4. RISK FACTORS 4. RISK FACTORS NOTWITHSTANDING THE PROSPECTS OF OUR GROUP AS OUTLINED IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS (WHICH MAY NOT BE EXHAUSTIVE) THAT MAY HAVE A SIGNIFICANT IMPACT ON OUR FUTURE PERFORMANCE, IN ADDITION TO OTHER INFORMATION CONTAINED ELSEWHERE BEFORE INVESTING IN OUR SHARES. IF YOU ARE IN ANY DOUBT AS TO THE INFORMATION CONTAINED IN THIS SECTION, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER. 4.1 Risks relating to our industry 4.1.1 We are affected by government policies and economic factors that are beyond our control Our Group may be affected by any adverse changes in the government policies. Introduction of new laws and regulations may impose and/or increase restrictions on the construction sector, ELV systems and structured cabling industry and ICT industry in Malaysia. It may also result in changes to financial and banking policies and gUidelines. Changes in government policies may affect our Group’s ability to continue its operations in the industry, for example changes in CIOB licensing requirements may result in our Group not being able to renew its CIOB license. Consequently, our Group will not be qualified to secure any projects. In addition, Bank Negara Malaysia may introduce new policies or revise current policies that may affect overnight policy rates (which in turn will affect lending rates charged by banks in Malaysia) or affect repatriation of funds into and from Malaysia. These may affect the overall economy of the country. Bank Negara Malaysia may also revise its credit policy, which may influence banks to revise their lending policies accordingly. Changes in financial and banking policies may affect our Group’s ability to secure financing for its operations and/or increase in cost of financing, which may in turn affect its ability to secure and deliver projects and/or increase our Group’s cost of operations respectively. The changes in the policies pertaining to repatriation of funds into and from Malaysia may affect our Group as our Group had undertaken projects in Brunei and Indonesia in the past and any future oversea projects to be undertaken by our Group pursuant to the Collaboration Agreement. Any widespread and/or prolonged economic slowdown will affect businesses and consumer confidence which will in turn affect the spending trend, either from the public or private sector. Economic factors include factors such as unemployment rates, GOP and inflation rates that may affect pUblic expenditure and/or private expenditure, thereby affecting the economy in general. Economic downturns may cause a decline in demand for our Group’s seNices and solutions. There can be no assurance that changes in any of the abovementioned risks will not have a material adverse effect on our business operations and financial performance. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4. RISK FACTORS (CO NT’D)
4.1.2 We are dependent on the construction sector in Malaysia We are dependent on the construction sector as the prospects of the industry in which our Group operates are correlated to the performance of the construction sector, which in turn is dependent on the state of the Malaysian economy. Any downturn in the Malaysian economy in general would lead to a decrease in the demand for properties which would in turn lead to a decrease in property-related construction activities due to weaker consumer demand. This may affect the overall demand of our Group’s services and solutions which will in turn affect our Group’s financial performance. The construction sector is affected by, amongst others, the political stability (where it affects business and consumer confidence, and ultimately investments or expenditure for construction-related actiVities) and economy condition of the country which is dependent on factors such as inflation, labour supply as well as labour and raw material cost. Furthermore, construction activities are also susceptible to risks such as rise in financing cost, fluctuating demand for properties as well as possible property cooling measures implemented by the government. According to the IMR Report, the construction sector in Malaysia, as measured by the value of projects awarded, grew from RM60.9 billion in 2006 to RM178.8 billion in 2014 at a CAGR of 14.4%. In 2015, the construction sector in Malaysia experienced a dip in terms of awarded project value to RM139.7 billion from RM178.8 billion in 2014. 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. According to the IMR Report, 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 construction sector in Malaysia is expected to recover over the long-term, with the upcoming of several major infrastructure construction projects highlighted in the Economic Transformation Programme, 11 Malaysia Plan, economic corridors, Budget 2015 and BUdget 2016, inclUding the following projects:.. Klang Valley MRT System Line 2; .. Extension of the Light Rail Transit lines CLRT”); .. KL -Singapore High Speed Rail project; .. East Coast Rail Line; and to 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 the follOWing projects:[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4. RISK FACTORS (CONT’D) .. 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 ; .. Tun Razak Exchange; .. Genting Integrated Tourism Plan in Genting Highlands; .. Port Dickson Waterfront Development; and .. Residential North Project in Johor.
