growing peak demand. A number of 500 kilovolts and 275 kilovolts transmission projects to reinforce the grid systems will be completed to enhance the security of supply to major load demand centres. The additional generation capacity coupled with expanded transmission and distribution networks will improve the system average interruption duration index for Peninsular Malaysia, Sabah, and Sarawak. ….—.—-.-..–1—:::—:–..,…….–:–:–:-­Transforming • Enhancing knowledge content construction
• The strategies to enhance knowledge content in the construction industry include increasing the quality of human capital, accelerating capacity and capability building of SMEs and Bumiputera contractors, and reducing the mismatch between labour demand and supply. Key initiatives include fostering greater collaboration between CIDB, the respective professional boards, and training institutions to develop industry-relevant training modules. A structured skilled trade apprenticeship programme for specific courses such as safety supervisors, crane operators, and rotary drill operators will also be introduced to produce a highly skilled workforce. SME capabilities will be enhanced, particularly Bumiputera contractors, with the support of key partners and the establishment of productivity centres of excellence for sharing of best practices. Regular manpower planning will be undertaken to reduce the mismatch between labour demand and supply. The proportion of skilled foreign labour will be increased by streamlining entry requirements and introducing a new levy system.
• Driving productivity
• The strategies to increase productivity in the construction sector will focus on increasing technology adoption and modernisation of construction methods as well as reducing dependency on low-skilled labour. The labour productivity of the sector is targeted to increase by about 1.6 times, from RM39, 116 per worker in

‘———­—-~-~._—“. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
Focus area Investing in competitive cities and regional economic corridors

 

 

SMITH ZANDER
Description 2015 to RM61,939 per worker by 2020. A number of initiatives will be introduced to drive productivity, including expediting the adoption of the Industrial Building System by the industry through the revision of the public procurement policy and Uniform Building By-Laws and improving existing regulations to ease construction­related business processes. This effort, which started with Kuala Lumpur City Hall, will be expanded to other local authorities. The use of ICT will be enhanced by providing a common platform to use BIM on a pay-per-use basis.
o Fostering sustainable practices In line with the growing need for green construction practices, strategies will be geared towards increasing the sustainability of built infrastructure. This will include inculcating green practices in the construction value chain and developing legislation that supports sustainable construction activities. Three (3) initiatives to foster environmental sustainability in the sector are: mandating compliance to sustainable waste management practices through EMS ISO 14001 certification;
enhancing the current rating systems for buildings and developing new standards for infrastructure to promote sustainability; and enhancing the awareness and accountability of health, safety and environment, where health, safety and environment good practices will be made obligatory. The minimum level of construction workers’ amenities will be raised in the code of practice and further mandated within standard contracts.

o Increasing the internationalization of construction firms

• The strategies to increase the internationalisation of firms will focus on building capability and scale of firms by encouraging highperforming SMEs to forge partnerships with larger corporations or form multidisciplinary consortia when bidding for international projects. The pUblic procurement policy will be reviewed to facilitate the formation of such consortia. In addition, firms will be encouraged to leverage free trade agreements and mutual recognition agreements, and provide feedback to the Government on challenges faced when venturing abroad to enable issues to be addressed at government-to-government level. The SEF, which covers activities such as tendering, negotiating, and conducting feasibility studies for international projects as well as export promotion activities, will assist construction firms to secure opportunities abroad.
o Expanding Transit-oriented Development (“TOD”) TOO refers to urban development concepts involving the mixed use of residential and commercial development to be pedestrian-friendly, designed with maximum access to public transport. City authorities will adopt TOO as part of the city’s competitiveness master plan to provide mobility options to residents, add vibrancy to city spaces, reduce pollution and energy consumption by reducing commute times and increasing the use of public transport or walking, and also revitalise brownfield areas within the city. Efficient land use through TOO will be given priority along established public transport routes.
o Strengthening knowledge-based clusters Knowledge-based clusters will be developed to attract investment and talent. Knowledge-based clusters are physical hubs within the city that agglomerate industry-specific firms and talent, particularly for industries such as creative content, ICT, and professional services. Knowledge-intensive investments will be given priority in the selected cities. Institutions of higher learning and research institutes located in the cities will be the catalysts to create knowledge-based clusters.

