6. BUSINESS OVERVIEW 6. BUSINESS OVERVIEW
6.1 Business Model Our business model is depicted below:Piling and Foundation l-Services —oj BoredPiles r-‘ –+ Piling Solutions Foundation Services H —-oj rI -H Driyen Piles Jack-In,Piles Earth Retaining System Earthworks -I I I I I I I I ~ Lateral Support System p————–~ Contiguous Bored Pile Walls I I ~ -:-r Diaphragm Walls I -H SteelSheet Piled Walls I 1______ ———EllC,wation Works ILf Temporary 5te eIPlatform an dStagin g I
Substructure and ~Co”,,”‘;oo’IiBottom-,p}Coo”,”,,;oo Method I Baseme nt Construction Works ‘-‘ Top-Down Construction Method J
~_——~r’———_~ Supporting Activities We are primarily involved in the provision of piling and foundation services. Our business is built on the foundation of our main core business, namely pilling solutions and foundation services. Piling solutions include bored piles, driven piles and jack-in-piles. Further details of each piling solution are set out in Section 6.2.1 of this Prospectus. Foundation services include earth retaining system, earthworks as well as substructure and basement construction works. Further details of each foundation service are set out in Section 6.2.2 of this Prospectus. Our Group also offers design and built services to our customers. We are abie to leverage on our piling technical expertise and available resources to provide alternative practical and economical design for foundation and substruction works. 6. BUSINESS OVERVIEW (CONT’D)
6.2 Principal Activities The principal activities of our Group are set out below:(Note: Save for the workshop as disclosed in Section 6.2.3 of this Prospectus, the other assets or properties in the photos shown in Section 6.2 of this Prospectus do not belong to our Group) 6.2.1 Piling Solutions i. Bored Piles Bored pile is a type of pile that is concreted at a permanent location at the holes bored in the ground. Bored piling is a major revenue contributor to our Group. Bored piles are formed by boring a hole into soil or rock to the required depth and place reinforcement and concrete into the bored hole. A temporary steel casing and! or drilling stabilising fluid is required to protect the stability of the bored hole during boring to prevent the collapse of the earth into the hole. Boring is carried out by boring rigs mounted on the undercarriage moving on a continuous mechanical track. Installation of temporary casing is carried out using a vibratory hammer that is iifted by crawler crane, which is a crane mounted on a continuous mechanical track. The difficulties in boring of bored piles will depend on the diameter and depth of the bored piles, and the ground conditions, which vary from soft soil to hard rock. The types of soil and ground deposit such as marine clay, slime, granite, bedrock, limestone with gravities and sandstone impose different challenges for installation of the bored piles. Large diameter bored piles require hydraulic boring rigs and special tools such as rock augers and buckets. Bored piling solution supports higher vertical column loads as compared to other types of piling solution such as driven and jack-in piling solutions. Hence, bored piling is widely used for high rise buildings, bridge piers, etc. It offers a reliable and economical solution for adverse ground conditions, especially in limestone bed rock areas. Bored Piles
[I Company Number: 1017164-M I
6. BUSINESS OVERVIEW (CONT’D)
ii. Driven Piles Driven piles are pre-manufactured or precast piles that are driven into the ground with hydraulic hammer mounted on a crawler rig, which is a rig mounted on a continuous mechanical track. The commonly used pre-manufactured or precast piles are precast concrete piles and steel piles. We procure the supply of precast reinforced concrete piles from the local’ manufacturers. that have obtained their respective product certification from SIRIM QAS International Sdn Bhd. Driven pile Is considered the most conventional method used for pile foundations for medium rise building or structures. Driven Piles
iii. Jack-in-Piles Jack-in-piles are pre-manufactured or precast piles that are jacked into the ground by form of exerting large force using hydraulic or mechanical jack-in machine. The jack-in machine is able to provide the jack-in force of minimum two (2) times of the designed load. The jack-in force of the machine is provided by the countered weight mounted on the machine. Jack-in-piles create lesser vibration and noise as compared to those generated by driven piles, and hence is widely used in densely built up area. Jack-in-Piles
II Company Number: 1017164-M II
6. BUSINESS OVERVIEW (CONT’D)
6.2.2 Foundation Services i. Earth Retaining System An earth retaining system is a support system created to retain or support the earth during excavation works. For basement excavations, the earth retaining system is required to resist lateral forces from the soil and the ground water to prevent the surrounding ground from excessive movement or collapsing. The types of earth retaining systems that we offer includes contiguous bored pile walls, diaphragm walls and steel sheet plied walls. Ground anchors and steel strutting may be required to provide the lateral support system to the earth retaining systems. The main types of retaining system are described below:a) Contiguous Bored Pile Walls Contiguous bored pile walls are essentially bored plies constructed at close spacing. Contiguous bored pile walls can be incorporated as permanent structure as the basement wall. Normally a concrete skin wall is casted against the contiguous bored pile walls to give fiat finishes. The advantage of the contiguous bored pile walls is that large diameter contiguous bored piles can be constructed to enable a longer cantilever structure for the ease of unobstructed excavation works. Contiguous Bored Pile Walls
[I Company Number: 1017164-M Ii 6. BUSINESS OVERVIEW (CONT’D)
b) Diaphragm Walls Diaphragm walls are rectangular reinforced concrete walls constructed as earth retaining system. A narrow trench, normally 0.6 to 1.0 metre wide, is excavated in panel using grab mounted on crawler crane, which is a crane mounted on a continuous mechanical track. The excavated trench is filled with drilling stabilising fluid that acts as stabiliser to provide the stability to the trench during excavation. After the excavation is completed, the rebar cage will be inserted into the excavated trench and this is followed by the placing of concrete from the bottom of the excavated trench. The drilling stabilising fluid will be displaced and pumped out for use in the subsequent operations. Diaphragm walls are designed as permanent structure and shall be incorporated as basement wall system. Diaphragm walls can be installed in ciose proximity to existing structure and hence, are commonly constructed in congested areas particuiariy for deep basements. Diaphragm Walls
c) Steel Sheet Pile Walls Steel sheet piie walls are commonly used as temporary retaining system, an alternative option used as retaining walls apart from diaphragm walls. These sheet piles have interlocking flanges that allow the sheet piles to be arranged and form a continuous steel wail. Steel sheet piles are arranged into their position before driven into the ground and can be reused. They are usually used as temporary retaining walls which can be extracted at the end of the project and the steel reused. Steel sheet pile walls can be used as remediation of contaminated soils, major components in the construction of infrastructures such bridges, dams and port facilities as well as support of excavation.
