Business Overview

7. BUSINESS OVERVIEW 7. BUSINESS OVERVIEW History and background Our Group’s business activities are segmented into two (2) main categories as follows:­
Our history began in the late 1960s with the business of tyre retreading, when Dato’ Seri Cheah’s family foresaw that the demand for commercial vehicles would significantly increase in Malaysia, which in turn, was expected to cause a healthy demand for retreaded tyres. In anticipation of this, Dato’ Seri Cheah’s family ventured into the tyre retreading business on a small-scale basis in their workshop at Jalan Raja Uda, Penang. In 1973, with the tyre retreading business growing, Syarikat Tai Hin Penchelop Tayar Sdn Bhd was incorporated to take over the tyre retreading business from Chop Tai Hin (sole proprietorship) and we began operations in a rented factory located at Mak Mandin Industrial Estate, Butterworth in 1974. Our pioneer customers included Malaysian Smelting Corporation Berhad, Malaysian Sugar lVIanufacturing Co Ltd., Malayawata Steel Bhd and public bus companies in the state of Penang. In 1977, Syarikat Tai Hin Penchelop Tayar Sdn Bhd changed its name to Olympic. In 1986, Olympic adopted a new retreading technique (i.e. the cold cure tyre retreading) where the tread liners were pre-vulcanised with tyre patterns before being bonded to the surface of the buffed tyre casings. Progressively, as the cold cure tyre retreading became more technologically advanced and commercially accepted, and in most cases preferred by our customers, we began implementing this process on a larger scale. For FYE 2015 and FPE 2016, approximately 73% and 76% of our retreaded tyres respectively were produced using the cold cure tyre retreading method. As we place strong emphasis on our ability to consistently provide quality products and services, we have established stringent QIVIS in our operations and obtained the ISO 9002 certification from SIRIM QAS in 1991. We have since progressively expanded our tyre retreading facility with the implementation of new and advanced machinery and equipment, including the commissioning of the German­made shearography tyre scanning and testing system and overhead monorail system. Through these investments and expansions, we now have a manufacturing capacity of approximately 89,100 retreaded tyres annually. 7. BUSINESS OVERVIEW (cont’d) Development, manufacturing and distribution of tyre retreading materials In 1980, Dato’ Seri Cheah and Eu Ah Seng incorporated Rubber Works to begin the development, manufacturing and distribution of tyre retreading materials in a factory situated at Lot 93, Tasek Industrial Estate, Ipoh. During that period, Malaysia’s economy was experiencing rapid growth, leading to an increase in the usage of commercial vehicles in the country. The commercial vehicles used by fleet operators wear out tyres fast due to heavy and regular usage. As tyres represent a major expense item, many fleet operators opt for retreaded tyres in place of new tyres in order to minimise costs. Therefore, the incorporation of Rubber Works was timely to capitalise on the growing demand for tyre retreading materials in tandem with the growth of retreaded tyres in the market since the late 1970s. Dato’ Seri Cheah gained his experience and knowledge back in the 1960s when he was involved in the tyre retailing and tyre retreading industries. Further details on our founders are set out in Section 9.1.2 of this Prospectus. During the early days since the incorporation of Rubber Works in 1980, our founders undertook product development activities for developing our own tyre retreading materials. Since then, our product development team has grown (see Section 7.7.2 for further details). With our expertise and experience, we successfully formulated many quality rubber compounds used in the development of tyre retreading materials for our customers. In 1986, we achieved a new milestone when we began to expand our market presence overseas, starting with the export of camelbacks to Hong Kong and Singapore. In the mid 1990s, there was a growing demand for pre-cured tread liners in the market. To capitalise on this, Rubber Works ventured into the manufacturing of pre-cured tyre retreading materials and today, we have the capability of producing a diverse range of tread patterns to cater to our customers’ requirements. Our product development team is continuously engaged in the development of new tyre retreading materials, tread patterns as well as usability and durability of our tyre retreading materials. With increased demand for our products, we expanded our manUfacturing facilities and warehousing space to Lot 82, Tasek Industrial Estate, Ipoh in 1995 and subsequently moved our administrative office and warehouse for non-rubber raw materials to Lot 94, Tasek Industrial Estate, Ipoh in 2000 to meet our requirements for more machinery space. Since 2004, through our active participation in international trade fairs and exhibitions and other promotional/marketing activities, we have been able to grow our export sales (for both pre-cured and hot-cured products) significantly with exports to at least 23 countries, contributing approximately 55% and 57% of our total revenue for FYE 2015 and FPE 2016 respectively. In 2005, we incorporated Eversafe Shanghai in PRC as a trading company for the import, export and distribution of rubber-based products and related equipment. This strategic move was undertaken in anticipation of future demand for tyre retreading materials to be on the rise in PRC and through Eversafe Shanghai, we established our presence in PRC. In 2006, with our Group’s expanding business presence in PRC, we acquired Supreme Good (a dormant company) in Hong Kong as an investment holding company with the intention of establishing a manufacturing arm in PRC. In 2007, we incorporated Jiaxing to manufacture rubber-based products in PRC. Since then, the manUfacturing and distribution of certain tyre retreading materials to PRC market has been carried out by Jiaxing and Eversafe Shanghai respectively. 7. BUSINESS OVERVIEW (cant’d) In 2010, we undertook a major rebuilding and upgrading of our first (1 51) factory at Lot 93, Tasek Industrial Estate, Ipoh in which we commenced business since 1980, with major renovations and setting-up of new mixing lines. In 2012, Rubber Works further expanded its manufacturing and warehousing capacity by setting-up a third (3rd) facility at Lot 90, Tasek Industrial Estate, Ipoh. The renovation and construction of the factory began in 2013 and was completed in 2014. The manufacturing of tyre retreading materials commenced in the new factory in 2015. In the same year, we also recognised the opportunity to enter the South American region, particularly Brazil being the largest economy in South America as its government is promoting the development of tyre retreading industry as well as highway construction for the next few years. We formulated strategies to penetrate this market and began to venture into South America. We took a proactive marketing strategy and in the same year managed to secure over RM1.3 million worth of sales orders from the Brazilian market. We are optimistic about the demand for our products and services in South America and intend to expand into other countries in South America. In late-2016, we have entered into a distribution agreement appointing a customer in South America (a trader af tyre retreading materials) to be the distributor to promote and market our tyre retreading materials for the South American market. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 7. BUSINESS OVERVIEW (cont’d)

7.2 Key achievements and milestones Year Key achievements and milestones We commenced our venture into the tyre retreading business. 1974 Expanded our tyre retreading operations to a rented factory in Mak Mandin Industrial Estate, Butterworth with a land area of 48,000 sq. ft. 1980 Rubber Works was incorporated to begin the development, manufacturing and distribution of tyre retreading materials in a factory situated at Lot 93, Tasek Industrial Estate, Ipoh. Our main products were masterbatch, camelbacks, and sidewall veneers. 1986 Eversafe Trading (incorporated in 1976 as a dormant company) began trading of camel backs for Rubber Works. We commenced our international business with exports to Hong Kong and Singapore. Olympic implemented the cold cure tyre retreading in its tyre retreading operations. 1994 Expanded our product range and began manufacturing pre-cured tread liners. Since then, we have developed and commercialised over 70 tread patterns for our customers. 1995 Expanded our manUfacturing operations and warehousing space to second (2nd) factory at Lot 82, Tasek Industrial Estate, Ipoh. 2000 Expanded to Lot 94, Tasek Industrial Estate, Ipoh. 2005 We established a business presence in PRC via the incorporation of Eversafe Shanghai to commence the import, export and distribution of rubber-based products and related equipment in the country. Rubber Works began expansion of its manufacturing capacity progressively by investing and commissioning new machinery and equipment as well as replacing older machines. Olympic began progressive expansion on its manufacturing facility by installing new and advanced machinery and equipment to increase manufacturing capacity and replacement of old machines. 2006 We acquired Supreme Good in Hong Kong as an investment holding company with the intention to establish a manufacturing arm in PRC. 2007 Jiaxing was incorporated to manufacture rubber-based products in PRC. Olympic implemented an overhead monorail system, which is used to transport the tyres from one process to another on the production floor. 2008 Olympic commissioned a German-made shearography tyre scanning and testing system. 2010 Rebuilt and upgraded factory at Lot 93, Tasek Industrial Estate, Ipoh to expand our mixing capacity. 2013 We began renovation and construction of a third (3rd) factory at Lot 90, Tasek Industrial Estate, Ipoh. 2015 The third (3rd) factory at Lot 90, Tasek Industrial Estate, Ipoh commenced operations. We expanded our overseas market by venturing into South America, particularly Brazil for the distribution of our tyre retreading materials. We appointed a customer in South America to be the distributor to promote and market our tyre retreading materials for the South American market.
I Company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) 7.3 Our business 7.3.1 Principal business activities, products and services We are principally involved in:­(i) the development, manufacturing and distribution of tyre retreading materials; and
(ii) tyre retreading operations.

Below is a summary diagram of our business activities across the tyre retreading value chain, of which our products include masterbatch, other tyre retreading materials and retreaded tyres as described below:­
lYRE RETREADING VALUE CHAIN
Raw rubber compound in the manufacturing of other tyre retreading materials

 

 

I III Pre-cured tread liner Camelback Cushion gum Repair rope Global customer base with exports to at least 23 countries for FYE 2015 and FPE 2016. Our customers are mainly tyre retreaders and rubber material traders (for tyre retreading materials) in local and international markets and fleet  operators  and  tyre  retailers (for tyre  retreading operations) in Malaysia.  I  I
Sidewall veneer Orbitread Used in manufacturing of retreaded tyres via the cold cure retreading  Used in manufacturing of retreaded tyres via the hot cure retreading  Used to bond pre­cured tread liners and camelbacks to the  Used in the process of repairing tyres  Used to sidewalls  repair  tyre  Used in retreading of OTR tyres via the hot cure retreading process  process  process  prepared  surface  of  the buffed tyre casings
7. BUSINESS OVERVIEW (cont’d)
Tyre retreaders Rubber material traders Our wholly-owned subsidiary, Olympic is involved in tyre retreading operations, where our products and services are mainly provided to fleet operators and tyre retailers in Malaysia. The retreaded tyres distributed by Olympic are marketed under our own brand “OlP”. Rubber Works and its subsidiaries (excluding Olympic) are involved in the development, manufacturing and distribution of tyre retreading materials, where our customers consist of mainly tyre retreaders and rubber material traders in local and international markets. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK ~anYNO.1133877-V I 7. BUSINESS OVERVIEW (cont’d) Development. manufacturing and distribution of tyre retreading materials The development, manufacturing and distribution of tyre retreading materials are carried out by Rubber Works and its subsidiaries (excluding Olympic). Our tyre retreading materials are rubber compounds used in tyre retreading applications. We develop and formulate our rubber compounds in-house, using a combination of raw materials blended to achieve qualities that are appropriate to the performance requirements of each type of tyres. Our tyre retreading materials are as follows:­Principal products Product images Masterbatch
Pre-cured tread liners
Product description and usage Masterbatch is an essential raw material which is compounded with chemicals, such as sulphur, accelerators and/or other additives, to form the desired rubber compounds which are used in the manufacturing of our other tyre retreading materials listed below:­pre-cured tread liners; • camelbacks; cushion gums; repair ropes;

• sidewall veneers; and orbitreads.

