[I Company Number: 1017164-M [I Company Number: 1017164-M 4. RISK FACTORS OUR BUSINESS IS SUBJECT TO A NUMBER OF RISK FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL. BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULL Y CONSIDER, ALONG WITH THE OTHER MA TTERS IN THIS PROSPECTUS, THE RISKS AND INVESTMENT CONSIDERA TlONS SET OUT BELOW. THE RISKS AND INVESTMENT CONSIDERATIONS SET OUT BELOW ARE NOT AN EXHAUSTIVE OR EXCLUSIVE LIST OF THE CHALLENGES THAT WE CURRENTLY FACE OR THAT MAY DEVELOP IN THE FUTURE. ADDITIONAL RISKS, WHETHER KNOWN OR UNKNOWN, MAY IN THE FUTURE HAVE A MATERIAL ADVERSE EFFECT ON US OR OUR SHARES. IF YOU ARE IN ANY DOUBT AS TO THE INFORMA TlON CONTAINED IN THIS SECTION, YOU SHOULD CONSULT YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER. 4.1 Risks Relating to Our Operations 4.1.1 Reliance on Approvals, Licences and Permits The Malaysian construction industry is highly regulated, with various government bodies governing the approval of licences and certification with GlOB, which governs the operations of our Group. As such, we are bound by the terms of the licences awarded by these authorities, which dictate the types and nature of activities which we engage in. In ensuring standards of construction, these licences and certification accord our Group various privileges such as limitless tender capacity, the ability to operate throughout Malaysia and provide approvals necessary to conduct activities required in the day-to-day operations of the projects undertaken by us. The majority of these licences and certification are subject to annual renewals. Under the LPIP Act, it is mandatory for all contractors to register with the GlOB before undertaking to carry out and complete any construction work in Malaysia. Anyone who undertakes to carry out and complete any construction work without being registered as a registered contractor with the GlOB commits an offence under the LPIP Act and, if convicted, shall be liable to a fine not exceeding RM50,OOO. There are a total of seven (7) registration grades, ranking from Grade “1” to Grade “7”, whereby Grade “7” being the highest registration grade. The capacity of a contractor in tendering for the value of construction work depends on its registration grade. We are currently a Grade “T’ contractor registered with the GlOB and with Grade “7” registration grade, we have the capacity to tender for construction works without limit to the values. The Grade “7” registration grade is a recognition of our capability and has been taken as a pre-qualification for government or government related projects. As stated above, we will not be able to undertake our piling and foundation services if our Grade “T’ licence is revoked or not renewed and our Grade “T’ licence may be revoked Or not renewed if we fail to comply with the rules and guidelines issued by GlOB, which may have an adverse effect on our business operations. 4. RISK FACTORS (CONT’D) 4,1.2
However, as long as we comply with the rules and guidelines issued by CIDB, we will not lose our Grade “7” licence and CIDB will not reject the renewal of our registration certificate, details of which are set out in Section 6.12 of this Prospectus. We wish to highlight that we have been registered with CIDB as Grade “7” contractor since 1997 and since then we have not encountered any issue in renewing our Grade “7” licence. While these licences and certification assist our Group in complying with the Malaysian construction standards, our operations can be adversely affected if the renewal of existing licences and certificates is prohibited, for whatsoever reason. However, our Group has not encountered any major disruption in renewal of our licences and certificates from the various government agencies mentioned above since commencement of our operations. Moving forward, our Group does not foresee any hindrances in renewing all our licences and certification due to our Group’s diligence in adhering to the conditions of the licences and certification. Project Risks Most of the risks involved in project risks are covered in Section 4.1 of this Prospectus. As our Group’s contracts with customers are mostly individually entered, the projects are sUbjected to the following individual risk factors:i. Customers may delay or cancel their projects. Delays may arise from changes in customer requirements or delay in approval by the relevant authorities. In the event that the delay is prolonged, customers will resort to cancellation of their projects. Project delays may affect profit margins and may delay the recognition of revenues. Additional costs may also be incurred as a result of these delays. As at the LPD, we have not experienced any cancellation of awarded projects to us by our customers and we have not experienced any delay in projects awarded by our customers; ii. Unexpected ground conditions. Normally, the design of the project will rely on the accuracy of soii investigation works in soil test reports done prior to award of the project. Due to variation of ground conditions, some of the variation in ground conditions might not be detected. Due to poorer than expected soil conditions, the construction may encounter problems such as excessive settlement of surrounding ground, cracks in adjoining structures, or failure of test piles. To reduce the risk of the unexpected ground conditions, we will carry out a project review with our technical team on the design before commencement of works. Our technical teams will review the ground condition, construction sequence and method and temporary works with the project team. Additional costs which may be incurred by us due to the adverse ground conditions would have been factored in our tender process and hence will not have material impact to the earnings of our Group. With our past experience, we are able to estimate the additional cost for the adverse ground conditions during the tender process. However, if we secure projects in areas which we are not familiar with the ground conditions, we shall rely on soil test reports, which may not fully reflect the extent of adverse ground conditions. Accordingly, additional cost arising from such conditions may not be adequately factored in our tender prices. 4. RISK FACTORS (CONT’D)