(Source: IMR Report) Nonetheless, there can be no assurance that any adverse change in the construction sector will not have a material adverse effect on our business operations and financial performance going forward.
4.1.3 Inability to keep up with technology changes and advancements Our Group operates in the ELV systems and structured cabling industry and ICT industry in Malaysia. The industries in which our Group operates is characterised by technological developments and evolving industry standards1. Technology changes have led to the development of new products and systems and/or enhanced features for existing products and systems. These technology changes in the industries in which our Group operates include digital, network-based video surveillance systems which have video analytics and time stamping capabilities, and are supported by a full range of hardware and software solutions. Our Group needs to keep abreast of such development as it impacts the services and solutions that we offer. To date, our Group has been able to keep up with the technology changes. In the event our Group is not able to keep up with market demands arising from technology changes, our business operations and financial performance will be adversely affected.
4.1.4 We face competition from existing industry players The ELV systems and structured cabling industry in Malaysia is competitive, owing to the large pool of industry players that compete for public and private projects in residential property, commercial property and industrial property and infrastructure segments in the country. The ELV systems and structured cabling industry comprise industry players who are:[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 1 Industry standards such as the standards set by Institute of Electrical and Electronics Engineers (IEEE) Standards Association (a technical professional organisation and developer of international standards that underpin telecommunications, IT and power generation products and services) pertaining to structured cabling specifications may require our Group to adopt new structured cabling hardware and/or new skills in order to remain relevant and meet the needs of our customers. 4. RISK FACTORS (CONT’D) (i) Distributors-cum-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;
(ii) installers of electrical wiring and fitting, electrical equipment and ELV systems, components and parts comprising industry players that secure contracts to install ELV systems and structured cabling; and
(iii) system integrators comprise companies that secure contracts to install ELV systems by integrating hardware and software products from multiple vendors based on the specific requirements of buildings. According to the IMR Report, in 2015, electrical services in Malaysia, measured by the total value of projects awarded, was registered at RM4.6 billion, where ELV systems and structured cabling projects were valued at RM926.8 million. During the same period, our Group was awarded with projects amounting to RM29.08 million and thereby garnered a market share of 3.1 % in Malaysia based on the total value of ELV systems and structured cabling projects awarded. As stated in the IMR Report, there are over 100 industry players in Malaysia’s ELV systems and structured cabling industry. There can be no assurance that competition from existing industry players will not have a material adverse effect on our financial performance in the future.
4.2 Risks relating to our business and operations 4.2.1 We are dependent on the availability of technical professionals Our Group is dependent on the availability of technical professionals as we are involved in the design, supply, build, testing and commissioning, as well as provision of project management, training, maintenance and aftersales service of ELV systems, structured cabling works and IT services, all of which require specialised skills. An experienced professional will be able to propose a design that is effective, efficient and easily installed with minimal maintenance needs, and fulfills the requirements of property stakeholders. The loss of any of our Group’s technical professionals simultaneously or within a short span of time without any suitable and timely replacement, and our inability to attract or retain qualified and competent technical professionals may adversely affect our ability to compete and grow in the industries we operate in. Our Group is aware of such risk, and hence, shall take the necessary measures to retain our Group’s technical professionals and recruit new technical professionals. Our Group has also made continuous efforts to groom existing qualified and competent personnel through training and professional development. Although we have not previously experienced any major disruption to our operations due to shortage of technical professionals, no assurance can be given that we will be able to recruit, develop and retain adequate number of qualified personnel. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4. RISK FACTORS (CONT’D) 4.2.2 We are dependent on the continuous employment and performance of our Directors and key management personnel We attribute our success to the leadership and contributions of our Directors and key management personnel. We believe that our continued success will depend, to a certain extent, upon the abilities and continuous efforts of our existing Directors and key management personnel. Further, due to the specialised and technical nature of the ELV systems and structured cabling industry, we are also dependent on our key management personnel who possess the relevant technical knowledge to ensure timely completion and delivery of our projects. We rely, in particular, on the strategic guidance of Tay Hong Sing (a founding member and Executive Director / Chief Executive Officer of our Group) and Tan Boon Siang (a founding member and the Executive Director / Deputy Chief Executive Officer of our Group). Apart from that, we also rely on other key management personnel such as Pauline Loh Yen Ping, Yong Thiam Yuen, Tan Ying Meng, Koh Thain Lin, Sim Yian Fei and Kong Tze Senn for their respective expertise. The loss of any of our Directors and key management personnel could adversely affect our continued ability to manage the operations effectively and competitively. Our Board recognises the importance of our Group’s ability to attract and retain its key management personnel and has made continuous efforts to develop our key management team by grooming the younger members of the key management team to assist the senior members of our key management team to operate and manage our Group’s activities. Further, in conjunction with the Listing, we have allocated a portion of our IPO Shares to our eligible employees, including our key management personnel. Should these employees subscribe for our IPO Shares, they will hold Shares and may therefore be further motivated to continuously contribute to our success. However, there can be no assurance that the above measures will always be successful in retaining our key management personnel or in ensuring a smooth transition or management succession should such key management personnel no longer serve our Group.