 

Our masterbatch is formulated and compounded in-house through a mixture of natural rubber and/or synthetic rubber, rubber processing oils, carbon black, chemicals and/or additives. Pre-cured tread liners are pre-vulcanised rubber strips moulded with patterns and profiles. The pre-cured tread liners are used in cold cure tyre retreading. Our pre-cured tread liners come in a variety of dimensions, sizes, weights and patterns. We have the capability to manufacture a diverse range of pre-cured tread liners to meet our customers’ requirement. We are constantly expanding our range of pre-cured tread liners, in line with the increasing demand and requirements from our customers. As at the LPD, we produce and distribute over 70 patterns of pre-cured tread liners to our customers locally and internationally. [Company No. 1133877-V I

 

7. BUSINESS OVERVIEW (cont’d) Principal products Product images Product description and usage Camelbacks Cushion gums Repair ropes

Camelbacks are unvulcanised rubber strips added to the surface of the buffed tyre casings. Camelbacks are mainly used in hot cure tyre retreading. These strips take the pattern of the mould during the process of vulcanisation. Cushion gums are strong adhesive strips used to bond pre-cured tread liners and camelbacks to the prepared surface of the buffed tyre casings. Our cushion gums are custom-made and have good tack adhesion properties. Repair ropes are rubber compounds extruded in a rope form. Repair ropes are used in the process of repairing tyres. [COmpany No. 1133877-V I

7. BUSINESS OVERVIEW (cont’d) Principal products Product images Product description and usage Sidewall veneers Sidewall veneers are rubber compounds used to repair the tyre sidewalls. The process is to apply a new rubber veneer to the tyre sidewalls during the hot cure tyre retreading.
Orbitreads Orbitreads are extruded rubber compounds used in hot cure tyre retreading for OTR tyres. Unlike tyres for other commercial vehicles, OTR tyres are larger and hence, require the use of orbitreads (instead of
came/backs) in the retreading process. L THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK I
7. BUSINESS OVERVIEW (cont’d) The main ingredients used in the manufacturing of our tyre retreading materials are rubber and fillers. The fillers we use to produce masterbatch are carbon black and various chemicals. Masterbatch will then be amalgamated with relevant chemicals to achieve different objectives (see Section 7.4.1A below for details on the manufacturing processes for our tyre retreading materials). These objectives can be, but are not limited to:­• Optimising tyre performance in harsh conditions;
• Maximising tyre traction in both wet and dry road conditions; and/or
• Achieving lower rolling resistance.

These objectives are dependent on the intended use of the tyres. To achieve these objectives, the appropriate type of masterbatch is selected, along with the type and amount of filler in the compounding process. Depending on the differing performance requirements, other ingredients such as additives and accelerators are added to aid the compounding process. Our tyre retreading materials are produced according to customers’ specifications. For example, if the tyres are used by a heavy load vehicle on rough roads, we can customise the rubber compounds and tread patterns, as well as thicker sidewall veneers to accommodate the weight and reduce the wear and tear, while at the same time maintaining a good level of comfort to the driver. At present, we manufacture our tyre retreading materials in two (2) locations (Malaysia and PRe) with an estimated capacity to manufacture 81,878 MT of tyre retread ing materials annually (see Section 7.4.2 below for details). 94% of our manufacturing capacity is based in Malaysia and our primary customers for this business segment are mainly tyre retreaders and rubber material traders in local and international markets. For FYE 2015 and FPE 2016, our export sales contributed 55% and 57% of our Group’s total revenue respectively, with exports to at least 23 countries globally. Tyre retreading operations Our tyre retreading operations are carried out by Olympic. Tyre retreading is a process where the used tyre casings are made serviceable by removing worn and damaged treads and replacing them with new treads. The retreaded tyres are brought back into the same service conditions without sacrificing tyre road performance. This process may be repeated as long as the casings’ integrity is intact. The main reasons why retreaded tyres are popular amongst our customers, especially fleet operators, are as follows:­• Value for money Retreaded tyres are cheaper than new tyres. For fleet operators with hundreds of vehicles, cost savings on purchasing new tyres can be substantial in the long run. • Safe to use Retreaded tyres are manufactured and tested with the same stringent standards as new tyres. Our retreaded tyres are MS 224:2005 certified and hence, safe for use in commercial vehicles in Malaysia. 7. BUSINESS OVERVIEW (cont’d) • Durable The average operating lifespan of our retreaded tyres is between three (3) months and a year, depending on the usage of the commercial vehicles. They can last as long as new tyres, and sometimes even longer due to our variety of tread patterns which cater to a diverse range of driving and road conditions. • Product flexibility Our retreaded tyres and tyre retreading materials are produced according to customers’ specifications. For example, if the tyres are used by a heavy load vehicle on rough roads, we can customise the rubber compounds and tread patterns, as well as thicker sidewall veneers to accommodate the weight and reduce the wear and tear, while at the same time maintaining a good level of comfort to the driver. Our tyre retreading business contributed approximately 12%, 11 % and 11 % to our Group’s total revenue for FYEs 2013, 2014 and 2015 respectively as well as 10% for FPE 2016. We ventured into the tyre retreading business in 1967 and have garnered approximately half a century of experience in the tyre retreading industry. Our tyre retreading activity is currently carried out at our tyre retreading facility situated in Mak Mandin Industrial Estate, Butterworth with a land area of 48,000 sq. f.t and an estimated maximum manufacturing capacity of 89,100 units of retreaded tyres per annum. As our tyre retreading facility is based in Penang, our customers are primarily concentrated in the northern region of Peninsular Malaysia comprising mainly tyre retailers and fleet operators (i.e. transportation and logistics companies). We market our retreaded tyres under our own brand “OLP”, and our retreaded tyres are mainly used by commercial vehicles such as buses and small to large transportation trucks. We utilise both the cold cure and hot cure retreading processes in the manUfacturing of our retreaded tyres. Cold cure tyre retreading is the most commonly used method today as it allows more flexibility in manufacturing retreaded tyres of different sizes and/or with different tread patterns as well as exerts less stress on a tyre casing (in view of lower pressure and temperature used during the curing process as compared to hot cure tyre retreading) allowing the tyre to be retreaded for more times. In cold cure tyre retreading, a pre-cured tread liner is applied with a layer of cushion gum on a buffed tyre casing, On the other hand, hot cure tyre retreading involves applying a camelback to a buffed tyre casing, which is then placed into a hot mould to form the tread pattern. A dedicated mould is required for each tyre size and each tread pattern. See Section 7.4.1 B below for further details on processes for our tyre retreading operations. We source our tyre casings from various parties including tyre traders, tyre retailers and our customers (mainly fleet operators). We only use tyre casings that comply with our quality standards in the manufacturing of our retreaded tyres. We have invested in a German-made shearography tyre scanning and testing system to check the conditions of used tyre casings, paying attention to tyre surface conditions as well as internal damages in the tyre casings, which cannot be easily detected through visual inspection. As at the LPD, Olympic has a total of nine (9) transportation trucks used in the collection and delivery of retreaded tyres to our customers in the northern region of Peninsular Malaysia. For other locations outside of our coverage, either external transportation companies are appointed or our customers will have to make their own transportation arrangements.
7. BUSINESS OVERVIEW (cont’d) 7.3.2 Competitive advantages and key strengths Established track record in lVIalaysia We have approximately half a century of history in the tyre retreading industry. Our founders and key directors, namely Dato’ Seri Cheah and his family members were in the battery and tyre services business since 1965 before venturing upstream into the tyre retreading business in 1967 followed by the development, manufacturing and distribution of tyre retreading materials in 1980. Through decades of operating in the rubber compounding and tyre retreading industries, we believe we have built a good reputation and brand name for the quality of our products and services amongst many of our loyal customers. Through the consistency in quality of our products and services, we are able to compete against our competitors to secure new customers as well as retain existing customers. We have over 260 customers contributing to our revenue for FYE 2015 and over 360 customers for FPE 2016. Our top ten (10) customers contributed 36.7% of our total revenue for FYE 2015 and 47.5% of our total revenue for FPE 2016. Half of our top ten (10) customers for FPE 2016 have been in business with us for an average of more than 25 years (collectively, they contributed 18.0% of our total revenue for the said period). This factor, along with our other competitive advantages and key strengths below and our growth strategies, has led us command a market share of about 22% in 2015 for the development, manufacturing and distribution of tyre retreading materials in Malaysia (source: IMR Report). We believe we will continue to maintain this position in Malaysia as well as to continue our growth in international markets. Global customer base with exports to at least 23 countries for FYE 2015 and FPE 2016 In 1986, we began to expand our market presence overseas, starting with the export of camelbacks to Hong Kong and Singapore. Since 2004, through our active participation in international trade fairs and exhibitions and via other promotional/marketing activities, we have been able to grow our export sales significantly. For FYE 2015 and FPE 2016, our overseas markets made up 55% and 57% of our total revenue respectively, with exports to at least 23 countries globally. As we have entrenched ourselves in Malaysia with a market share of about 22% in 2015 for the development, manufacturing and distribution of tyre retreading materials (source: IMR Report), and in our view the Malaysian market is already saturated with various players, our wide reach to overseas markets provides us with valuable growth avenues. With our penetration into various overseas markets, we are able to capitalise on growth opportunities where we are able to supply new product range with a focus on high value­added and premium products required by many international customers. For example, European customers may require specialised pre-cured tread liners for use in extreme winter conditions that demand softer compounds, finer tread patterns and various channels and grooves for better traction whilst South American customers may require more durable pre-cured tread liners and tougher sidewalls to absorb the impact of rocks and other heavy duty off-road conditions. We view these markets as areas for growth and our future plans and growth strategies are designed to capitalise on these opportunities (see Section 7.3.3 below). Having a global customer base also mitigates the risks relating to concentration of customers and single country risk. Where certain countries may be experiencing prolonged economic difficulties, we are able to channel more of our sales effort to other countries that may command higher sales volume and higher profitability margins. 69

