Risk Factors

5. RISK FACTORS 5. RISK FACTORS The risks set out below are not an exhaustive list that could affect us and the value of our Securities. Additionally, some risks may be unknown to us and other risks, currently believed to be immaterial, could turn out to be material. All of these could materially and adversely affect our business, financial condition, results of operations and prospects. The trading price of our Securities could significantly decrease due to any of these risks, and you may lose part or even all of your investment. You should also consider the information provided below in connection with the forward-looking statements and the warning that forward-looking statements in this Prospectus may not be accurate. Save as disclosed in this section, our Directors are not aware of any relevant material information including factors or risks which have materially affected or could materially affect, directly or indirectly, our business, financial condition, results of operations and prospects, and investments by holders of our Securities. In particular, you should pay attention to the fact that our Group, and to a large extent our activities, are governed by the legal and regulatory environment in the United Kingdom and Australia, which may be different from Malaysia. RISKS RELATING TO OUR BUSINESS 5.1.1 We have a limited operating history as a company We have a limited operating history upon which you can base an evaluation of our business and prospects. As a company in the early stages of development, there are substantial risks, uncertainties, expenses and difficulties to which our business is subject. To address these risks and uncertainties, our Group must successfully develop and execute our business strategies and respond to competitive developments. There can be no assurance that we will earn significant profits or any profits from our operations, which could impact our ability to complete our projects or obtain additional funds that we may require in the future to satisfy requirements beyond our current committed capital expenditure. We cannot be certain that we will successfully develop and implement our business strategies or that we will successfully address the risks that are faced by our business. If we do not successfully address these risks, our Group’s business, financial condition, results of operations and prospects, could be materially and adversely affected Furthermore, as a result of our limited operating history, our historical financial statements included in this Prospectus are unlikely to provide a sufficiently meaningful basis for you to evaluate our financial performance and to be indicative of our future financial condition, results of operations, cash flows or rate of growth. Accordingly, our past performance should not be relied upon as an indication of our future performance. 5.1.2 All of our Group’s existing projects are in the early stages of development and there is no guarantee of their successful completion All of our projects are in the early stages of development. As at the LPD, we have commenced construction of three out of our four projects (namely the London City Island Phase 2, the Embassy Gardens Phase 2 and the Ward ian London projects), the earliest of which we expect to be completed in the first half of 2018. Execution risks are generally higher at the early stages of development. Such risks include failure in design, unexpected delays in construction, cost overruns and purchasers’ defaulting in payments. Failure to complete or significant delays in completing any of these projects could have a material adverse effect on our Group’s business, financial condition, results of operations and prospects 5. RISK FACTORS (Cont’d) 5.1.3 Our Group is dependent on our management team and on the expertise of key personnel and may be unable to attract and retain a highly-skilled and experienced workforce The future success of our Group is, to a large extent, dependent upon the specialist experience, industry knowledge and network, and skills of our management team. Our Group has a strong management team comprising individuals who each have significant experience in the property development industry, including in the United Kingdom and Australia. Our Group’s future success depends, to a large extent, upon the continued service of the members of our management team, in particular, our Executive Vice Chairman, Tan Sri Liew, our Executive Director/President and CEO, Dato’ Teow, our CFO, Melissa Tan Swee Peng, our Chief of Design and Planning, Tan Cheng Yong, our Chief of Sales and Marketing, Norhayati binti Subali, our CEO, International Business (United Kingdom), Cheong Heng Leong and our CEO, International Business (Australia), Yap Foo Leong. Due to their extensive business experience and, on average, over 20 years of relevant experience, they are critical to the overall management of our Group as well as management of our property development projects, our corporate culture and our strategic direction. The success of our Group’s businesses is further dependent on recruiting, retaining and developing highly-skilled and competent people at all levels of our organisation Recognising our reliance on key management personnel, we will continuously consider appropriate measures to attract and retain our key management personnel while grooming and developing younger members of the management team to gradually assume greater responsibilities as part of our succession plan in preparation for our anticipated grow1h. Nonetheless, the unexpected departure or loss of members of our management team, or the inability of our Group to retain or attract key management personnel, or develop a succession plan effectively, or find individuals with comparable experience and knowledge if members of our management team leave, could have an adverse impact on our Group’s business, financial condition, results of operations and prospects. 5.1.4 The subscription of our IPO Shares by EW Berhad is subject to certain conditions and the performance by the relevant parties of their respective obligations as set out in the EW Berhad Share Subscription Agreement The subscription of our IPO Shares by EW Berhad, through EW Capital, is subject to the fulfilment of certain conditions precedent within the stipulated cut-off period, such as the Retail Underwriting Agreement and the Placement Agreement having been entered into and having become unconditional, as well as the performance by the relevant parties of their respective obligations as set out in the EW Berhad Share Subscription Agreement. If any of the conditions precedent is not fulfilled or waived or if there is any non­performance of the relevant parties’ obligations as set out in the EW Berhad Share Subscription Agreement, EW Berhad will not be obligated to subscribe for our IPO Shares and could terminate the EW Berhad Share Subscription Agreement. The termination of the EW Berhad Share Subscription Agreement would result in the termination of our IPO and Listing. For more information on the EW Berhad Allocation, please refer to Section 4.3.3 of this Prospectus. 5. RISK FACTORS (Cont’d) 5.1,5 We will not be able to enjoy the potential value of having GuocoLand as a strategic investor if the GuocoLand subscription is not completed The subscription of our IPO Shares by GuocoLand, through GLL EWI, is subject to the fulfilment of certain conditions precedent within the stipUlated cut-off period, as well as the performance by the relevant parties of their respective obligations as set out in the GuocoLand Share Subscription Agreement. This includes, amongst other things, the Retail Underwriting Agreement and the Placement Agreement having been entered into and having become unconditional and our Company providing GuocoLand a written confirmation that the aggregate proceeds from the IPO are not less than RM2.0 billion. If any of the conditions precedent is not fulfilled or waived or if there is any non­performance of the relevant parties’ obligations as set out in the GuocoLand Share Subscription Agreement, GuocoLand will not be obligated to subscribe for our IPO Shares and could terminate the GuocoLand Share Subscription Agreement, which could delay our IPO, result in less IPO proceeds than anticipated or prevent our IPO and Listing from occurring altogether. Any of the foregoing could materially and adversely affect the business, financial condition, results of operations and prospects of our Group. Consequentially, we will also not be able to enjoy the potential value of haVing GuocoLand as a strategic investor. For more information on the GuocoLand Allocation, please refer to Section 4.3.4 of this Prospectus. 5.1.6 The past performance of our management team is not a guarantee of the future performance of our Group Our Group is reliant on our management team to identify and manage prospective property development projects for the growth of our Group and in order to create value for our shareholders. This Prospectus includes certain information regarding the past performance of our management team in other companies and ventures. The past performance of our management team is not indicative, nor intended to be indicative, of the future performance or results of our Group. The past performance of our management team in other companies and ventures advised and/or operated by our management team may not be entirely and/or directly comparable with our Group’s business. Differences between the circumstances of our Group and the circumstances of the track record of our management team in this Prospectus include actual acquisitions, objectives, fee arrangements, structure (including for tax purposes), terms, leverage, performance targets and market conditions. All of these factors can affect our Group’s results and impact the usefulness of performance comparisons and, as a result, none of the historical information or track record information contained in this Prospectus is directly comparable to our Group’s business or performance. 5. RISK FACTORS (Cont’d)