Notwithstanding the above, as at the LPD, we have not experienced any additional cost arising from such conditions which has materially affected our Group in the past; iii. For each project, the detailed management and execution of the works are headed by the project manager. Project manager is also responsible for day to day operation of the project site. The works will be seriously affected if the project manager fails to perform his duty expediently, this will result in delay and cost overrun. To ensure the project manager is carrying out his duty, a management control system involving tabling of weekly and monthly report is implemented. The senior management will review the report and will need to do their separate assessment on the project and present their weekly and monthly report to the top management highlighting the deiay and problems on site. This will ensure timely intervention, which includes putting in additional resources, supervision, manpower or replacement with more experienced project managers, by the management if the project manager performs unsatisfactorily; and iv. Unfavourable economic conditions and! or financial performance of our customers may cause them to terminate their project(s) with us. Our Group’s business may be adverseiy affected by such an even!. However, as at the LPD, we have not experienced such an even!. To mitigate the above risks, our Group will conduct studies on the complexity and the requirements of each project during the tender! quotation stage. We shall conduct a thorough understanding of project requirements, sequencing of works, work planning and technical requirements in our tender submission. Any major discrepancies in the project requirements shall be highlighted and qualified in our tender submission. Armed with the experience and expertise, our management team works closely with our customers to ensure that all work requirements and quality are met so that the defects of our projects are at minimal level. Also our works are also supervised by the customer’s project consultant’s team, which consists of peopie from various professions such as architects, engineers, and quantity surveyor. All works are supervised by the consultant site personnel which comprise resident engineer and clerks of works. Before handing over of the project, joint inspection will be carried out together with the consultant to ensure the works are carried out to their satisfaction. The risk of potential rectification works and claims made by our customers will be limited. Some minor defects are normally rectified within the defect liability period, which normally ends within one (1) or two (2) years from date of handing over. The average rectification cost constituted less than 0.5% of our Group’s revenue per annum for the past financial years! periods under review. Further, such cost would have been priced in our tender price during the tendering process. Possible Delays in Completion of Construction Projects construction projects are subject to certain deadlines and budgets. Any extensions of time in the projects would result in project cost overrun as well as, attract negative reputation and legal uncertainties such as possibility of the enforcement of the LAD by the customer. 35 4. RISK FACTORS (CONT’O)
In the event of a delay in a project due to conditions beyond the control of the contractor, the contractor would apply for extension of time for the project. If the extension of time is successfully approved and granted by the customer based on the recommendation of the architect, the enforcement of the LAD would not be made against the contractor, However, in the event of a delay in a project due to the fault of the contractor and the enforcement of the LAD by the customer, the architect will make necessary recommendations to the customer to deduct the LAD from the contractor’s progress payment, which will in turn reduce the total revenue of the contractor generated from this project. As such, the timeliness in completing piling and foundation projects is vital in upholding our Group’s financial performance and our Group’s reputation in the construction industry, The timely completion of any construction project is dependent on various externai factors, which may include but are not limited to, securing the necessary permits or approvals from relevant government agencies or authorities, adequacy in the supply of raw materials and availability of workers, In mitigating such risks, our Group has formulated an effective cost and operationai monitoring procedure to ensure that our projects are completed within the stipulated timeframes, When a project has been awarded, a kickoff meeting will be organised by the contract department and project department. Contract department will prepare a cost budget and shall be responsible for the cost monitoring