I Company No. 1133877~V I 7. BUSINESS OVERVIEW (cont’d) We are a tyre retreading solutions provider operating across the value chain We are a tyre retreading solutions provider established in both the upstream and downstream sectors of the tyre retreading value chain. We commence our principal activities upstream from sourcing of raw materials comprising natural rubber, synthetic rubber, carbon black, rubber processing oil and chemicals, to producing masterbatch, which is further developed into other tyre retreading materials and ultimately to tyre retreading products and services downstream, as illustrated below:­
By serving across the value chain, we are able to understand the diversity of specific requirements expected by our upstream to wholesale customers across the chain. It helps us in our formulation and development of new and improved rubber compounds used in the manufacturing of our tyre retreading materials and we are able to leverage on our downstream activities to provide our customers with total tyre retreading solutions to meet their needs. We believe our ability to integrate our business and operations across the value chain is key to maintaining competitiveness in the market. Through such integration, we have been able to improve supply chain coordination, leading to high production efficiency, ability to capture upstream and downstream profit margins, gain access to downstream distribution channels and expand on our competencies. We possess the expertise and experience garnered over half a century Our Group’s founders and key directors have been involved in rubber-related industries since the 1960s, from trading of raw rubber and servicing the retail tyre markets to currently producing rubber compounds for the global tyre industry as well as running wholesale tyre retreading operations (see Section 9 of this Prospectus for details of our Directors and Key Management). They possess strong technical expertise garnered over the years and practise a hands-on approach throughout our businesses, from product development to operations and customer service. Individual directors have their own specialty in their respective field of work. For example, Dato’ Seri Cheah possesses extensive experience and influence in the tyre retreading industry in Malaysia. He is the Life Honorary President for the Malaysian Association of Tyre Retreaders and Dealers Societies and North Malaysia Tyre Association as well as an Executive Advisor to North Malaysia Tyre Association and Tyre Retreads Manufacturers Association of Malaysia. He is one of the key people who started the tyre retreading materials manufacturing business for our Group. Throllgh his leadership and vision in the tyre industry, he has created a strong corporate branding for our Group which has positioned us as one of the tyre retreading material providers with an established market reputation in Malaysia. Our co-founder, Eu Ah Seng, possesses over 50 years’ experience and knowledge in rubber compounding. With his leadership and expertise, we have been able to successfully formulate many customised rubber compounds used in the manufacturing of tyre retreading materials. His business network in the industry has also helped in expanding our businesses. 70 7. BUSINESS OVERVIEW (cant’d) Our Group’s Chief Executive Officer / Executive Director, Cheah Siang Tee, has also been actively involved in the tyre business for over ten (10) years. He joined our Group in 2004 and has been instrumental in formulating our sales and marketing strategies, especially in penetrating new overseas markets, which we have since enjoyed significant growth in our export sales. Furthermore, most of the key personnel employed possess the necessary management qualifications and have been with our Group for many years. As such, we have the necessary experience, knowledge and network, and shall endeavour to deliver quality products and services to meet our customers’ requirements. We also provide our young management personnel the opportunity to attend relevant training programmes to groom the next generation of talents to assist in running and growing our business. Development and customisation capabilities to meet unique requirements Leveraging on our decades of experience in the rubber compounding industry, we are able to develop and customise various formulations to fulfill the unique and evolving requirements of our customers. Our database of rubber compounding formulations is also constantly being improvised via continuous feedback from our customers. As such, our formulation of tyre retreading materials cannot be easily plagiarised by other competitors. Manufacturers with the same factory set-up may not be able to produce the same product quality unless they possess the right formulations, technical know-how and manufacturing experience. Over the years, we have customised numerous products for various applications in different weather and workload conditions, which emphasise on a combination of the folloWing tyre performance properties:­Properties Description (i)  Contact patch  Portion of the tyre that is in actual contact with the road surface  (ii)  Cornering force  Side force exerted on the tyre during cornering movement  (iii)  Force variation  Property of a tyre that affects steering, traction, braking and load  support  (iv)  Work load and load  Behaviour of tyres under load. For instance, the effectiveness of the  sensitivity  tyre’s  friction  against  the  road  surface  decreases  as  the  load  increases  (v)  Rolling resistance  Friction between the tyre and the road. A low rolling  resistance  contributes to fuel savings  (vi)  Aligning torque  Ability of tyre to realign after a cornering movement to  return the  wheels to a straight movement  (vii)  Stopping distance  Distance a vehicle will travel from the point when its brakes are fully  applied to when it comes to a complete stop  (viii)  Wet and dry traction  Performance of the tyre under wet and dry conditions  (ix)  Tread wear of  Durability and lifespan of the retreaded tyres  retreaded tyres  (x)  Tyre balance  Distribution of mass within a tyre. An imbalanced tyre attached to  the vehicle can result in a wobbling of the entire vehicle
In addition, in the upstream operations, we have the technical expertise to develop formulations to produce rubber compounds with qualities that can be used to further develop other rubber-based products for other industries. For example, we have formulated and manufactured rubber compounds to produce conveyor belts that are being used in the mining industry, and thermal insulation materials for pipes. See Section 7.3.3(ii) below for further details on our other rubber-based products. 71 7. BUSINESS OVERVIEW (cont’d) 7.3.3 Future plans and strategies FUTURE PLANS AND STRATEGIES I Grow overseas Enhance product market quality • Establish footprint in new overseas markets
• Increase export sales to overseas markets

• Improve efficiency and reduce wastage • Enhance manUfacturing capabilities • Ensure consistent product quality • Widen range of products, particularly high value-added and premium products
• Branding initiative and establish IPR in new overseas markets

(i) Increase export sales to overseas markets For our tyre retreading materials business, we plan to increase our export sales and our geographical footprint to various overseas markets. The new markets we intend to expand to will primarily be outside the ASEAN region, with a focus on the South American region. Although we exported to at least 23 countries around the world for FYE 2015 and FPE 2016, we are still expanding to new markets through trade fairs and exhibitions and other promotional activities. Outside of Hong Kong and PRe, we do not have overseas marketing or distribution office. We believe this represents an opportunity for us to strengthen our position and to increase our sales in countries we currently serve as well as those in new markets. For FYE 2015, we enjoyed an increase of 181 % for our export sales to a growing demand for our tyre retreading materials in the American region. It also marks our first foray into Brazil, in which we expect demand for our products to grow progressively in the foreseeable future. We recognise this potentially lucrative market and plan to focus our efforts in Brazil, as well as other countries in South America. 7. BUSINESS OVERVIEW (cont’d) In 2016, we have identified a customer in South America (a trader of tyre retreading materials) to be our business partner for the South American market, where collaboration shall be in two (2) areas. Firstly, we have entered into a distribution agreement in September 2016 (see further details in Section 15.5 of this Prospectus) appointing our business partner to be the distributor to promote and market our tyre retreading materials for the South American market. Secondly, we are finalising details of a JV arrangement with our business partner to establish a tyre retreading plant in South America. The JV arrangement will be such that our Group will supply tyre retreading materials such as pre-cured tread liners and cushion gums for the tyre retreading plant in South America whilst the JV entity to be incorporated shall market and distribute the retreaded tyres. With Olympic’s tyre retreading experience and knowledge, we believe we are able to create synergies with our business partner to provide quality tyre retreading products and services for the South American markets. In late-2016, our business partner has rented a factory in South America and we have been working together in planning the factory set-up. The installation works of the retreading plant are expected to commence in mid-2017 and the plant is expected to commence tyre retreading operations in mid-2018. As at the LPD, we have not incurred any financial commitments in respect of the JV arrangement. The sharing of any such commitments and/or benefits by our Group in the JV arrangement will depend on our eventual equity participation and finalisation of other terms in the JV agreement. Furthermore, we will set up an office and storage facility in Eastern Europe in mid-2017 using internally generated funds. This is to better service our existing and potential customers in the whole European market. The premise will be used to carry out our administrative and marketing activities as well as for the storage of our products for the European market. (ii) Enhance manufacturing capabilities to widen range of products, with focus on high value-added and premium products Over the period under review, we have managed to significantly increase our gross profit margins for our overseas markets (see Section 12.4.3 of this Prospectus) as we are able to command better pricing in certain overseas markets which demand a wider range of products as compared to Malaysia due to seasonal weather differences, different vehicle specifications as well as to cater for the different working conditions in overseas markets. Hence, we intend to further capitalise on such growth opportunities by utilising the IPO proceeds to establish manufacturing lines that are capable of producing a wide product range to meet our overseas customers’ requirements. For example, European customers may require specialised pre-cured tread liners for use in extreme winter conditions that demand softer compounds, finer tread patterns and various channels and grooves for better traction whilst South American customers may require more durable pre-cured tread liners and tougher sidewalls to absorb the impact of rocks and other heavy duty off-road conditions. In addition, we intend to fUlly utilise our technical capabilities to continue developing new innovative products as well as improve the quality of our existing products for our customers in our existing and new markets. In our product expansion plan, we will focus on the following areas:­• Formulate and develop new rubber compounds to produce tyre retreading materials with better performance and longer durability; and
• Design and develop more pre-cured tread liner designs to cater for different road, weather and driving conditions.

73 7. BUSINESS OVERVIEW (cont’d) We are also venturing into the development of other new rubber-based products for different industries. For example, we began supplying the Weir Minerals group of companies (which specialises in the supply of specialty machinery and equipment for the mining industry) with rubber compounds to be used in the manufacturing of rubber conveyor belts for their conveyor systems. Conveyor systems used in mining operations must be able to withstand rough and heavy material handling. Therefore, the rubber materials used have to be able to perform under those conditions. With our experience and knowledge in rubber compounding, we are able to manufacture the desired rubber compounds to their conveyor belts’ specification and requirement. Since FYE 2015 up to 30 September 2016, we have supplied them over 350 tonnes of customised rubber compounds, which had contributed approximately RM2.93 million to our revenue. At the same time, we have also identified new opportunities to expand our business, to produce rubber compounds for thermal insulation pipes. In 2016 (until 30 September 2016), we have secured a rubber compound mixing workmanship order and successfully delivered over 200 tonnes of rubber compounds for thermal insulation pipes, contributing approximately RMO.13 million to our revenue. Currently, we are conducting a feasibility study on how best to utilise our expertise in rubber compounding and excess capacity to produce other rubber­based products. We see this as an opportunity to expand into another business segment and provide more rubber-based products to the mining industry, as well as other industries that require rubber-based products. (iii) Branding initiative and establish IPR in new overseas markets We have already registered our trademarks in Malaysia and PRC. As a next step, we intend to trademark our brand in a number of countries (see Section 4.7.2 of this Prospectus) and towards this end, we expect to incur approximately RM2.0 million, of which RM1.0 million will be financed from our IPO proceeds and the remaining from our internally generated funds. We view the protection of our trademarks as an important step towards becoming an international player. Upon the successful registration of our trademarks with the respective foreign regulators, we will be able to secure and protect our logos and/or brand name, products’ identity and integrity as well as our position in the new markets. This serves to mitigate the risk factor associated with the protection on our trademarks (see Section 5.1.6 of this Prospectus). (iv) Improve efficiency, reduce wastage and ensure consistent product quality As set out in Section 4.7.1 of this Prospectus, we intend to utilise a major portion of our IPO proceeds to invest in new manufacturing lines and manufacturing automation systems comprising automated buffing and packing lines, loading and unloading systems, robotic hands as well as conveyor systems in our manufacturing facilities in Malaysia. We believe that with enhanced automation systems in place, we will be able to improve the consistency of our product quality, increase production efficiency, reduce wastage and reduce human error. This is also in line with our strategy to reduce our dependency on foreign workers. The rationale for investing in new manufacturing lines and manufacturing automation systems vis-a-vis our manufacturing capacity utilisation rate are set out in the Notes to Section 7.4.2 below. 74 7. BUSINESS OVERVIEW (cont’d) We have identified several manufacturing system providers in Taiwan, PRC, Brazil, Italy and Germany to supply us with the relevant technology. Since late­2016 (up to the LPO) , we have incurred RM4.0 million for such new manufacturing lines and automation systems. The supplier’s quotations for the remaining items shall be finalised and the most suitable quote will be selected closer to the acquisition date. We intend to complete the acquisition and installation of all these machines within two (2) years from our Listing. 7.4 Operational processes and facilities 7.4.1 Manufacturing model Our Group’s overall operational process workflow is outlined in the diagram below:­
Suppliers ~

 

 