• Enhancing livability Cities need to be livable and should create a conducive environment that attracts talent to live, study, work, and play in. Better city planning mechanisms will be developed, including land use zoning that promotes residential, commercial, and basic social amenities in close proximity to increase walkability. Sports, arts, and cultural facilities will be promoted through greater collaboration between related associations, corporate bodies, –‘-__and non-governmental organisations. Emphasis .•••• .J_…:.- … 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
• &••Focus area will also be given to the quality, capacity, and reliability of public transport, social amenities, and telecommunications networks. Healthcare facilities and high­quality schools will be planned for and developed accordingly to meet local demand. Vibrant cultural attractions, food and beverage and retail spaces will be developed to create cities that are attractive to global talent. • Adopting green-based development and practices
• All these cities will place high importance on continuous sustainable growth by enhancing green-based development and optimising low carbon resources. Environment-friendly practices, such as green buildings, green lifestyles, and sustainable consumption and production, will be embedded within the development plans of these cities.

L-._’– . . .——c=—,–,-1 Source: Economic Planning Unit Malaysia The implementation of these economic plans and targeted strategies under the respective plans, including infrastructure and transportation improvement, have great impact on socio-economic developments in Johor, and the anticipated business opportunities arising from these economic plans will have positive impact on commercial property supply and demand in Johor Bahru. Development of the oil and gas sector and ICT industry create demand for construction activities The development of the oil and gas sector and ICT industry in Johor would result in a growth in the commercial and industrial property segments in the state. As part of an effort to develop the ICT sector, the Johor State Government announced its intention in 2016 to develop a 20,000 hectare area in the town of Sedenak into a data centre. The Iskandar Malaysia Development Plan consists of five (5) flagship zones, and Iskandar Malaysia’s initiatives includes the development of the oil and gas industry in Johor. The development of the oil and gas industry in Johor is primarily in Flagship C or the Western Gate Development and Flagship D or the Eastern Gate Development, and includes the development of oil and gas processing, support industries, manufacturing, storage and distribution terminals, and storage and bunkering activities. The development of the oil and gas sector in Johor would generate greater economic activity and result in a greater demand for human talent. There is an established port and industrial park in Tanjung Langsat, with three (3) existing oil and gas storage facilities, namely the Tanjung Langsat Port Oil Terminal, Langsat Terminal One and Langsat Terminal Two. In order to increase total storage capacity to two (2) million cubic metres by 2020, an additional storage facility, Langsat Terminal Three, will be built. The location, land and port infrastructure availability will enable Tanjung Langsat to emerge as a petroleum support services hub in Johor. Oil and gas development in the Pengerang area is primarily focused on the Pengerang Integrated Petroleum Complex, which is located on approximately 20,000 acres of land, and will house oil refineries, naphtha crackers, petrochemical plants, liquefied natural gas import terminals and a regasification plant. To date, there are two (2) major projects in the Pengerang Integrated Petroleum Complex area, namely the Pengerang Deepwater Petroleum Terminal and the Petronas Refinery and Petrochemical Integrated Development projects. The first phase of the Pengerang Deepwater Petroleum Terminal project was completed in December 2014, and involved the construction of a storage capacity of approximately 1.3 million cubic metres and six (6) deepwater berths, with the capability of handling the storage, blending and distribution of crude oil, petroleum, chemical and petrochemical feedstock products and by-products. The second phase is currently being carried out, and involves the development, construction and operation of the facilities required for the handling, storage and distribution of crude oil, petroleum, chemical and petrochemical feedstock products and by-products to and from the Petronas Refinery and Petrochemical Integrated Development complex. In addition, the second phase also involves the construction of a storage capacity of approximately 2.1 million cubic metres and a deepwater jetty with 12 berths. Further, the 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