6. BUSINESS OVERVIEW (CONT’D)
Steel Sheet Piled Walls
d) Lateral Support System The retaining system is able to withstand a free standing height. However, as the excavation works go deeper, a iateral support system is required to support the retaining system to prevent excessive movements in the earth retaining system. Excessive movements in the earth retaining system sinks the ground surface surrounding the excavated pit leading to the collapse of the earth retaining system. Ground anchors and steel strutting are two (2) of the most used laterai support system. Ground Anchors Ground anchors are used to provide lateral support to the retaining system. Ground anchors are constructed by drilling holes through the soil according to the required depth and placed in steel strands. The resulting holes are filled with cement ground. After the cement ground has gained strength, the steel strands are stressed against an anchor block. The anchor block is constructed aiong the retaining system and upon stressing against the block, the steel strands will provide the lateral resistance to the retaining system. Steel Strutting For steel strutting used in propped excavation, a laterai support needs to be firstly provided to the retaining system before proceeding to the next stages. This can be done using the ground anchors method. Steel H sections are commonly used to brace the excavation pit by extending over the excavation. The steel section will be supported by vertical H beams or king post, which is a central vertical post. As for deep excavation, multi-layers of steel strut are installed. 6. BUSINESS OVERVIEW (CONT’O)
Ground Anchors Steel Strutting
ii. Earthworks Earthworks form part of our scopes and sequences of construction works for pile caps and basement slabs, details of pile caps and basement slabs are sel out in Section 6.2.2 (iii) of this Prospectus. Clients are able 10 engage our earthwork services to facilitate basement excavation. Our earthwork services can be divided into two (2) parts as set out below:a) Excavation Works Excavation works involve excavating the earth and transporting them within the site to make up level or to an offsite dumping ground. This requires a close coordination with lorry transportation companies and the preparation of dumping ground. I Company Number: 1017164-M II 6. BUSINESS OVERVIEW (CONT’D) Earthwork
b) Temporary Steel Platform and Staging For deep basement excavation within a congested site, temporary steel platforms need to be constructed to facilitate the movement of machinery and lorries. We have also used a speciaily lifting bucket for efficient lifting and transporting of earth from the deep basement constructed. The steei platform is essentially constructed using temporary vertical steel members, steel beams and steei plates, which are designed to facilitate and withstand vehicular ioad. The struts form the skeletal frames of the platform that strengthen the framework by resisting longitude compression. The staging areas, on the other hand, are designated areas in the construction site where all the vehicles, machinery, materials and tools are located for access. Temporarv Steel Platform and Staging
iii. Substructure and Basement Construction Works Substructure works consist of pile cap, basement floors and columns up to the ground floor level. Pile cap is a thick concrete slab that is constructed above a group of installed piles and acts as support to the column which supports the superstructure. After the completion of the pile caps, the basement slabs will be constructed next For multi-level basements, reinforced concrete columns will be constructed and then, the subsequent fioors will be constructed. [I Company Number: 1017164-M I
6. BUSINESS OVERVIEW (CONT’D) Pile Caps
Basement slabs form the surface of the basement floor. It is reinforced concrete floor and the thickness of the basement slabs are dependent on the load that it will be bearing. For the lowest basement floor, the concrete slab needs to be designed in a way that supports any uplifts in ground water pressure. Basement Slabs
For substructure works and deep basement works, there are two (2) methods involved, namely a conventional (bottom-up) construction method and a top-down construction method as described below:a) Conventional (Bottom-Up) Construction Method The construction of substructure with basement starts with the excavation works. If there is no space restriction and the soil conditions are good, an open excavation method is used. For area which requires the earth retaining system, excavation works will be carried out in stages according to the level of depth involved. At each stage, a lateral support system needs to be installed until the excavation works reached the bottom of the basement. The piles are exposed and sliced off before the pile cap is casted. The casting is later performed on the lowest basement, column and the subsequent basement slab in this order. Once the basement slab is completeiy casted, the temporary lateral support system used will be removed. The sequence is repeated until the basement slab reached the ground floor level. Hence, the work sequence starts from .the lowest slab before progressing upwards towards the ground floor level I.e. bottom-up construction sequence under the conventional construction method. 69
6. BUSINESS OVERVIEW (CONT’D)
b) Top-Down Construction Method Top-down construction is the opposite of the traditional bottom-up construction. Top-down construction for substructure means the structure is constructed downwards from ground level, rather than starting from downwards towards ground level. Top-down construction is preferable in congested areas where shorter construction periods are allocated. The construction of upper floor slabs before reaching the lowest basement floor provides an advantage by enabling the utilisation of the upper floor slab as lateral support to the retaining system and thus, omitting the construction of ground anchors or steel struts. The works sequence starts with the installation of the retaining system, usually diaphragm wall or contiguous bored pile wall, and the installation of king post, which is a central vertical post, or plunge in column, which is a beam to support basement slabs. Excavation shall be carried out to the soffit of designed upper floor slab level. The slab, which is usually in perimeter ring form, shall then be casted after the reinforcement bar is placed and thus acts as lateral support to the retaining system. The temporary vertical H-beam provides verticai support to the floor slab. The perimeter ring slab with centre opening allows sufficient working space for excavation works to continue at a deeper level. When the next designed floor slab level is reached, the ring slab is again casted. The excavation works would continue to the lowest basement slab and pile cap. The construction works would then continue from the bottom level for the pile cap and slabs before the Inner ring opening is finally closed. In some cases, certain floor slabs are not casted during the top down sequence to give sufficient working space for the excavators. This is termed as jump floor. Such works involve detailed works sequencing, the designing of retaining system, perimeter ring siab, king post, which is a central vertical post and temporary working platform and customised equipment. Top-down construction requires a team with high technical expertise and vast experience personnel. For construction of basement at heavily built-up area, the top-down construction method offers various advantages such as reducing the work footprint leading to shorter completion of project and concrete volume. I Company Number: 1017164-M II
6. BUSINESS OVERVIEW (CONT’D)
6.2.3 Supporting Activity Our workshop is used to support our foundation, geotechnical and structural works. It has a covered working space that is supported by overhead gantry cranes and ancillary lifting equipment making the repair and fabrication of the tools and parts possible. With the workshop, our Group has the in-house capability to undertake refurbishment, fabrication, modification repair or maintenance works on our existing fleet of machinery, tools and equipment. Drilling tools and parts can also be fabricated or modified at our workshop to cater to the specific needs of each individual project undertaken by us. This is one of our Group’s competitive advantages as we have flexibility to offer customised solutions or undertake various projects of different scales and difficulty ievels due to our ability to modify and customise tools and equipment. With less reliance on external parties, we are in a better position to manage our project deliverables and ensure a shorter project completion period. The above works are undertaken by ESB’s rented workshop located in BUkit Beruntung, Rawang from PPSB, which consists of detached factories. Our workshop occupies five (5) parcels of vacant industrial land that have a combined land area of approximately 230,788 square feet. As at the LPD, 81 personnel including mechanics, welders and drivers have been assigned to the workshop. We also use our workshop as our strategic resources centre for addressing any requests from the sites of each project and coordinating the mobilisation of services and support team and the delivery of the materials, machinery and equipment requested. 6. BUSINESS OVERVIEW (CONT’O) Workshop
Company Number: 1017164-M
6. BUSINESS OVERVIEW (CONT’D)
6.3 Business Process The diagram below depicts the flow of our business tendering process as per our current model:
Tender by Invitation Not Feasible
Project Commencement and Planning Project Execution, Monitoring and
Contro~Jing Obtaining Project Sign-offs
Company Number: 1017164-M I 6. BUSINESS OVERVIEW (CONT’D) 6.3.1 6.3.2 6.3.3 Evaluation of Tender Opportunities As a result of our track record in the construction industry as a reputabie piling and foundation contractor, most of our tender opportunities come via invitation from project principals whom we have previously worked With, or referrals from past customers. Nevertheless, we are also able to participate in open tenders. Upon receiving invitation from a project principal or project consultant for tender, our finance department will conduct a credit risk assessment, if necessary, on our potential customer’s financial background and capacity in consultation with our key management team. Upon confirmation of the potential customer’s creditworthiness, the finance department will prepare the required documents fees and arrange for collection of tender documents from the potential customer’s premise. Preparation and SUbmission of Tender Our contracts department will then conduct a meeting to evaluate the project’s requirement in terms of project timeline, schedule, location and technicality. After considering the availability of resources for the project, our team will proceed to prepare the tender for sUbmission. The processes are detailed below:I. Establish requirements, specifications and schedule of the project from tender documents; il. Discuss with project and design departments on specific requirements of the project; iiI. To clarify ambiguities in tender documents with project principal or project consultant; iv. Evaluate the availability of machinery, manpower and other resources according to the project timeline and schedule; and
v. Internal costing and budgetary evaluations on subcontractor costs, material costs and overheads to determine the pricing of the tender.
