Risk Factors

5.1 Risks affecting our business and operations 5.1.1 We rely on our major suppliers We are dependent on the continuous and stable supply of raw materials from our suppliers. See Section 7.11.2 of this Prospectus for the list of our major suppliers for the past three (3) financial years and FPE 2016. We source raw materials (except for natural rubber) from various suppliers. We source our natural rubber only from Lee Rubber, which has been providing us a consistent supply of quality natural rubber according to our specifications and on terms satisfactory to us (see mitigating factor in Section 5.2.1 below). Any disruption of supplies will have an adverse impact on our ability to deliver products to customers in a timely manner. We may incur additional costs, time and resources to seek for alternative supply sources on terms that mayor may not be commercially satisfactory to us. This may affect our revenue, profit margins and price competitiveness. To mitigate such risk, we maintain a good business relationship with our suppliers. Our major suppliers have been supplying raw materials to us between eight (8) and 26 years. With such established business relationships, we have not encountered any major problems in sourcing raw materials as at the LPD. In addition, we constantly monitor our inventory level to ensure that there are sufficient raw materials to pre-empt any unforeseen disruptions in supply. Moreover, most of our raw materials can be obtained from other suppliers. Hence, we do not foresee any problems in sourcing raw materials for our requirements. Nevertheless, there is still a risk that relationships with our major suppliers may be impacted in the future due to unforeseen circumstances or events beyond our control which in turn may affect our business.
5.1.2 We rely on our Directors and Key Management for our business Our continued success, future business growth and expansion depend on the contributions of our Executive Directors and other key management personnel (see Sections 9.1.2, 9.2.2 and 9.3.2 of this Prospectus for their profiles). Our Executive Directors playa crucial role in our daily operations as well as charting, formulating and implementing strategies to drive the future growth of our Group. As such, taking into consideration their rapport with our customers and suppliers as well as their expertise and experience in rubber compounding, the loss of any of our Executive Directors and other key management personnel may be disruptive to our current operations and future growth of our business as this may affect our ability to compete with our competitors and ultimately, the business and financial performance of our Group may be adversely affected. Therefore, our ability to retain and attract competent and skilled personnel is crucial for our continued success, future business growth and expansion. To retain and attract competent and skilled personnel, we have in place incentive schemes, on-the­job training programmes and career advancement opportunities for our employees. We also have in place a management succession plan (see Section 9.8.2 of this Prospectus for further details), with Cheah Siang Tee (son of our founder, Data’ Seri Cheah) and Eu Hong Lim (son of our co-founder, Eu Ah Seng) as part of our Key Management. 39 5. RISK FACTORS (cont’d)
5.1.3 We rely on foreign workers in our manufacturing operations The nature of the rubber compounding and tyre retreading industries is such that they are highly dependent on foreign labour. The tyre retreading industry is comparatively more labour-intensive than the rubber compounding industry. More skilled labour is needed to manufacture retreaded tyres while the rubber compounding industry can be more easily automated. In tyre retreading, the retreading technician must first place the used tyre casing (which has passed the initial inspection process) in a buffing machine to remove old worn tread and sidewall rubber on the tyre casing; followed by further visual inspection and manual removal of materials. Next, the technician must inspect the tyre casing for any damages / holes. Lastly, the technician applies gum solutions onto the tyre casing for adhesion and fills the holes in the tyre casing with rubber compounds. Once the tyre is repaired, the buffed tyre casing is ready for retreading. In the case of cold cure tyre retreading, the technician finally places the tyre on a machine which will apply a new tread onto the tyre casing while in the case of hot cure tyre retreading, it requires more skilful technicians and more sophisticated equipment such as a range of moulds capable of withstanding high temperatures. Throughout both retreading processes, much manual intervention is required. Any shortage of labour or increase in labour costs will adversely affect our ability to meet manufacturing schedules and our profitability. As at the LPD, we have a workforce of over 250 employees, of which 49% are foreign workers employed for our manufacturing lines in Malaysia (excluding workers from PRC who run our operations in PRC). Our foreign workers are production workers from Nepal and Myanmar. We rely on our production workers and a prolonged shortage of labour resources will have a negative bearing on our business and growth prospects. In addition, cost of labour may increase in the future and we may not be able to offset such increases in labour cost against corresponding increases in the prices of our products and services. As