development of the Pengerang Liquefied Natural Gas Terminal located in the Pengerang Integrated Petroleum Complex area, which comprises liquefied natural gas storage, loading and regasification facilities will further boost the oil and gas industry in Johor. The expected completion date of the Pengerang Liquefied Natural Gas Terminal is in 2018. Globally, crude oil prices began witnessing a drop below the US0100 per barrel mark in September 2014 after nearly five (5) years of stability, raising concerns on the impact of lower oil prices on the oil and gas industry in Malaysia. The combination of robust world crude oil supply growth and weak global demand has contributed to rising global inventories and falling crude oil prices. The decline in crude oil prices has impacted upstream oil and gas activities in Malaysia, resulting in lower capital expenditure on exploration and production activities. However, despite reduced exploration and production activity of crude oil, the oil and gas industry remains as a significant contributor to Malaysia’s GOP. Activities in the downstream oil and gas sector remain robust as petrochemical companies that use oil and gas products to make the various derivatives and chemicals that are used in consumer goods such as plastics are benefitting from the lower crude oil prices. Emergence of tourism as a key economic sector Tourism is also a key economic cluster under the Iskandar Malaysia masterplan. Latest available figures indicate that tourist arrivals in Johor have increased from approximately 11 million in the first eight (8) months of 2011 to 14 million in the first eight (8) months of 2012. Johor is also now becoming a destination where tourists spend time at as opposed to stopping by en route to Singapore. Iskandar Malaysia has built in place infrastructure and facilities that provide family tourism, edu-tourism and health tourism in an effort to boost tourist arrivals and tourism receipts. The demand for hotel rooms is anticipated to increase, thus improving occupancy rates, as several projects with tourism components have been launched in the corridor. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
SMITH ZANDER 6 PROSPECTS AND OUTLOOK FOR CASNET HOLDINGS BERHAD Economic growth is a catalyst for development and growth in residential, commercial, and industrial construction activities. Construction activities in Malaysia are largely influenced by the nation’s economic development. Between 2006 and 2016, Malaysia’s real GOP increased from RM573.9 billion to RM1, 107.9 billion, while the nation’s GOP for construction activities increased from RM16.0 billion to RM50.1 billion. Between 2006 and 2016, construction activities contributed to between 2.5% and 4.5% of Malaysia’s total GOP, increasing from 2.8% in 2006 to 4.5% in 2016, signifying its importance to overall economic development. Between 2006 and 2014, the construction sector in Malaysia, as measured by the value of projects awarded, grew from RM60.9 billion to RM178.8 billion and recorded a CAGR of 14.4%. The construction sector experienced a slowdown in 2008 and 2009 as public and private expenditure on construction activities were tightened due to the global financial crisis which occurred during the period. However, the construction sector rebounded in 2010 in a show of resilience as the Government of Malaysia and the private sector resumed construction activities. In 2015, the construction sector in Malaysia experienced a year-on-year dip of 21.9%, to an awarded project value of RM139.7 billion. Subsequently in 2016, the awarded construction project value was registered at RM125.0 billion. The fall in awarded project values in 2015 and 2016 was largely due to the slowdown in demand in the property market. Nevertheless, the construction sector in Malaysia has proven to be resilient in the past, having recovered from troughs that occurred during the global financial crisis in 2008 and 2009, and thus the construction sector in Malaysia is expected to recover over the long term. SMITH ZANDER expects the value of projects awarded to further grow from RM125.0 billion in 2016 to RM153.9 billion in 2019 at a CAGR of 7.2%. The growth in electrical services and consequently ELV and structured cabling, correlate closely to the growth of residential, commercial, industrial and infrastructure construction activities, where these developments serve as end-user properties of electrical services. Demand for electrical services is also supported by increase in investments, government expenditure, greater adoption of intelligent building automation systems and integrated building automation solutions, as well as greater emphasis on safety and security. Electrical services in Malaysia, measured in terms of value of awarded electrical wiring and fittings projects, ELV and structured cabling for residential, commercial, industrial and infrastructure development, increased from RM1.9 billion in 2006 to RM7.1 billion in 2014 at a compound annual growth rate of 17.9%. In 2015, electrical services dipped to RM4.6 billion in terms of value of projects awarded, mirroring the construction sector that was affected by the slowdown in demand in the property market. During the period between 2006 and 2015, electrical services for new development projects increased from RM1.7 billion to RM3.8 billion at a CAGR of 9.3%. New development projects formed approximately 90.8% of total electrical services in 2006 and gradually decreased to 81.6% in 2015. Nonetheless, new development projects continue to comprise a significant percentage of total electrical services. During the same period, other electrical services, comprising