of the project and will coordinate on the appointment of subcontractors or suppliers and to ensure the cost are within budget. Meanwhile, the project department will prepare a work schedule, works statement and site organisation, Technical department will be called In as and when the works require technical input. The project manager is responsible for the day to day operations of the project and shall prepare a weekly report to the Senior General Manager (Project), identifying the progress of the project and identifying the problems on site, At the same time, we constantly strive to appOint reliable and reputable suppliers and subcontractors to ensure timely delivery of raw materials, and closely follow project completion deadlines. Notwithstanding the above, we have not experienced any material delay in the past which triggers the enforcement of the LAD against us, Availability and Fluctuations in Prices of Raw Materials Due to the nature of our business, we purchase a range of raw materials, which include cement, pre-mixed and ready-mixed materials, steel bars, etc from our suppliers, Generally, our Group does not maintain long term contracts with any of our suppliers but we maintain long term relationships with our suppliers based on their performance, By maintaining a large pool of suppliers, we are not dependent on any Single supplier or subcontractor, However, raw materials are price sensitive, and there can be no assurance that our Group will be able to obtain sufficient quantities of raw materials for our projects when the materials are scarce in the market. At the same time, there is no assurance that any shortage or increase in the cost of raw materials will not have an adverse effect on our financial performance, Price fluctuations in the raw materials market caused by the price volatility of raw materials, which are beyond our control, could also result in increased costs and result in a material adverse effect on our Group’s financial performance, [I Company Number: 1017164-M I 4. RISK FACTORS (CONT’D) Notwithstanding the above, we have not experienced any significant price increase in raw materials which has material adverse effect on our Group’s financial performance in the past.
4.1.5 Dependence on the Services of Our Subcontractors Our Group engages subcontractors to provide various labour-intensive works in our piling and foundation services projects such as constructing diaphragm walls and basement. Please refer to Sections 6.2.2 (i) (b) and 6.2.2 (iii) of this Prospectus for further details on diaphragm walls and basement construction, respectively. Subcontractors are appointed through the assessment of tenders submitted by the subcontractors, as well as past working experiences with them. Upon negotiation, formal contractual agreements are executed between our Group and subcontractors to ensure the terms and conditions for the collaboration are predefined before the commencement of any construction work. Notwithstanding this formal contractual relationship, any failure of a subcontractor to provide its contracted services may lead to damages and penalties made against our Group in favour of the customer who awarded the construction project. While there are no guarantees that any failure by our subcontractors to provide agreed contracted services will adversely affect our Group’s financial performance, our Group endeavours to mitigate this risk through various procedures which include performing regular assessments of our subcontractors along with evaluations on their ability to deliver services in a timely, reliable and satisfactory manner. In order to avoid over-dependence on any single subcontractor, our Group also maintains a large pool of subcontractors with Which we can work with should the need arise. 4.1.6 Dependence on Group Managing Director, Group Chief Executive Officer, Executive Director and Key Management and Technical Personnel Our continued success will depend significantly on the ability, expertise and continued efforts of our Group Managing Director, Group Chief Executive Officer, Executive Director and key management and technical personnel. The departure of any of these individuals may, to a certain extent, affect our future business operations and financial performance. Our future success also depends on our ability to attract, hire, train and motivate sufficient skilled personnel. Recognising the importance of our key management and technical personnel, we will continuously consider appropriate measures so as to attract and retain our key personnel. We also strive to groom and develop younger members of the management team to gradually assume greater responsibilities in preparation for our long-term expansion as part of our succession plan. Further, service agreements have been entered into between our Group and The Cheng Eng and Pang Sar to ensure their commitment to our Group upon the Listing. Please refer to Section 8.9 of this Prospectus for further details on the service agreements. 4. RISK FACTORS (CONTO)