a result, our business and financial performance may be adversely affected. In addition, any unfavourable changes in foreign labour policies by our government or the relevant foreign governments from which we source our foreign workers may adversely affect our Group’s operations, especially if it relates to the supply of such labour in Malaysia, or the minimum wage of these workers. The previous upward revision of minimum wages in Malaysia in July 2013 did not materially affect our financial performance as our foreign labour cost increased by only approximately 2% against overall staff cost for FYE 2013. Further to that, the upward revision of minimum wages in Malaysia in July 2016 also did not materially affect our financial performance as our foreign labour costs increased by less than 1.0% against overall staff cost for FPE 2016 in view that we have generally been paying our foreign labour close to the minimum wage level prior to the revision. In order to gradually reduce dependency on foreign labour as we expand our operations, we are enhancing our manufacturing automation systems in certain processes such as buffing lines (see Section 4.7.1 of this Prospectus on utilisation of proceeds). Nonetheless, any material loss of production workers or our inability to recruit new ones as our business grows may have a material and adverse impact on our business operations and/or our growth prospects. 40 5. RISK FACTORS (cant’d)
5.1.4 We may face manufacturing and/or operational disruptions Our revenue is dependent on our manufacturing processes running smoothly and efficiently. Our daily operations are susceptible to risks beyond our control such as outbreak of fire and floods, explosion, energy crisis, sabotage, civil commotion and other calamity which may cause significant downtime, losses and/or damage to our products, production facilities, warehouse and office, thus disrupting and affecting our business operations. Recognising the above, we have in place several backup contingencies as follows:­(i) Our factories are located in Tasek Industrial Estate, Ipoh, whereby our production facilities at Lot 93 are located across the road from those at Lot 82 and Lot 90. Hence, should there be any emergencies such as fire breakout, we can still run on 24-hour shifts plus weekends to ensure undisrupted supply to our customers;
(ii) The electricity supplies for our premises at Lot 93 and Lot 94 are sourced from different substations, hence limiting the risk of any concurrent interruptions. Furthermore, we have invested in high-tension power supply system for our factory at Lot 90 where we have our own in-house substation; and

(iii) In the event of machinery breakdowns, we have in storage back-up machineries / components for most of our manufacturing lines to temporarily sustain and keep our manufacturing lines running whilst we resolve the breakdowns. Nonetheless, any major manufacturing or operational disruptions will have an adverse impact on the business, operations and financial performance of our Group. As at the LPD, we have not experienced such major manufacturing and/or operational disruptions in the past that may materially affect our business or financial performance.
5.1.5 Revocation of manufacturing licenses, business licenses and permits We have obtained manufacturing licenses for our manufacturing activities from the MITI and rubber licenses from the Malaysian Rubber Board. We have also obtained other approvals, major licenses and permits from various governmental authorities for our business (see Section 7.12 of this Prospectus). These approvals, licenses and permits are SUbject to compliance with relevant conditions, laws and regulations under which they were issued and in the event we are deemed to be in non­compliance with such conditions, laws or regulations, our licenses may be revoked. Revocation of our licenses and permits will have a material adverse effect on our ability to continue our operations and thus affect our financial performance. In mitigation, our key management keeps a close tab on our compliance status and also works closely with the relevant authorities such that any queries or issues raised will be promptly addressed and resolved. As at the LPD, we have not experienced any non-compliance issues for these manufacturing, business licenses and permits that may materially affect our business or financial performance.
5.1.6 Protection of Eversafe Rubber and Olympic trademarks We are to an extent dependent on the protection of our proprietary trademarks as set out in Section 7.13 of this Prospectus. We have registered our trademarks in Malaysia and PRC in order to protect our IPR. We also intend to utilise a portion of the IPO proceeds to register our IPR in a number of countries (see Section 4.7.2 of this Prospectus). 41 5. RISK FACTORS (cont’d) Existing laws relating to the protection of IPR only afford limited protection. Our IPR may suffer against unauthorised use or exploitation and any such event may deteriorate the market recognition of our brands and trademarks or may have a negative impact on our brand image. Nevertheless, as at the LPD, we have not experienced such events that may materially affect our business or financial performance. In addition, in order to mitigate such risk, we are attentive of new products and service providers in the industry and will not hesitate to take legal actions should we encounter any such unauthorised use or exploitation of our IPR.