upgrading, expansion, maintenance, repairs and renovation projects, increased from RM173.6 million to RM854.9 million at a CAGR of 19.4%. Based on SMITH ZANDER’s research, the value of awarded ELV and structured cabling projects comprise approximately 20.0% of the value of awarded electrical services works. Based on this, ELV and structured cabling projects were valued at RM378.7 million in 2006 and increased to RM1.4 billion in 2014 at a CAGR of 18.0%. The value of awarded ELV and structured cabling projects subsequently dipped to RM926.8 million in 2015, in line with a decline in the construction sector in the same year. Nevertheless, SMITH ZANDER projects the ELV and structured cabling works industry to recover and grow from RM926.8 million in 2015 to RM1.1 billion in 2018, based on awarded project value, at a CAGR of 5.9%. Growth in ELV and structured cabling is anticipated to be driven by recovery in construction activities as a result of private investments and Government policies to spur growth in the construction sector and socio-economic development. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
In Malaysia, the ICT industry is a high performing sector that contributes to enhancing overall national productivity, where it has evolved beyond technological tools to become a socio-economic enabler and key driver of business. The ICT industry is able to improve the efficiency and effectiveness of product and/or service delivery, and the extensive features and characteristics of ICT are continually impacting the way we work, play and learn. The development of ICT services in Malaysia has been promoted by MSC Malaysia, the country’s nationallCT initiative, under the banner of MDEC. The ICT industry in Malaysia, comprising telecommunication services and computer services, has witnessed positive growth historically. The ICT industry in Malaysia, measured by value added services for telecommunication services and computer services, increased from RM22.4 billion in 2006 to RM60.2 billion in 2015 at a CAGR of 11.6%. Telecommunications services comprised 68.8% of ICT services in 2015, and registered a CAGR of 8.8% having increased from RM19.3 billion in 2006 to RM41.4 billion in 2015. Computer services comprised the remaining 31.2% of ICT services in 2015, and witnessed a CAGR of 22.2% between the period of 2006 and 2015. Under the 11 MP, the ICT industry in Malaysia is expected to achieve a contribution of 18.2% or approximately RM324.9 billion to the nation’s GOP by 2020, thus reflecting the prospects and outlook of the ICT industry for industry stakeholders. The future of the ICT industry is promising on the back of on-going capital intensive economic transformation programmes and mega projects that have been stimulating domestic demand for ICT services, including the MRT project in the Klang Valley; Petronas RAPID project in Pengerang, ,Iohor; Tun Razak Exchange in Kuala Lumpur, River of Life in the Greater Kuala Lumpur/Klang Valley, Bandar Malaysia at Sungai Besi as well as the regional economic corridors comprising Iskandar Malaysia, NCER, ECER, SOC and SCORE. The demand for property in Malaysia, measured by value of property transactions, increased from RM47.0 billion in 2006 to RM111.8 billion in 2015 at a CAGR of 10.1%. The residential property segment witnessed the highest CAGR of 10.7% between 2006 and 2015, recording a rise from RM29.4 billion to RM73.5 billion, The total value of property transactions was registered at RM49.7 billion for the period of January to June 2016, of which residential, commercial and industrial property transactions comprised RM32.7 billion, RM11.3 billion and RM5.6 billion respectively. Regional growth is strongly driven by growth of property demand in key sub-markets, with the Klang Valley strongly driving growth in the Central region, Johor driving growth in the Southern region and Penang and Perak driving growth in the Northern region. In 2015, the Central region was the most significant regional property market in Malaysia where RM60.2 billion worth of property transactions mainly for residential properties took place during that year, whereas the most significant growth in property transaction value over the period of 2006 and 2015 was witnessed in the East Coast that recorded at a CAGR of 14.5% from RM1.9 billion to R/\/I6.6 billion compared to the national CAGR of 10.1% from RI\/I47.0 billion to RM111.8 billion. Construction activities in the Southern region of Malaysia have intensified follOWing the launch of Iskandar Malaysia. Between 2006 and 2015, the construction sector in the Southern region of Malaysia, as measured by total project value, grew from RM4.6 billion to RM35.3 billion and recorded a CAGR of 25.5%. Between the period of 2006 and 2015, residential construction projects increased from RM2,3 billion to RM14.0 billion at a CAGR of 22.2%, while commercial and industrial construction, termed non-residential construction, increased from RM2.2 billion to RM21.3 billion at a CAGR of 28.7%. In 2016, the total project value of construction projects in the Southern region was registered at RM 13.6 billion, of which residential construction projects comprised RM4,9 billion and non-residential construction projects comprised the remaining RM8.7 billion. The fall in awarded project value in the Southern region in 2016 was largely due to economic slowdown in Malaysia as a result of the depreciating Ringgit against the United States Dollar and falling crude oil prices (USD50.75 per barrel and USD42.81 per barrel in 2015 and 2016 respectively compared to USD96.24 per barrel in 2014). These factors have adversely impacted the construction sector in the Southern region as there was a cutback in private and public expenditure on construction activities. l\Jotwithstanding this, future growth in the construction sector in the Southern region will be positively impacted by: 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (CONT’D)