7. BUSINESS OVERVIEW (cant’d) A. Development, manufacturing and distribution of tyre retreading materials The tyre retreading materials manufactured by us are mainly pre-cured tread liners, camelbacks, cushion gums, repair ropes, sidewall veneers and orbitreads. The operations of our tyre retreading materials business are detailed below:­Product development and customisation We conduct continuous product development and customisation activities to manufacture new and enhanced tyre retreading materials to meet our customers’ requirements and specifications via the formulation of various rubber compounds used in our manufacturing of tyre retreading materials and retreaded tyres. When developing new products, we begin by product trial and testing through our customers such as fleet operators, providing them the use of these new products in their transportation and logistics operations. Once the new products are accepted by our customers, we will commercialise and promote them in existing markets as well as to new markets via trade fairs and exhibitions. Sales and marketing Our tyre retreading materials are marketed and distributed to tyre retreaders and rubber material traders, locally and internationally. We adopt a personalised marketing strategy where we actively participate in international trade fairs and exhibitions to promote and demonstrate our products to customers. We also visit our customers to promote new and existing range of products. Customers can place their orders through our sales and marketing department. Once a sales order is placed and secured, we will prepare the production order for the production department to commence manufacturing. Raw material preparation To avoid any delays in manufacturing, we ensure that we have a sufficient amount of raw materials in our warehouse prior to commencement of manufacturing. We procure our raw materials, mainly natural rubber and/or synthetic rubber, rubber processing oils, carbon black and chemicals from our suppliers locally and internationally. Upon receipt from our suppliers, we inspect the raw materials received to ensure that there are no deficiencies or defects which may cause a delay or disruption in our manufacturing process. After inspection, raw materials are delivered to the warehouse to await manufacturing. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 7. BUSINESS OVERVIEW (cont’d) The manufacturing processes and flowcharts for our tyre retreading materials are further illustrated below:­
RubberFillers(1) processing oils

Notes:­(1) Comprise carbon black and chemicals
(2) Chemicals used comprise curing agents, accelerators and/or antioxidants
(3) These are the new machines / systems for our manufacturing enhancement exercise as set out in Section 4.7.1 of this Prospectus

7. BUSINESS OVERVIEW (cant’d) Manufacturing of masterbatch Masterbatch is an essential raw material used in the manufacturing of other tyre retreading materials. Our masterbatch is formulated in-house through the mixing of a series of natural rubber and/or synthetic rubber, rubber processing oils and fillers such as carbon black and chemicals. Prior to commencement of manufacturing of the masterbatch, the necessary raw materials are prepared from the warehouse. All the raw materials used in the manufacturing of masterbatch will be weighed to ensure that they are in accordance with the pre-determined formulations. When all raw materials have been prepared, the manufacturing process begins, starting with compounding. The mixer is adjusted to the correct parameters to ensure that the compounds are mixed in the proper sequence. After the mixing process is completed, the masterbatch is sent for sheeting to be turned into a sheet form. The masterbatch then undergoes an anti-tacking process. Hot rubber compounds have a tendency to stick together due to their tackiness. The application of an anti-tacking coating to the surface of the rubber sheet keeps it from sticking to other rubber sheets. The rubber sheets will then be cooled down, dried and cut into the slabs (af pre­determined shape and size) with a cutter. The masterbatch slabs will be weighed and inspected before being packed. Next, the masterbatch undergoes a batch testing in our internal laboratory. Upon successful testing, the masterbatch is ready to be used to manufacture our other tyre retreading materials. If the test results are not up to standard, the whole batch is reworked to achieve the desired results or discarded. The masterbatch is further compounded with chemicals such as curing agents, accelerators and/or antioxidants to produce other tyre retreading materials i.e. camelbacks, orbitreads, repair ropes, cushion gums, sidewall veneers and pre-cured tread liners. Manufacturing of rubber compounds Our rubber compounds are formulated to meet the physical and functional requirements of individual tyre retreading materials i.e. camelbacks, orbitreads, repair ropes, cushion gums, sidewall veneers and pre-cured tread liners. We have a team of experienced staff constantly working on improving our rubber compound formulations to enhance our tyre retreading materials. The raw materials are put through a series of processes to produce our rubber compounds:­• Mixing;
• Blending;
• Cutting;
• Anti-tackillg; and
• Drying and cooling.

The finished products are then QC tested for viscosity, gravity, rheumatic, hardness, tensile strength and abrasiveness. To manufacture our tyre retreading materials, a sequence of manufacturing processes, such as extrusion, calendering, moulding, trimming and buffing, are carried out before being developed into finished products, being camelbacks, orbitreads, repair ropes, cushion gums, sidewall veneers and pre-cured tread liners. 7. BUSINESS OVERVIEW (cant’d) Manufacturing of camelbacks, orbitreads and repair ropes The rubber compounds to manufacture camelbacks, orbitreads and repair ropes go through an extrusion process and other sub-processes before the finished products are produced. The rubber compounds are force fed into an extruded hopper, set at a pre-determined speed and temperature, and go through a screw and die under pressure of the extruder to form the extruded rubber, in this case the camelback, orbitread and repair rope. Next, the surface of the extruded rubber is coated with an anti-tacking solution. SUbsequently, the extruded rubber will go through a series of cooling and drying processes to remove water from the surface. Camelback is formed by processing the extruded rubber through a size roller to flatten it into a rubber sheet with pre-determined thickness and width. Subsequently, we will carry out an anti-tacking process followed by a cooling and drying process before being packed in reel or roll form. Orbitread is formed after the extruded rubber goes through a cooling process in a water bath. It is then SUbjected to an anti-tacking process to prevent stickiness before being dried by a cooling fan. Finally, the orbitread is stacked neatly into individual packing crates via a roller. After being extruded, the repair ropes go through an anti-tacking process to prevent stickiness and then dried by a cooling fan. They are then packed into carton boxes through a conveyor belt. Subsequently, the camelbacks, orbitreads and repair ropes will go through a visual inspection to ensure that they are free of defects and meet product specifications. They are then weighed, labelled and stored in the finished goods area. Manufacturing of cushion gums and sidewall veneers Our cushion gums and sidewall veneers are made from pre-formulated, pre-compounded and extruded rubber compounds. The extruded rubber compounds will undergo a calendering process and other sub-processes to form the cushion gums and sidewall veneers. To manufacture our cushion gums and/or sidewall veneers, the extruded rubber compound ;s pre-heated in a milling machine until it is hot and soft. It is then cut into a roll form and fed into the calendering line to form a compound sheet with pre-determined thickness and width. The compound sheet is then cooled on a conveyor belt at a pre­determined temperature and speed. After the drying process, a visual inspection is conducted to confirm that the cushion gums and/or sidewall veneers are free of surface defects, and that the thickness and width of the cushion gum and/or sidewall veneer sheets conformed to our product specifications. After the QC approval, the cushion gum and/or sidewall veneer sheets are coiled together with embossed plastic sheets. Each roll of cushion gum and sidewall veneer sheets is then measured to the required weight before being labelled and stored in the warehouse awaiting delivery. 7. BUSINESS OVERVIEW (cont’d) Manufacturing of pre-cured tread liners Pre-cured tread liners are pre-vulcanised tyre treads moulded with patterns and profiles. Our pre-cured tread liners come in a variety of dimensions, sizes, weights and patterns. We use our pre-compounded extruded rubber and pre-fabricated moulds to produce our pre-cured tread liners. We manufacture our own extruded rubber and cut them into the required lengths. Each batch of extruded rubber is then packed in coil form and properly recorded. Prior to the moulding process, the extruded rubber will go through a calendering process. In the calendering process, extruded rubber is passed through a series of rollers to flatten the extruded rubber compound into a blank rubber sheet. The next process is moulding. The blank rubber sheets are placed into the moulds to be pressed into the pre-designed tread liner pattern. As at the LPD, we produce and distribute over 70 patterns of pre-cured tread liners. Our product development team is constantly developing new and enhanced pre-cured tread liners with different patterns to improve tyre performance and durability for our customers. As such, we have many moulds properly stored in our warehouse. After the moulding process, the newly moulded tread liners usually have excess rubber, which has to be trimmed and buffed before a QC inspection is done to ensure that the new moulded tread liners conform to specifications and requirements. After a final inspection, the pre-cured tread liners will be weighed, packed, labelled and stored in our warehouse awaiting delivery. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 7. BUSINESS OVERVIEW (cont’d) B. Tyre retreading operations
Buffing Skiving Patching, repairing, cementing and filling
Tread building Camelback building Finishing and repairing Finishing and repairing Enveloping and rimming TUbing and rimming Curing Curing
Final inspection and trimming 7. BUSINESS OVERVIEW (cont’d) We provide tyre retreading products and services to local tyre retailers and fleet operators. Customers can place their orders through our sales and marketing department. Used tyre casings We source our tyre casings from various parties including tyre traders, tyre retailers and our customers (mainly fleet operators). We only use tyre casings that comply with our quality standards in the manufacturing of our retreaded tyres. Initial inspection The tyre retreading process begins with an initial inspection of the used tyre casings collected. In the initial inspection process, we conduct a visual and tactile check of the used tyre casings, followed by a non-destructive shearography scan. The non-destructive shearography scan detects inherent separations in the tyre casings that are otherwise invisible and remain undetected by the naked eye. If the tyre casings pass the initial inspection process, we will keep them in a storage area until they are sent for the tyre retreading process. If the tyre casings fail our inspection (i.e. severely damaged and/or in unusable condition), they will not be accepted and subsequently disposed of or returned to the respective source. Buffing The next process is bUffing, where we remove old worn tread and sidewall rubber on the tyre casings to prepare the used tyre casings for the application of new treads. We use a computer-controlled machine with high-speed revolving rasps and brushes to ensure that the buffed tyre casings can achieve the exact dimensions for further processes. This leaves a rough surface on the tyre casings, which aids in proper adhesion with the new treads. Before the new treads can be applied, further inspection is required. Skiving After the buffing process, we will brush the tyre casings with a stiff wire brush to remove any loose rubber and debris. Patching, repairing, cementing and filling After the skiving process, the used tyre casings have to be cleaned. Subsequently, we will conduct visual diagnostics on the severity of punctures, cuts or other damages and repair these internal damages. The prepared tyre casings will undergo a cementing process where gum solutions are sprayed onto the casings. After the cementing process, any damages on the surface of tyre casings will be repaired (i.e. holes found in the tyre casings are filled with rubber compounds / repair ropes and patched) to reinforce the tyre strength. This creates a permanent repair that maximises tyre life. 7. BUSINESS OVERVIEW (cont’d) Tyre retreading Once the tyres are repaired, the buffed tyre casings are ready for retreading. We carry out two (2) types of tyre retreading processes (i.e. cold cure and hot cure tyre retreading). Details of these two (2) tyre retreading processes are further explained below:­(i) Cold cure tyre retreading The cold cure tyre retreading works by applying a pre-cured tread liner with a layer of cushion gum on a buffed tyre casing. Cold cure tyre retreading is the most commonly used method today as it allows more flexibility in manufacturing retreaded tyres of different sizes and/or with different tread patterns as well as exerts less stress on a tyre casing (in view of lower pressure and temperature used during the curing process as compared to hot cure tyre retreading) allowing the tyre to be retreaded for more times. For FYE 2015 and FPE 2016, approximately 73% and 76% of our retreaded tyres respectively were produced using the cold cure tyre retreading method. Tread building To begin the cold cure retreading process, we source the pre-cured tread liners and cushion gums from Rubber Works. In cold cure tyre retreading, the tread liners have already been vulcanised with the new tread pattern. To stick the pre­cured tread liner onto a buffed casing, we will wrap a layer of cushion gum around the crown area of the tyre casing. Subsequently, the pre-cured tread liner is wrapped around the tyre casing. This is called the tread building process. Finishing and repairing After the tread building process, we will conduct the finishing and repairing processes to ensure there are no defects in the retreaded tyre before the enveloping and rimming process as well as curing process. Any defects identified will be repaired. Enveloping and rimming The built tyres are then mounted with envelopes to prepare them for curing. The tyres are first fitted with an outer envelope (enveloping) before the inner envelope is fitted onto them (rimming). The enveloped tyres are then vacuumed out for preparation prior to curing. Curing The tyres are then placed in a curing chamber where the pre-cured tread liners will adhere to the tyre casings through a vulcanising process. After the curing process, the retreaded tyres will have a tough and hard tread that resists abrasion and provides good mileage and traction. (ii) Hot cure tyre retreading Hot cure tyre retreading is a traditional tyre retreading method. An unvulcanised rubber strip (i.e. camelback) is applied to a buffed tyre casing and SUbsequently placed into a pre-fabricated mould where the tread is to be formed. In hot cure tyre retreading, a dedicated mould is required for each tyre size and each tread pattern. 83 7. BUSINESS OVERVIEW (cont’d) Camelback building The application of tread in hot cure tyre retreading is very similar to new tyre manufacturing. The camelback and sidewall veneer are applied to the buffed tyre casing. This is called the camelback building process. Finishing and repairing After the camelback building process, we will conduct the finishing and repairing processes to ensure there are no defects in the retreaded tyre before the tubing and rimming process as well as curing process. Any defects identified will be repaired. Tubing and rimming The prepared tyre casing with uncured or unvulcanised rubber (i.e. camelback or orbitread) is placed inside the mould. Next, the body of the tyre gets inflated to the proper pressure inside the mould, the tyre casing conforms the camelback to the mould, forming the tread pattern under a pre-determined temperature and time. Curing The tyres are then sent for curing process to strengthen its toughness. After the curing process, the retreaded tyres will have a tough and hard tread that resists abrasion and provides good mileage and traction. Final inspection and trimming The retreaded tyres will then undergo a trimming process before a final inspection is performed. This QC inspection ensures that only tyres that meet industry quality standards are allowed to leave our tyre retreading factory. All tyres retreaded by us are MS 224:2005 certified by SIRIM QAS. 7.4.2 Office, warehouse, manufacturing facilities and capacity As at the LPD, the locations of our Group’s office, warehouse and/or manufacturing facilities are as follows:­Company Address
Rubber Lot 82, 90, 93 and 94, Lebuh Portland, Tasek Industrial Estate, 31400 Ipoh, Perak, Works Malaysia Jiaxing No. 581, Xinnong Road, Jiaxing, PRC Olympic No. 6422 and 6424, Jalan Permatang Pauh, Mak Mandin Industrial Estate, 13400 Butterworth, Penang, Malaysia Eversafe Room 308, Building No. 20, 1440 Middle Yanan Road, Shanghai, PRC Shanghai See Section 7.16 below for details on existing use of the above properties. 84 [~ompany No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) Our Group’s estimated maximum manufacturing capacity and our actual manufacturing outputs for FYEs 2013,2014 and 2015 as well as FPE 2016 are shown below:­Manufacturing of tyre retreading materials
Mixing and Masterbatch and I 25,920 I 25,920 I 38,880 I 29,160 I 16,902 I 18,100 I 17,512 I 13,357 I 65.2 I 69.8 I 45.0 I 45.8 kneading lines rubber compounds Extrusion lines Extruded rubber I 20,400 I 20,400 I 20,400 I 15,300 I 8,046 I 8,237 I 7,829 I 5,577 I 39.4 I 40.4 I 38.4 I 36.5 compounds Calendering Cushion gums and I 2,640 I 2,640 I 2,640 I 1,980 I 663 I 725 I 591 I 485 I 25.1
27.5 I 22.4 I 24.5 lines sidewall veneers Pre-cured Pre-cured tread liners 10,148 I 10,148 I 15,008 I 11,256 I 5,931 I 6,227 I 5,966 I 4,694 I 58.4 I 61.4 I 39.8 I 41.7 pressing lines Subtotal 59,108 59,108 76,928 57,696 31,542 33,289 31,8981 I 24,113 II 53.41 56.31 41.5(1) I 41.8(1) …….
. RubberWorks’ factorv inPRt. ·.·.·i.··.i· e•••… Dee 180(2) , 84(2) I121(2) 170(2)Extrusion line Extruded rubber 2,700 2,700 2,700 2,025 4.5 I 6.3 I 6.7 I 4.1 compounds Pre-cured Pre-cured tread liners I 2,250 I 2,250 I 2,250 I 1,687 I 124 I 164 I 170 I 89 I 5.5 I 7.3 I 7.6 I 5.3 pressing line Subtotal 4,950 4,950 245 I 334 I 350 I 173 I 4.9 I 6.7 I 7.1 I 4.7 Total 64,058 64,058 4,950  3,712 II
81,878
61,408 T 31,787 T 33,623 T 32,248 T 24,286 I 49.6 I 52.5 I 39.4 I 39.5 III The estimated maximum manufacturing capacity for FPE 2016 is prorated based on a nine (9)-month period.
[company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) Notes:­The rationale for investing in new manufacturing lines and manufacturing automation systems despite the average utilisation rate of approximately 42% for our manufacturing lines for tyre retreading materials in Malaysia for FYE 2015 and FPE 2016 are as follows:­Utilisation of proceeds Our Group’s future growth theme focuses on (i) grow overseas markets and (ii) enhance product quality (see Section 7.3.3 above). The amount ofRM12. 6 million from our listing proceeds allocated for new manufacturing lines and manufacturing automation systems is specifically tailored to support our Group’s growth theme which aims to achieve the two (2) main objectives below (i.e. primary objective is not intended to increase existing manufacturing capacity as this has been addressed via the expansion at Lot 90, Tasek Industrial Estate, Ipoh in 2015):­(i) Grow overseas markets: enhance manufacturing capabilities and widen range of products, particularly high value-added and premium products
In order to produce OTR treads for the intemational customers, our Group requires a large extruder and larger pressing lines. Without the large extruder and larger pressing lines (see Section 4.7.1 of this Prospectus), our existing extruders and pressing lines are unable to produce these OTR treads due to their large size.
(ii) Enhance product qualitv: improve efficiency, reduce wastage and ensure consistent product quality