4.2.3 We are dependent on third party suppliers for equipment, components and parts Our Group relies entirely on third party suppliers to provide local and imported equipment, components and parts. These third party suppliers are predominantly local suppliers. Hence, our Group’s business may be materially and adversely affected if the equipment, components and parts are no longer available to our Group. We are dependent on third party suppliers for equipment, components and parts, but we are not dependent on any particular supplier as the purchasing patterns (in the context of amount, products and source) of our Group vary from year to year, depending on the specific requirements of our projects. Our usual practice is to accept quotes from several suppliers who can consistently provide good quality of materials, reliable services and favorable purchase terms and conditions. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
4. RISK FACTORS (CONT’D) Our Group’s major suppliers are Innovix Distribution Sdn Bhd (formerly known as Jardine OneSolution (2001) Sdn Bhd) and ECS AStar Sdn Bhd. Please refer to Section 6.10 of the Prospectus for details on our Group’s major suppliers. Our Group’s purchases from the abovementioned suppliers for the past three (3) financial years are as follows:
Notes:(1) Relating to IT services-related equipment, components and parts from Innovix Distribution Sdn Bhd (formerly known as Jardine OneSolution (2001) Sdn Bhd) and ECS AStar Sdn Bhd.
(2) Represents the percentage over our Group’s total purchases.
There were no major suppliers from other business segments for the past three (3) FYE 31 December 2014 to FYE 31 December 2016. Nevertheless, our Group has developed long term business relationships with our major suppliers for equipment, components and parts, who have been working closely with us for more than five (5) years. The continuous relationship with these suppliers over the years ensures a stable source of supply of equipment, components and parts. As at the LPD, our Group has not experienced past occurrence of supply disruption. However, there can be no assurance that all of our major suppliers for equipment, components and parts will continue to work closely with us in the future. Any disruption in the supply of equipment, components and parts may adversely affect our Group’s reputation, business plans and financial performance. 4.2.4 We are dependent on our ability to continuously and consistently secure new contracts Our business is mainly project-based. There can be no assurance that we will be able to secure new contracts in the future. As such, our future financial performance will depend on our ability to continuously and consistently secure new projects. Any failure in securing new projects may adversely affect our financial performance. The financial results of our Group is dependent on our ability to secure contracts on a timely basis and there can be no certainty that our current order book of RM33.70 million as at the LPD (details of which are set out in Section 11.8 of this Prospectus) can be sustained in the future given that tenders for ELV systems and structured cabling works contracts are competitive as there are numerous players in the industry. There can also be no assurance that there will be a continuous upward trend or a sustained level of activity in the construction sector in Malaysia. Our inability to maintain a strong order book would have a material adverse impact on our Group’s future financial performance and prospects.