Despite the abovementioned service agreements allowing for early termination by either party, The Cheng Eng and Pang Sar are actively involved in our day-to-day operations. Their departure, if any, may affect our business operations and financial performance. However, any unfavourable performance of our Group would greatly affect both The Cheng Eng and Pang Sar as the major shareholders of our Company, which collectively hold approximately 72.8% of the enlarged issued and paid-up capital of our Company upon the Listing. Premised on the above, both The Cheng Eng and Pang Sar are very active in our operations and they are also grooming and developing younger members of the management team to assume greater responsibilities as part of our succession plan. As such, an early departure before the end of the three (3)year tenure of the service agreements would be unlikely. Piling and foundation services are the main businesses for both The Cheng Eng and Pang Sar and they are actively involved in our day-to-day operations. Further, both The Cheng Eng and Pang Sar do not have any other major financial interest outside our Group. Hence, the chances of The Cheng Eng and Pang Sar exiting our Group in the medium term are highly unlikely. We believe that offering a competitive salary package, training and conducive working environment should mitigate this risk further. We also believe that by increasing our profile through the Listing, we will be able to attract more qualified personnel to continuously play an active role in the growth of our Group. Notwithstanding the above, we have not experienced any departure of our Executive Director, key management and! or technical personnel which has a material adverse effect on our business operations in the past. Borrowings and Financing Risks Our total borrowings as at the LPD amounted to approximately RM34.28 million, all of which are domestic borrowings and interest-bearing. As such, any additional borrowings and! or increase in interest rates, which is beyond our control, may result in an increase in interest expense, which may affect our profitability. There can be no assurance that current interest rates will be maintained in the future and! or that any increase in our borrowings will not have any material effect on our financial performance. Notwithstanding the above, we have not experienced any increase in interest rates which has a material adverse impact on our financial performance in the past. Our credit facilities may also be sUbject to periodic review by the financiai institutions and contain certain covenants which may limit our operating and financing fleXibility. Any act or omission by us that breaches such covenants may give the rights to the financial institutions to terminate the relevant credit facilities and! or enforce any security granted in relation to those credit facilities. This may in turn cause a cross default of other credit facility agreements. As these covenants are commonly contained in the credit facility agreements in Malaysia, we will endeavour to monitor the compliance with all such covenants. Nevertheless, there can be no assurance that our performance will not be adversely affected should we breach such covenants of any of our facility agreements. Notwithstanding the above, we have not breached such covenants of any of our facility agreements in the past. 4. RISK FACTORS (CONT’D) 4.1.8 Absence of Long-Term Contractual Agreement with Customers Our Group does not have any long-term contract with our customers. However, we have established close working relationships with our customers. Our customers, namely Glomac Berhad group of companies, have been our customers for more than 10 years. In addition, we also have received repeated orders from our other customers such as Putrajaya Perdana Berhad group of companies, Bandar Raya Developments Berhad group of companies, Selangor Dredging Berhad group of companies and 101 Corporation Berhad group of companies. Each of the piling and foundation services contract generally ranges from three (3) to 18 months depending on the size and complexity of the project. Our Group seeks to limit this risk by maintaining a close working relationship with our exisiting customers. Our Group believes that by providing quality services, on-time delivery, competitive pricing and value-added services, our Group will be able to maintain a continuous relationship with our customers.
4.1.9 No Assurance that Future Plans will be Commercially Successful In order to achieve our future plans as disclosed in Section 6.19 of this Prospectus, our Group relies on the availability of management, financial and customer support as well as operational and other resources. The success of our continued expansion within the piling and foundation services market will be dependent upon, amongst others, our ability to continuously succeed in securing projects, broaden our customer base and further improve our services and internal capabilities. In addition, we may utilise significant resources in our business expansion plans, upgrading our internal capabilities such as purchase of machinery and equipment as well as implementing an ISO 14001 :2004-compliant Enviromental Management System. However, there is no assurance that the successful implementation of our future plans will improve our earnings given that additional resources or costs would have to be incurred for the implementation of our future plans. Further, to manage any future growth of our operations and personnel resulting from our business expansion, we will improve and effectively utilise our operational, management, marketing and financial systems and successfUlly recruit, hire, train and manage additional personnel. Our failure to manage our business expansion and growth may materially and adversely affect our business operations and financial performance. Notwithstanding the above, we have not experienced any mismanagement in our business expansion and growth which has a material adverse impact on our business operations and financial performance in the past.