To achieve the above objective, our Group is enhancing automation systems including loading and unloading systems, automated buffing and packing lines as well as foundation and robotic hands. Manufacturing capacity utilisation rate The estimated maximum manufacturing capacity is computed based on 20 daily operating hours for 300 days per year. The loss hours include company off-days and public holidays, changes in manufacturing configuration as well as machinery maintenance and repair downtime. (1) As compared to FYE 2014, the overall utilisation rate of our manufacturing capacity for tyre retreading materials in Malaysia for FYE 2015 decreased to 41.5% following the completion and commencement of our new factory operations at Lot 90, Tasek Industrial Estate, Ipoh in JUly 2015. With our new factory, we had commissioned an additional one (1) mixing line and four (4) pressing lines which increased our overall capacity by about 30%. Moreover, in the calculation of utilisation rate, the denominator had included the increased capacity whilst the numerator will need additional lead time to gradually increase. The overall utilisation rate increased slightly to 41.8% for FPE 2016. Prior to the expansion, our mixing and kneading lines as well as pressing lines were operating at high capacity (i.e. above 70%) in certain months of the year due to high production orders from our customers (see below for further details). In practice, we maintain a 20% to 30% buffer capacity to accommodate any unexpected machinery breakdown and/or order backlog. The investment was necessary to ensure uninterrupted supply of tyre retreading materials to our customers, with a reasonably fast turnaround time. In our industry, high customer satisfaction is important as it will translate into recurring sales orders as well as business referrals, contributing to higher revenue. [ Company No. 1133877-V I

7. BUSINESS OVERVIEW (cont’d) The table below sets out the utilisation rate for our mixing and kneading lines as well as pressing lines for FYE 2014 (prior to completion and commencement of our new factory operations at Lot 90) as well as FYE 2015 and FPE 2016 (after completion and commencement ofour new factory operations at Lot 90):­
The estimated maximum manufacturing capacity for FPE 2016 is prorated based on a nine (9)-month period. As illustrated in the flowchart set out in Section 7.4.1A above, our manufacturing process starts with the manufacturing of masterbatch and rubber compounds (Which are essential raw materials used in the manufacturing of our other tyre retreading materials). Hence, a consistent and sufficient supply of masterbatch and rubber compounds is crucial to facilitate our entire manufacturing of tyre retreading materials process. Any bottleneck in our mixing and kneading lines will cause interruption to our subsequent manufacturing processes. Prior to the expansion, our utilisation rate for mixing and kneading lines was already at 70% for FYE 2014. In addition, during certain months in 2014 and 2015 (i.e. March, May, August, September and November of 2014 as well as January, March, April and June 2015), our mixing and kneading lines were operating at high capacity of above 70% as we received high purchase orders from our overseas customers. Following our expansion, the utilisation rate for mixing and kneading lines reduced to 45.0% for FYE 2015 before gradually picking up to 45.8% for FPE 2016 (with the highest utilisation rate of 56.3% achieved in August 2016). As for pre-cured tread liner, it is the top contributor to our Group’s revenue. More than 60% of our Group’s revenue for the period under review were derived from the sales ofpre-cured tread liners. As at the LPD, we produce and distribute over 70 patterns ofpre-cured tread liners. Hence, it is essential for us to have sufficient pressing lines to meet our customer orders within the delivery time. Prior to the expansion, we have six (6) pressing lines to produce our pre­cured tread liners. Even with these six (6) pressing lines, we were unable to fully cater to our production during peak months and had to prolong delivery time to our customers such as during the month of August 2014 whereby we operated at close to full capacity in certain weeks, leading to a high utilisation rate of 82.1% for the month. Although technically we can further extend the running time of pressing lines, the process of changing moulds will consume a lot of time. This would result in inefficiencies with only six (6) pressing lines to cater to over 70 different types ofpre-cured tread liners. Following our expansion, the utilisation rate for pressing lines reduced from 61.4% for FYE 2014 to 39.8% for FYE 2015 before gradually picking up to 41.7% for FPE 2016 (with the highest utilisation rate of48.0% achieved in March 2016). For our extrusion lines and calendering lines, we have not increased their capacity for the past five (5) years as we currently have sufficient capacity. As part of our manufacturing enhancement exercise using the IPO proceeds (see Section 4.7.1 of this Prospectus), the acquisition of a large extruder and a large pressing line enables us to produce OTR treads up to 800 mm width for our intemational customers. Due to the large size of the new product range i.e. the OTR treads, we need to utilise larger machines. Prior to the acquisition ofsuch large extruder and large pressing line, we do not produce OTR treads. As for our PRC operations, we have no intention for further expansion as we currently have sufficient capacity to produce for our PRC market. (2) All extruded rubber compounds produced in PRC are used in the manufacturing ofpre-cured tread liners for our PRC market. [ Company No. 1133877-V I 7. BUSINESS OVERVIEW (cont’d) Manufacturing of retreaded tyres
22.6 19.3 15.9 13.9 presses Hot cure Retreaded tyres 5,77755,500 I 55,500 I 55,500 I 41,625 I 12,568 I 10,733 I 8,797 (for hot cure tyre retreading) 70.8 chambers 85.4 76.4 69.9Pre-cured Retreaded tyres 17,84333,600 I 33,600 I 33,600 I 25,200 I 28,687 I 25,686 I 23,471 (for cold cure tyre retreading) 35.346.3 40.9 36.2Total 89,100 I 89,100 I 89,100 I 66,825 I 41,255 I 36,419 I 32,268 I 23,620 The estimated maximum manufacturing capacity for FPE 2016 is prorated based on a nine (9)-month period. Note:­The estimated maximum manufacturing capacity is computed based on 12 daily operating hours for 300 days per year. The loss hours include company off-days and public holidays, changes in manufacturing configuration as well as machinery maintenance and repair downtime. We utilise both the cold cure and hot cure retreading processes in our tyre retreading operations. Comparatively, our pre-cured chambers are operating at a higher utilisation rate of approximately 70% while our hot cure presses are operating at a utilisation rate of approximately 15% only for FYE 2015 and FPE 2016. This is because the cold cure tyre retreading is the most commonly used method today and in most cases, preferred by our customers. For FYE 2015 and FPE 2016, approximately 73% and 76% of our retreaded tyres respectively were produced using the cold cure tyre retreading method. 7. BUSINESS OVERVIEW (cont’d) 7.5 Market access We market and distribute two (2) categories of products, namely:­• tyre retreading materials which cater mainly to the tyre retreading industry, and
• retreaded tyres which cater mainly to the transportation and logistics industries.