5.1.7 Our Group is subject to revenue, profit and operating cash flow volatility Our revenue, profit and operating cash flow in any financial year may fluctuate as each is predominantly project-based and dependent on the sales performance, number, value and completion of the projects we undertake. There is no assurance that the amount of revenue from the sale of our projects will remain comparable each year. We aim to manage some of this volatility by phasing the development of our projects. However, if we undertake fewer or no new projects in certain periods or there are delays in the completion of our projects or sales of our projects are poor, our revenue recognised, share of profits or cash flow generated in such periods may be adversely affected. This will consequently have a material adverse effect on our financial position. Further, from an accounting perspective, revenue from the sale of property in the United Kingdom and Australia can only be recognised by our subsidiaries and joint ventures when the risks and rewards of the property sold have been fully transferred to the purchaser, which is upon physical completion and handover of the vacant possession of the property. Accordingly, our subsidiaries and joint ventures will not recognise the deposits received from purchasers or development progress of property for which a sales contract has been signed as revenue until the physical completion and handover of the vacant possession of the property. In Australia, where our projects are currently undertaken through our wholly-owned subsidiary, our revenue on a year-to-year basis will fluctuate depending on the number of projects completed in each financial year. In the United Kingdom, where our projects are currently undertaken through our joint ventures, the revenue of these companies on a year-to-year basis will fluctuate as well, depending on the number of projects completed in each financial year, which will, in turn, cause our share of profits from each of these joint ventures to fluctuate as well. Additionally, due to the above revenue recognition method, we will not recognise any revenue from our property development projects Or share of profits (where applicable) until the aforementioned physical completion and handover of vacant possession of the projects in phases, which we expect to commence from the first half of 2018. Further, property development usually requires substantial capital investment during the construction period and as such, it is not unusual for a property developer to generate negative operating cash flow over a particular period when the cash outlay for land acquisition and construction expenditures during that period, after taking into account changes in other working capital items, exceeds the cash inflow from property sales or pre-sales over the same period. Our Group had pro forma negative operating cash flow of RM86.27 million for the FYE 31 October 2015 and audited consolidated negative operating cash flow of RM39.16 million for the FYE 31 October 2016. We therefore require external funding to expand our business and to acquire land and to develop our projects. In the United Kingdom and Australia, the purchaser typically makes a partial payment of the purchase consideration on the date the sale and purchase agreement is exchanged followed by the payment of the remaining purchase consideration (which usually represents a substantial portion of the total purchase consideration) to the developer when the construction work is completed and vacant possession has been delivered. 5. RISK FACTORS (Cont’d) In the United Kingdom, the purchaser typically pays an initial cash deposit of either 5.0% or 10.0% of the purchase consideration as required by the developer upon signing of the sale and purchase agreement. An additional 150% or 10.0% of the purchase consideration, as the case may be, is then payable a year later which will be held by the developer’s solicitors as stakeholder in a trust until the construction of our project is completed and handover of the vacant possession of the unit to the purchaser is completed. The remaining purchase consideration is only paid upon physical completion and handover of the vacant possession of the unit to the purchaser. An amount equivalent to the lower of 10.0% of the purchase consideration or GBP100,000 per unit out of the amounts received from the purchasers, can be utilised by the developer to fund the development works if such developer has procured deposit insurance from an insurance provider for that amount. We will review our sales report on a quarterly basis to determine the number of units pre-sold for the respective blocks of our existing United Kingdom property development projects, following which we will register the pre-sold units for NHBC Buildmark cover by paying an upfront premium. Once these units have been registered, an amount equivalent to the lower of 10.0% of the purchase consideration or GBP100,000 per unit out of the amounts received from the purchasers will be released to us and can be used to fund the development costs of our property development projects, including funding the payment of insurance premiums for future insurance cover of amounts paid in connection with the sale of additional units in the project. In Australia, the purchaser typically pays an initial cash deposit of 10.0% of the purchase consideration upon the signing of the sale and purchase agreement, which cannot be used by the developer to finance the development of the project and is held in trust by the relevant solicitor. The remaining 90.0% of the purchase consideration is only paid upon physical completion and handover of the vacant possession of the unit to the purchaser.
5.1.8 Our Group may achieve lower GDVs than estimated Our Group’s GDVs relating to our projects are estimates made on the basis of market conditions as at the date of valuation and certain assumptions which may ultimately prove to be inaccurate. These assumptions include demand for homes, average selling price, the number of units within developments and the split between private residential units and affordable housing units (in terms of our projects in the United Kingdom only) as well as obtaining the relevant planning permissions and other consents (including obtaining approval for reserved matters and/or detailed/full planning permissions for property development projects). Our estimated GDVs are based on the valuation of our projects in the United Kingdom as at 14 September 2016 and for our project in Australia, as at 15 December 2016, which are inherently subject to various forecasts and assumptions. In particular, the GDV estimates made by JLL for our projects in the United Kingdom set out in the valuation certificates included in Section 9 of this Prospectus were made as at the valuation date reflecting market conditions at that time. The GDV estimates provided may be affected by recent developments in the United Kingdom occurring after the date of such valuations. For further details on potential risks relating to the withdrawal of the United Kingdom from the EU, please refer to Section 5.3.1 of this Prospectus. There is no assurance that the estimated GDVs will reflect the actual sales prices achieved by any developments built on the land. In particular, factors including lower demand for homes, increased costs or a failure to obtain the planning permissions and/or other consents sought by our Group, may result in lower GDVs than estimated. Any failure to sell as many units as anticipated, and/or to achieve the expected selling prices, could result in our Group not achieving our estimated GDVs. This in turn could have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. 5. RISK FACTORS (Cont’d) 5.1.9 Our Group is dependent on the performance of the property industry in the countries in which we operate Our business is subject to the performance of the property industry in the countries in which we operate, where property prices are largely affected by supply and demand. Long-term demand for mixed-use properties is typically directly related to population growth and the rate of new household formation. These factors have, in the past, contributed to an increase in home ownership and demand for new homes but there is no guarantee that they will continue to do so, nor that any future recovery in consumer confidence or improvement in credit availability would result in an increase in residential property prices and sales volumes. In particular, the demand for properties could be adversely affected by, amongst other things, any of the following: (i) weakness in the domestic and international economies;
(ii) lower population growth, including migration;