4.2 Risks Relating to Our Industry 4.2.1 Dependence on the Construction and Property Development Industry Piling and foundation services are a subset of construction and property development activities. Hence, there is an interdependence between both the piling and foundation services market and the construction and property development industry, where all construction and property development projects create demand for piling and foundation services. ~mpany Number: 1017164-M I 4. RISK FACTORS (CONT’D) 4.2.2
Therefore, our Group’s operations are highly dependent on the performance of the construction and property development industry in Malaysia and any impact on the construction and property development industry will have direct impact on the market we are operating in. The construction and property development industry are affected by the political and economic stability of the country, inflation, shortage of labour supply as well as increase in labour and raw material cost. Furthermore, the Malaysian property development industry is also susceptible to risks such as rise in financing cost and fluctuating demand for real estate properties as well as further property cooling measures implemented by the Federal and/or State Government particularly in Penang and Johor Darul Takzim where our Group intends to expand our business in the near future. These risks may result in the dampening of investors’ sentiment and demand for properties ieading to the possible delay or cancellation of construction projects. Under such circumstances, our Group’s business may be affected as the pool of potential demand for our piling and foundation services may be reduced accordingly from the delay or cancellation of construction projects. Our planned future expansion in Penang and Johor Darul Takzim may also not be smooth or successful. Notwithstanding the above, we have not experienced any slowdown in the construction and property development industry, which has a materiai adverse impact on our financial performance in the past. The performance of piling and foundation services market players such as our Group is correlated with the performance of the construction and property development industry. At first glance, the property market cooling measures announced in the BUdget 2014 seem to dampen the sentiment in the property market leading to potential slower demand for properties which can affect construction demand. However, the move is seen as curbing unhealthy excessive speculative activities particularly in the residential segment. This may lead to a more sustainable property market in the long ru n with lesser speculative influence that can drive the price high. In addition, the Malaysian Government has continued to impiement projects related to affordable housing and projects with a positive impact on the citizen and iow import value are expected to be implemented. As such, the Board does not foresee any major impact on our business as we generate our revenue from both residential and commercial projects. As at the t.PD, our order book for the piling and foundation services segment stood at approximately RM449.88 million and our Group has not experienced any slowdown in securing new contracts. Please refer to Section 11.5 of this Prospectus for further details on the state of our order book. Malaysia is undergoing continuous expansion as the economy is expected to maintain moderate growth moving forward. The construction industry is expected to benefit tremendously from government-led initiatives and spending. Favourable labour market conditions leading to rising disposable income is likely to fuei improvements in domestic demand. However, there is no assurance that there will be no adverse condition affecting the stability of the bullish construction industry. Competition Risks The construction industry is highly competitive and we face competition from various construction companies, both iisted and non-listed companies. Competitive pressures may result in highly competitive pricing in order to secure a contract, which may affect our financial performance. [I Company Number: 1017164-M I 4. RISK FACTORS (CONTD)
However, our Group is a Grade “7” contractor registered with CIDB. The registrations with CIDB enable us to tender for government and private sector projects of any size and amount within the categories of works which we are licensed to carry out. In addition, the barrier of entry to the piling and foundation services market in Malaysia is relatively high as huge capital investment is required to purchase drilling rigs and other related machinery in order to undertake large-scale projects. Grade “7” main contractors may have the licences to undertake the piiing and foundation works on their own. However, in view of the nature of the piiing and foundation services, which requires special skillsets and heavy investrnent in specialised equipment and machinery, main contractors may not necessary possess those skillset and the necessary equipment and machinery. As such, the main contractors may prefer to concentrate on the construction works and subcontract the piling and foundation services works to us. Our Group is also led by an experienced management team with extensive experience in their respective fieids of piling and foundation services to ensure smooth internai operations. Our Group’s consistent track record since our establishment of more than 25 years has earned us many recurring customers and new customers through favourable referrals and recommendations from existing customers. Furthermore, our Group has extensive experience