Currently, only our tyre retreading materials are exported. For the past three (3) FYEs 2013,2014 and 2015, our export sales contributed 40%,50% and 55% to our revenue respectively. For FPE 2016, our export sales contributed 57% to our total revenue, with exports to 23 countries globally comprising:­
Local sales Malaysia 48,149 59.6 40,988 50.4 34,067 45.2 23,612 Export sales Asia (excluding Malaysia) 27,259 33.7 34,349 42.2 32,667 43.4 24,910 45.2 Australia and Oceania 799 1.0 720 0.9 1,109 1.5 1,006 1.8 Africa 1,430 1.8 1,130 1.4 1,541 2.0 874 1.6 America 211 0.2 646 0.8 1,813 2.4 804 1.5 Europe 947 1.2 2,317 2.8 1,350 1.8 1,219 2.2 Middle East 2,021 2.5 1,237 1.5 2,750 3.7 2,641 4.8 32,667 40.4 40,399 49.6 41,230 54.8 31,454 57.1 Total revenue 80,816 100.0 81,387 100.0 75,297 100.0 55,066 100.0 7.6 Quality management system Our adherence to stringent quality standards and commitment to product quality have been reinforced through the possession of ISO 9001 certifications from accredited governing bodies. The internal quality management assurance policies set forth by our Grou p ensure that products and services are of quality and meet the specifications and requirements of our customers. We are of the opinion that the essential attribute in retaining eXisting customers and attracting new ones in local and international markets, as well as maintaining our market presence, lies in our quality consistency and service excellence. Hence, we put a lot of efforts in ensuring that our products are of high quality and most importantly, safe to use. To achieve this, we have adopted an effective OMS, where we conduct comprehensive quality inspections at various stages of the manufacturing process to facilitate corrective actions in order to eradicate any causes of deviation at their sources. Our OMS covers all activities from sourcing quality raw materials, product development and customisation to manufacturing process. We have also equipped ourselves with the necessary inspection equipment in our laboratory to ensure that our products consistently meet our own quality standards, as well as the requirements and specifications set by our customers. We conduct quality testing on the raw materials received from our suppliers to ensure that the raw materials meet our manufacturing specifications and requirements. We only procure and use approved raw materials in our manufacturing. We also conduct laboratory testing on our masterbatch, rubber compounds and the finished products such as pre-cured tread liners, camelbacks, sidewall veneers and orbitreads derived from them. The finished products are OC tested for viscosity, gravity, rheumatic, hardness, tensile strength and abrasiveness. Our laboratory staff will collect and send a batch sample of the test subject to the laboratory for testing. All batch sample test results will be properly recorded for manufacturing tracking. Any product defect detected in the laboratory testing will be rectified immediately to avoid any disruption in our operations. 7. BUSINESS OVERVIEW (cont’d) As at the LPD, we have obtained the certifications of MS 1208:2010 for our pre-cured tread liners, MS 1097:2010 for our camelbacks and MS 1348:2010 for our cushion gums from SIRIM OAS. As for our tyre retreading operations, we visually inspect and test all retreaded tyres produced by us before being packed and shipped to our customers. Olympic also invested in a German-made shearography tyre scanning and testing system to check the conditions of the used tyre casings, paying attention to tyre surface conditions as well as internal damages in the tyre casings, which cannot be easily detected through visual inspection. Olympic’s facility is also equipped with an overhead monorail system, which is used to transport the tyres from one process to another on the production floor. This improves work efficiency, flexibility and the effective use of our manufacturing floor space, as well as to reduce contamination and improve cleanliness in the workplace. Olympic is certified by SIRIM OAS under the product certification scheme for MS 224:2005, which implies that retreaded tyres manufactured by Olympic are safe for use in commercial vehicles in Malaysia; and ISO 9001 :2015 from BM TRADA Certification Ltd, United Kingdom in recognition of our OMS for the provision of retreaded tyres. Furthermore, Olympic’s manufacturing lines and processes are sUbjected to an annual surveillance audit by SIRIM, in which SIRIM will randomly select and test our retreaded tyres to ensure the tyres comply with the SIRIIVI MS 224:2005 standards. The certifications and recognition of our OMS and product quality are as follows:­Company Issuance body Type of certifications Date of expiry Rubber Works SIRIM QAS ISO 9001 :2008 Quality Management System 10.04.2018 (Scope of certification: Manufacturing of rubber compounds for retreading tyre industry)(1) Rubber Works SIRIM QAS Product certification license to use the 13.11.2017 certification mark on cushion gum used in precured retreading of tyres as complying with MS 1348:2010 Rubber Works  SIRIM QAS  Product certification license to use the  29.04.2017(2)  certificate mark on precured tread for  retreading tyres as complying with MS  1208:2010  Rubber Works  SIRIM QAS  Product certification license to use the  09.12.2017  certification mark on rubber tread compound  for hot retreading of passenger car and  commercial vehicle tyres as complying with  MS 1097:2010  Olympic  SIRIM QAS  Product certification license to use the  21.11.2017  certification mark on retreaded hot-cured  pneumatic rubber tyre for commercial vehicles  as complying with MS 224:2005(3)  Olympic  SIRIM QAS  Product certification license to use the  21.11.2017  certification mark on retreaded pre-cured  pneumatic rubber tyre for commercial vehicles  as complying with MS 224:2005(3)  Olympic  8M TRADA  ISO 9001 :2015 Quality Management System  29.04.2019  Certification Ltd  (Scope of certification: Provision of rubber tyre  retreads)  90
7. BUSINESS OVERVIEW (cont’d) Notes:­(1) An application for ISO 9001:2015 Quality Management System (Scope of certification: Manufacturing of rubber compounds for retreading tyre industry) has been submitted, pending approval.
(2) Renewal application for the certification has been submitted, pending approval.
(3) Olympic (provider of our Group’s tyre retreading operations) provides a defects claim policy to its customers for a specified period of up to 18 months, of which historically, such claims made by its customers over the period under review has not been material.

 

7.7 Technology and product development 7.7.1 Technology Our technical strength lies in our experience, technical know-how and capability to formulate rubber compounds used in the manufacturing of tyre retreading materials, which are in turn used to manufacture retreaded tyres that meet our customers’ tyre requirements and specifications. The rubber compounds manufactured by us are formulated in-house. We have many years of data, collected from our customers and downstream operations, in formulating a variety of rubber compounds to produce quality retreaded tyres. The formulation of rubber compounds coupled with the appropriate manufacturing processes will determine the characteristics of the individual rubber compounds, whether it is to optimise the tyre performance, to maximise tyre traction in both wet and dry road conditions or to achieve lower rolling resistance (indirectly saving fuel cost). Our rubber compounds are not limited to manufacturing of retreaded tyres; but can also be used in the manufacturing of other rubber-based products for other industries (see Section 7.3.3 above).
7.7.2 Product development As set out in Section 9.8 of this Prospectus, as at the LPD, we have a team of seven (7) personnel dedicated to our product development and QC activities. Our product development and customisation activities are primarily focused on the following activities:­• the formulation and development of new and improved rubber compounds to be used in the manufacturing of tyre retreading materials;
• the development of high performance pre-cured tread liners, which provide better handling and manoeuvrability, enhanced traction while providing a flexible cushion to absorb shocks, good load sensitivity as well as improved lifespan for retreaded tyres;
• constantly developing a wide variety of tyre treads using different rubber compound formulations to achieve different tyre performance characteristics such as tyres that are highly resilient, flexible and durable;
• continuously developing and improving the quality of our products in compliance with the utmost standards; and
• enhancing our manufacturing efficiency by reducing manufacturing time and resources used.

We have spent many years of product development and customisation to create and improve our proprietary formulation for quality rubber compounds used in the manufacturing of our tyre retreading materials. Our unique formulations allow us to improve tyre performance properties by achieving good tyre balance, wet and dry traction, force variation, load sensitivity, rolling resistance, torque alignment, stopping distance and tread wear of the retreaded tyres to suit various road conditions, weather and workloads. 7. BUSINESS OVERVIEW (cont’d) Some examples of our product development and customisation achievements for the past two (2) years are as follows:­Year Achievements 2015 • Successfully developed and formulated new rubber compounds used for our new tyre retreading materials for the European markets, which for example, enables production of pre-cured tread liners that achieve better traction quality on roads in winter conditions. 2016 • Successfully developed and formulated new rubber compounds to manufacture orbitreads used in the manufacturing of specialised OTR tyres, for mining applications which require strong wear resistance and handling grip when operating under harsh conditions. • Successfully developed a new formulation of rubber compounds which enables our Group to offer its new enhanced performance tyre tread for the Japanese market.
• Developed our Group’s new tread pattern offering customised for the road and weather conditions in the American market.