(iii) adverse government regulation; (iv) absence of financing for purchase of properties;
(v) the consequences of the United Kingdom’s withdrawal from the EU; and/or
(vi) higher interest rates.

To the extent that any of these factors occur, they are likely to impact the demand and pricing of our properties which consequently, will adversely affect the business, financial condition, results of operations and prospects of our Group as well as the value of our Group’s properties. We rnay also incur losses in our property development business by retaining unsold properties or selling them below cost in a depressed market. If we are unable to sell our unsold properties, we may incur holding costs such as interest costs and maintenance costs. For further information on the outlook of the property industries in the countries in which we currently operate, please refer to Section 8 of this Prospectus. 5.1.10 We are subject to risks relating to foreign currency exchange rate fluctuations Our Group’s reporting currency is in RM whilst the functional and reporting currencies of our subsidiaries and joint ventures which develop our projects are in foreign currencies, currently GBP, AUD and USD. The cash flows of our subsidiaries and joint ventures that are developing our current projects are denominated in GBP, AUD and USD, as the case may be, including purchases of land, investment, development and operating costs, financing and revenues. Consequently, our revenues, costs, profits and asset values are affected by fluctuations in the foreign currency exchange rates among the abovementioned currencies. We cannot predict the effects of future foreign currency exchange rate fluctuations on our assets, liabilities, revenue, cost of sales and profits. Weakening of the GBP and AUD against the RM may have a material adverse impact on our financial position and results of operations expressed in RM. We may experience foreign currency exchange rate gains or losses when our assets and liabilities in foreign currencies are translated or exchanged into RM for financial reporting or repatriation purposes. 5. RISK FACTORS (Cont’d) In particular, the value of the GBP against the RM and other foreign currencies has declined since the United Kingdom’s national referendum on 23 June 2016, where a majority of voters in the United Kingdom voted for the United Kingdom to withdraw from the EU (“Brexit”). The recent months leading up to the Brexit vote had resulted in a significant decline of the GBP against the RM in part due to uncertainties surrounding the outcome of the referendum and continued to do so in part due to uncertainties surrounding the implementation and effect of Brexit, inclUding the commencement of the exit negotiation period, the terms and conditions of such exit and the uncertainty in relation to the legal and regulatory framework that would apply to the United Kingdom. From 1 January 2016 through 31 December 2016, based on middle rates as at 5pm quoted by BNM on 4 January 2016 and 30 December 2016, the GBP declined by almost 14.2% against the RM. If this weakness persists over a lengthy period of time, it could have a material adverse impact on our Group’s financial condition and results of operations. For further details on the potential risks relating to the withdrawal of the United Kingdom from the EU, please refer to Section 5.3.1 of this Prospectus. Our Group recorded pro forma losses of RM 19.72 million and audited consolidated gains of RM33.87 million from exchange differences on the translation of foreign operations for the FYE 31 October 2015 and for the FYE 31 October 2016, respectively. For further information on the net foreign exchange gain and loss recognised by our Group for the FYE 31 October 2015 and for the FYE 31 October 2016, please refer to note 25 of the report on the compilation of pro forma consolidated financial information of Eco World International Berhad included in Section 14 of this Prospectus and note 27 of the audited consolidated financial statements of our Company for the FYE 31 October 2016. For further details on the impact of a shift in the foreign exchange rates of GBP and USD on our profits, please see the section on Foreign Currency Risk in the Accountants Report inclUded in Section 14 of this Prospectus. For a view of the historical exchange rates of GBP, AUD and USD against the RM, please refer to Sections 1.2 and 6.1 of the executive summary of the IMR Report.The IPO proceeds will be raised in RM. A substantial portion of the IPO proceeds will be utilised to finance the development costs of our current projects which are denominated in GBP or AUD, as well as to repay debt denominated in GBP, AUD and USD. As we do not currently hedge our foreign exchange rate risk, a strengthening of the GBP, AUD and USD against the RM before we convert the equity capital raised in RM to GBP, AUD or USD will have a negative impact on our working capital and results of operations. 5.1.11 Our Group’s existing property development portfolio has concentrated exposure to three development projects in London Our Group’s existing property development portfolio is currently subject to a relatively concentrated exposure to three residential-led mixed-use developments in London. Our property development projects in London account for roughly (i) 13.01 acres out of 14.19 acres (roughly 91.7%) of the total land area of all our property development projects; and (ii) RM11,920.5 million out of RM12,962.8 million (roughly 92.0%) of the total estimated GDV of all our property development projects. For further information of these developments, please refer to Sections 7.5.4 and 7.7 of this Prospectus. 5. RISK FACTORS (Cont’d) Property developments in general are high risk ventures with continuous construction, financing, operational and selling challenges, the possibility of changes to budgets, and prolonged exposure to market and economic conditions. Moreover, uncertain global economic conditions have created pressure on the macroeconomic climate in the United Kingdom. An economic slowdown in the United Kingdom or further adverse changes in the macroeconomic climate, for example, due to the results of the United Kingdom’s referendum on withdrawal from the EU which took place on 23 June 2016, could negatively affect the London property market with regards to sales volumes and/or property prices. A deterioration in any of these projects or in the London property market in general may have a material adverse effect on our Group’s business, financial condition, results of operations, cash flows and prospects. For further details on potential risks relating to the withdrawal of the United Kingdom from the EU, please refer to Section 5.3.1 of this Prospectus.
5.1.12 We are exposed to an increase in interest rates An increase in interest rates in any of the countries in which our Group operates may negatively impact the demand for our Group’s properties. Higher interest rates may make the properties more expensive and affect the ability of potential purchasers to secure financing, which could lead to a decrease in the demand for our properties. Additionally, our Group has entered into financing through bank borrowings at floating interest rates and may enter into additional financing with floating interest rates in the future Should there be any increase in such floating interest rates and should we be unable to obtain alternative facilities with more favourable interest terms, we will incur additional borrowing and financing costs, which will result in higher repayments required from us to our financiers. 5.1.13 Any inability to purchase development land suitable for our Group’s purposes and to purchase land at the right time may have an adverse impact on our Group’s future performance We derive profit principally from sales of properties by our Group. This profit depends on the completion of, and our Group’s ability to sell property developments. In order to maintain and grow our business in the future, we will need to replenish our landbank with land of sufficient size in desirable locations and at a commercially acceptable cost. Procurement of land to build new projects is essential for the future performance of our Group’s business. The acquisition of new development lands located at attractive geographical locations at the appropriate time and price are fundamental to our Group’s strategy. Increased demand for development lands from our competitors. such as other local, regional and overseas property developers and speculative land acquirers, may make it more difficult for our Group to acquire development lands and could potentially lead to an increase in the price of procuring development land. If our Group is unable to acquire strategically located and commercially viable sites or other development lands in line with our acquisition criteria, the number of new projects our Group is able to undertake may be adversely affected. This in turn could have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. 5. RISK FACTORS (Cont’d) 5.1.14 Our Group’s business and expansion plans are capital intensive and subject to our ability to raise financing Our Group’s ability to develop properties depends on continued capital expenditures, including the acquisition of land. To meet continued capital requirements, we will need to raise sufficient financing, whether through external debt financing, equity financing and/or internally generated cash flows. Although we believe that we have thus far maintained a good relationship with financial institutions, there can be no assurance that financing, either on a short-term or a long-term basis, will be made available to us, or if available, such financing will be obtained on terms favourable to our Group. For further details on our exposure to an increase in interest rates, please also refer to Section 5.1.12 of this Prospectus. If our Group is unable to secure the necessary financing or secure such financing on terms which are favourable to us, this could adversely affect the business, financial condition, results of operations and prospects of our Group. 5.1.15 Our Group’s substantial existing indebtedness (including bank borrowings) could have a significant impact on our Group’s business, financial condition and/or results of operations Our Group’s substantial existing indebtedness (including bank borrowings) could have a significant impact on our Group’s business, financial condition and/or results of operations by: (i) increasing our Group’s vulnerability to downturns in the real estate market and the economy generally;
(ii) exposing our Group, or increasing our exposure, to interest rate risk whereby a material increase in interest rates would increase borrowing and financing costs, which may in turn weaken our Group’s financial standing when seeking future financing to be secured for our projects;

(iii) requiring our Group to dedicate a substantial portion of cash flow to debt service thereby reducing the resources available for other purposes such as capital expenditures and/or dividend payments; (iv) subjecting our Group’s assets to security interests or creating liens or guarantees thereby restricting our Group’s freedom to deal with such assets as it deems fit; and
(v) placing our Group at a competitive disadvantage to competitors with lower levels of indebtedness.