in bored piling, top-down construction, weil-equipped and organised maintenance workshop with necessary toois such as gantry, welding sets and tooling machines as well as experienced technicians to maintain, modify and repair our fleet of specialised piling equipment in-house in an efficient manner and a sizeable fleet of piling machinery and equipment; details of our material machinery held by our Group are set out in Section 6.18.2 of this Prospectus, to support our operations. Our commitment to quality assurance has also been proven by the accreditation of our quality management system in compliance with ISO 9001 :2000 by BM TRADA since 2002 for the provision of installation and testing of bored piles, driven piles and construction of substructure. We seek to maintain our order books and market share by actively participating in competitive bidding and negotiation to secure contracts and continuing our efforts in maintaining OUr competitive edge in terms of cost efficiency, service quality, reiiability and innovation in construction industry. Please refer to Section 11.5 and Section 7 of this Prospectus for the state of our order book and our market share, respectively. However, no assurance can be given that we wiil be able to compete effectively with current and new entrants into the construction industry in the future. Notwithstanding the above, we have not experienced any material decrease in market share which has a material adverse effect on our financial performance in the past. Dependence on Foreign Workers The industry in which our Group operates is dependent on the employment of foreign workers due to the shortage of local workers in the local construction industry. While the employment of foreign workers is currently allowed in the construction industry, these foreign workers can only be sourced from specific countries as determined by the Malaysian Government. In general, approvai is granted based on the merits of each case and is subject to conditions determined by the relevant authorities from time to time. Additionally, the Malaysian Government may amend poiicies relating to the employment of foreign workers in the construction industry and/ or include new conditions. 4. RISK FACTORS (CONT’O) 4.2.4 4.2.5 As our Group’s operations are highly dependent on the supply of foreign workers, any scarcity in its supply would adversely affect our business. Furthermore, any increase in the levy or minimum wages for foreign workers or any other costs to be paid to the Malaysian Government would increase our Group’s construction overheads, directly impacting our financial performance. Should the Malaysian Government amend their policies and impose any restriction or limit to the number of foreign workers to be employed for our projects, the completion of our construction projects may be delayed, hence affecting our Group’s business plans and financial performance. To mitigate these risks, we have appointed agents and sUbcontractors, from whom we can draw supply of foreign workers as and when necessary for our projects. Notwithstanding the above, we have not experienced any shortage of foreign workers which has a material adverse impact on our business operations in the past. Workplace Safety and Health Matters Our Group’s operations are subject to laws and regulations, including those relating to workplace safety and workers’ health. Our Group believes that our existing operations are in compliance with the relevant laws and regulations and is currently not aware of any breaches of workplace safety and health matters. Our management attended and will continue to attend workplace safety and health related seminar and conference to keep abreast of the recent development of relevant laws and regulations. Further, all the management and site personnel of our Group who are required to work on site have attended the green card program regulated by GlOB and possess the green card before being allowed to work on site. In addition, prior to engaging a subcontractor, we would obtain a name list of site personnel from the subcontractor for compliance checking. This is to ensure that all site personnel of subcontractors possess green card and comply with the relevant laws and regulations. Nevertheless, we remain exposed to potential workplace safety and health liabilities. Notwithstanding the above, we have not experienced any breach of workplace safety and health matters which has material adverse impact on OUr business operations in the past. Insurance Coverage on Assets and Employees Our Group believes that we have an adequate insurance coverage on our assets and empioyees. In ensuring such risks are minimised, our Group reviews our insurance policies on a regular basis to ensure that there is adequate coverage on our assets and employees. However, there can be no assurance that all liabilities incurred will be sufficiently covered by insurance and as such, claims for damages arising from our Group’s operations may have an adverse impact on our Group’s financial condition or results of operations. Notwithstanding the above, we have not experienced any claim for damages arising from our Group’s operations which is not sufficiently covered by insurance and has a material adverse impact on our financial performance in the past. 4. RISK FACTORS (CONT’O)