The final pricing of the tender quoted in the tender submission is determined after having evaluated all the related costs, including indicative prices from suppliers and subcontractors. Once the management has confirmed the tender price, the tender will be submitted to the project consultant or customer’s office, on or before the prescribed submission deadline. Post-Submission Negotiations/Interview Before the contract is awarded, if necessary, the customer may call for an interview for clarification on details on the proposed tender. Among the issues to be discussed are tender pricing, technical capabilities and quality control, related project experience, availability of plant and machinery including manpower, financial strength of our company, and projectcompletion time. Upon clearance of all the issues mentioned above, negotiation is completed and finalised. 74 II Company Number: 1017164-M II 6. BUSINESS OVERVIEW (CONT’D)
6.3.5 6.3.6 6.3.7 Award of Contract The notification of a successful tender is generally received from the Project Consultant or customer in the form of a letter of award within 60 to 90 days from the date of the submission of tender. Most customers require us to secure Our performance by providing a performance bond within a stipulated timeframe after the award of the project. The value of the performance bond is usually five (5) percent of the contract value, and in the form of a bank guarantee provided by a licensed bank or financial institution acceptable to the customer. Project Commencement and Planning Once the letter of award is received, our project team will be assembled for the planning of project implementation and at the same time, the identified suppliers and subcontractors are formally contracted for the project. The project plan involves various key components such as resources and staffing, risk planning, testing, change control planning and quality management. The temporary site facilities together with the necessary insurance and Signboard with details of the project will be put up, signifying the commencement of the project. Preparation and implementation of HSE policy will be on-going throughout the project life cycle to ensure safety at work site at all times. Project Execution, Monitoring and Controlling The project team will manage the project based on the agreed scope of works. The project team will closely monitor the progress of the project according to the project’s Gantt chart as well as bill of quantities and ensure that there are sufficient available resources to perform the works required. The on-going performance of the project execution will be reported on a daily basis to the project manager. A meeting with the representative of our customers will also be organised periodically to discuss on the status of the project, project issues and change requests. If a change to the scope of works is requested, a variation order will be prepared and executed by our customers. Obtaining Project Sign-offs A project deliverable or a milestone is considered to be completed when a sign-off is successfully obtained from our customer or representative of our customer. During a project, there may be more than one (1) sign-off required depending on the terms and conditions stipulated in the letter of award. The project is fully completed upon obtaining the final sign-off from our customer. However, our Group may be required to undertake remedial works to rectify construction defects within the warranty period given. 6. BUSINESS OVERVIEW (CONT’D)
6.4 Competitive Strengths Our business is supported by the following competitive strengths to sustain the business as well as to support our growth:I. Experienced Management Team Our management team has extensive experience in their respective fields of piling and foundation services. They ensure smooth internal operations and are a key factor of our service quality. Their experience and combined expertise enable us to execute projects in accordance with project specifications, safety precautions, deadline and budget, as well as allowing us to make knowledgeable, accurate and realistic alternative solutions to our customer based on their accumulated experience in handling similar situations and project conditions. In addition, the extensive experience of the management team in managing projects as mentioned above allows our Group to have a proper scheduling as well as coordination of projects intake and projects on-hand. Their on-site experience in coordinating resources also allows our Group to reduce idle time of our machinery. Premised on the above, our Group would be able to operate efficiently while maximising output for our customers. It also allows proper scheduling and coordination of projects intake and projects on-hand. The following is a summary table of our Group’s management team along with their experiences:Years of Years with No. Key Personnel Position Experience ESe 1. The Cheng Eng Group Managing Director 45 27
2. Pang Sar Executive Directorl Group 30 23 Chief Executive Officer
3. The Kun Ann Executive Director 8 4 4. Choo King Hwa Senior General Manager 27 4 (Construction)
5. Bin Lay Thiam Senior General Manager 23 2 (Finance)
6. Amrick Singh NL Atar General Manager 21 7 Singh (Operations)
7. Sukumaran NL General Manager 24 3 Ramadass (Projects)
8. Muhammad Hafiz Bin Senior Project Manager 17 16 Jaialuddin
I Company Number: 1017164-M II 6. BUSINESS OVERVIEW (CONT’O)
ii. Proven Track Record We have been serving in the piling and foundation services market for more than 25 years, which has contributed well to our brand equity in the construction industry in Malaysia. Our proven track record in securing contracts as shown in our list of selected notable projects secured by our Group since inception disclosed In Section 5.1 of this Prospectus and our key achievements and milestones as disclosed in Section 5.8.1 of this Prospectus has earned us many recurring customers and new customers through favourable referrals and recommendations from existing customers. Our service quality and track record have also won us many long-running working relationships with major property developers and construction companies in Malaysia, contributing to a growing project portfolio. iii. Extensive Experience in Bored Piling We have accrued extensive bored piling experience from different types of projects ranging from infrastructure construction to high rise bUildings to substructure construction. Our venture into bored piling has heiped us to accumulate vast technical knowledge in handling different types of soil condition and piling requirements. We keep abreast with the latest technology and piling techniques to continuously improve our technical capability as a supplement to Our already extensive domain experience. We have the capability to construct large diameter bored piles of up to three (3) metres in diameter. We have also in the past installed piles up to depth of 92 metres. Bored piling of such size and depth requires expertise and experience, and not just the relevant physical tools and machinery. Such experience enhances our competitiveness in the market. In addition, our technical support teams are able to undertake the design-and-built option or contractor’s alternative design option for foundation and substructure works. We are able to package the piling works with our design and building services that would potentially lead to an economical solution for the construction project and shorter completion period. iv. Extensive Experience in Top-Down Construction Our extensive experience in top-down construction has enabled us to adapt and to work more effectively in challenging urban environments. Construction in urban iocations brings challenges. New structures are often extended to the edge of site boundary to maximise development potential. Our Group has the capability to undertake top-down construction for substructure. By using the top-down construction approach, we are able to effectively address the vertical and horizontal displacement challenges during the construction of substructures in highly populated city centres as it is difficult to use the conventional anchors and struts and perform site operations for complex underground faciiities and lifeline structures. We have the experiences and skills in the construction of temporary steel platform and staging in congested sites to solve both problems of limited access and working space. Our platforms above excavated areas do not only allow access for heavy machinery, but also provide space for storage of materiais, fabrication and repair works. 6. BUSINESS OVERVIEW (CONT’D)