The risks stated above would also apply to such additional indebtedness incurred by our Group. In addition, we may not be able to refinance our existing indebtedness or the terms of any refinancing may not be as favourable as the terms of our existing indebtedness. Our Group’s financing arrangements also contain certain restrictive covenants which may limit our Group’s operating and financial flexibility. Any breach of such covenants may give rise to a right by the financiers to terminate our existing financing arrangements and/or enforce any security granted in relation to the financing arrangements. These include failure to rectify any material breach in a primary construction agreement or to meet project completion timelines to the satisfaction of the financiers. For further details on our capitalisation and indebtedness, please refer to Section 13.6 of this Prospectus. 69 5. RISK FACTORS (Cont’d)

 

5.1.16 We may not be able to successfully implement our business strategies The successful implementation of our business strategies will entail actively identifying suitable acquisition opportunities and making such acquisitions, undertaking development on the land acquired, securing purchasers, raising funds in the capital and/or credit markets and cooperation from joint venture partners who invest with us, as well as contractors, professional consultants and other counterparties. Our ability to successfully implement our business strategies is also dependent on other factors, including but not limited to, the competition we face in our business, which may affect our ability to acquire and sell properties on commercially viable terms and our ability to hire and retain key employees. Our ability to expand into new markets is dependent on our ability to adapt our experience and expertise and to understand new environments. Although we are confident in our management’s ability to navigate in new markets and adapt our business strategies to new markets and/or economic conditions, we cannot assure you that we will be able to implement all or some of our business strategies successfully and the failure to do so may adversely affect our business, financial condition, results of operations and prospects. 5.1.17 The interests of EW Berhad and/or GuocoLand may not be aligned or may conflict with those of our Company or our other shareholders Under the EW Berhad Share Subscription Agreement and the GuocoLand Share Subscription Agreement, EW Berhad through EW Capital and GuocoLand through GLL EWI, will, upon the successful completion of our IPO, each own 27.0% of our enlarged issued and paid-Up share capital. We have entered into the Collaboration Agreement with EW Berhad under which EW Berhad has covenanted that it will not, amongst other things, engage in or carryon any property development or investments in countries other than Malaysia, except through our Company. However, no such collaboration agreement exists between us and GuocoLand and there may be potential conflicts of interest between us and GuocoLand as a result. For example, we, our subsidiaries, associates or joint ventures have and may, in the future have investment and/or development properties in jurisdictions where GuocoLand has a similar business presence. We cannot provide any assurance that GuocoLand’s interest will not be in conflict with the interests of our present and future property development projects, including in relation to the acquisition of sites and competition for buyers for the Group’s projects in the relevant markets. The investment by GuocoLand in our Company and the Shareholders’ Agreement do not preclude GuocoLand from directly competing with our Company, except if a potential investment is voted down by GuocoLand’s nominee director who is also on the Board of our Company and where GuocoLand has agreed not to undertake the potential investment in the next 12 months from the date of our Board’s decision. While GuocoLand would be required to comply with provisions regulating conflict of interests under the Listing Requirements, there can be no assurance that the interests of GuocoLand in its capacity as our shareholder will be aligned with and will not differ from or conflict with those of our Company or our other shareholders. 5. RISK FACTORS (Cont’d) Furthermore, under the Shareholder’s Agreement, EW Berhad, Tan Sri Liew and GuocoLand must come to a consensus on certain matters as set out in the Shareholders’ Agreement, which include, amongst other things, approval of any business plan and any budget of our Group, entry into any investment or project, merger, acquisition and joint venture or partnership or similar arrangement by our Group, declaration or payment of any dividends or other contribution by our Company and the appointment of development managers by any company within our Group in respect of future developments or projects. If the parties fail to come to a consensus in respect of the decision or approval, the matter will not be approved nor implemented, therefore delaying necessary action that may materially and adversely affect our Group’s business, financial condition, results of operations and prospects. Also, other than in situations where EW Berhad, Tan Sri Liew and/or GuocoLand must abstain from voting in accordance with the provisions of the Listing Requirements, the parties will collectively be able to influence the approval for any corporate proposal or transaction requiring a shareholders’ resolution under the Act which mayor may not be aligned with the interests of other shareholders. 5.1.18 Our Group may be affected by adverse developments or negative publicity affecting the “ECOWORLD” brand name Our Group is closely associated with the “ECOWORLD” brand name. We believe that “ECOWORLD” and its associated branding have garnered a good reputation thus far and we intend to use those marks in the construction, sale and marketing of our development projects. Under the Brand Licensing Agreement, our Company has been granted the non­exclusive, worldwide, royalty-free licence to use the “ECOWORLD” and “CREATING TOMORROW & BEYOND” marks including logos, brands and other features associated therewith by EW Berhad for our business operations. Such licence is granted for an indefinite term subject to termination in certain circumstances. For further details of the Brand Licensing Agreement as well as the termination events, please refer to Section 7.20 of this Prospectus. In accordance with the terms of the Brand Licensing Agreement, we have applied for registration of the aforesaid marks with the relevant authorities in the United Kingdom and Australia. As at the LPD, all of the marks are registered under the key areas of: (i) real estate and property development, construction and maintenance; (ii) real estate affairs, management and investment; (iii) advertising, marketing and promotional services relating to real property; and (iv) provisions of facilities and recreational areas. For further details, please refer to Annexure C of this Prospectus. Notwithstanding such registration, there is no assurance that our rights in those marks will not be infringed upon by any other third party in Malaysia, the United Kingdom, Australia or other foreign jurisdictions. Depending on whether our Company and/or EW Berhad are able to discover any such infringement and successfully enforce our legal rights in the jurisdictions where such infringements may occur, any misuse, degradation, adverse market developments and/or negative publicity relating to the “ECOWORLD” and “CREATING TOMORROW & BEYOND” marks and brand name may adversely affect our Group’s business, financial condition, results of operations and prospects. Both our Group and EW Berhad market property development projects under the “ECOWORLD” brand name and conduct business using the “ECOWORLD” trademark. Although our Group has the non-exclusive right to use such trademark, we have no control over how EW Berhad chooses to use such marks. Should the “ECOWORLD” mark suffer negative reputational or other harm as a result of action or inaction by EW Berhad, our business, financial condition, results of operations and prospects may be materially and adversely affected. 71 5. RISK FACTORS (Cont’d) In addition, our rights to use the “ECOWORLD” and “CREATING TOMORROW & BEYOND” marks including logos, brands and other features associated therewith under the Brand Licensing Agreement may be terminated by EW Berhad if we misuse or permit the misuse of any of the marks or do anything which damages the reputation of any of the marks, purport to effect any assignment of any of the rights granted to us under the Brand Licensing Agreement, or otherwise breach any of the provisions of the Brand Licensing Agreement. If EW Berhad terminates the Brand Licensing Agreement, we would no longer have the right to use the “ECOWORLD” name and our business, financial condition, results of operations and prospects may be materially and adversely affected. 5.1.19 Our Group is subject to risks inherent in investing in joint ventures and other entities which are not wholly-owned by us, including our joint venture with Ballymore Our Group holds and expects, in the future, to hold a significant portion of our property interests through interests and investments in entities that are not wholly­owned by us, such as joint ventures. Disputes may occur between our Group and our joint venture partners regarding the business and operations of such Joint ventures, which may not be resolved amicably. In addition, our joint venture partners and/or other investors may, amongst other things: (i) have economic or business interests or goals that are not aligned with our Group; (Ii) take actions contrary to our instructions, requests, policies or objectives; (iii) be unable or unwilling to fulfil their contractual obligations (for example, they may default in making payments during future capital calls or capital raising exercises); (iv) have financial difficulties;
(v) experience a decline in creditworthiness; or
(vi) have disputes with our Group as to the scope of its responsibilities and obligations.