5.1.7 Our future plans and growth strategies may not achieve our objectives As part of our expansion efforts, we plan to increase our export sales and our geographical footprint primarily outside the ASEAN region. Although we exported to at least 23 countries around the world for FYE 2015 and FPE 2016, we are constantly expanding our reach to new markets. We are optimistic of the potential of the South American market for our tyre retreading materials and our tyre retreading business. As set out in Section 7.3.3 of this Prospectus, 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 appointing our business partner to be the distributor of 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. With our tyre retreading experience and knowledge garnered over the past half a century, we believe we are able to create synergies with our business partner to produce quality tyre retreading products and services for the South American markets, while the other entities of our Group will have the opportunity to supply the tyre retreading materials required and penetrate further into the South American market. See Section 7.3.3 of this Prospectus for further details of our future plans and strategies. We recognise that our expansion plans involve a number of risks, including but not limited to capital expenditure incurred to enhance our manufacturing capabilities and to build new facilities, working capital tied up in inventories, increased marketing and promotional expenses as well as other working capital requirements. While we believe that we have sufficient resources at our disposal to execute our business expansion plans after the IPO, there is a risk of unforeseen circumstances that may disrupt the execution of those plans. We may be unable to successfully identify, negotiate and/or finance such expansion plans and joint ventures on terms that are satisfactory to us, or to successfUlly reap the benefits as per the objectives of such new ventures. These factors may lead to a material adverse effect on our financial performance and financial position.
5.1.8 We are SUbject to risk of inadequate insurance coverage We have purchased insurance policies to insure ourselves against, amongst others, risks of fire, goods in transit and product liability. We believe our current insurance coverage is adequate for our business and level of operations. Nonetheless, we are still exposed to the risk that the insurance coverage would be inadequate to cover the losses, damages or liabilities, which we may incur in the course of our business operations. To the extent such risks are uninsured, not covered under our insurance policies, or where the insurance protection is not sufficient to cover such risks, we may have to bear such losses, damages or liabilities and consequently our business and financial condition may suffer a material adverse impact. 42
5. RISK FACTORS (cant’d)
5.1.9 We are subject to risks of public liability claims and other disputes We may be subject to customer claims in the case of alleged substandard or defective products. Any negative publicity arising from customer claims or negative media reports that we may be directly or indirectly associated with may affect our brand equity, reputation and subsequently our sales. We are also susceptible to the risk of public liability claims arising from accidents and/or injuries sustained by our customers / end consumers from using Olympic’s retreaded tyres. Litigation or dispute resolution processes arising from these claims may be costly and time consuming. Moreover, the outcome of such proceedings may be unfavourable to us, resulting in material adverse impact to our financial performance. As a mitigating factor, our products have been in compliance with the requirements and standards relevant to our industry. For our tyre retreading materials, we have obtained MS certification by SIRIM QAS and we only supply raw materials in accordance with the MS requirements. For our retreaded tyres, they are MS 224:2005 certified and safe for use in commercial vehicles in Malaysia. We also received the ISO 9001 :2015 from BM TRADA Certification Ltd, United Kingdom in recognition of our QMS for the provision of retreaded tyres. In addition, our retreaded tyre manufacturing lines and processes are under the surveillance and audit purview of SIRIM and product testing by the Malaysian Rubber Board. As for roadworthy retreaded tyres, the Road Transport Department Malaysia is the enforcement unit and regular inspections are carried out to ensure that only retreaded tyres with MS 224:2005 certification are allowed to be used on the road. As at the LPD, we have not experienced any material disputes or negative publicity that may materially affect our business or financial performance.