7.8 Marketing activities As at the LPD, we have a sales and marketing division with a total of twelve (12) sales and marketing personnel (including our Chief Executive Officer / Executive Director and four (4) of our senior managers). Our sales and marketing division is primarily responsible for promoting and marketing our products and services as well as maintaining and building good relationships with our existing customers, in addition to securing new customers for our Group. Our primary sales and marketing efforts are through active participation in overseas trade fairs and exhibitions to promote our tyre retreading materials to prospective customers globally. Such participation is significant as our Group is then able to demonstrate and present our full range of products to the attendees effectively via direct face-to-face communication. The list of recent international trade fairs and exhibitions participated by us are as follows:­Year Events Venue 2015 Autopromotec 2015 -an international biennial exhibition of automotive Italy equipment and aftermarket products 2015 Singapore Tyre Expo 2015 Singapore 2015 REIFEN China 2015 PRe 2016 North American Tire & Retread Expo 2016 US 2016 REIFEN Essen 2016 Germany The international trade fairs and exhibitions that we participated in are showcased to a global audience for the tyre and automotive equipment industries. Through this participation, we can obtain invaluable knOWledge on technology innovations, developments and trends of the industry, as well as gain access to potential customers from all over the world to demonstrate our products and services. We also market and promote our Group’s products and services through multiple media advertising inclUding brochures, catalogues and advertisements in local and international tyre magazines, such as Tyre and Accessories, Retreading Business, The Tyreman and Trucks and Buses. Our Group’s profile and portfolio of products are listed on Malaysia External Trade Development Corporation’s website (MATRADE). We are also members of Malaysian Rubber Export Promotion Council (MREPC), Federation of Malaysian Manufacturers (FMM), Malaysian Rubber Products Manufacturers Association (MRPMA) and Tyre Retreads Manufacturers Association of Malaysia (TRMAM). Being a member of these organisations and associations enables us to receive updates and information about the industry, broaden our business networks, as well as enhance our skills in the industry. 7. BUSINESS OVERVIEW (cont’d) Distribution channels
Sales of tyre retreading materials
Tvre retreading materials The marketing and distribution of our tyre retreading materials is carried out by Rubber Works and its subsidiaries (excluding Olympic). Our tyre retreading materials are mainly sold to tyre retreaders and rubber material traders, both locally and internationally. We market and distribute our tyre retreading materials to our customers directly, except for Japanese and South American customers. In general, Japanese customers prefer to use liaison agents to search, identify and secure supplier contracts outside of Japan. Currently, we work with Toyo Trading Co., Ltd to secure new Japanese customers. Only after we have successfUlly secured the new Japanese customers, we will deal directly with the same Japanese customers for subsequent sales orders. As for Toyo Trading Co., Ltd, we will pay them commission fees on every sales invoiced from their introduced Japanese customers. There are no existing written arrangements with them. Nevertheless, we have established a good working relationship with Toyo Trading Co., Ltd since 2007 and believe this will continue to grow. In the event Toyo Trading Co., Ltd ceases to be our liaison agent, we do not expect a material impact to our Group as we may source for other agents. For FYE 2015 and FPE 2016, our sales to Japan contributed approximately 13% and 19% respectively to our Group’s total revenue. Towards the end of 2016, we have entered into a distribution agreement appointing a customer in South America (a trader of tyre retreading materials) as our distributor to promote and market our tyre retreading materials for the South American market. We believe our relationship with the said distributor will enable us to penetrate further into the South American market, where we will be able to supply our tyre retreading materials by tapping onto their distribution network. This will be further strengthened upon finalisation of a separate JV arrangement with them to establish a tyre retreading plant in South America. The JV arrangement will be such that our Group will supply tyre retreading materials such as pre-cured tread liners and cushion gums for the tyre retreading plant in South America whilst the JV entity to be incorporated shall market and distribute the retreaded tyres. 7. BUSINESS OVERVIEW (cont’d) Retreaded tyres The wholesale distribution of our retreaded tyres is carried out by Olympic. Retreaded tyres are mainly used by commercial vehicles such as buses and small to large transportation trucks. Our customers are mainly tyre retailers and fleet operators (i.e. transportation and logistics companies). We distribute our retreaded tyres mostly to our customers in the northern region of Peninsular Malaysia, such as Perlis, Kedah, Penang, Perak and Kelantan. As at the LPD, Olympic has a total of nine (9) transportation trucks used in the collection and delivery of retreaded tyres to our customers in the northern region of Peninsular Malaysia. For other locations outside of our coverage, either external transportation companies are appointed or our customers will have to make their own transportation arrangements. As set out above, we are finalising details of a JV arrangement with our business partner to establish a tyre retreading plant in South America.

 

7.9 Seasonality Generally, our sales for the first (1 st) half of the year will be slower as compared to the second (2nd) half of the year. This is attributable to the festive seasons and public holidays in both Malaysia and PRC such as Labour Day and Chinese New Year as well as the Ramadhan fasting month. We generally see our sales picking up in the second (2 nd) half of the year. Save for the above, our Group does not experience any other material seasonality / cyclical effects in sales.
7.10 Major customers Our Group is not overly dependent on any single customer. None of our customers contributed to more than 10% of our total revenue for the past three (3) FYEs 2013, 2014 and 2015 while for FPE 2016, there is only one (1) customer which contributed to more than 10% of our total revenue as follows:­Major customer  Country  Approximate length of relationship (Years)  FYE 2013 RM’OOO  %(1),  FYE 2014 RM’OOO  Value of revenue FYE 2015 %(1) RM’OOO  %(1)  FPE 2016 RM’OOO  %(1)  Kohshin Retread Co., Ltd  Japan  3  2,021  2.5  7,696  9.5  7,287  9.7  9,346  17.0
Note:­(1) Asa percentage of total revenue for the respective year / period. Furthermore, we do not enter into any supply contracts with our customers and all sales are conducted on purchase order basis, which is a norm in the industry. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 7. BUSINESS OVERVIEW (cont’d) 7.11 Availability of resources and major suppliers 7.11.1 Raw materials Set out below is a breakdown of the main raw materials procured by our Group for FYE 2015 and FPE 2016, together with their respective sources of supply:­FYE 2015 FPE 2016 Asa Asa percentage percentage of total of total Type of raw purchases Local Overseas purchases Local Overseas materials Country of origin (%) (%) (%) (%) (%) (%) Natural Malaysia, other 51.3 80.3 19.7 49.6 92.7 7.3 rubber and countries within synthetic Asia Pacific and rubber America region Carbon black Malaysia and PRC 21.5 44.0 56.0 19.8 43.2 56.8 Chemicals Malaysia 18.6 100.0 22.0 100.0 and rubber processing oils Used tyre Malaysia and other 2.6 53.0 47.0 2.5 75.1 24.9 casings countries within Asia Pacific region
94.0 93.9 Others 6.0 6.1 Total 100.0 100.0
Purchases of our main raw materials for FYE 2015 and FPE 2016 accounted for approximately 94% of our total purchases of RM40.9 million and RM30.4 million respectively. The main raw materials used in the manUfacturing of our masterbatch and other tyre retreading materials are mainly natural rubber, synthetic rubber, carbon black, chemicals and rubber processing oils. On the other hand, Olympic acquires mainly used tyre casings from external parties, such as tyre traders, tyre retailers and our customers (mainly fleet operators). Almost all the tyre retreading materials such as pre-cured tread liners, camelbacks and cushion gums used in our tyre retreading operations are sourced internally from Rubber Works and its subsidiaries (excluding Olympic). By sourcing tyre retreading materials internally, we have better control on our product quality as well as production cost. Most of the main raw materials used in our manufacturing processes are sourced from local suppliers. Those which are imported from overseas include synthetic rubber, carbon black and used tyre casings. They can also be easily sourced from local distributors who import them from overseas. 7. BUSINESS OVERVIEW (cont’d) Currently, we source our natural rubber from a single supplier, namely Lee Rubber. As such, we rely on Lee Rubber for a consistent supply of quality natural rubber for our manufacturing of tyre retreading materials. The write up on this risk and its mitigating factors is set out in Section 5.2.1 of this Prospectus. Apart from the supply of natural rubber, we have a diversified source of suppliers for our other main raw materials so as to minimise our dependence on any single supplier. In addition, as all our main raw materials are easily available both locally and globally, we do not foresee any major supply problems that would adversely affect our manufacturing operations. Over the years, we have built strong working relationships with many of our suppliers as we have established good track records for our purchases and payment obligations. This provides us access to a regular supply of raw materials. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK [company No. 1133877-V I 7. BUSINESS OVERVIEW (cont’d)
7.11.2 Major suppliers Our major suppliers, which have contributed more than 10% to our Group’s total purchases, for at least one (1) of the past three (3) FYEs 2013, 2014 and 2015 or FPE 2016, are as follows:­Major suppliers  Country  Types of raw materials supplied  Approximate length of relationship (Years)  FYE 2013 RM’OOO  %(1)  FYE RM’OOO  Value of purchases 2014 FYE 2015 %(1) RM’OOO  %(1)  FPE 2016 RM’OOO  %(1)  Lee Rubber  Malaysia  Natural rubber  26  16,573  33.1  15,773 32.4  11,314  27.7  8,778  28.9  Behn Meyer Chemicals (M) Sdn Bhd  Malaysia  Synthetic rubber and chemicals  10  1,796  3.6  2,634  5.4  2,952  7.2  3,632  12.0  Jinneng Science and Technology Co., Ltd I Hong Kong Jinneng Co., Limited  PRC I Hong Kong  Carbon black  8  5,423  10.8  5,166  10.6  4,490  11.0  3,163  10.4  Luxchem Trading Sdn Bhd  Malaysia  Synthetic rubber and chemicals  22  5,816  11.6  2,554  5.2  2,568  6.3  1,763  5.8  Note:­
(1) As a percentage of total purchases for the respective year / period. See Section 5.1.1 of this Prospectus for further discussion on our reliance on major suppliers.
C THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK I [company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) 7.12 Approvals, major licenses and permits Details of the approvals, major licences and permits obtained by our Group for our business operations and the status of compliance are set out ~mpany No. 1133877-V I below:­ Approving  Type of approvals I licenses I  License I Permit I  Date of issuance I  Major conditions  Status of  Company  authority I issuer  permits  Reference no.  Validity  imposed  compliance  Rubber Works  MITI  Manufacturing license  A001850  17.04.20141  For any disposal of shares  Complied  (for Lot 82 and 93, Tasek Industrial  Valid until and unless  in the company, the MITI  Estate, Ipoh)  revoked  and  MIDA  have  to  be  notified  Rubber Works  MITI  Manufacturing license  A019862  07.11.20141  For any disposal of shares  Complied  (for Lot 90, Tasek Industrial Estate,  Valid until and unless  in the company, the MITI  Ipoh)  revoked  and  MIDA  have  to  be  notified  Rubber Works  Malaysian Rubber  Rubber license  Al03/14079  23.09.2016 I  Nil  N/A  Board  (for Lot 93, Tasek Industrial Estate,  23.09.2016 to 22.09.2017  Ipoh)  Rubber Works  Malaysian Rubber  Rubber license  Al03/14081  23.09.2016 I  Nil  N/A  Board  (for Lot 82, Tasek Industrial Estate,  23.09.2016 to 22.09.2017  Ipoh)  . Rubber Works  Malaysian Rubber  Rubber license  Al03/15718  27.07.2016 I  Nil  N/A  Board  (for Lot 90, Tasek Industrial Estate,  27.07.2016 to 26.07.2017  Ipoh)  Eversafe  Shanghai  Business license  91310115717858151Q  02.09.2005 I  Nil  N/A  Shanghai  Administration for  Valid until 01.09.2035  Industry and  Commerce of  PRC, Pudong New  Area Branch
7. BUSINESS OVERVIEW (cont’d) Company  Approving authority I issuer  Type of approvals I licenses I permits  License I Permit I Reference no.  Major conditions imposed  Status of compliance  Jiaxing  Administration for Industry and Commerce, Jiaxing Branch  Business license  91330400661714879N  24.05.2007 1 Valid until 23.05.2037  Nil  N/A  Olympic  MITI  Manufacturing license  A004083  13.01.19861 Valid until and unless revoked  (i)  All shares in the company must be held by Malaysians  Complied  (ii)  Should the company be allowed to be a public listed company, all its revaluation of properties, goodwill, share capital, policies as to issuance of  shares will require approval from the relevant authority  (iii) Composition of board of directors should  reflect the company’s equity structure in general and MITI must be notified of any changes to the board of directors  Olympic  Malaysian Rubber Board  Rubber license (for No. 6424, Jalan Permatang Pauh, Mak Mandin Industrial Estate, 13400 Butterworth, Penang)  P/01/15451  05.05.20161 05.05.2016 to 04.05.2017 (an application for renewal will be submitted prior to the expiry date)  Nil  N/A
I Company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) 7.13 Brand names, trademarks, patents, license agreements and other IPRs Save as disclosed below, our Group does not have any other brand names, trademarks, patents, license agreements and other IPRs:­Certificate Name of Registration no. 1 No. issuance date Trademark applicant Issuing authority Class Status 1Validity 1. 28.02.2008 Rubber Works Intellectual Property 05006150/17 Registered 1 Corporation of Malaysia Valid until 22.04.2025 @ 2. 30.07.2013