Currently, each of our three property developments in London are held through EW­Ballymore Holding, our 75.0%-owned Joint venture with AIHL, a company within Ballymore. Such developments represent about 92.0% of the estimated GDV of all our current developments. Under the terms of the EW-Ballymore Shareholders’ Agreement, for certain reserved matters and super reserved matters, the consent of both parties must be obtained before action may be taken by EW-Ballymore Holding and its subsidiaries. If a deadlock occurs on a reserved matter that is not a super reserved matter, the status quo shall prevail and the matter in dispute shall not be implemented. If a deadlock occurs on a super reserved matter that cannot be resolved by the parties through negotiation, the EW-Ballymore Shareholders’ Agreement provides for the manner in which the parties are to resolve such deadlock that may result in the joint venture shareholder bidding the higher price per share (which shall not be lower than the price determined by experts appointed in accordance with the terms of the EW-Ballymore Shareholders’ Agreement) acquiring the shares of the other joint venture shareholder. For further details on the EW-Ballymore Shareholders’ Agreement, please refer to Section 7.22.2 of this Prospectus. 72 5. RISK FACTORS (Cont’d) Our Group may also, in the future, hold a portion of our property interests through interests and investments in entities over which we do not have majority control. If our Group does, in the future, hold a portion of our property interests through interests and investments in entities over which we do not have majority control, we cannot assure you that we will be able to influence the management, operation and performance of these entities, whether through our voting rights, contractually, in a manner which would be favourable to us, or at all. The occurrence of any of these events may materially and adversely affect the performance of the entities which are not wholly-owned by us, including the joint ventures in which our Group is involved, which in turn may materially and adversely affect the business, financial condition, results of operations and prospects of our Group. 5,1,20 Our Group’s due diligence may not identify all risks and liabilities in respect of an acquisition Prior to entering into an agreement to acquire any land site, either directly or through purchase or investment in a corporate entity, our Group performs due diligence on the proposed acquisition. In doing so, we would typically rely, in part, on third parties, such as solicitors and/or property valuers to conduct a significant portion of this due diligence, including providing legal reports on land title and property valuations. However, there can be no assurance that the due diligence examinations carried out by third parties on behalf of our Group in connection with any land sites that our Group may acquire will reveal all of the risks associated with that asset or the full extent of liability arising from such risks. Land sites that we acquire in the future may be subject to hidden material defects not apparent at the time of acquisition. In certain circumstances, our Group may only be abie to conduct a limited scope of due diligence exercise due to timing constraints in completing the proposed acquisition. Furthermore, due diligence does not ensure the future performance of the land site post-acquisition. To the extent we or third parties underestimate or fail to identify risks and liabilities associated with an acquisition, our Group may be subject to, amongst other things, the following risks: (i) defects in title;
(ii) environmental, structural or operational defects or liabilities requiring remediation and/or not covered by indemnities or insurance;

(iii) inability to obtain permits which enable us to use our assets as intended; (iv) existing structures or developments on the site having structural issues or not being in compliance with planning permissions and/or other consents; or
(v) acquiring assets that fail to perform in accordance with expectations.