the increase in investments under Iskandar Malaysia that will drive future demand for property; and Government plans, policies and strategies to drive economic growth in the Southern region. The state of Johor is a key driver for the high commercial property transactions in the Southern region as the launch of the Iskandar Malaysia masterplan in 2006 has resulted in intensified business activities in the state, thus creating strong demand for commercial properties. Residential. commercial and industrial development in Johor, based on property transaction value, witnessed positive growth between 2006 and 2014 from RM4.8 billion to RM23.0 billion at a CAGR of 21.6%. Transactions for residential, commercial and industrial properties in 2015 was RM 15.3 billion, registering a CAGR of 13.7% between 2006 and 2015. Demand for properties in Johor are supported by increase in investments, growth in the number of companies and businesses, government plans, policies and strategies, and a rise in tourist arrivals. The construction sector in Johor is expected to witness growth, spurred by major projects which include the railway project between Gemas and Johor Bahru spanning 197 km, the Forest City project and the high speed rail project connecting Malaysia and Singapore. The demand for residential and commercial properties in Johor Bahru, the capital city of Johor, measured by property transaction values, have been growing on an upward trend between 2006 and 2015 as total transaction values increased from RM2.8 billion to RM8.5 billion at a CAGR of 13.1 %. Demand for residential and commercial properties witnessed a dramatic increase of 219.2% in 2013 compared to the previous year demand of RM5.2 billion following the completion of the foundation and infrastructure for Iskandar Malaysia in 2010 that prepared the way for increased commercial activities in Johor Bahru. Johor Bahru City Centre is also being revitalised through the upgrading of its central business district and waterfront to reposition the city as a vibrant, modern and livable city centre, thus further drawing prospective homeowners and businesses to this city. In addition, the terraced properties in Johor and Johor Bahru continue to sustain strong demand as housing developers offered features such as gated and guarded security facilities to prospective homeowners. Johor’s CDP (2006 -2025) was launched for Iskandar Malaysia and encompasses the districts of Johor Bahru, Kulai (formerly known as Kulaijaya), Pontian and Kota Tinggi. Over the period of 2011 and 2015, Iskandar Malaysia intends to achieve the creation of 55,730 employment opportunities. This target is in line with the commencement of several jet catalyst projects under various flagship development zones, including the Danga Bay Integrated Waterfront City, Johor New Administration Centre at Kota Iskandar, Pasir Gudang Industrial Park and the development of Senai Airport City that are anticipated to spur Johor’s socio-economic development. Nine (9) major economic clusters have been identified to spearhead the growth of Iskandar Malaysia and these clusters are electrical and electronics, petrochemicals and oleochemicals, food and agro-processing, logistics and related services, tourism, health services, educational services, financial services and creative industries. The implementation of these economic plans and targeted strategies under the respective plans, including infrastructure and transportation improvement, have great impact on socio-economic developments in Johor, and the anticipated business opportunities arising from these economic plans will have positive impact on commercial property supply and demand in Johor. In 2015, electrical services in Malaysia, measured by the total value of projects awarded, was registered at RM4.6 billion, where ELV and structured cabling projects were valued at RM926.8 million. During this same period, Cabnet Holdings Berhad was awarded projects amounting to RM29.08 million and thereby garnered a market share of 3.1 % in Malaysia based on the total value of ELV and structured cabling projects awarded. SMITH ZANDER believes that the prospects for Cabnet Holdings Berhad will be supported by the long term growth of the construction sector that is projected to grow from RM125.0 billion in 2016 to RM153.9 billion in 2019 at a CAGR of 7.2% and benefit the Central and Southern regions including the state of Johor, the prospects of the ICT industry under 11 NIP, as well as the positive outlook in the demand for electrical services.

 

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