In addition to limited access and working space, new structures are typically built in close proximity to existing structures and foundations. It is critical to limit ground movement during new construction works to prevent damage to surrounding structures. Top-down construction has the advantage of preventing movement of surrounding ground with its perimeter retaining walls firstly constructed before excavation starts. We have employed the technicaliy advanced top-down construction methodology in constructing basements for severai projects in Kuala Lumpur city centre. Our portfolio in this area includes the construction of four (4) levels of basement parking for The Troika, a luxury condominium development, five (5) levels of basement parking for Menara Hap Seng 2, a 30-storey office tower, four (4) levels of basement parking for W Hotel and The Residences, a 53-storey mixed hotel and residential development. v. Well-equipped and Organised Maintenance Workshop One of our competitive advantages is our organised and well-equipped workshop, used to maintain, modify and repair our fleet of specialised piling equipment. The workshop comprises a dedicated team of experienced technical personnel responsible for supporting our large fleet of machinery. They can be deployed as part of our mobile response team to perform quick on-site repairing works if necessary. The workshop enables our Group to optimise the utilisation of our machinery fleet by reducing vehicle downtime, ensuring maximum machinery effectiveness and prolonging the useful life of each machine. We are also able to customise tools to accommodate difficult project conditions. With less reliance on third parties for maintenance and repair works, our Group is less vulnerable to external factors such as long servicing hours and queuing time as well as unavailability of external service providers which can lead to longer disruption in our operations. We also stand to enjoy higher cost savings by undertaking the maintenance and repair works on tools and equipment internally. We have a well-maintained system which allows daily updates on the availability of machinery, tools and spare parts. The daily updates enable efficient resource planning and coordination for projects and proper inventory management, which optimise the use of our capital equipment while ensuring maintenance is efficient. vi. Sizeable Fleet of Piling Machinery and Equipment to Support Operations Our Group has a sizeable fleet of piling machinery and equipment, including but not limited to, eight (8) drill rigs as stated in Section 6.18.2 of this Prospectus that can assist us to undertake large-scale projects or more small-to medium-scale projects leading to more potential revenue stream. We also have a diversified fleet of piling machinery and equipment that provide us with the flexibility of adopting many different construction methods. We have invested in state-of-the-art drilling rigs and we have an extensive inventory of customised drilling tools to cater to the different needs of each project. We own hydraulic and mechanical rigs of various brands and models, which include those manufactured by a well-known German-based construction and machinery manufacturing concern, Bauer group, with models ranging from BG7 to BG40. The selection of rigs is complemented with a wide range of customised accessories such as soil augers, boring buckets and coring tools. In addition, we have vibratory hammers with various capacities to help with the driving of piles and foundation supports into the ground.
6. BUSINESS OVERVIEW (CONT’O)
Supporting our piling operation is a wide range of general construction equipment. Our extensive fleet of crawler cranes, which is a crane mounted on a continuous mechanical track, have the lifting capacity ranging from 30 tonnes to 100 tonnes. We also own and maintain various excavators, some of which with long reach capability which are ideal for basement work. vii. Commitment to Quality Assurance We strive to render superior service quality and ensure customers’ satisfaction in the delivery of all of our projects. Since our establishment, our Group has established a long-standing reputation as a quality provider of consistent piling and foundation services. Our commitment in quality standards is proven by the accreditation of our quality management system in compliance with ISO 9001 :2000 by 8M TRADA since 2002 for the provision of installation and testing of bored piles, driven piies and construction of substructure. In keeping with ISO 9001 quality standards, we have updated our accreditation to ISO 9001 :2008 in 2011. Our quality consistency over the years has helped us establish a strong reputation as a reliable and trustworthy partner in the piling and foundation services market, and this has further strengthened our customers’ faith in our capabilities. 6.5 Principal Markets Our principal market of operations is the Malaysian market. As at the LPD, ali our customers and projects are based in Malaysia. We intend to continue focusing on the local piling and foundation services market in line with our expertise, track record and capaCity in the country.
6.6 Seasonality of Our Business The property development and construction industry are cyclical in nature and are highly dependent on the general economic conditions and political stability of the country. However, we believe that there will be continued demand for our services because the construction industry serves as a catalyst for national wealth creation and it has a far reaching multiplier effect on other industries namely manufacturing, financial services and other professional services. The construction industry further supports social development of the country through the provision of basic infrastructures and employment opportunities.
6.7 Types, Sources and Availability of Materials! Input The bulk of our contract expenses are contributed by subcontractor fees and raw materials used for our business such as cement, concrete and steel. In line with our business of constructing solid foundation and substructures, our Group has also developed standardised procedures in selecting subcontractors and suppliers. All selected subcontractors and suppiiers are analysed prior to awarding of subcontracts. Our Group selects only experienced subcontractors and suppliers with high reliability and strong financial positions to ensure the quality of the structures and services rendered to end-users. All our raw materials are sourced locally. The prices of our principal raw materials such as cement, concrete and steel are volatile and are subject to price fluctuations caused by supply and demand conditions. Please refer to Section 11.3 (ii) of this Prospectus for further details on our contract expenses. 79 6. BUSINESS OVERVIEW (CONT’D)
6.8 Technologies Used Our Group is dependent on proprietary software and drilling machinery and tool technologies to sustain our operations and maintain our competitiveness. We utilise Microsoft Project to assist us in project management and AutoCAD to assist us preparation of shop and construction drawings. We have also invested in hydraulic drilling machinery and tools that can be used to drill rocks in various ground condition and bore deep holes. Our existing drilling machinery and tools include Bauer BG 40 rotary drilling rig from Germany,
6.9 Quality Assurance Procedures and Management 6.9.1 Main Quality Objectives Our Group places strong emphasis on our quality control procedures to meet our customer’s expectations and to comply with the ISO’s standards and regulations set by the local government. Our Group ensures proper implementation and execution of stringent quality standards and procedures at each stage throughout the business process to ensure high-end service quality are delivered within the stipulated timeframe. The consistent quality and on-time project delivery help in driving our Group towards favourable growth by retaining our Group’s reputation in its reliability and tru stworthiness. Our quality objectives are:i. To achieve less than 15 percent of machine breakdown hour per project; ii. To achieve zero accident hour for every project; iii. To minimise wastage of material to 10 percent per project; iv, To complete all projects within schedule; v. To reduce written customer complaints to an average of not more than five (5) cases per project; and vi. To reduce administration cost to 7.5 percent of turnover through promotion of wastage control.
6.9.2 Ensuring Quality through Stringent Partner Selection In line with our mission of constructing solid foundation and substructures, our Group has also developed standardised procedures in selecting subcontractors and suppliers. All selected subcontractors and suppliers are analysed prior to awarding of subcontracts. Our Group selects only experienced subcontractors and suppliers with proven track record based on their working history with our Group to ensure the quality of structures and services delivered to end-users. II Company Number: 1017164-M II 6. BUSINESS OVERVIEW (CONT’D)
6.9.3 Quality Assurance Team Our quality assurance team is led by one (1) of our employees who is a certified ISO 9001:2008 Lead Auditor, accredited by International Register of Certified Auditors. An internal audit is conducted annually, and is carried out by all departments. Cross-checking across departments is also carried out to ensure more thorough auditing. An external audit is conducted by BM TRADA every year.