Any of these consequences may have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. 5. RISK FACTORS (Cont’d) 5.1.21 The valuation of our property development projects is subject to uncertainty which could impact the actual market value of the projects The valuation of our projects is inherently subjective. As a result, valuations are sUbject to uncertainty. We have engaged independent registered valuers, namely, JLL and m3property, to value our Group’s current development projects in the United Kingdom and Australia, respectively. The valuation certificates set out in Section g of this Prospectus were made on the basis of certain forecasts and assumptions regarding the United Kingdom and Australian real estate markets which may not prove to be accurate in light of developments in the United Kingdom and Australian markets occurring after the date of such valuations. In particular, the valuations prepared by JLL in relation to our projects in the United Kingdom, as at 14 September 2016 were made using a greater degree of Judgement than usual due to the lack of comparable transactions following the United Kingdom national referendum on 23 June 2016 where a majority of voters in the United Kingdom voted for the United Kingdom to withdraw from the EU. For further details on potential risks relating to the withdrawal of the United Kingdom from the EU, please refer to Section 5.3.1 of this Prospectus. JLL and m3property have valued each of our Group’s projects on the basis set out in Section g of this Prospectus. The use of different valuation methodologies and assumptions would likely produce different valuation results. In addition, JLL and m3property have assessed construction costs in accordance with, amongst other things, cost plan reports prepared by construction consultants as well as published construction indices. These costs are based on current prices and future price forecasts and are therefore subject to changes in the market. The valuation assumes that all necessary planning permissions and other consents in relation to our Group’s projects have been obtained or will be received in due course. Prospective investors are advised to read the valuation certificates in their entirety. For the reasons stated above, there can be no assurance that the market values of our development projects as appraised by JLL and m3property reflect their actual market values or that such values will not change over time.
5.1.22 Significant unanticipated costs might arise in relation to our business Cost estimates are made in advance of commencing a project and are dependent upon assumptions, estimates and judgments which may ultimately prove to be inaccurate. Notwithstanding that we take reasonable steps to ensure that our risk management and financial and operational procedures, controls and systems are appropriate for our business, including entering into fixed fee contracts with our contractors where possible, there is no guarantee that significant unanticipated costs will not arise despite these measures. Cost overruns could arise during the course of development where we have not entered into fixed fee contracts with our contractors or professional consultants due to (i) errors and omissions; (ii) unforeseen technical and market conditions or increases in contractor rates or material costs; or (iii) inadequate contractual arrangements or tendering processes which do not provide for a final and known cost in advance. Should significant unanticipated costs arise, this could have a material adverse impact on the profits achieved in respect of the relevant project and on our Group’s business, financial condition, results of operations and prospects
5.1.23 Our Group is subject to risks in relation to our pre-sold properties If our Group pre-sells any properties prior to completion of construction, our Group may be held liable to cover the potential losses that the purchasers of such pre-sold properties may suffer if there is a failure or delay in the delivery of such pre-sold properties. 74 5. RISK FACTORS (Cont’d) Failure to complete a property development project on time may be attributed to factors such as delays in obtaining requisite licences, permits or approvals from government agencies or authorities, shortages of labour, adverse weather conditions, natural disasters, labour disputes, disputes with joint venture partners, disputes with contractors, accidents and adverse changes in government priorities and policies. If the delay in delivery extends beyond the contractually specified period (which varies depending on the property development project and ranges from five to seven years for our current property development projects), purchasers may also be entitled to rescind the sale and purchase agreement and claim a refund of monies paid. Our Group may also be subject to default by purchasers of such pre-sold properties in making payments for these properties. In such events, the business, financial conditions, results of operations and prospects of our Group may be adversely affected. 5.1.24 Occurrence of any force majeure events such as acts of God, war, adverse political developments and terrorist attacks or any events beyond our control may adversely and materially affect the business, financial condition, results of operations and prospects of our Group Force majeure events such as natural disasters are beyond the control of our Group and may adversely affect the economy, infrastructure and livelihood of the local population in the communities in which we operate. Consequently, our Group’s business and operations may be adversely affected. There can also be no assurance that any war, adverse political developments, terrorist attacks or other hostilities in any part of the world (potential, threatened or otherwise) will not, directly or indirectly, have an adverse effect on the business, financial condition, results of operations and prospects of our Group.
5.1.25 Our Group may be involved in legal and other proceedings from time to time As at the LPD, our Group is not engaged in any material litigation or arbitration proceedings which have or may have a material effect on our business operations or financial position, and there are no proceedings threatened or of any fact likely to give rise to any proceedings which may materially affect our business operations or financial position. However, our Group may from time to time be involved in disputes with various parties such as contractors, sUb-contractors, professional consultants, purchasers, directors, employees, joint venture partners and other parties involved in the development, sale and purchase of properties. These disputes may lead to legal and/or other proceedings, and may cause us to incur additional costs and delays in construction, completion and delivery of our properties. Such disputes, if they arise, may also occupy a significant amount of management’s time and attention In addition, our Group may, from time to time, be required to deal with issues or disputes in connection with regulatory bodies in the course of our operations which may result in our Group being subject to legal or administrative proceedings and unfavourable orders, directives or decrees that may result in financial losses and delay the construction or completion of our projects. There is no assurance that these disputes will be settled or settled on terms which are favourable or reasonable to our Group. If such disputes are not settled or are not settled on terms which are favourable or reasonable to our Group, the business, financial condition, results of operations and prospects of our Group may be adversely affected. 75 5. RISK FACTORS (Cont’d) 5.1.26 Our Group may suffer uninsured losses or suffer material losses in excess of insurance proceeds We maintain insurance policies covering our properties and business operations, in line with general market practice and legal requirements, where applicable, in the countries which we operate. For further details regarding our insurance coverage, please refer to Section 7.15 of this Prospectus. Nonetheless, our real estate assets could suffer physical damage caused by fire, natural disasters or other causes, resulting in losses which may not be fUlly compensated by insurance. In addition, certain types of risks, such as risk of war, terrorist acts and losses caused by the outbreak of contagious diseases, may be uninsurable or the cost of insurance may be prohibitive. There are also certain types of losses, such as from wars or acts of God, that are generally not insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could be required to pay compensation and/or suffer a loss in market value which could include a loss of the capital invested in the affected property as well as anticipated future revenue from that affected property. Our Group may also remain liable for any debt or other financial obligations related to that affected property, if any. There is no assurance that uninsured losses or losses in excess of insurance coverage will not occur in the future. Such an event would adversely affect the business, financial condition, results of operations and prospects of our Group. 5.1.27 Environmental laws, regulations and standards may expose our Group to the risk of substantial costs and liabilities Laws and regulations, which may be amended from time to time, may impose environmental liabilities associated with development land and projects, on our Group. These may be in relation to any soil and/or other contamination that may have arisen during or prior to our Group’s acquisition of such properties. Regardless of whether our Group originally caused the contamination or other environmental hazard, such liabilities may result in significant investigation, removal, clean-up or remediation costs and could prohibit or severely restrict development of our projects in certain locations and/or cause the proposed development to become financially unviable. Additionally, there may be an impact on the reputation of our Group which could, amongst other things, harm our ability to obtain financing for future projects. As is normally the case for property developers, these liabilities would typically not be covered by our insurance. In addition, environmental liabilities could adversely affect our ability to sell or redevelop a property, or to secure financing using the property as security. Further, it may, in certain circumstances such as the release of certain materials such as asbestos into the air or water, form the basis for liability to third persons for personal injury or other damages. Our land bank may include properties historically used for commercial, industrial and/or manufacturing uses. For example, London City Island Phase 2 has a history of industrial use that includes use for food production and use as a timber yard, an iron foundry and an oil mill, Embassy Gardens Phase 2 has a history of industrial use and then as warehousing and distribution depots, and Wardian London has a history of use as a dockyard, with some associated railway and warehousing use. Such properties are more likely to contain, or may have contained, storage tanks for the storage of hazardous or toxic substances. 