5.1.10 Environmental concerns Inappropriate disposal of tyres can affect the environment and human health. Tyres are not biodegradable. Used tyres represent waste that takes up much physical space and is difficult to compact, collect and eliminate. The curved shape of tyres, together with their impermeability, allows rainwater to collect and creates an ideal habitat for rodents and mosquitoes, particularly in the tropical and subtropical regions. Prone to heat retention, tyres in stockpiles can also ignite, creating fires that are difficult to extinguish and can burn for months, generating unhealthy smoke and toxic oils. Retreaded tyres provide an environmentally friendlier alternative as they assist to reduce the amount of tyre wastes, when the former is recycled. They also help to save non-renewable natural resources in an energy scarce world, as they require significantly less crude oil as compared to the manufacturing of new tyres, hence reducing overall energy and greenhouse emissions. In most rubber compounding activities, the primary environmental concerns are fugitive emissions, solid wastes, waste water and hazardous wastes. The rubber compounding area, where chemicals are weighed and put into containers prior to mixing, can be a source of fugitive emissions, and possibly spills and leaks. Waste water from cooling, heating and cleaning operations is an environmental concern in many facilities. To address the issue of possible leaks, our chemical weighing systems are placed in enclosed areas where any fugitive emissions and possible spills are minimised. To address the waste water issue, our production facilities have implemented water reuse and recycling programs. 43 5. RISK FACTORS (cont’d) Waste rubber from rubber compounding and tyre retreading activities can be classified into three (3) categories as follows:­uncured rubber waste; cured rubber waste; and off-specification products.
Uncured rubber waste can be recycled in the factory. Meanwhile, cured rubber waste can either be recycled in-house or sold to other companies that use it to make products such as mud flaps and playground mats. Lastly, off-specification products can be sold to other companies that make products from shredded or scrap rubber or they can be disposed of. Our manufacturing facilities are sUbject to regular inspections by the Department of Environment and as such, we are constantly monitoring our manufacturing facilities to ensure compliance with environmental legislations. We have also implemented an environmental management system for the provision of retreaded tyres, and obtained the ISO 14001:2015 from 8M TRADA Certification Ltd, United Kingdom in 2016. As at the LPD, we are not subject to any penalty or administrative order in relation to compliance with environmental requirements from any government or regulatory authority, which may materially affect our Group’s operations and utilisation of our assets. Nevertheless, we are subject to the risk of any unintended mishaps in processes or any changes made to the environmental legislations in the future that may materially affect our operations. 5.2 Risks affecting the industry in which we operate 5.2.1 We are subject to the volatility in prices of raw materials The two (2) main raw materials we use in the manufacturing of our tyre retreading materials are natural rubber and synthetic rubber. The purchases of natural rubber and synthetic rubber collectively accounted for approximately 51 % of our total purchases for FYE 2015 and 50% of our total purchases for FPE 2016. The prices of these main raw materials are SUbject to fluctuations due to supply and demand conditions in the global commodity market. Any material increase in the prices of these raw materials may have an adverse impact on our financial performance and financial condition. The price of the natural rubber we procure is SUbject to fluctuations in the market price of SMR 20 grade natural rubber. The market prices of SMR 20 have experienced material volatility in the market between January 2011 and January 2017, decreasing by 39.4% between these two (2) periods. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 44 5. RISK FACTORS (cont’d) Monthly prices for SIVIR 20 grade natural rubber from January 2011 to January 2017 sen/kilogram 1,800.00 1,600.00 1,400.00 1,200.00 1,000.00 800.00 600.00 400.00 200.00 ~ 0.00
..–..–..–N N N (‘i) (‘i) (‘i) lO lO lO c.o c.o c.o I’­..–..–..–..–..–..–..–..–..–..–..–..–..–..–..–..–..–..–..-­IIIIIIIII”””I”””I”””IIII I I II C >-a. c >-a. c >-a. c >-a. c >-a. c >-a. c ctl ctl (\) ctl ctl (\) ctl ctl (\) ctl ctl (\) ctl ctl (\) ctl ctl (\) ctl-, -,-,-, -,-,-,if) if) if) if) if) if)22 2 2 2 2 (Source: Malaysian Rubber Board) We currently source our natural rubber from an approved supplier, namely Lee Rubber, a sUbsidiary and trading arm of the Lee Rubber Group in Malaysia. The Lee Rubber Group is one of the oldest natural rubber suppliers in the region. We have been dealing with Lee Rubber for 26 years. The consistency in their supply of quality natural rubber according to our specifications and on terms satisfactory to us are the main reasons we procure our natural rubber from Lee Rubber. Although we currently procure our natural rubber from a single supplier, natural rubber is a commodity and can be easily sourced from many other suppliers in the country. Hence, we do not foresee any procurement difficulties or shortage of supply of natural rubber from suppliers in the market. Synthetic rubber is a derivative