4.2.5 Our R&D on CISS may not yield the benefits that we expect Our Group engaged and commissioned a third party developer, Kong Chee Wah (background details of which are set out in Section 6.11 of this Prospectus), in early 2015 for development works (i.e. programming) of a software, known as the CISS, to integrate our ELV systems. CISS is a software that integrates various brands of CCTVs and ACS onto a single platform which allows users to manage and control these systems from a centralised control room. The CISS is a value added option to
4. RISK FACTORS (CONT’D) our customers and is not intended for sale on a standalone basis, details of which are set out in Section 6.11 of this Prospectus. The development of GISS was based on Gabnet’s management understanding of the local market needs through Gabnet management’s experience from past dealing with its clients where Gabnet’s management foresees the demand for integrated security solutions. As such, there is a potential risk that we may not be able to accurately anticipate trends in technological or software development that meet the needs of our target customers. Despite our R&D efforts in refining the GISS as detailed in Section 6.11 of this Prospectus, there is no assurance that the GISS will contribute positively to our Group. 4.2.6 We are exposed to workplace safety and health matters Due to the nature of construction activities, which often involves hazardous site work being carried out by teams of workers, we are exposed to the occurrence of accidents and potential resultant workplace safety and health liabilities. Workplace accidents and incidents caused by human error and other factors are typical risks associated with construction work. Irrespective of the cause of such accidents or incidents, our Group may be liable for breaches in law (such as the OSHA) relating to workplace safety and health regulations and requirements. As a result, our Group may be imposed with a stop-work order for a short period or other penalties upon the occurrence of any such accidents or incidents. Our Group has purchased and maintains insurance policies to cover its employees for personal accident and hospitalisation. In addition, our Group also makes the mandatory contributions to SOGSO. As at the LPO, there has been no occurrence of any accidents or incidents that has led to penalties being imposed on our Group. However, there can be no assurance that the occurrence of any accident or incident in the future would not have a material adverse effect on the timeliness of completion of project works or give rise to liabilities on our part which would ultimately result in a material adverse impact on the financial position and business of our Group.
4.2.7 We are dependent on the validity of our CIDB license to tender for public sector projects and private sector projects The Malaysian construction sector is regulated by GlOB. Under the LPIP Act, it is mandatory for all contractors, both local and foreign, to register with the GlOB before undertaking any prescribed construction work in Malaysia. Anyone who undertakes to carry out and complete any construction work without being registered as a registered contractor with GlOB commits an offense under the LPIP Act and, if convicted, shall be liable to a fine between RM10,OOO and RM100,OOO. There is a total of seven (7) registration grades, ranking from Grade 1 to Grade 7, Whereby Grade 7 is the highest registration grade. The capacity of a contractor in tendering for the value of a construction project depends on its registration grade. Our subsidiary, Gabnet Systems, is currently a Grade 7 contractor registered with GlOB. This allows Gabnet Systems to undertake activities approved by GlOB such as installation of monitoring and security systems. The Grade 7 registration grade allows Gabnet Systems to tender for projects of unlimited contract value in the public and private sectors. Our Group will ensure that we comply with the rules and guidelines issued by GlOB to mitigate the risk of losing our GlOB license.
4. RISK FACTORS (CONT’D) There is no certainty or guarantee that the registration certificate will be renewed or will not be revoked in the future. To date, our Group has not encountered any disruption in the renewal of our CIDB license. Any failure to renew the CIDB license will have a material adverse impact on the business operation and financial performance of our Group as our Group will not be able to secure any contracts. 4.2.8 We are exposed to the risk of security breaches or system failures Our Group’s business is dependent on our ability to provide secured transmissions of confidential information over network accessible to the public which is subject to bandwidth capacity limitations, breaches of security by computer viruses, industrial espionage, sabotage, hacking, break-ins and other factors. Security risks that we face can be broadly separated into two (2) categories as follows:(i) Physical security risk
We have to ensure that measures are undertaken to safeguard our equipment and property against anticipated threats as the failure to maintain physical security may lead to the leakage of confidential data. As a mitigating factor, our Group has equipped our premises with various security systems such as CCTV and ACS, whereby certain areas are only accessible by authorised personnel.
(ii) Information security risk
Due to the nature of the scope of work of Cabnet, we may have access to confidential information of our clients and we have to ensure that the confidentiality and the integrity of our client’s confidential data are wellprotected. Hence, the failure to protect any confidential data may have an extensive impact on our business operations. To mitigate information security risk, our Group has installed firewalls and anti-virus software on all computers within the network to protect all data stored within the system. We also do regular backups for our in-house servers and centrally-manage our in-house servers to ensure that it is only accessible by designated personnel via VPN. As at the LPD, there has been no occurrence of any security breaches. Despite a variety of network security and alternative measures undertaken by our Group, our Group cannot assure that unauthorised access, computer viruses, accidental or intentional actions and other disruptions will not occur. In addition, any of these occurrences may cause system failures and interruptions in the services provided to our customers, which could have an impact on our Group’s ability to manage or service our customers. Occurrence of any of these risks may have a material adverse impact on our business operations and financial performance.