6.9.4 ISO 9001 :2008 Compliance Our Group’s QMS was certified with the ISO 9001 :2000 accreditation on 27 August 2002 and the subsequent updated ISO 9001 :2008 certification on 25 May 2011 for the provision of installation and testing of bored piles, driven piles and construction of substructure.
Conllnuallmprovemenl 01 QMS Our Group has established a complete OMS, which complies with ISO requirements in ensuring the proper execution of our business processes to constantly meet our customer’s expectations within the given timeframe. As part of these processes, our audit team measures and monitors the characteristic of the service to verify that the requirements for the services are met. Our audit team also ensures that services, which do not conform to the service requirements, are identified and controiled to prevent unintended implementation. Corrective actions will be taken to eliminate the cause of non-conformities of the services in order to prevent recurrence of the problem. The quality assurance manual has been carefully prepared by our Group’s audit team. Our management is committed to the execution of the procedures established in the quality assurance manual whilst the quality assurance personnel has complete authority to carry out the quality assurance system to identify control problems, and to initiate, recommend and rectify the problems identified. The quality assurance manuai is reviewed as and when necessary to comply with our customers and our Group’s procedures. 6. BUSINESS OVERVIEW (CONT’D) Our company focuses on the following criteria for our quality assurance:i. Resource Management Our Group recognises the experience and right working attitudes of our employees as a precious intangible asset in driving our company towards constantly meeting our customers’ expectations and conforming to the required standards and regulations set by the Malaysian Government. Hence, we ensure each of our employees possesses a high competency and is aware of his specific job functions from time to time. Each new entrant is briefed on his job function and provided Information regarding our Group’s background, structure and policy especially our QMS. Besides that, new entrant is also guided by his immediate superior in executing his job until he is familiar with our Group’s procedures and QMS. On top of that, our Group also provides formal training to our employees from time to time to aim them with the required knowledge and skills to carry out their tasks, conforming to ISO requirements and the relevant government regulatory bodies. Training requirements are identified by our human resource manager and the management representative. The formal training provided to the site team covers the following criteria:Purpose and objectives of quality system Quality system elements Documentation involved Technical nature of their duties Functional relationships Job responsibilities and functions ii. Measurement, Analysis and Improvement Our Group employs internal auditing as an approach to review our conformity to government regulations and the ISO standards, which will be assessed annually by BM TRADA. Each department will be responsible to conduct audit on another department based on the prepared checklist. Our internal cross checking effort ensures higher compliance to the regulations and requirements before being assessed by the relevant authorities. The results of audit are documented systematically for management review. Corrective action is taken if any non-conformity is highlighted during the auditing process. FOllow-up audit is conducted if necessary to ensure that all non-conformity issues are resolved. [I Company Number: 1017164-M I
6. BUSINESS OVERVIEW (CONT’D) 6.10 R&D We are principally involved in the piling and foundation services market specialising in bored piling and substructure works in the construction industry. As such, our Group is not materially involved in the R&D of technology but rather a user of technology. The extent of our R&D involves research into the latest technologies and techniques of piling and foundation implementation in the construction industry to keep abreast with the latest technology and improvise our technical capability to undertake design and built option and! or alternative design and method. We are also constantly studying into ways of implementation to enhance the performance of our services. Further details of our extensive experiences in bored piling and top-down construction are set out in Sections 6.4 (iii) and 6.4 (iv) of this Prospectus, respectively.
6.11 Sales and Marketing Strategies Our Group’s sales and marketing strategies are set out below:i. Collaboration with Past Customers and Customer Referrals Our marketing approach and strategy is dependent on our track record and reputation in the construction industry, which has been solidified over the years. Our Group’s track record and reiiability as a piling and foundation specialist has helped us establish a strong and mutually beneficial relationship with our customers. Our track record and goodwill with satisfied project principals continue to perpetuate new and greater business opportunities either through recurring business and! or recommendations to other prospective customers. As a result, the majority of our new projects are secured via participation in invited tenders or past customer referrals, instead of participation in open tenders. Tender invitations and referrals represent more exclusive opportunities that offer a greater chance of success upon participation. The familiarity that comes with working in collaboration with past project principals also creates a synergy that leads to work effectiveness and efficiency over the project period.
Ii. Contracts Department Our contracts department is responsible for acting on project leads and sourcing for new projects for our Group. Potential projects could come in the form of invited tenders, customer referrals and to a much lesser extent, open tenders. Our contracts department team is responsible for approaching and submitting project tender bids upon rigorous planning and costing work. As at the LPD, our contracts department consists of 17 personnel. II Company Number: 1017164-M ~ 6. BUSINESS OVERVIEW (CONTO) 6.12 Approvals, Major Licences and Permits Obtained Details of the approvals, major licences and permits obtained by us for the business and operations of our Group are set out below:Company Approving Validity Type of Licence and Certificate Authorityl Issuer ESB CiOB From Grade “7” licence for specialisation in: 18.03.2014 to i. Category B : 17.03.2017 a) B02: Building and plant construction using hot-rolled or cold-rolled steel structures such as steel beams, steel columns, steel roof truss and portal frame: b) B04: General building works, reinforced concrete frame building, construction works excluding reinforced concrete frame structures; c) B05: Piling works such as in situ concrete piling, precast reinforced concrete, pre-stress and post-tension concrete, steel, wood and patented system; d) B12: Aluminiuml steel and glass works; e) B13: Tile installation and rendering works; f) B14: Paint works; g) B24: Building maintenance works, cleaning system, etc;
Certificate No.1 Registration No. Conditions Imposed Status of Compliance 135642 A I (il General conditions 1970430WP030390 (b) (a) CIOB reserves the right to review the registration grade of ESB from time to time; This certificate is non-transferable; and Noted Noted (Ii) ESB’s responsibilities and obligations (a) ESB shall comply with the provisions of the LPIP Act, the regulations made thereunder and any term, condition or restriction imposed by CIOB from time to time; Complied (b) ESB shall not participate any tender or execute any construction works after this certificate has expired and unless it is renewed: Complied (c) ESB shall not undertake any construction project which exceeds the value of construction works specified under the registration grade and shall not execute any construction works which is outside his registered category; Complied (d) ESB shall submit information regarding any new construction works or contraet(s) within one (1) month of the award; Complied (e) ESB shall submit any CIOB from time to time; information required by Complied
[ Company Number: 1017164-M ! 6. BUSINESS OVERVIEW (CONTO) Company Approving Validity Type of Licence and Certificate Certificate Conditions Imposed Status of Authorityl No.1 Compliance Issuer Registration No. h) CE21: General civil engineering works; (e) ESB has obtained the certificate by making or Noted causing to be made any false or fraudulent i) CE34: Pre-cast concrete installation, declaration, certification or representation either in reinforced concrete Or non writing or otherwise; reinforced concrete for beams, kerbs, sewers and drains; (I) ESB has abandoned any construction works Noted undertaken without any good reason; j) CE36: Soil works; and (g) ESB is found negligent by the court or by any Noted iii. Category ME: board of enquiry established under any written law in connection with any construction works a) E10: Special control panel; undertaken; or b) M01: Installation, commissioning, (h) ESB contravenes any of the terms and conditions Noted maintenance and repair of alr of the contractor’s responsibilities and obligations conditioners, cold room coolers as specified in item (Ii) above. and ventilation system; and c) M15: Various mechanical equipment such as installation and repair of plant machinery and equipment, installation, testing, commissioning, maintenance and repair of mechanical based system like waste treatment plant, installation of water treatment plant, rotary pump, reciprocating pump, centrifugal pump and special purpose pump. Installation of pumping apparatus, conveyor system, mobile rack, etc.