 

Rubber Works Intellectual Property 05006151 117 Registered 1 Corporation of Malaysia Valid until 22.04.2025 3. 10.05.2010 Rubber Works Intellectual Property 08015628/16 Registered 1
Corporation of Malaysia Valid until 07.08.2018 —–*$: t~ fl~EVERSAFE RUBBER 4. 13.05.2010 Rubber Works Intellectual Property 08015629/17 Registered 1 Corporation of Malaysia Valid until 07.08.2018 —-*$:mfl~EVERSAFE RUBBER 5. 10.01.2011 Olympic Intellectual Property 08002254 112 Registered 1 Corporation of Malaysia Valid until 05.02.2018 OLP T …. AES ( Company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) Certificate Name of Registration no. 1 No. issuance date Trademark applicant Issuing authority Class Status 1Validity 6. 02.12.2010 Olympic Intellectual Property 08002253/37 Registered 1 Corporation of Malaysia Valid until 05.02.2018
OLP Re:T~E:AO:S 7. 22.09.2011 Olympic Intellectual Property 2010051128/37 Registered 1 Corporation of Malaysia Valid until 22.12.2020
8. 14.05.2012

 

Supreme Good Trademark Office of the 7527422 112 Registered 1 State Administration for Valid until 13.05.2022 Industry and Commerce ofPRC 9. 14.03.2012 Supreme Good Trademark Office of the 9173024 112 Registered 1 State Administration for Valid until 13.03.2022 Industry and Commerce ofPRC

7. BUSINESS OVERVIEW (cont’d) 7.14 Interruptions to the business for the past twelve (12) months We have not experienced any interruptions to our business having a significant effect on our Group’s operations for the past twelve (12) months prior to the LPD. 7.15 Dependency on contracts, agreements, documents or other arrangements As at the LPD, our Group is not highly dependent on any material contracts, agreements, documents or other arrangements including patents or licenses, industrial, commercial or financial contracts which are material to our Group’s business or profitability. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK r Company No. 1133877-V I 7. BUSINESS OVERVIEW (cant’d) 7.16  Material properties, plant, machinery and equipment  7.16.1  Material properties owned by our Group  The material properties owned by our Group are as foliows:­ No. -­ Location! Postal address  Registered I Beneficial owner  Description! Existing use  Express conditions of land use I Category of land use  Encumbrances  Land area! Built-up area (approximately)  Tenure  Date of issuance of certificate  NBVas at 30.09.2016 (RM)  1.  Lot 69531, Kawasan Perindustrian Tasek, Mukim Hulu Kinta, Perak (also referred as Lot 82, Tasek Industrial Estate, Ipoh)  Rubber Works  A unit of detached single storey factory building ! Manufacturing facility  Industrial! Industrial  Charged to Public Bank Berhad  43,751 sq. ft. ! 40,146 sq. ft.  99-year leasehold, expiring on 31 October 2075  #  930,457  2.  Lot 70070, Kawasan Perindustrian Tasek, Mukim Hulu Kinta, Perak (also referred as Lot 90, Tasek Industrial Estate, Ipoh)  Rubber Works  Two (2) units of detached single storey factory building ! Manufacturing facility and warehouse  Industrial! Industrial  Nil  102,511 sq. ft. ! 38,508 sq. ft.  99-year leasehold, expiring on 1 September 2075  CCC: 09.07.2015  7,807,284*  3.  Lot 70074, Kawasan Perindustrian Tasek, Mukim Hulu Kinta, Perak (also referred as Lot 93, Tasek Industrial Estate, Ipoh)  Eversafe Trading  A unit of detached double storey factory building with a unit of single storey warehouse and laboratory ! Manufacturing facility and warehouse  Industrial! Industrial  Charged to OCBC Bank (Malaysia) Berhad  41,790 sq. ft.! 33,782 sq. ft.  99-year leasehold, expiring on 30 June 2076  #  1,948,791
I Company No. 1133877-V I 7. BUSINESS OVERVIEW (cont’d) Express conditions Registered I of land use Land area I Date of NBVas at Location I Beneficial Description II Category Built-up area issuance of 30.09.2016 No. Postal address owner Existing use of land use Encumbrances (approximately) Tenure certificate (RM) 4. Lot 76187, Kawasan Rubber A unit of detached Industrial I Charged to 41,968 sq. ft. I 99-year # 1,407,401 Perindustrian Tasek, Works single storey Industrial OCBC Bank 23,513 sq. ft. leasehold, Mukim Hulu Kinta, Perak warehouse with (Malaysia) expiring on an annexing Berhad 17 March (also referred as Lot 94, double storey 2079 Tasek Industrial Estate, Ipoh) office lots I Head I Management office and warehouse Notes:­# We do not have a copy of the CF for Lots 82, 93 and 94 and have requested for a copy from Majlis Bandaraya Ipoh (“MBI’J. As indicated by MBI in its letter dated 2 March 2015, MBI is unable to provide us with a copy of the CF as MBI does not have a copy in its records as these premises are old buildings. MBI has informed us in the same letter that it has no objection for us to occupy these premises. In addition, we had submitted the redrawn building plans to MBI for its assessment and MBI had subsequently approved the building plans on 16 June 2015. This excludes the NBV as at 30 September 2016 for electrical works of RM1.22 million and fire protection system of RMO.35 million, which are capitalised as separate assets in our combined statement of financial position. All properties owned by our Group above have not breached any of the land use conditions I permissible land use; and where buildings are involved, we are in compliance with applicable laws, rules and building regulations. There are plants and machineries, or temporary structures (which are removable or demolishable without materially affecting the operations of our Group) within the boundaries of the abovesaid properties. We have consulted and obtained confirmation from the architect that these are not permanent structures and therefore, are not reflected in the approved building plans and they do not require approval from the authority. We have not in the past encountered any occasion of non-renewal of manufacturing licenses in relation to the premises (details of manufacturing licenses are set out in Section 7.12 above). In addition, all our properties are adequately insured and are in compliance with the relevant fire safety requirements. The Perak Fire and Rescue Department conducts periodic site visits to our factories and we have complied with all their directives to date. In this regards, the Perak Fire and Rescue Department has informed us that Lots 82, 93 and 94 adhere to fire safety requirements (vide its letter dated 13 January 2016) and has informed vide its letter dated 29 November 2016 that Lot 90 does not require a fire certificate as it is not classified as a designated premise under the Fire Services Act 1988. I Company No. 1133877-V I 7. BUSINESS OVERVIEW (cont’d) 7.16.2 Material properties rented by our Group The material properties rented by our Group are as follows:­Company  Location I Postal  Description I Existing  Tenure of  Land area I  Date of issuance  Rental per  (Tenant)  Landlord  address  use  tenancy  Built-up area  of certificate  annum  Olympic  Tai Hin(1)  No. 6422 and 6424,  No. 6422: A unit of semi- Two (2) years /  48,000 sq. ft. /  Occupation  RM120,000  Jalan Permatang  detached double storey  01.07.2015 to  23,300 sq. ft.  certificate(2l:  Pauh, Mak Mandin  office with an annexing  30.06.2017  04.08.1983  Industrial Estate,  single storey factory  (No. 6422)  13400 Butterworth,  building / Warehouse  20.11.1974  Penang  (No. 6424)  No. 6424: A unit of semi­ detached single storey  office with an annexing  single storey factory  building / Manufacturing  facility  Eversafe  Shanghai Apollo  Room 308, Building  A unit of office lot /  Two (2) years /  N/A / 280 sq. ft.  Certificate of  RMB102,000  Shanghai  Building Co., Ltd I.~ ~iiJ l&:;7′ *~-;(if ~~0-§’]  No. 20, 1440 Middle Yanan Road, Shanghai, PRC  Administrative office  01.09.2016 to 31.08.2018  property ownership: 27.01.2003
Jiaxing Jiaxing Milanna No. 581, Xinnong A unit of detached Five (5) years / 151,644 sq. ft. / Certificate of RMB360,000 Clothing Co., Ltd Road, Jiaxing, PRC double storey factory 01.06.2013 to 26,910 sq. ft. property .~*~;]~nRt1Pn~ building with an 31.05.2018 ownership: tn’-;(if~~0-§,] annexing single storey 29.03.2011 office / Manufacturing facility and office Notes:­(1) This tenancy is a related party transaction between Olympic and one of our Promoters, Tai Hin. See Section 11.1.2 of this Prospectus for further details on this related party transaction.
(2) In addition to the occupation certificate issued by Majlis Perbandaran Seberang Perai, Butterworth (“MPSP’j, MPSP has informed vide its letter dated 13 November 2014 that it has no objection for us to occupy and operate at both the premises (No. 6422 and 6424).

7. BUSINESS OVERVIEW (cont’d) There is no breach of any land use conditions / permissible land use and/or non­compliance with any applicable laws, rules and building regulations which may materially affect our Group’s operations and utilisation of our assets in respect of the properties rented by our Group above. Our tyre retreading operations are conducted at No. 6422 and 6424, Jalan Permatang Pauh, Mak Mandin Industrial Estate, 13400 Butterworth, Penang. There are plants and machineries, or temporary structures (which are removable or demolishab/e without materially affecting the operations of our Group) within the boundaries of the abovesaid properties. We have consulted and obtained confirmation from the architect that these plants and machineries, or temporary structures do not require approval from the authority. MPSP had conducted inspections on the premises and have issued a letter of no objection dated 13 November 2014 for Olympic to occupy and operate from the premises. We have not in the past encountered any occasion of non-renewal of manufacturing licenses in relation to the premises (details of manufacturing licenses are set out in Section 7.12 above). In addition, all our properties are adequately insured and are in compliance with the relevant fire safety requirements. The Penang Fire and Rescue Department conducts periodic site visits to our factories and we have complied with all their directives to date. In this regards, the Penang Fire and Rescue Department has issued a supporting letter dated 26 May 2015 indicating that these premises adhere to fire safety requirements.

 

7.16.3 Material plant, machinery and equipment Material plant, machinery and equipment used in our operations are manufacturing lines as set out in Section 7.4.2 above. The NBV of these manufacturing lines as at 30 September 2016 are as follows:­Average remaining NBV as at Manufacturing line in Average age useful life 30.09.2016 Malaysia and PRe No. of lines (years) (years) (RM’OOO) Mixing and kneading lines 3 66 4,519 Extrusion lines 5 9 2 299 Calendering lines 3 7 6 201 Pre-cured pressing lines 11 5 7 3,747 Subsequent to 30 September 2016, we have incurred RM4.0 million for new manufacturing lines and automation systems (see Section 4.7.1 of this Prospectus for further details).
7.17 Governing laws and regulations The governing laws, regulations as well as standards applicable to our industries are set out in Sections 6 and 9 of the IMR Report in Section 8 of this Prospectus.

 

 

 

Comments are closed