4.2.6 Uncertainty in Securing New Contracts Our business development team is always on the lookout for new business opportunities to sustain business continuity and growth. Our technical team and labour workforce on the other hand will correspondingly provide and maintain consistent quality of service delivery to our customers to encourage recurring business with existing customers and business with new customers. The encouraging influx of customers through recommendations and through our market reputation in piling and foundation services also contributes positively into our future business expansion. As at the LPD, our current book order amounts to approximately RM449.88 million which would last for 12 to 15 months. However, there is no assurance that we will not be facing a situation of uncertainty in securing new contracts. 4.3 Other Risks 4.3.1 Political, Economic and Regulatory Risk Our financial and business prospects, and the industry in which we operate in, will depend to some degree on the developments in the political and regulatory front in Malaysia. Amongst the political, economic and regulatory factors are changes in inflation rates, interest rates, war, terrorism activities, riots, expropriations, Changes in political leadership and unfavourable changes in the governments’ policies such as licensing regulations. The performance of piling and foundation services market players such as our Group is correlated with the performance of the construction and property development industry. At first glance, the property market cooling measures announced in the Budget 2014 seem to dampen the sentiment in the property market leading to potential slower demand for properties which can affect construction demand. However, the move is seen as curbing unhealthy excessive speculative activities particularly in the residential segment. This may lead to a more sustainable property market with lesser speculative influence that can drive the price high. In addition, the Malaysian Government has continued to implement projects related to affordable housing and projects with a positive impact on the citizen and low import value are expected to be implemented. As such, the Board does not foresee any major impact on our business as we generate our revenue from both residential and commercial projects. As at the LPD, our order book for the piling and foundation services segment stood at approximately RM449.88 million and our Group has not experienced any slowdown in our tender project. Please refer to Section 11.5 of this Prospectus for further details on the state of our order book. We will continue to adopt effective measures such as prudent management and efficient operating procedures to mitigate these factors. However, there can be no assurance that adverse political, economic and regUlatory changes, which are beyond our control, will not materially affect our Group’s business. Notwithstanding the above, we hav.e not experienced any adverse political, economic and regulatory changes which have a material adverse impact on our business operations in the past. ~any Number: 1017164iiJ
4. RISK FACTORS (CONT’D)
4.3.2 Vulnerability to Changes in Government Regulations Our Group’s operations are governed by the terms of the licences awarded by CIDB, which set out the types and nature of activities which a construction company in Malaysia is allowed to undertake. In addition to the above, our Group is also subject to, amongst others, the LPIP Act, the Occupational Safety and Health Act, 1994, the Environment Quality Act 1974 and the Factories and Machinery Act 1967 in Malaysia. Furthermore, construction works carried out at construction sites are often subject to directives and terms imposed by local authorities. We have not experienced any severe restrictions on our conduct of business which have a material adverse impact on our business operations in the past. We will always endeavour to comply with any new laws and regulations imposed. However, there is no assurance that any adverse development or change in the regulatory environment in Malaysia would not have an adverse impact on our ability to conduct business in the country.
4.3.3 Forward-Looking Statements Certain statements in this Prospectus are based on historicai data, which may not be reflective of the future results and others are forward-looking in nature, which are sUbject to uncertainties and contingencies. All forward-looking statements are based on assumptions made by our Group and although we believed to be reasonable at that time, are sUbject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forward-looking statements. Such factors include, inter alia, the risk factors set out in Section 4 of this Prospectus. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Prospectus should not be regarded as a representation or warranty by our Company that the plans and objectives of our Group will be achieved.
4.4 Risks Relating to Our IPO 4.4.1 No Prior Market for Our Shares and Possible Volatility of Our Share Prices Prior to the IPO, there has been no public market for our Shares. There can be no assurance that an active market in our Shares will be developed or be sustained upon Listing. Our IPO Price was determined through negotiations between our Directors, Promoters, Offerors, and RHBIB as the Principal Adviser, Underwriter and Placement Agent, after taking into consideration various factors. We cannot assure you that the market price of our Shares will not decline below the IPO Price. We believe that a number of factors could cause our Share price to fluctuate, including but not limited to sales of substantial amounts of our Shares in the public market in the immediate future, announcements of developments relating to our business, fluctuations in our operating results, general industry conditions or the performance of the global economy.