of petrochemicals. Hence, the price of synthetic rubber is subject to the volatility of petroleum prices. The suppliers of synthetic rubber quote prices to customers, usually on quarterly basis, which in turn, is dependent on market conditions. The prices of synthetic rubber are subject to negotiations between the suppliers and purchasers. Therefore, unlike natural rubber prices, we are not sUbjected to daily fluctuations in synthetic rubber prices. Generally, we are able to pass on the price volatility in raw material costs to our customers, due to our constant price monitoring and management of our raw material purchases. To mitigate the fluctuations in raw material pricing, we also work closely with our customers in planning their respective production forecasts to map out our production schedules so that we may determine a more accurate supply forecast and plan our purchases accordingly. Nevertheless, a prolonged material increase in the prices of raw materials will ultimately affect our business and the industries as a whole. 45 5. RISK FACTORS (cont’d) 5.2.2 Fluctuation in foreign exchange rates In the past three (3) FYEs 2013, 2014 and 2015, our export sales to overseas markets have increased from 40% to 55%, resulting in 36%, 44% and 46% of our total revenue being denominated in foreign currencies for the respective years. Moving forward, we expect these figures to further increase, in line with our growth plans into overseas markets. For FPE 2016, our export sales contributed 57% to our total revenue, with 47% of our total revenue being denominated in foreign currencies. Our Group’s export revenue is mainly transacted in USD and JPY while other foreign currencies include AUD, EUR, HKD, RIVIB and SGD. In addition, the import of our raw materials is mainly denominated in USD. As such, we are exposed to foreign currency exchange gains or losses arising from timing differences between our billings, actual receipt of payments and conversion I translation into RM. Bank Negara Malaysia has recently announced a new policy which is effective from 5 December 2016 which requires a resident exporter to convert 75% of its export proceeds into RM while the balance 25% is allowed to be retained in foreign currencies. However, Bank Negara Malaysia has sUbsequently issued further guidance that exporters may request to simultaneously reconvert the 75% of its export proceeds into foreign currency at the same rate up to the value of six (6)­month import and foreign currency loan obligations. Hence, our Group will still be able to utilise the foreign currencies kept in our onshore foreign currency bank accounts as a natural hedge to better manage fluctuations and volatility of the foreign currency exchange rates as well as for our foreign purchases (see Section 12.3(v) of this Prospectus for the breakdown of foreign-denominated sales and purchases by currency). While we are not at the moment materially affected, any new development in this policy may, depending on the exchange rate fluctuations and spreads, have an adverse impact on our financial performance if we are required to bear the additional expenses for double conversion from USD to RM and then back to USD for payments to our suppliers. For information purposes, the foreign exchange gain I (loss) of our Group for the period under review are as follows:­Audited FYE 2013  FYE 2014  FYE 2015  FPE 2016  RM’OOO  RM’OOO’  RM’OOO  RM’OOO  Gain I (Loss) on foreign exchange  Realised  (322)  (655)  554  (148)  Unrealised  871  524  1,188  2,609
The foreign exchange gain I (loss) above arises from trade transactions in our ordinary course of business. 5.2.3 Lack of long-term contracts with our customers The nature of the rubber compounding industry is such that customers do not enter into long-term contracts with suppliers. In line with the normal industry practice, our sales are generated via purchase orders (ranging from monthly purchases up to orders made for one (1) year’s supply) as our customers try to match their needs for tyre retreading materials to their own internal requirements I sales orders, ensuring efficiency in their inventory management. As such, the absence of long-term contracts is an inherent risk in our industry. 46 5. RISK FACTORS (cont’d) We are 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 (approximately 17%). Our top ten (10) major customers collectively contributed approximately between 33% to 39% of our revenue for FYEs 2013, 2014 and 2015 and 47.5% of our total revenue for FPE 2016. Our Group seeks to mitigate this risk by establishing good business relationship with our customers. Over the years, despite the absence of long-term contracts with our customers, our Group has an established and proven track record in consistently providing quality products and services, which has earned the confidence and recognition of our local and overseas customers. This is evident as we have managed to retain most of our major customers, whereby 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 ourtotal revenue for the said period). Furthermore, this risk is mitigated as one of our competitive advantages and key strengths is our diverse and international customer base (see Section 7.3.2 of this Prospectus). Nevertheless, the absence of long-term contracts in our industry practice may have an adverse effect on the financial and operational conditions and the overall profitability of our Group in the long-term should there be any prolonged disruptions in customer orders.