5. RISK FACTORS (Cont’d) Additionally, environmental laws and regulations may limit the development of, and impose liability for the disturbance of, lands located at or close to wetlands or the habitats of threatened or endangered species. Historic investigations undertaken had identified several contamination hot spots with elevated concentration of hydrocarbons at London City Island Phase 2, the presence of contaminants in the soil at Embassy Gardens Phase 2 and the presence of hydrocarbons and hazardous substances at Wardian London. The remediation works for such identified contamination issues at London City Island Phase 2 and Wardian London have been completed to the satisfaction of the relevant regulatory authorities prior to the acquisition of such properties by our Group while for the Embassy Gardens Phase 2 project, we have completed the remediation works in accordance with the remediation programme approved by the relevant regulatory authority. Save for the foregoing, our Group is currently not aware of any material environmental liabilities with respect to the sites of our projects. However, in the future, we may be exposed to environmental liabilities or increased costs or limitations on our use or disposal of properties as a result of environmental laws and regulations. This may in turn have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. There can be no guarantee that all costs and risks regarding compliance with environmental laws and regulations can be identified. There can also be no assurance that any site will at all times comply with all applicable environmental laws, regulations and permit requirements. New and more stringent environmental laws, regulations and permit requirements or stricter interpretations of current laws or regulations could impose substantial additional costs on our operations. Compliance with current environmental requirements does not ensure that our Group will not be required to incur additional unforeseen environmental expenditures in the future. Moreover, failure to comply with such requirements could have a material adverse impact on our Group, including penalties, onerous remediation obligations or suspension of development work on our properties. 5.2 RISKS RELATING TO OUR INDUSTRY 5.2.1 The property development business is highly competitive Our Group’s business faces competition from both international and local property developers with respect to factors such as location, facilities and supporting infrastructure, services and pricing. Competition between property developers may result in increased costs for land acquisition, more difficulty in successfully bidding for property projects via tenders, oversupply of new properties and a slowdown in the approval process for new property developments by the relevant government authorities as well as lower selling prices. Therefore, strong competition with other property developers may adversely affect our Group’s business. Further, our Group’s strategies may not be effective in competing successfully against our existing or potential competitors or we may face increased competition with respect to our activities. Any of these events may have an adverse effect on the business, financial condition, results of operations and prospects of our Group. 5. RISK FACTORS (Cont’d) 5.2.2 Property development is subject to the risk of construction defects, which may give rise to contractual or other liabilities and reputational damage Construction defects may occur on our development projects and may arise some time after completion of that particular project. Our Group seeks to obtain warranty, guarantee or indemnity protection in our contracts with designers, engineers and contractors, and may have arrangements with insurance providers to insure against such risks. However, we may not be able to obtain adequate protection or the protection may not cover all risks and significant liabilities may not be identified or may only come to light after the expiry of warranty or indemnity periods. Any claims relating to defects arising on our Group’s property developments may give rise to contractual or other liabilities. Unexpected levels of expenditure attributable to defects arising on a project may have a material adverse impact on the levels of return generated from a particular project. In addition, severe or widespread incidence of defects giving rise to unexpected levels of expenditure on a project could, to the extent that insurance or legal redress against contractors and/or sub-contractors does not provide adequate compensation, have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. Furthermore, widespread defects could generate significant adverse pUblicity and have a negative impact on our Group’s reputation and our Group’s ability to sell properties and acquire new land, which in turn would have a material adverse impact on our Group’s business, financial condition, results of operations and prospects. 5.2.3 Our Group may be affected by shortages and/or fluctuations in the costs of construction materials, labour and equipment Contractors engaged by our Group or representatives (such as the development manager) will supply the construction materials, labour and equipment used to develop our projects as part of their obligations under their contracts with our Group. Contractors may be sUbject to supply risks related to the availability and cost of materials, labour and equipment. if we have entered into fixed fee contracts with our contractors, fluctuations in the prices of the various construction materials may result in our contractors experiencing financial difficulties. This may affect their ability to carry out construction work, thus delaying the completion of development projects beyond the deadline for completion stipulated in the relevant tender conditions and resulting in additional costs to and/or penalties payable by our Group. Where we have not entered into fixed fee contracts with our contractors and instead directly enter into contracts with sub-contractors based on the construction schedule, any increase in the prices of various construction materials and the costs of leasing construction equipment from the commencement of construction to the time we place the orders with the sub-contractors may result in an increase in our project costs. If there is any material increase in the costs of construction materials, equipment and labour and we are unable to secure alternative supply at costs acceptable to us or pass such additional costs to our customers, or renegotiate improved terms with suppliers and contractors, the operating costs of our projects may increase and hence, our margins from such projects may be reduced. Consequently, our profitability and financial performance will be adversely affected. In addition, the construction of our property projects requires a relatively large number of skilled and unskilled labour. Increased costs or shortages of skilled or unskilled labour could cause increases in construction costs and construction delays. 78 5. RISK FACTORS (Cont’d)
5.2.4 Our Group relies on contractors and sub-contractors to construct our projects Our Group engages or will engage third-party contractors and sub-contractors to provide various services in connection with our proJects, including construction, piling and foundation, bUilding and property fitting-out and landscaping work, alterations and additions, interior decoration and installation of air-conditioning units and lifts. There is no assurance that the services rendered by such third-party contractors and sub­contractors will be satisfactory. By relying on contractors and sub-contractors, we become subject to a number of risks relating to these entities, such as sub-standard quality of performance, varied work ethics, potential performance delays, construction defects, shortage of workers, failure to obtain the relevant permits and/or approvals for the provision of their services, and financial or other difficulties. These risks, should they occur, would have a detrimental effect on our projects, and may affect the ability to complete the construction phases of our projects on time and within bUdget resulting in additional costs to and/or penalties payable by our Group. 5.2.5 The construction of property development projects involves health and safety risks The property development industry poses certain health and safety risks. Any significant health and safety incident at any of our projects or general deterioration in our standards could put our employees, contractors, sub-contractors and/or the general public at risk as well as lead to significant liabilities and/or damage to our reputation. As operational and occupational safety, health and safety regulatory requirements are pivotal to successfully bringing a project to completion, health and safety performance is critical to the success of all areas of our Group’s business. Any failure in health and safety performance, including any delay in responding to changes in health and safety regulations, may result in penalties for non-compliance with the relevant regulatory requirements. Moreover, any failure which results in a major or significant health and safety incident may be costly to us, in terms of potential liabilities such as legal injunctions incurred as a result. Furthermore, such a failure could generate significant adverse publicity and have a negative impact on our reputation and our ability to sell our property projects. Any of the foregoing may have a material adverse impact on our Group’s business, financial condition, results of operations and prospects.