4.2.9 We are exposed to unanticipated project cost overruns and project delays Our revenue is mainly derived from project-based contracts and our revenue recognition for any particular year is dependent on the stage of completion of the projects within that particular year.
4. RISK FACTORS (CONT’D) For each project, the detailed management and execution of works are headed by our project managers, who are also responsible for day-to-day operations of the project site. The project managers will closely manage and monitor the costs and resources to be used for each project and delegate tasks accordingly to technical personnel to ensure timely completion of each project. Project costs overruns may arise during the installation, testing and commissioning stages of execution works as a result of unanticipated modification works due to customer requests or unscheduled delays due to delay in readiness of site. In the event of unanticipated modification works done upon customer requests, we would normally issue variation orders to recover the additional costs incurred. In selected events, we may also elect to bear the additional costs incurred in view of maintaining good relationships with long-term customers of our Group. Notwithstanding the above, most of our contracts contain liquidated and ascertained damages (“LAD”) clause which holds us liable for our failure to meet the completion date of the projects, leading to additional costs being incurred and thus affecting our profitability. In addition, customers may delay or cancel their projects due to any unforeseen circumstances at any point of time during the duration of the project. This may have an adverse impact on our financial performance as we may not be able to recover any costs incurred as a result of a delay or cancellation of projects caused by our customers. However, in such event where the delay is not caused by us, our Group endeavours to enter into negotiations with our customers for the recovery of any costs incurred. As at the LPD, we have not experienced any material project delays or cancellations or any material project cost overruns in the projects awarded to us which was caused by us. Although we strive to maintain a commendable track record of timely project completion, there can be no assurances that the project cost overruns or project delays would not occur which in turn would affect our Group’s financial performance and reputation. 4.2.10 Our business may be affected by defects in our work The systems developed and installed by us along with our corresponding equipment must conform to and perform according to our customers’ specifications as agreed upon with our customers. In the event our installed systems do not conform to the pre-agreed specifications or suffer from defective workmanship, we will have to rectify the defects at our own cost, resulting in reduced profitability. Our Group had not encountered any workmanship defects during the warranty period for the past three (3) FYEs 31 December 2014 to 2016. In addition, the incidences of product defects during the warranty period are less than 1% of total products installed by our Group as we use products that conform to industry standards. Any product defects during the warranty period will be replaced by Cabnet Group which in turn will be claimed back from the suppliers. We usually provide warranties for a period of up to two (2) years upon the commissioning of our systems, depending on the terms of contracts. During the system warranty phase, we will provide on-site and/or remote support. As part of our ISO quality procedures, all support calls and/or requests are logged, tracked and compiled according to the customer service procedures of our Group. We also adopt standard operating procedures (“SOP”) for all key aspects of our work, and ensure that our SOP are constantly reviewed and improved. In addition, we have qualified inhouse professionals comprising engineers and system designers, to help ensure that all work specifications are met. 41
4. RISK FACTORS (CONT’D) Our Group has good relationships with customers based on our track record in meeting our customers’ requirements and needs, As such, any occurrence of unusual or excessive defects may affect our business reputation and financial performance of our Group. Nevertheless, our Board believes that by working closely with our customer, coupled with our experience and expertise, we would be able to ensure that all work specifications are met and major defects in our projects can be reduced to a minimum level. Although we have not suffered any material losses as a result of non-performance of project specification or any defective workmanship on our part as at the LPD, no assurance can be given that we will not be adversely affected in the event of the abovementioned risk materialises, 4.2.11 We may be affected by an adverse judgment or settlement in respect of any future civil claims The operation of our business involves risks that may lead to civil claims being taken against our Group, such as contractual or tortious claims, Further, an adverse judgment or settlement following any future civil claims against us may lead to negative publicity about us and may adversely affect our market reputation and customers’ perception, which in turn would affect the financial performance of our Group. As at the LPD, we have not experienced any contractual or tortious claims against us. However, there can be no assurance that future claims made against us as well as any resulting adverse jUdgment or settlement will not have a material and adverse effect on our business, results of operations and financial performance,