5.2.4 Our tyre retreading materials may be subject to unauthorised use for spurious tyres There is a possibility that our tyre retreading materials may be purchased by third parties and unscrupulously used to produce counterfeit new tyres. However, there are high entry barriers in the manufacturing of new tyres, as it is a very capital-intensive business and requires a high degree of technical know-how as well as the establishment of large-scale plants in order to achieve economies of scale. Significant investments have to be made in research and development as well as marketing and distribution in order to be competitive in the market. In addition, due to the competitive nature of the automotive industry, purchasers of new tyres practise a stringent vendor selection process, appointing only reputable component suppliers (including tyre manufacturers). The automotive companies undertake periodic audits of their component suppliers in the supply chain, in order to ensure that their brand equity is not affected by counterfeit products. In addition, retail consumers nowadays are also more brand conscious, preferring to select reputable tyre brands as opposed to unknown tyre brands. Tyre manufacturers will also not hesitate to take legal actions against spurious manufacturers, failure of which will risk losing their credibility due to counterfeit, inferior tyres. In the case of retreaded tyres, it would be difficult for traders to purchase retreaded tyres and then sell them to retail consumers as new tyres. This is because tyre retreaders have to comply with their respective countries’ regulations and standards. In Malaysia, the standard for retreaded tyres is MS 224:2005 where all retreaded tyres have to be embossed with, amongst others, the tyre retreader’s name and/or trademark, and week and year of the manufacture of retreaded tyres (see Sections 6 and 9 of the IMR Report set out in Section 8 of this Prospectus for further details on the various regulations and standards governing the industries in which we operate). In the US, it is the Department of Transportation code with an “R” that indicates that a tyre ;s a retreaded one; and in Japan, both new and retreaded tyres have to comply with the standards set by Tyre Standards Committee (which comprises representatives from the government, tyre manufacturers and automotive manufacturers). 47 5. RISK FACTORS (cont’d) Nonetheless, we are subject to risks that our tyre retreading materials may be used to make spurious products, particularly in countries with weak regulatory and enforcement conditions. However, as at the LPD, we are not aware of any instances of such incidents happening arising from utilisation of our products. 5.2.5 We face competition from existing and new market entrants locally and overseas As set out in Section 16 of the IMR Report (set out in Section 8 of this Prospectus), there are a number of other industry players comparable to our Group which are active in the rubber compounding and tyre retreading industries. In Malaysia, we command a market share of about 22% for tyre retreading materials in 2015 and a 4% market share for tyre retreading operations in the same year. We believe that with our focus and growth strategies, we can maintain our market share. However, despite our efforts, we will still face challenges for market share from both existing competitors and potentially new market entrants in local and international markets. Despite the relatively high barriers to entry such as the possession of a solid knowledge of rubber compounding formulations, the ability to provide superior and differentiated products and the ability to achieve a fast turnaround time, local or international competitors may still enter or increase their presence in our industries. For example, in the Malaysian market (which contributed 45% and 43% of our total revenue for FYE 2015 and FPE 2016 respectively), our local sales volume for tyre retreading materials has been decreasing at a CAGR of -9.0% from FYE 2013 to FYE 2015. This negative CAGR is due to, amongst others, pricing competition amongst industry players in the Malaysian market. For example, against a backdrop of falling rubber prices by 15.3% in 2013 and 20.7% in 2014, we had correspondingly reduced our Malaysian average selling prices per tonne for our tyre retreading materials by 10.0% and 8.1% for FYE 2014 and FYE 2015 respectively. However, we believe that our competitors had reduced their prices to a greater extent, resulting in our products to be more expensive, leading to the decline in our local sales volume. We believe this also caused our local sales volume for tyre retreading materials to decline further by 10.5% for FPE 2016 although we had reduced our Malaysian average selling prices per tonne for our tyre retreading materials by 1.3%, relative to FPE 2015. Nevertheless, we believe this negative trend