~mpany Number: 1017164-M ~ 6. BUSINESS OVERVIEW (CONT’D) Company Approving Validity Type of Licence and Certificate Certificate Conditions Imposed Status of Authorityl No.1 Compliance Issuer Registration No.
CIDB From SPKK A 145195! (i) General conditions 18.03.2014 to (i) Category B: Building Construction; 1970430 (a) This certificate is issued based on the information Noted 1703.2017 WP030390 provided by the applicant! company; (ii) Category CE: Civil Engineering Construction; and Grade “7” (b) This certificate shall not be used as Noted acknowledgement for initiating or undertaking to (iii) Category ME: Mechanical and Electrical. execute construction work. This certificate shall be used to participate in the government procurement or any work with the governmental agencies only; (c) This certificate will be revoked automatically if the Noted certificate of registration as a contractor has expired or cancelled! revoked! suspended in accordance with RegUlation 15 of the Registration of Contractors (Construction Industry) Regulations 1995; (d) This certificate must be submitted together with Noted the certificate of registration as contractor during the tender for government procurement work or any work with the governmental agencies; (e) This certificate shall be renewed together with the Noted certificate of registration as contractor; and (f) This certificate which is not renewed within six (6) Noted months from the date of expiry of the certificate of registration as contractor will be removed from the register of CIDB. Any application made thereafter is deemed to be a new application and the terms and conditions for the issuance of SPKK for new application shall be complied with.
[ Company Number: 1017164-M II 6. BUSINESS OVERVIEW (CONT’D) Company Approving Validity Type of licence and Certificate Certificate Conditions Imposed Status of Authority! No.1 Compliance Issuer Registration No. (Ii) ESB’s responsibilities and obligations (a) The company! the holder of this certificate shall Complied not lend, lease, transfer, permit or cause the certificate to be used by someone who has not been named to use this certificate for the purpose of procuring government work; (b) Only officers of the company who are named in Complied this certificate is authorised to sign the company contract documents and take or authorise the employees to take document tendered; (c) The company! holder of this certificate shall Noted ensure all terms and conditions to obtain this certificate are complied with at all time during the period of validity of this certificate; (d) The company! holder of this certificate shall inform Complied CIDB of any changes of information within 21 days from the date of the said change occurred; (e) The company! holder of this certificate shall Complied comply with all the instructions and resolutions of government via treasury instructions, treasury circular letters and circulars issued by Jabatan Teknikal (Jabatan Kerja Rayal Jabatan Pengairan & Saliran) from time to time; and (I) The company! holder of this certificate shall Complied comply with all instructions and resolutions issued by CIDB from time to time. 88
[ Company Number: 1017164-M ~
6. BUSINESS OVERVIEW (CONT’D) Company Approving Validity Type of Licence and Certificate Certificate Conditions Imposed Status of Authority! No.1 Compliance Issuer Registration No. (iii) Disciplinary actions (a) The company! holder of this certificate shall be Noted sUbject to disciplinary action as set out in Regulation 15 of the Registration of Contractors (Construction Industry) Regulations 1995 in the even! of failure to comply with item (iO above; (b) CIDB has the right to take disciplinary action and Noted impose any punishment on registered contractor; (c) The company! holder of this certificate who has Noted been blacklisted, suspended, revoked or which this certificate has been withdrawn due to disciplinary proceeding shall not participate in any tender or involve in government procurement work; (d) The company! holder of this certificate whose Noted certificate has been revoked Or withdrawn will be removed from the reg’lster of CIDB. Such company! holder of this certificate shall comply with the terms and conditions for the issuance of SPKK for new application. A blacklisted key management personnel is prohibited from obtaining SPKK for a period of three (3) years; and (e) The company! holder of this certificate who has Noted been blacklisted and suspended shall participate in tender or government procurement work only after the expiry of the blacklisting or suspension period. 89
iCompany Number: 1017164-M ! 6. BUSINESS OVERVIEW (CONT’O)
Company Approving Validity Type of Licence and Certificate Certificate Conditions Imposed Status of Authorityl No.1 Compliance Issuer Registration No. (iv) Financial limits (work cost) SPKK registered contractor shall only participate Complied In tender allowed under the registration grade it registered. = C THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
6. BUSINESS OVERVIEW (CONT’D) 6.13 Brand Names, Patents, Trademarks, Technical Assistance Agreements, Franchises and Other Intellectual Property Rights Save as disclosed below, as at the LPD, we do not have any other brand names, patents, trademarks, technical assistance agreements, franchises and other intellectual property rights for our business operations:Class Application Application datel Company Trademark number Status Econpile 37 2013060887 14.10.20131 Pending approval from the Intellectual Property Corporation of Malaysia~ Econpile 37 2013060885 14.10.20131 PendingECONPILE approval thefrom Intellectual Property Corporation of Malaysia 6.14 Dependency on Patents, Licences, Industrial, Commercial or Financial Contracts or Arrangements Save for the licences as disclosed in Section 6.12 of this Prospectus, we are not dependent on any other patents, licences, industrial, commercial or financial contracts or arrangements that could materially affect our business or profitability. 6.15 Interruptions in Business for the Past 12 Months We have not experienced any business interruption in the form of trade disputes or major operational breakdown occurring within andl or outside our Group that may have a significant effect on our operations during the 12 months preceding the date of this Prospectus. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
~ Company Number: 1017164-M ~
6. BUSINESS OVERVIEW (CONT’O) Our Group is not dependent on any particular customer such as Glomac Damansara Sdn Bhd, Greenhill Resources Sdn Bhd, Syarikat Muhibbah Perniagaan dan Pembinaan Sdn Bhd and Urusharta Cemerlang (KL) Sdn Bhd and does not expect to be in the future as majority of our past years’ revenues were derived from project based revenue, which are non-recurring in nature and the contribution by major customers are dependent on the contract value of the projects in the respective years. Our customer base and revenue stream remains diverse. We continue to work with long-standing customer such as Glomac Berhad group of companies with whom we have working relationships spanning more than 10 years. I THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I 93
II Company Number: 1017164-M ~ 6. BUSINESS OVERVIEW (CONT’D) 6.17 Major Suppliers Our suppliers who individually contributed 10% or more of our purchases for each of the past three (3) financial years up to the FYE 30 June 2013 and the seven (7)-month FPE 31 January 2014 are setout below:<N———————————–Purchases———————————–> Year(s) of Seven (7)-month Products relationship as at <————·—··——–FYE 30 June————_·–·——-·> FPE 31 January Suppliers purchased Country the LPD 2011 2012 2013 2014 RM’OOO % RM’OOO % RM’OOO % RM’OOO % C.I.Readymix Sdn Bhd Concrete Malaysia More than 10 13,422 18.4 26,176 30.5 20,817 21.6 14,595 14.5 years Chuan Hual Industrial Steel bars Malaysia Five (5) to 1O 6,906 9.5 10,662 12.4 10,931 11.3 5,553 5.5 Marketing Sdn Bhd years Y.K. Chan Enterprise Steel bars, pipes Malaysia Five (5) to 1O 4,824 6.6 10,284 12.0 9,119 9.5 2,690 2.7 Sdn Bhd and steel plates years Tasek Concrete Sdn Concrete Malaysia Five (5) to 1O 7,519 10.3 8,348 9.7 Bhd years