4.2.12 We may not be able to generate additional revenue from the offering of video monitoring solutions in collaboration with NetPosa As part of our future plans and strategies as set out in Section 6.18.1 (iii) of this Prospectus, we intend to offer video monitoring solutions for township, district and state level in Malaysia through our collaboration with NetPosa, which we believe will generate additional revenue potential to our Group. While we believe that we have sufficient resources to execute our future plan to offer video monitoring solutions in collaboration with NetPosa, there can be no assurance that we will be successful in executing our future plan. Any failure to successfully execute our future plan to offer video monitoring solutions in collaboration with NetPosa may lead to our Group not being able to generate additional revenue which may then affect our future financial performance,
4.2.13 We may be exposed to fluctuations in exchange rates Our Group’s revenue denominated in foreign currency (i.e, USD) for the past three (3) FYE 3’1 December 2014 to FYE 31 December 2016 accounted for 0,06%, 0.02% and 0.01 %, respectively. Meanwhile, our Group’s purchases that are denominated in foreign currency (i.e. SGD) for the past three (3) FYE 31 December 2014 to FYE 31 December 2016 accounted for 2,57%, 0.63% and 0.64%, respectively, For the FYE 31 December 2014 to FYE 31 December 2016, our Group recorded net loss on foreign exchange transactions of RM44,000, RM65,000 and RM40,000, respectively, Although minimal, there can be no assurance that any future fluctuations in exchange rates will not have a material and adverse impact on our financial performance 4. RISK FACTORS (CONT’D) In addition, our Group expects to have business transactions with NetPosa and/or NetPosa China pursuant to the Collaboration Agreement. These business transactions include, our purchases of NetPosa China’s Products for customers in Malaysia, and installation of NetPosa China’s Products to be performed by our Group in South East Asia region. Details of the Collaboration Agreement are as set out in Section 6.14 (ii) of this Prospectus. Moving forward, the purchases of NetPosa China’s Products as well as the income to be derived from NetPosa China for installation works in South East Asia region to be performed by our Group will be denominated in USD. In the event the USD strengthens against the RM, our Group may incur higher purchasing costs for NetPosa China’s Products to be sold to our customers in Malaysia. On the other hand, our Group may register lower income derived from the installation of NetPosa China’s Products in South East Asia region if the USD weakens against the RM. There can be no assurance that there will not be any material fluctuations of the value of RM against USD, the occurrence of which may affect our Group’s future financial performance.
4.2.14 We may face competition from NetPosa China NetPosa China, which has an indirect 23.0% interest in our Company through NetPosa, is involved in video processing technologies and the provision of video monitoring solutions and high-quality video storage products. NetPosa China currently does not have market presence in Malaysia and are predominantly based in the PRC. Through the Collaboration Agreement and the Supplemental Agreement, NetPosa had appointed our Company as sole business partner to sell and supply NetPosa China’s Products in Malaysia. Our Group stands to face competition from NetPosa China if:(i) NetPosa China sets up operations in Malaysia for the design, supply, build, testing, commissioning and aftersales service of ELV systems, which is similar to the business activities carried out under our Group’s ELV systems segment; and
(ii) our Group ceases to be a sole business partner of NetPosa or ceases to be the first choice business partner to NetPosa upon termination of the Collaboration Agreement.
There can be no assurance that NetPosa would not set up operations in Malaysia in future that would potentially compete with the business of our ELV systems segment, which in turn may affect our future financial performance.
4.3 Risks relating to investment in our Shares 4.3.1 Our Promoters control a significant portion of our Shares which may result in our Promoters being able to influence the outcome of certain matters requiring the vote of shareholders Our Promoters, namely, Tay Hong Sing and Tan Boon Siang collectively control approximately 50.15% of our enlarged issued share capital after the IPO. Consequently, our Promoters will generally be expected to, in the foreseeable future, have significant influence on the outcome of certain matters requiring the vote of our shareholders, unless they are required to abstain from voting by law and/or by the relevant authorities.