5.3 RISKS RELATING TO THE COUNTRIES IN WHICH WE OPERATE 5.3.1 The results of the United Kingdom;s referendum on withdrawal from the EU may have a negative effect on global economic conditions, financial markets, the London property market and our business The result of the Brexit vote is not legally binding and the terms of any withdrawal are subject to a negotiation period that could last for a number of years after the government of the United Kingdom formally initiates a withdrawal process. Nevertheless, the results of the referendum have created significant uncertainty about the future relationship between the United Kingdom and the EU, including the laws and regulations that will apply as the United Kingdom determines which EU laws to replace or replicate in the event of a withdrawal. These developments, or the perception that any of them could occur, may continue to have a material adverse effect on global economic conditions and the stability of global financial markets and may also significantly reduce global liquidity. Furthermore, the British government’s plan for leaving the EU was thrown into further uncertainty after the United Kingdom’s high court ruled on 3 November 2016 that the Parliament must give its approval before the Brexit process can begin. The House of Lords is currently debating the

5. RISK FACTORS (Cont’d) Article 50 Bill which will allow the United Kingdom to begin withdrawal talks under Article 50 of the EU treaties, with the current United Kingdom government having pledged to trigger Article 50 by the end of March 2017. There may also be an impact on the London property market with respect to, among others, demand for properties in London, a potential decrease in property prices and the possibility that mortgage financing available to customers of our properties in London may be less readily available or available only on less attractive terms. Any of the above-mentioned factors could depress economic activity or may result in potentially lower demand and correspondingly lower prices for our properties in London, which could have a material adverse effect on our business, financial condition and results of operations. Until the terms and timing of the United Kingdom’s withdrawal from the EU are clearer, it is not possible to determine exactly the impact that, the United Kingdom’s withdrawal from the EU and/or any related matters may have on our business, financial condition and results of operations. 5.3.2 Our Group is subject to government regulation in the countries in which we operate The property development industry in the countries in which we operate is subject to significant government regulation, which may result in a reduction in our income and/or an increase in our costs. In addition, regulatory approvals may be required for, amongst other things, land and title acquisition, development planning and design and construction. Such approvals may stipulate, amongst other things, maximum periods for the commencement of development of the land. Some of these countries may also restrict the level, percentage and manner of foreign ownership and investment in real estate or may impose additional costs on foreigners seeking to invest in, or own properties. In particular, in Australia, there are rules requiring foreign entities to obtain approval from the Treasurer of the Australian Government by making an application to the Foreign Investment Review Board prior to acquiring an interest in Australian real estate (with some limited exceptions). From 1 December 2015 new foreign investment application fees were introduced. The fees range from AUD5,000 for property valued at AUD1 ,000,000 or less to AUD10,000 for property valued over AUD1,000,000 (with incremental fee increase per additional AUD1,000,000 in property value). Property developers may also apply for new dwelling exemption certificates to sell fifty or more residences in a development to foreign investors (with the limitation that a single foreign investor cannot purchase more than AUD3,000,000 worth of property in any development without obtaining further approval). There are also new criminal penalties for a foreign person who acquires property without approval. Interpretation and application of such regulations are often sUbject to the relevant regulatory authorities’ discretion which can result in inconsistent decisions from the same authority. The inconsistent decision making process may result in changes to the current rules or the imposition of additional conditions that we are required to comply with which may result in us incurring additional cost, time and resources. Also, if we are unable to comply with such new rules or conditions imposed on us, our ability to complete a development project as well as demand for our projects can be affected and that may potentially be detrimental to our Group. Within the United Kingdom there are no restrictions on foreign ownership or occupation of real estate but our Group will need to comply with a legislative framework in development, taxation, acquisition of real estate and the occupation and management of the real estate to enable our Group to acquire, operate and maintain this asset class. 80 5. RISK FACTORS (Cont’d) If our Group fails to obtain the relevant approvals or comply with applicable laws and regulations in the countries in which our Group operates, we may, amongst other things, be subject to penalties, have our licences or approvals revoked, or lose our right to develop or manage our properties and businesses, any or all of which could have an adverse impact on our business, financial condition, results of operations and prospects. Governments of the countries in which our Group operates may also seek to promote a stable and sustainable real estate market by monitoring the real estate market and adopting measures as and when they deem necessary. These governments may introduce new policies or amend or abolish existing policies at any time and these policies may have retroactive effect. These changes may have a material and adverse impact on the overall performance of the real estate markets in which our Group operates and thus affect our Group’s business, financial condition, results of operations and prospects. In addition, in the countries in which our Group operates, in order to develop and complete a property development project, a developer must obtain various planning permissions, consents, permits, licences, certificates and other approvals from the relevant administrative authorities at various stages of the real estate development process, including land use rights certificates, planning permits, and certificates or confirmation of completion and acceptance. Each approval is dependent on the satisfaction of certain conditions. Problems may be encountered in obtaining such government approvals or in fulfilling the conditions required for obtaining the approvals, especially as new laws, regulations or policies may come into effect from time to time with respect to the real estate development industry in general or particular process with respect to the granting of approvals. Additionally, delays to the expected timeframe for receipt of planning permissions or consents for a site may cause delays to the completion of the development of projects. Planning policies can also place restrictions on access to new land and on how land is developed. If our Group fails to obtain the relevant approvals or the relevant planning permissions or consents on a timely basis, or fulfil the conditions of those approvals and consents for our projects, these developments may not proceed as scheduled, and our Group’s business, financial condition, results of operations and prospects may be adversely affected. Additionally, Malaysia continues to maintain liberal exchange administration rules which are mainly prudent measures to support the overall macroeconomic objective of maintaining monetary and financial stability. However, our business and operations are predominantly based outside Malaysia and any remittance of capital abroad will require the approval of BNM. There is no assurance that we will be successful with our application for such approval, when required. If any of our applications to BNM for the remittance of capital abroad cannot be obtained, our business, financial condition and results of operations will be adversely affected. 5.3.3 Our Group may be subject to liabilities as a result of the original owners of the land on which our property development projects are sited failing to comply with their planning obligations Our property development projects in the United Kingdom comprising London City Island Phase 2, Embassy Gardens Phase 2, and Wardian London are subject to planning permissions which are granted by the relevant LPA under Section 57(1) Town and Country Planning Act 1990 (“TePA”). The planning permissions are granted in respect of the entire project sites of London City Island, Embassy Gardens and Wardian London, within which the areas acquired and/or to be developed by us are located. The planning permissions are granted subject to the planning legal agreements (also known as section 106 agreements) (“Section 106 Agreements”), which are private agreements between the relevant LPA and persons who have an interest in the land (for instance, freeholders, leaseholders and mortgagees) in the project sites as of the date of such agreements. 5. RISK FACTORS (Cont’d) The planning obligations contained therein are enforceable in respect of (i) the person entering into the obligation; and (ii) any person who derives title from the land. As the Section 106 Agreements are binding on the parties and their successors in title for the entire project sites, some of the planning obligations that are applicable to the development projects (including outside of our development areas) of the original owners of the land may be enforceable against us by the LPA. Whilst we have agreed with the original owners of the land on the allocation of specific obligations that are applicable to our respective development projects, if the original owners of the land fail to fulfil their planning obligations and the relevant LPA enforces such obligations against our Group, and we are unable to successfully recover our losses from the original owners of the land, our Group’s business, financial condition, results of operations and prospects may be adversely affected.
5.3.4 Our land sites may be subject to compulsory acquisition Our Group’s land sites may be compulsorily acquired by the respective governments of the countries in which they are located for, amongst other things, public use or due to public interest. In the event our Group’s land sites are compulsorily acquired, and the NBV of the land site to be compulsorily acquired is greater than the compensation paid to our Group in respect of the acquired land, the income of our Group may be adversely affected. Accordingly, our Group’s business, financial condition, results of operations and prospects could be adversely affected.
5.3.5 Future changes in tax legislation may adversely affect our Group Any change (including a change in interpretation) in tax legislation, including the imposition of new taxes or increases in tax rates, or any change in the tax treatment of assets or liabilities held by our Group may have an adverse impact on our Group’s business, financial condition, results of operations and prospects. In particular, an increase in the rates of stamp duty in the United Kingdom and Australia could have an adverse impact on the price at which potential land sites can be acquired, and therefore increase in property values and prices. On 21 June 2016, the New South Wales State Government announced an amendment to the Land Tax Act 1956 to include a land tax surcharge which is payable in addition to the already payable land tax on residential properties which are owned by foreign persons (including foreign corporations). Section 5A of the Land Tax Act 1956 states that the land tax surcharge applies from 1 January 2017 and will apply to all properties (both already held and newly acquired).
5.4 RISKS RELATING TO OUR SECURITIES 5.4.1 Our Securities may not be a suitable investment for all investors Each prospective investor in our Securities must determine the suitability of that investment in light of their own circumstances. In particular, each prospective investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of our Securities, our Group, the merits and risks of investing in our Securities and the information contained in this Prospectus;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in our Securities and the effect our Securities will have on its overall investment portfolio;

 

 

Comments are closed