C.1. Readymix Sdn Bhd topped our major suppliers’ list, of which contributing to more than 10 percent of our annual materials purchases for the past three (3) financial years up to the FYE 30 June 2013 and the seven (7)-month FPE 31 January 2014. We have the capability to acquire the required materials from more than one (1) supplier to fulfil all our business demand and to mitigate the risk of being over dependent on a single supplier. Nevertheless, our Group has established long term business relationship with a number of these companies, and believes these relationships are beneficial to our purchasing and cost efficiency. In the event that these major suppliers cannot supply to us, we are still able to obtain comparable substitutes from other suppliers in the local market. I THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I 94 ICompany Number: 1017164-M] 6. BUSINESS OVERVIEW (CONT’D) 6.18 Information on Land and Buildings 6.18.1 Summary of Properties Used A summary of the material properties owned by our Group are set out below: Registered owner Address Tenurel of lease Expiry Description existing use and Date of issuance of certificate of fitness for occupation! certificate of completion and compliance Approximate age of building Total built up area and land area square feet Net book value as at 31 January 2014 RM Major encumbrances ESB Unit C1T08, Block C Plaza Dwitasik Ja(an Sri Permalsurj Bandar Sri Permaisuri 56000 Kuala Lumpur Leasehold 99 years will expire 11.01.2095 for and on Vacant commercial unit at seventh (7’h) floor of a 13-storey office block held for future office use 10 April 2001 12 Built-up: 5,597 Land area: Not applicable 2,244,098 Nil Unit C1T09, Block C Plaza Dwitasik Jalan Sri Permaisuri Bandar Sri Permaisuri 56000 Kuala Lumpur Leasehold 99 years will expire 11.01.2095 for and on Vacant commercial unit at eighth (8Ih) floor of a 13-storey office block held for future office use 10 April 2001 12 Buill-up: 5,597 Land area: Not applicable 2.244,098 Nil Unit P-2.5, Podium Block, Plaza Dwitasik Jalan Sri Permaisuri Bandar Sri Permaisuri 56000 Kuala Lumpur Leasehold 99 years will expire 11.01.2095 for and on Vacant commercial unit al second (2’d) floor of a 13-slorey office block held for future office use 10 April 2001 12 Buill-up: 3,907 Land area: Not applicable 783,641 Nil
[ Company Number: 1017164-M ~ 6. BUSINESS OVERVIEW (CONT’D) Registered owner Address Tenurel of lease Expiry PPSB No.5, 7, 9, 11, 13 Jalan Kenanga 5 Seksyen BB11 Bandar Bukit Beruntung 48300 Rawang Selangor Darul Ehsan Freehold
Description and existing use Five (5) parcels of industnal land, of which one (1) single storey detached workshop is erected on No.9, Jalan Kenanga 5 and another one (1) single storey detached workshop is erected on No. 11 and 13, Jalan Kenanga 5. All five (5) parcels of industrial land together with Ihe workshops are rented to ESB Date of issuance of certificate of fitness for occupationl Net book certificate of Approximate Total built up value as at completion and age of area and land 31 January Major compliance building area 2014 encumbrances square feet RM 10 July 2013 11 Built-up: 6,368,903 Charged to 26,677 CIMB Bank Berhad Land area: 230,788
A summary of the property rented by our Group for our operations are set out below:Total built up area and land Tenant Registered owner Address Tenurel Date of expiry of lease Description and existing use area square feel Yearly rental RM ESB The Cheng Eng and Pang Sar No. 55, Jalan Sungei Besi 57100 Kuala Lumpur Three (3) years from 01.07.2013 liIl30.06.2016 A four and a half (4 Y,)-storey commercial terrace shopoffice occupied for office use Built-up: 7,400 Land area: 1,604 16,200
The above properties owned and leased by our Group have been issued with the relevant certificate of fitness as at the date of this Prospectus. 96
II Company Number: 1017164-M ~ 6. BUSINESS OVERVIEW (CONrO) Our Listing Scheme does not involve any valuation of the above-mentioned land and buildings. As at the date of this Prospectus, our Group is not in breach of any law, rules and bUilding regulations in relation to the use of the properties above. Our Directors wish to highlight that, with respect to the land and buildings owned and leased by our Group as stated above, there are no environmental issues that may materially affect our Group’s operations and utilisation of the above properties. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 97
~ Company Number: 1017164-M I 6. BUSINESS OVERVIEW (CONT’D) 6.18.2 Material Tangible Fixed Assets Other than Property Save as disclosed below, as at the date of this Prospectus, our Group does not have any other material tangible fixed assets:Remaining depreciation life Net Book Value as at No. Description No. of Units Date ofAcquisition No. afYears 31 January 2014 RM’OOO 1. Drill Rig Bauer BG40 1 22.08.2011 6 4,550
2. Drill Rig Bauer BG25V 1 27.08.2012 7 1,378
3. Drill Rig Bauer BG40 1 09.08.2012 7 1,805
4. Drill Rig Bauer BG40 1 01.10.2012 7 3,725
5. Drill Rig Bauer BG28V 1 16.11.2012 7 1,521
6. Drill Rig Bauer BG22V 1 27.06.2013 8 1,599
7. Drill Rig Bauer BG25V 1 27.06.2013 8 1,868
8. Drill Rig Bauer B840 1 11.10.2013 8 4,674 Total 21,120
6.18.3 Material Plans to Construct, Expand or Improve Facilities As at the date of this Prospectus, our Group does not have any other material plans to construct, expand or improve our facilities. 98
[I Company Number: 1017164-M I 6. BUSINESS OVERVIEW (CONT’D)
6.19 Future Plans and Strategies Our Group’s vision is to become one of the leading piling and foundation services contractors in Malaysia, specialising in bored piling and foundation services works. Moving forward, our Group’s future plans and business strategies will centre on the following key action plans:i. Continued Expansion within the Piling and Foundation Services Market Our Group’s primary thrust moving forward is to continue expanding within the piling and foundation services market, focusing on the principal activities at which we are prominent in terms of industry practices and reputation. We wiil continue to expand our reach in this market, building upon our strong reputation, ability to secure new and greater projects, and growing capabilities and resources. We believe that our expertise and experience in our existing activities are our best chance of higher growth and success moving forward. Through our sales and marketing strategies and consistent work quality, we will continue to secure new piling and foundation projects. These strategies coupled with our track record have contributed to our past success, and will continue to drive our future growth. We strive to increase our penetration rate in the Malaysian piling and foundation services market by actively bidding for projects in Penang and Johor Darul Takzim. We expect more opportunities in Penang following the construction of the second Penang bridge, which is expected to increase the property development activities in Penang, especially the areas adjacent to the new bridge. Furtherto, George Town, Penang was accorded the United Nations Educational, Scientific and Cultural Organisation World Heritage List of Cities and Sights on 7 July 2008, Penang has experienced an expanding tourism industry since then, which has led to more hotel development projects. We also expect more opportunities in Johor Darul Takzim due to the high voiume of development in Iskandar Malaysia, including property development and infrastructure projects. According to the Iskandar Regional Development Authority, Iskandar Malaysia has progressed rapidly, with several key developments completed and many more nearing completion since its launch in 2006. Progress is being achieved across multiple sectors including education, healthcare, leisure and tourism, property, creative and retail. In addition, critical enablers such as physical infrastructure, safety and security, public housing, and social development initiatives are also moving forward. Despite the transportation cost for machinery required for projects located in the said area, is higher, the cost is not significant and it would be priced in our tender process. Further, we have on-going projects in Penang and Johor Darul Takzim, it would be more cost effective for us to continue to expand our footing and diversify our clientele base in both states for future projects in view of the supplier chain network and good credit relationship built. 