will improve upon the recovery of rubber prices (which increased slightly by 3.0% for FPE 2016) as the selling prices of our products correspondingly become more competitive as our competitors raise their selling prices to a greater extent as compared to us. With our pricing approach, our customers will experience less fluctuation in their purchase prices and at the same time, receive a consistent supply of retreading products of their specifications. Nevertheless, for our overseas markets (which contributed 55% and 57% of our total revenue for FYE 2015 and FPE 2016 respectively), our export sales volume for tyre retreading materials has been increasing at a higher CAGR of 10.2% over the said three (3) financial years. This positive CAGR is mainly attributable to growing sales from existing overseas countries in which we serve (FYE 2014: 98% and FYE 2015 95%) as well as new countries we have penetrated. Our export sales volume for tyre retreading materials increased further by 3.2% for FPE 2016, as compared to FPE 2015. This is in line with our future plans and growth strategies to build our overseas markets (see Section 7.3.3 ofthis Prospectus). Nevertheless, to mitigate competition risks, we have taken pro-active measures including continuous review of our development and market strategies in response to market demand. We are also building on our competitive advantages and key strengths (see Section 7.3.2 ofthis Prospectus). However, we are still exposed to the risk that we may be unable to compete effectively against our existing or future competitors and arising therefrom, our business, financial performance and financial condition may be adversely affected. 48 5. RISK FACTORS (cont’d) 5.2.6 Our performance is dependent on the general state of the Malaysia’s economy As our principal place of operations and manufacturing facilities are based in Malaysia, and a large part of our revenue is generated from our Malaysian customers, our financial performance is dependent on the general state of the Malaysia’s economy, including the level of commercial and industrial activities, population growth, disposable income of consumers and inflation. A growing economy spurs consumption growth and higher disposable income for consumers. This creates demand for tyre retreading products and services among fleet companies. Any decline in the economic conditions in Malaysia may cause a reduction in consumption and demand for tyres, which could have a negative impact on the overall financial performance of industry players. Nevertheless, we believe that demand for our products is less sensitive to adverse changes in economic conditions as retreaded tyres are an economical alternative to new tyres, and are easily accessible to fleet companies at affordable price points. Nonetheless, any severe or prolonged decline in the economy may materially and adversely affect our sales, financial performance and financial condition. 5.2.7 We are subject to political, economic and social developments in Malaysia Our business, prospects, financial performance and financial condition may be affected by political, economic and social developments that are beyond our control in lVIalaysia. Such developments include, but are not limited to terrorism, riots, nationalisation, expropriation, changes in interest rates, economic recession, fiscal and monetary policies of the Government such as foreign exchange control regulations, inflation, deflation, methods of taxation and tax policy (including customs, excise, duties and tariffs), unemployment trends, deterioration of international bilateral relationships and other matters that influence consumer confidence and spending. Increasing volatility in financial markets may cause these factors to change with a greater degree of frequency and magnitude. Unfavourable developments in the socio-political environment in Malaysia such as minimum wage increases and/or restrictions on bringing in foreign workers may materially and adversely affect our business, financial performance, financial conditions and prospects. 5.3 Risks affecting our Shares 5.3.1 Delay or failure of our Listing The occurrence of anyone or more of the following events, which is not exhaustive, may cause a delay in or cancellation of our Listing:­(i) our Sole Underwriter exercising its rights pursuant to the Underwriting Agreement to be discharged of its obligations thereunder;
(ii) we are unable to meet the public shareholding spread requirement of the Listing Requirements, i.e. at least 25% of our Shares for which Listing is sought must be held by a minimum number of 200 public shareholders holding not less than 100 Shares each at the point of our Listing; or

(iii) the revocation of approvals from the relevant authorities prior to our Listing and/or admission to the Official List for whatever reason. 49

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