6. BUSINESS OVERVIEW (CONT’D) Ii. Upgrading Internal Capabilities A solid combination of technical knowledge and management skills of experienced personnel, up-to-date machinery, tools and knowledge, sufficient manpower and systematic work process is crucial to sharpen the competitive edge of our Group In the local market. In order to become one of the leading piling and foundation service provider in Malaysia, we intend to strengthen our internal capabilities and expand our resources to be able to compete effectively against both local and foreign competitors operating in the local market. Our Group will be investing in more new and higher technology equipment and machinery that are less manual intensive and more automated. Higher technology equipment can increase our human resource efficiency, while increasing precision and reducing human error across our operating processes. We will also be looking to expand our pool of skilled human resources, exploring foreign skilled labour as a means to increase our capacity while mitigating against the shortage of skilled labour within the local construction labour market. iii. Implementing an ISO 14001 :2004-compliant Environmental Management System In our continuous effort towards process improvement, we are in the midst of implementing an environmental management system in compliance with ISO 14001 :2004 standards. We have appointed BM TRADA as our consultant and we have also complied with the Enviroment Aspect-Impact analysis as stipulated in ISO 14001 :2004. Further, we have set up a program for submission and to be audited for the certification by the certification bodies by third quarter of 2014. We are gradually adapting our environment management practices such as waste management at the construction site and effluent management to be ISO 14001 :2004 compliant and are targeting to become fully accredited by 2014. Currently, the contract department will monitor the overall wastage of the material used on site without examining the detailed work process in minimising the wastage. The methodology adopted in ISO 14001 :2004 emphasizes in identifying Environment Aspect and Impact analysis through systematic approach. As SUCh, through a plan and documented process, it ensures an efficient waste management in order to achieve the works and cost efficiency at work site. By implementing ISO 14001 :2004, we are able to benefit from reduction of operational cost and increase in workplace productivity through efficient resource and waste management as wastage from projects will be planned in advance and monitored. A reduced wastage at work site would provide a cleaner and safer working environment, which would have in turn improve workplace efficiency and result in cost saving. Apart from creating a safer working environment, being ISO 14001 :2004 certified helps to brand our Group and increase our competitiveness in the industry especially with the increasing demand for GBI certified buildings. Two (2) out of the six (6) GBI rating system’s criteria require implementation of proper construction management and proper waste management system. Property developers would prefer an ISO 14001 :2004 certified contractor to help them achieve the GBI certification. We intend to be one (1) of the pioneers in the local construction industry to be accredited with ISO 14001 :2004 standard. [I Company Number: 1017164-M I 6. BUSINESS OVERVIEW (CONT’D)
6.20 Prospects of Our Group We believe the prospects of our Group are favourable as our business is led by an experienced management team. In view that our Group has been serving in the piling and foundation services market for more than 25 years, we have a proven track record of our service quality and have accrued an extensive experience in bored piling and top-down construction. Furthermore, our well-equipped and organised maintenance workshop and sizeable fleet of piling machinery and equipment can assist us to undertake large-scale projects or more small-to medium-scale projects leading to more potential revenue stream. Our commitment to quality assurance and our quality consistency over the years has helped us establish a strong reputation as a reliable and trustworthy partner in the piling and foundation services market. Further details on our competitive strengths are set out in Section 6.4 of this Prospectus. Our Group’s vision is to become one of the leading piling and foundation services contractors in Malaysia, specialising in bored piling and foundation services works. Moving forward, our Group’s future plans and business strategies will centre on the continuous expansion within the piling and foundation services market, upgrading internal capabilities and the implementation of an ISO 14001 :2004-compliant Enviromental Management System. We intend to increase our penetration rate in the Malaysian piling and foundation services market by actively bidding for projects in Penang and Johor Darul Takzim. We expect more opportunities in Penang due to the increase of property development activities following the construction of the second Penang bridge, especially the areas adjacent to the new bridge. Further, Penang has experienced an expanding tourism industry since George Town, Penang was accorded the United Nations Educational, Scientific and Cultural Organisation World Heritage List of Cities and Sights on 7 July 2008, which has led to more hotel development projects. We also expect more opportunities in Johor Darul Takzim due to the high volume of development in Iskandar Malaysia, which has progressed rapidly since its launch in 2006. Further details on our future plans and strategies are set out in Section 6.19 of this Prospectus. According to the Independent Market Researcher’s report, the piling and foundation services market in Malaysia was valued at an estimated RM2.96 billion in 2013 and is expected to grow at a compound annual growth rate of 9.1% for the years 2013 to 2018. Further details on our prospects and outlook of the industry are set out in Section 7 of this Prospectus. As our Group is primarily project-based, our future profitability is dependent on the number of projects and value of the projects secured. Over the past three (3) years, we have been able to secure notable projects from property developers, governmentinitiated infrastructure projects and also from other large corporations. As at the LPD, the state of our book order in our piling and foundation services segment amounts to RM449.88 million. Further details on the state of our order book are set out in Section 11.5 of this Prospectus. 6. BUSINESS OVERVIEW (CONT’O) Given that the piling and foundation services business is capital intensive, we need to constantly upgrade our machinery with newer, more powerful and more efficient machines to remain competitive. Our Group has earmarked approximately RM14.58 million, representing 30% of the gross proceeds from the Public Issue, for the purchase of machinery and equipment to further expand our piling and foundation service market. We would be able to operate in a more cost efficient manner with newer and higher technology machinery and equipment due to lower likelihood of machinery’s and equipment’s breakdown. As such, we should be able to further enhance our competitiveness in our tender. Please refer to Section 3.11 of this Prospectus for further details on utilisation of proceeds from the Public Issue. As a result of the above, we believe that we will continue to enjoy positive growth and favourable prospects over the next few years. We will continue to leverage on our core competencies, competitive edge and our established track record whilst pursuing growth opportunities within the piling and foundation ind ustry. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK