Business Overview

OUR BUSINESS MODEL OUR BUSINESS MODEL Our business model is depicted as follows:

PRINCIPAL ACTIVITIES We are principally involved in the manufactUling, and trading of biomass materials and value-added products focusing On: (i) Oil palm EFB fibre and value-added products; and
(ii) Coconut fibre and value-added products.

We are also a manufacturer and distributor of our own brands of mattresses and related products. 6,2.1 Biomass Materials and Value-Added Products Our core competency is in the manufacturing and trading of biomass materials and value-added products through our subsidiary companies, HK Fibre, HK Kitaran and HK Palm Fibre. We are able to produce large quantities of oil palm EFB fibre of up to 8,372 mt per month, which are not only long, clean and fine, but also in uniformity through our self-designed and installed custom-built production lines. 6. BUSINESS OVERVIEW (Co/li’d) The biomass materials and value-added products that we cun-entIy produce comprise the following:
Oil Palm EFB Fibre(‘)
Coconut Fibre
Coconut Peat(2)
Length: >5Omm Moisture content: ~15% Impurity: <3% Oil content: <3% Quantity: Ix40 HC (17­20mt)
Length: >50mm Moisture content: <15% Impurity: <2% Quantity: Ix40 He (17­18mt)
Weight: 8-10 kg per pack Moisture: < 30%
Size: 7 em diameter Shape: Cylindrical Length: 50 mm to 300 mm Moisture: <12% Ash content <3.79%
• Mattress
• Briquette
• Geotextile
• Paper pulp
• Landscaping
• Horticulture
• Coconut fibre sheet
• Mattress ~ Geotextile ~ Paper pulp
• Landscaping
• Horticulture

Alternative to peat moss • Fertigation
• Soil conditioning

Alternative to firewood and charcoal • Industrial boiler
• Furnace
• Kiln
• Residential and commercial steam generation and healing purpose

 

6. BUSINESS OVER=–V–=I=E_W~(C:….:o…:..::ll.::….t’:..:..t.d),—– _
(ffu~ss~atel”jalsa~.d ••• ..•. ‘ “ile~Added.i>tbdud~/.;

Coconut Fibre ~~ Thickness: Mattress
• Mattress fibre sheet: 8 mm·IOmm • Needle punched fibre sheet: 20 mm Can be customised <lccording to customers’ requirements Notes: (I) The industry Jpecificmion MS 1408. 1997(P) for oil palm £FB fibre issued by the Department of Slandards Malaysia, whereby compliance is on a \’o/rmlary basis. prescribes thefol/owing:
(a) MoislUre content: ~ /5%
(b) Impurity: ~ /5%
(c) Oil content: :s 3%

 

(2) Coconut peal is a by-product producedfi-orn the manufacture ofcocol1urfibre,

Our biomass materials and value-added products contributed to approximately 73.43% of our Group’s total revenue for the FYE 31 December 2013, of which 58.79% is contributed by our principal product, i.e. oil palm EFB fibre, while the remaining balance of 14.64% is contributed by other biomass materials and value-added products such as coconut fibre, coconut peat, coconut fibre sheet and Briquette. 6.2.2 Mattresses and Related Products Pursuant to the Fibre Star Reorganisation as detailed in Section 5.4.2 of this Prospectus, Fibre Star commenced manufacturing mattresses and related products under the brands of ‘Fibre Star@’ and ‘Xiong Mao®’ on 16 June 2012. For the FYE 31 December 2013, revenue from the mattresses and related products division accounted for approximately 26.57% of our Group’s total revenue. We offer a wide range of mattress in different sizes <lnd dimensions suited towards our customers’ preference under the brand of ‘Fibre Star®’. We also produce related products such as pillow, bolster, cushion, cushion cover and mattress protector which are marketed under the brand of ‘Fibre Star@’ and ‘Xiong Mao@’, as well as divan and headboard to complement our ‘Fibre Star@’ mattresses series. Currently, we distribute all our fibre and other mattresses and related products to furniture retailers in Malaysia, We are also an OEM of fibre mattress for several local brands. The principal types and :’!eries of mattresses which are produced by our Group and marketed under the brand of ‘Fibre Star®’ comprise the following: TypeofMattresses Coconut fibre mattress (Height) Series (i) Romance fibre mattres:’! (7 “)
(ii) Palmira coconut fibre mattress with pillow top (9 “)

(iii) Loiusa Fibre mattress with plu:’! top (7 ”) (iv) Dream coconut fibre mattress with pillow top (8 “)
(v) Tlu”ee foldable mattress (3″J

6. BUSINESS OVERVIEW (Crmt'(l) fXm~e{6J~tNl’:rtti!¢~~~C~’)~ Pocket spring mattress (Height)  BOImel spring mattress (Height)  Rebond mattress (Height)  Hotel mattress (Length x height, spring type, fabric type)
/.). i>·/’.···..·..
(i) Audra pocket spring with latex and box top mattress (13 “)
(ii) Gene pocket spring with memory foam and latex mattress with euro top (13 “)

(iii) Sapphire pocket spring mattress with pillow top (10”) (iv) Delfina 2000 latex pocket spring mattress with pillow top (12 “)
(i) Ful1rest spring mattress (8 “)
(ii) Hugo spring mattress with plus top (10″)

(iii) Caterina spring mattress (10 ‘J (iv) Scorpio spring mattress with pillow top (8 ‘J
(v) Andria spring mattress with plus top (12″)
(i) Rebond mattress (8″)
(ii) Rebond mattress QT-JG (8″)

(iii) Rebond mattress QT (8”) (i) Fibre Star EG 1 (75 “x9 “, 2.4 mm supreme spring coil with 5 turns inner spring, damask)
(ii) Fibre Star EO 3 (75 “x10 “, 2.4 mm elite spring coil with 5 turns free inner spring, knitted)

(iii) Fibre Star TR (75 “x10″, 2.4 mm supreme spring coil with 5 turns inner spring, damask)
6. BUSINESS OVERVIEW (Cont’d)
Note: Hotel mattresses are coconut fibre mal/res.\’, pocket spring mattress, bonne! spring matlress or rebUild matlress supplied to hotels. 6. BUSINESS OVERVIEW (Cont’d) The principal types and series of mattresses’ related products which are offered by our Group and marketed under the brands of ‘Fibre Star®’ and ‘Xiong Mao®’ comprise the following: /Br;tj’iiL(‘d<. Pillow / Bolster (i) Fibre Star pillow and bolster

Fibre Star® (ii) Savina pillow and bolster
Fibre Star® (iii) Xiong Mao pillow and bolster Xiong Mao® (iv) XM polyester pi1low

Xiong Mao® (v) Jungle Hole Pillow
Fibre Star® Cushion/Cushion cover (i) Contour cushion with cover

Xiong Mao® (ii) Square cushion GK
Xiong Mao® (iii) Square cushion JKR Xiong Mao®

Cushion Cover 6. BUSINESS OVERVIEW (Cant’d) PRINCIPAL MARKETS Our principal markets comprise the local and China markets. Our revenue contribution by geographical location for the past three (3) FYE 31 December 2011 to 2013 is as follows:
Local:  •  End product users (ll  4,166  13.14  7,511  11.93  9,936  13.47  Intennedimies (2)  8,790  27.73  15768  25.04  22,967  3U5  12,956  40.87  23.279  36.97  32,903  44.62  Exports:  •  China _1ntennediaries (3)  18,746  59.13  39,590  62.88  40,719  55.22  Singapore -Intermediaries  96  0.15  118  0.16  18,746  59.13  39,686  63.03  40,837  55.38  Total Revenue  31702  100.00  62,965  100.00  73,740  100.00
Notes: (I) End product users re.fer to the.fOllowing:
(i) Users ofcoconut peat such asfarmers: and
(ii) Companies lhal are involved in mamlj(lcturing ofproducts with our fibres. stich as mattress manufacturers, and customer’s that purchase mattresses and related products during our occasional. one-offsale event such as warehouse sales, etc.

 

(2) Intermediaries refer to companies that are involved in trading of aliI’ coconut and oil palm EFB .(lbre,
i.e. trading hO!lses.
(3) Our oil palm EFB(lbres were shipped direcrly to China via Chilla intermediaries.

Further details of our distribution network are set out in Section 6.6.2 of this Prospectus. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANI( 6. BUSINESS OVERVIEW (Collt’d) 6.4 PRODUCTION PROCESS Our production process, which are carried out in our Plant 1, Plant 2, Plant 3, Plant 5 and Plant 6, involves a series of thorough and controlled procedures. Stringent quality checks on all our products are conducted at every stage of the production process. The sub-sections below illustrate the production process for our principal products. 6.4.1 Biomass Materials Production Flow OUf biomass materials production can be divided into three (3) stages: material handling, production process and packing system. (i) Material Handling Receiving and weighing biomass wastes ~
Unloading biomass wastes ~
Removing foreign materials and impurities from the biomass wastes ~
Transferring biomass wastes to storage facilities Material handling is the initial stage of our production process. Upon recelvmg biomass wastes, such as coconut husks and pressed oil palm EFBs from our suppliers, the biomass wastes are weighed to ensure that the incoming volume is accurate. The oil palm EFB biomass wastes that we receive from our suppliers have been pressed by our suppliers to facilitate our production process. The biomass wastes are then unloaded and visually inspected to remove the presence of any foreign materials or impurities. Thereafter, the biomass wastes are transferred to our storage facilities before being transfened for subsequent processing as depicted in our production process as sci out in Section 6.4.1 (ii) of this Prospectus. 6.  BUSINESS OVERVIEW (Collt’d)  (ii)  Production Process  -­~–~~~~——–~——–­–­……… /” Unpressed oil palm ‘ .. i EFB transferred to :\-0.( \, boiler (1) ./, ‘ –­——-,_..” ……_——–­- Transferring biomass wastes from storage facilities to conveyor ‘V  Dc.fiberising biomass wastes in hammer mill  , ;,————–.. , ,//……..~hort oil palm EFE …………” ‘.l fibres transfcncd \ I for Briquette k­\ production or to /, / \ …._——~:~~~~~:_——-“”  ~ Filtering fibres in sifter ~  _1————–­” -/…….. ……..\. Fine particle of ( coconut fibre sold k-­, ‘ ‘……… as coconut peat ..// …. …… —————–­ Drying of1ibres in dlyer ~ Inspection  ——————-/,…” .., ” Wet–~1 ” sen. ~~~~~~~–­<: –­——­ ,,,,, ~~ … long fibres \ : t to dryer ” , w __••_.-,–‘,.. –~—–~-~–~  ~
Dried long fibres transferred to packing system Noles:  (/)  Boiler is used lor power generation lor our production process through unpressed oil palm EFB or rejected short oil palm EFB fibre.  incineration 0/  (2)  Currently, approximately 60% 01 our short oil palm EFB fibres are used loBriquelle and the remaining 40%forpower generation through the boiler.  r production 0/
The operators transfer the biomass wastes from the storage facilities to the production area. While the biomass wastes are shovelled onto the conveyor, the operators will sort the biomass wastes for unpressed oil palm EFB, if any, which are sent to the boiler for power generation through incineration. The rest of the biomass wastes are led to the hammer mill by the conveyor to be dc-fiberised. The de-fiberised biomass wastes are then transferred 10 the sifter, a machine that filters out short fibres. The short oil palm EFB fibres are transferred to storage facilities prior to being used primarily for the production of Briquette, and tbe remaining for power generation through the boiler (2). Meanwhile, the fine particles of coconut fibre::; from the sifter are transferred to storage facilities prior to being packed and sold as coconut peat to our customers. The rest of the long fibres are sent to the subsequent drying process. The long fibres are dried in the dryer. which allows us to control the temperature to ensure that the fibres are uniformly dried. Subsequently, the long fibres are inspected on its mOIsture content, whereby rejected wet fibres are sent to the dryer for re-drying. The dried long fibres are then transferred to the subsequent packing stage as depicted in Section 6.4.1 (iii) of this Prospectus. 60

 

6. BUSINESS OVERVIEW (CoIlI’d) (iii) Packing System Transferring dried long fibres to conveyor ‘It’ Packing fibres into bales in the auto packer ‘¥’
Weighing and labelling fibre bales ‘¥’
Transferring fibre bales to warehouse r————–!…—————1 Y’  V­ EFB palm fibre  Coconut fibre  bales  bales
\'” W Final inspection
‘¥ Loading fibre bales onto cont<.liners for delivery to cu~tomers t Coconut fibre sheet production Packing system is the final stage of our coconut or EFB palm fibre production process. The dried long fibres are transfened to the conveyor before being packed into bales in the auto packer. Subsequent to the packing process, the fibre bales are weighed and labelled. Thereafter, the fibre bales, comprising both EFB palm fibre bales and coconut fibre bales, are transfened to our warehouse for storage before delivery to customers or for use in our coconUf fibre sheet production as depicted in Section 6.4.2 of this Prospectus. The coconut fibre bales are primarily used for our coconut fibre sheet production, and the remaining sold to our customers. The EFB palm fibre bales and those remaining coconut fibre bales will go through a final inspection for correct weightage before loading onto containers for delivery to our customers. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 6. BUSINESS OVERVIEW (Colft’d) 6.4.2 Coconut Fibre Sheet Production Process Receiving coconut fibre bale from warehou~e y Dismantling coconuttibre bale k
,, —————————————-,11 “‘ifII J Compres~ing coconut fibre inlo fibre mat in sheeting room y
Spraying chemical and latex onto coconut fibre mat “‘if Drying coconut fibre mat in -(————————————-,tunnel drier room y II I I I I Ir IIII ~~~.—-~—–~~~, : p” …… t , Sent to tunnel ‘,:• ~l\ t-‘ , , 71, drier room I: Compressing coconut tibrc mats into sheet y Cutting coconut fibre sheet …, ~,’ ‘~::::.-..—….::.~:..~:~!
‘V I ,;,… ….., : ” Recycled as \ : In~pection and/or trimming ——:.—-~ raw materials L .!7′, J , J …… ~’ ‘~,,—–~-~-~~~~’~ Transferring coconut fibre sheet to storage faci Iities beforc deli very The process begins with receiving coconut fibre bale from our warehouse, which is then dismantled into loose fibre. The coconut fibre is then compressed into a thin layer of mat in the sheeting room. A certain mixture of chemical and latex are sprayed onto the coconut fibre mat as a fOIDI of adhesive to make the fibre mat more compact. The fibre mat is then sent to the tunnel drier room for drying. Subsequently, multiple pieces of coconut fibre mats are assembled together and compressed into a thicker sheet by a compressor machine. Thereafter, the coconut fibre sheet is cut into specific width, length and height according to our specifications or customers’ preferences. The discarded edges of the cut coconut fibre sheet are recycled as raw materials for our coconut fibre sheet production. The coconut fibre sheet is then inspeeted for its moisture content, density, thickness and size. Any defects detected during the inspection process would either be: (a) Sent to the tunnel drier room for re-drying if the coconut fibre sheet does not meet the required moisture content; or
(b) Recycled as raw materials if the coconut fibre sheet does not meet the density and/or thickness specifications, which is generally less than 1% of our coconut fibre sheet production. The defective coconut fibre sheet are sent for recycling as raw materials as and when it occurs, whereby the recycled fibres will be mixed together with new fibres from our warehouse. Thus, there is no limit to the number of times the coconut fibre sheet can be recycled as raw materials; or
(c) Trimmed all around if the coconut fibre sheet does not meet the size specifications, to ensure greater accuracy to the size of the coconut fibre sheet.

After inspection, the coconut fibre sheet is sellt (0 our storage facility before delivery to our customers.
6. BUSINESS OVERVIEW (Conl’d)

 

6.4.3 FilJre Mattress Production Process Receiving orders from production plmming department ~
Delivering raw materials including coconut fibre sheet to production floor ~
Assembling sponge, coconut fibre sheet and springs
-.¥’
Spraying glue to join raw materials together {t
Sewing patterns onto the mattress covering t Sewing the mattress covering over ..r(..i oined ra w materials ~ Inspection ~-­{­Packing and storing before delivery to customers
Our fibre mattress production begins with a planning schedule provided by the production planning department. The schedule is planned according to sales orders from our customers. The planning schedule is important because it helps to detennine the amount of raw materials needed for our production and also the number of mattresses to produce so as to avoid over stocking. From the planning schedule, the slore department will deliver the raw materials, including our manufactured coconut fibre sheet, to the production floor. Firstly, the sponge, coconui fibre sheet and springs are assembled together. They are then joined together through the glue spraying process. Next, the covering for the mattress is produced with special patterns requested by our customers or our in-house designs sewn onto fabrics. Subsequently, the mattress covering are sewn over the joined materials to produce a mattress. Inspection is then canied out to ensure the overall cleanliness of the mattress and to detect any sewing defect, whereby any defects are sent for re-sewing. Once the inspection is completed, the mattress is packed and stored in our storage facility before delivery to our customers.
6. BUSINESS OVERVIEW (COllt’r1) 6.4.4 Briquette Production Process Receiving short fibre t Drying short fibre at dryer -< ~ Inspection ~ Crushing fibre into small particles ~ Compacting crushed fibre into Briquette t Inspection ~ Packing and storing before delivery to customers
The production process begins after receiving short fibre from our biomass materials production process as set out in Section 6.4. I (ii) of this Prospectus. The short fibre is first shovelled onto a conveyor and sent to the dryer to remove the moisture in the short fibre. Thereafter, the short fibre is sent for inspection, whereby any wet fibre detected will be sent to the dryer for re-drying. Next, the short fibre is conveyed to the crushing machine where the fibre is crushed into smaIl particles. Subsequently, the crushed fibre is conveyed to the Briquette machine to produce Briquette by compacting the crushed fibre into high density and uniform Briquette. Samples of Briquette are regularly conected and sent for inspection on its size, moisture content and density, whereby lower grade Briquette (i.e. Briquette of shorter length, higher moisture content or lower density) will be supplied to the local market. After inspection, the Briquette is then packed into jumbo bag and sent to our storage facility before delivery to our customers. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 6, BUSINESS OVERVIEW (Conl’d)
6.5 PRODUCTION FACILITIES 6.5,1 Production Capacity The monthly production capacity, average production output and utilisation levels for our production of biomass materials and value-added products, and mattresses for the past three (3) FYE 31 December 2011 to 2013 are as follows: …… <–,-,,”.::.-~”–FYE 31 December ——“—.>.  ~­ .  …•.  1.011  2012  2013  Palm fibre  No. of production lines  18  20  20  Installed production capacity per month (mt) (I)  7,254  8,372  8,372  Average production output per mouth (mt) (6)  3,748  6,041  6,200  Capacity utilisation rate (%)  51.67  72.16  74.06
Coconut fibre No. ofproduction lines 2 2 2 Installed production capacity per month (mt) (2) 546 546 546 Average production output per month (mt) (7) 312 303 290 Capacity utilisation rate (%) 57,14 55.49 53.11 Coconut fibre sheet No. of production lines -2 2 Installed production capacity per month (meters~ (.~) -312,000 312,000 Average production output per month (meters) ( ) -87,717 102,587 Capacity utilisation rate (%) -28.11 3288 I Briquette ,No. of production lines -2 Installed production capacity per month (mt) (4) -, 3,016(9) Average production output per month (mt) (8) , -1,000 Capacity utilisation rate (%) –33.16 AJattresses Installed production capacity per month (pieces) {5} -15,600 15,600 Average production output per month (pieces) (8) -4,014 4,327 Capacity utilisation rate (%) -25.73 27.74 Notes: (/) Based on the maximum month{v capacity 0.[ the machineries/or 24 hOllrs per day/or an average oI26 days a month, which translate to the instafled production capacity a/approximately 11.63 mr per hOllr /ot’ the FYE 3J December 2011 and 13.42 mt per hour/or (he FYE 31 December 20J2 and 2013. (!) Based on the maximum monthly capacity a/the machineriesjor 24 hours per day lor an average 0/26 days a month, ~vhich translate to the installcd production capacity 0.[ approXimately (J.88 111( per hour/or the FYE 31 December 2011 to 2013. (3) Based on the maximum monthly capacity ofthe machineries/or 24 hours per day/or (111 average 0.[ 26 days a month, which translate to the insra11ed production capacity (~1″50(J meters per hOllr/or the FYE 31 December 2012 and 20/3.
(4) Based on the maximum monthly capacity ofthe machineries/or 24 hOllrs per day lor an avemRe 0/26 days a month, which translate /0 the instal/ed prodllc/ion capaci(v o{appl’oximateZy 4.83 mt per 1IOur.f{Jr the FYE 31 Decelnber 2013.
(5) Based on the maximum monthly capacity ofthe machineries for 24 hours per day/or all average 0/26 days a month, which trans/ate to the installed production capacity 0.[25 pieces per hour/or the FYE 31 December 2012 and 2013.
(6) Currently runs all two (2) 12-hour shUts per day jar 26 days a month.
(7) Currentlyrunson one(I) IO-hourshiji perdayjar 26 days (/ month.
(8) Currently runs on one (I) 8-hol/f’shUi per day/or 26 days (/ munth.
(9) The Briquette produclion Jines were installed in Ihe jourth quorter o.{ 20 12 and commenced commercial production in Jamwl:V 2013.

65
6.  BUSINESS OVERVIEW (Cont’d)  6.5.2  Our Material Equipment  The details of our material equipment are as follows:

./l”‘+Auditedl·~IlVas.~t ]Jecembert013. i:i}:/>~'(jOO’ HK Fibre Coconut fibre and coconut peat 2 To produce coconut fibre and 382 production line coconut peat Packing machine 6 To compress and pack the fibre 292 into bale form Rice husk burner To generate heat for drying the 41 fibre Fibre sheet manufacturing 2 To produce coconut fibre sheet 3,196 machine 3,911 HK Palm Fibre Oil palm EFB fibre production 8 To produce oil palm EFB fibre 2,080 line Feeder To transfer oil palm EFB to 115 hammer mill Packing machine 2 To compress and pack the fibre 441 into bale fOlm Steam boiler To generate heat for drying the 1,077 fibre 3,713 HK Kitaran Oil palm EFB fibre production 12 To produce oil palm EFB fibre 5,358 line Feeder 2 To transfer oil palm EFB to 1,509 hammer mill Packing machine 3 To compress and pack the fibre 265 into bale form Weighing apparatus 4 To weigh the bale 258 Stearn boiler 3 To generate heat for drying the 2,934 fibre Briquette production line 2 To produce Briquette 8,150 18,474
Fibre Star ‘” Foaming machine To produce foam mattresses, 649 cushion and pillow Spring mattress manufacturing 3 To produce spring mattress 139 machine Rebond mattress manufacturing To produce rebond maHress 36 machine Quilting 2 To sew pattem and design Oll 222 the cover of the mattress Sewing machine 19 To sew the cover of the mattress 24 Other equipment 32 Including saws, spray guns, etc. 94 1,164
Note: PlIl’Sliant 10 Ihe Acquisili(Jfl ofAsselsji’om HH Manujoclurer, the equipmenl has been acquired by Fihre ‘” Slar at the realisable value willI effCctfi’Otn J6 June 20J2. 66
6. BUSINESS OVERVIEW (Colt/’d) 6.6 MARKETING AND DISTRIBUTION NETWORK As at the LPD, we have two (2) dedicated sales and marketing teams collectively comprising seventeen (17) sales and marketing personnel. They are responsible for the sales, marketing and business development of our biomass products, and mattresses and related products respectively. Both teams are led by our Executive Director, Teh Chai Luang. 6.6.1 Marketing Strategies We have initiated the following marketing strategies to sustain and expand our business:
(i) Marketing activities The main marketing activities undertaken by the companies within our Group, uamely HK Fibre, HK Kitaran, HK Palm Fibre and Fibre Star Marketing to promote our biomass products as well as our ‘Fibre Star®’ aud ‘Xiong Mao®’ in-house brands and products are as follows: (a) Advertising We market and advertise through various medium iucluding: • Billboards in commercial districts or along the highway; ill Leaflets, pamphlets, newspaper and magazines; and
• Information on our Group and our products on our website. (b) Tradeshows aud exhibition As at the LPD, we have participated in various tradeshows and exhibition includiug:
Penfurnex Exhibition Export Furniture Exhibition Penang Furniture Exhibition Export Funliture Exhibition Penang Furniture Exhibition Export Furniture Exhibition PellHng Furniture Exhibition Malaysia Services Exhibition 20J3 10,h The Incorporated Society of Planters (“lSP”) National Seminar 20 J3 Furniture and related products Furniture and related produl;ls Furniturc and related products Funliture and related products Fumiture and related products Fumiturc and related products Furniture ilnd related products Biomass materials and value-added products Biomass materials and value-added products
Pcnang, M<1I<1ysia  2010  Kuala Lumpur, Mal<1ysia  2010  Penang, Malaysia  2011  Kuala Lumpur, Malaysia  2011  Penang, Malaysia  2012  Kuala Lumpur, Malaysia  2012  Penang, Malaysia  2013  Doha, Qatar  2013  Kuala Lumpur, Malaysia  2013

6. BUSINESS OVERVIEW (Com’d)
Some ofour other marketing activities include: • Organising visits to our factories for potential customers; and
• Conducting regular sales visits to potential customers.

 

(ii) Understanding our cllstomers’ demand trend and matching our biomass materials and value­added products supply allocation to these trends; (iii) Continuous provision of customer services, including after-sales services to foster customer loyalty and be the prefen’cd biomass products supplier ofour customers; (iv) Developing new business opportunities with existing and potential customers by way of referrals; and
(v) Keeping abreast of new processes and technological development in the biomass industry to better meet our customer’s requirements.

6.6.2 Distribution Nctwork Our distTibution network for the past three (3) FYE 31 December 2011 to 2013 are as follows: 2——-i···.——–~-,–.f~; .., –2011L-~—-c–>. . <~”–~ End ·T~tlll·lntedri .Users .··~di:iric.
Local  Northern region  13  13  26  416  28  444  34  553  519  Central region  4  4  264  19  283  374  37  41 J  Southel11 region  1  1  80  3  83  172  2  174  East Coast region  66  66  128  50  178  170  34  204  East Malaysia  14  3  17  24  5  29  18  79  97  902  103  1.005  1,259  112  1,371  Ovcrsc,lS  13  13  17  17  10  10
I Total (i)  31 79 110 919 ]03 ..J.&~ 1,269 112 Oil palm EFB fibl’c Our oil palm EFB fihre is distl’ibuted through a network oflocal and China intermediaries.  1,381  68
BalticBuilci 2013 The Big 5 Intcrnational Building and Construction Show 2013 Mosbuild 2014 PaJmcx Malaysia 2014 2014 ISP North Sarawak Branch Seminar Biomass materials and value­addeci products Biomass materials anci value­adcieci products Biomass materials and value­addecl products Gcotextile GcotextiJc
Saint Petersburg. Russia  2013  Dubai, United Arab Emirales  2013  Moscow, Russia  2014  Sanciakan, Malaysia  2014  Miri, Malaysia  2014

6. BUSINESS OVERVIEW (Collt’d) (ii) Coconut fibre, coconut fibre sheet and coconut peat For the FYE 31 December 2013, we consumed approximately 83.54% of our coconut fibre 10 produce coconut fibre sheet for our mattress manufacturing businEss, while the remaining balance of 16.46% was supplied to China intermediaries. OUf coconut peat is distributed through local intermediaries and directly to the local end users. (iii) Briquette For the FYE 31 December 2013, approximately 89.21% of our Briquette was supplied to the local market, while the remaining balance of 10.79% was supplied to China intermediaries. (iv) Mattresses and related prodnets We distribute our mattresses and related products through local retailers to the end users, except for occasional one-off sales event such as warehouse sales, where it would be sold directly to end consumers. 6.7 SEASONALITY Save for oil palm EFB fibre, our biomass materials and value-added products are not significantly affected by seasonal/cyclical effects. Demand for our oil palm EFB fibre experience a decline during the Chinese New Year season mainly due to a slowdown in logistics services in China during this period as some of these logistics services are closed during the festive season. We typically experience higher sales of mattresses and related products prior to major festive season such as Chinese New Year and Hari Raya in tandem with the expected increase in household spending for such items during such periods. 6.8 TECHNOLOGY USED The production lines used for our biomass materials and value-added products manufacturing operations are custom-built according to our design and specifications arising from our process development initiative as detailed in Section 6.10.1 of this Prospectus. The machineries used for the production of our biomass materials and value-added products include: (i) Coconul and oil palm EFB fibres: feeding conveyor, hammer mill, sifter, dryer, packing machine, \veighbridge and boiler;
(ii) Coconut fibre sheet: fibre separator, conveyor, rolling dryer, press dryer, feeding blower. needle punching machine, press hot roller, puller machine and cutting machine; and

(iii) Briquette: feeding conveyor, dryer, crusher, briquetting machine. Our Group also commenced the production of mattresses and related products in June 2012. The production process of mattresses and related products is labour intensive, particularly more so for coconut fibre mattress. The machineries used for the production of mattresses and olher products include: (i) Foam mattress: foaming machine;
(ii) Spring mattress: spring mattt’ess manufacturing machine;

(iii) Rebond mattress: reband mattress manufacturing machine; 6. BUSINESS OVERVIEW (CoIlI’d) (iv) Cushion, pillow and bolster: foaming machine; and
(v) Mattress cover: quilting machine, sewing machine.

The application of these machineries in our production processes are detailed in Section 6.4 of this Prospectus.

6.9 QUALITY ASSURANCE We place strong emphasis on the quality of all products produced and are committed towards ensuring a consistent and reliable supply to OUf customers according to their requirements. We condnually seek to uphold the quality of our products, particularly our biomass products, whereby our subsidiary company, HK Kitaran was accredited with the ISO 900 I:2008 in April 2012 for its commitment to quality. OUf entire production process including material handling, fibre production and packing system goes through proper quality checks at various critical points to ascertain that our product quality remain consistent throughout. Please refer to Section 6.4 of this Prospectus for details of our production processes. In addition, we check all in-coming raw materials to ensure that the materials meet pre-detennined standards and to reject materials that do not meet specification.
6.10 PROCESS AND PRODUCT DEVELOPMENT Although we do not perfonn any research and development, we have been focusing on our process and product development initiatives in order to, among others: • Improve the efficiency of our production process and product quality;
• Minimise wastage during the production process;
• Cornmercialise production of new products; and
• Keep abreast of technologies.

Our process and product development initiatives are spearheaded by our Deputy Managing Director, Kee Swee Lai, who is supported by our Process Development Engineer, Ch’ng Chee ‘t’eong, and other key production personnel. 6.10.1 Pl’ocess Development Milestones and Achievements (i) Design and customisation of coconnt fibl’e pl’oduction machiuCl’y Our co-founder) H’ng Choon Seng, initially relied on the sun to dry coconut fibres, Due to limitations on production capacity arising from, among others, weather fluctuations, H’ng Choon Seng together with Kee Swee Lai began researching on the techniques and testing to automate the drying process. In 2007, they successfully designed and installed a custom-built dryer that enables coconut fibre to be air-dried in a controlled environment and ensures greater control over the quality of the coconut fibre. This facilitated large scale production of coconut fibre with consistent quality. 6. BUSINESS OVERVIEW (CoIlI’d) (il) Design and customisation of oil palm EFB fibre production machinery Due to limited expansion opportunities for our coconut fibre production as a result of limited supply of coconut husks, we began testing and redesigning our coconut fibre manufacturing machinery, particularly the hammer mill and boiler, to cater for the manufacturing of oil palm EFB fibre. The redesign of our production machinery was necessary due to the different properties of oil palm EFB, which is softer, contains oil and more moisture, and of a shorter length, as compared to coconut husk. This eventually led to our successful venture into large scale production of oil palm EFB fibre in 2010,
(iii) Process Improvement Notwithstanding the successful development of our coconut and oil palm EFB fibres production machineries, we continue focusing on our process development initiatives to improve the efficiency of our production process. This led us to link and streamline our production into one continuous process in order to reduce waste and increase our production capacity. Arising from this, the monthly production capacity of an existing oil palm EFB fibre production line was increased from 234 mt in 2009 to 390 mt at the end of2010, (iv) Product Improvement Prior to the introduction of Briquette as our product offering, we have conducted extensive product development and improvement initiatives to the said product. We successfully improved the density of our Briquette from 500kglm’ to 704kglm’ hy March 2012. Subsequently to this, further improvements were made to the moisture content and the density of our Briquette. By June 2012, we managed to lower the moisture content from 25 percent to 15 percent, and further increased the density of our Briqueltc from 704kglm’ to 1,080kglm’, Further improvements were made to our Briquette in September 20 12 whereby its density was increased from 1,080kglm’ to 1,167kglm’, Wc subsequently commenced cOlmnercial production of our Briquette in January 2013.
(v) Product Development Through our continuous product development efforts to widen our product range, we are currently exploring the introduction of Geotextile, a value-added product, as pal1 of our product offering, Accordingly, we have installed one (1) production line with a monthly capacity of 500 mt of Geotextile in Plant 2 as part of our development effort in the manufacturing of Geotextile. Further details on the product development are as disclosed in Section 6,18, 1(i) of this Prospectus.
6.11 COMPETITIVE STRENGTHS We possess a number of key competitive strengths which enahle us to compete effectively in our principal markets and provide us with a strong platform to facilitate the continued sustenance of our business expansion and future growth as follows: (i) Consistent and Reliable Supply Over the years, we have developed and installed additional production lines which enabled us to provide our customers with consistent, reliable and large quantities of biomass materials. As at the LPD, we have two (2) coconut fibre production lines and twenty (20) oil palm EFB fibre production lines with a total monthly production capacity of 546 mt and 8,372 111t respectively. OUf sizeable production capacity coupled with Our ability to efficiently and effectively produce biomass materials with consistent quality throughout the year have enabled us to penetrate the overseas market. 6. BUSINESS OVERVIEW (COIt/’,!) (ii) Process and Product Development Initiatives Since our establishment in 2007, we have been focusing on our process and product development initiatives which are spearheaded by our Deputy Managing Director, Kee Swee Lai. Our process development initiatives have led us to design and install our custom-built production lines, which enabled us to commence large-scale production of coconut fibre and oil palm EFB fibre in 2007 and 2010 respectively. In addition, our process development initiatives have also enabled us to improve our biomass materials and value-added products quality WIlich led to an increase in demand for our biomass materials and value-added products, as well as improve our production efficiency which led to lower cost of production. Through our continuous process development initiatives1 we expect to commence large-scale production of other value-added biomass products as well as further improve our biomass materials quality and production efficiency. Further1 throngh our product development initiatives, we have ventured into the production of Briquette using short oil palm fibre since dIe fourth quarter of2012, and is currently exploring the introduction of Geotextile as detailed in Section 6.18.1 (i) of this Prospectus. (iii) Strategic Location of Operations Our biomass production facilities are situated strategically within the vicinity of multiple oil palm plantations and palm oil mills, which assure us of a sustained and scalable supply of raw materials at lower transportation cost for our production process. In addition, our subsidiary company, HK Kitaran operates within close proximity to Penang Port (approximately 45km) which enables us to have convenient access to shipping services for the export of our oil palm EFB fibre to our China customers. By locating ourselves strategically, we are able to obtain our raw materials at a lower cost, which ultimately enable us to offer our manufactured biomass materials to our customers at a competitive price. (iv) Experienced Management Team Our co-founders, H’ng ehoon Seng and Kee Swee Lai, who collectively have an average of 28 years of experience in the furniture as well as biomass materials and value-added products industries, have played pivotal roles in the growth and development of our Group since our inception in 2007. In addition, our co-founders arc supportcd by our tcn (10) key management and key technical persotlllel, comprising of staff with diverse backgrounds and experience in various industries, including manufacturing and marketing. Their different expertise, experience and ability to collaborate as a team have contributed positively to our operations and growth, which is reflected in our financial performance over the past few years. (v) Reusing Waste to Generate Biomass Energy We reuse waste (by-products from our biomass materials production such as foreign waste materials and short fibres) to generate biomass energy. The biomass energy is then used to supplement the power needs of the manufacture of our biomass materials and value-added products. This has resulted in substantial cost savings and has reduced our reliance on firewood, which in tum has rcduced our overall cost of production and improved our profit margm. 6.12 MAJOR CUSTOMERS Our major customers (those who contributed 10% or more of our total sales) for the past three (3) FYE31 December 2011 to 2013 are as follows:
•.••_”.•••_–_••_ ••>
2013 % RM’OOO % Total revenue  31702  100.00  62965  100.00  73.740  100.00  Chongqing Justit Industries Co., Ltd  Oil palm EFB fibre  3  4,059  12,81  7,436  11.8 [  Jiahua Global (M) Sdn Bhd  Oil palm EFB fibre  5  3,761  11,86  1,337  2.13  106  0.14  L&PC International Ltd  Oil palm EFB fibre  3  3,412  10.76  2,443  3,88  Guangzhou Yuetai Trade Co Ltd  Oil palm EPB fihre  2  11,331  [8.00
Shenzhen Yuemao Import~ & Exports Co., Ltd (“Shenzhen Yuemao”)  Oil palm EFB fibre  2  [2,918  20.52  22,224  30,14  1  Total  13,579  42.83  35,465  56.34  22330  30.28  Total no. of customers Bjom3~s materials and value-added products • Mattresses and related products  110 110  147 875 1,022  139 1,242 1,381
For the FYE 31 December 2013, our major customer, Shenzhen Yuemao contributed to approximately 30.14% of our Group’s total revenue, To mitigate the risk of dependency on our major customers, we have been eontinuously increasing our marketing efforts to expand our customer base. Our customers for biomass materials and value-added products have increased from 91 customers in 2009 to 139 customers in 2013, while pursuant to the Fibre Star Reorganisation, we have garnered a total of 875 customers for our mattresses and related products division which has increased to 1,242 customers in 2013, Further, we have eight (8) other China intermediaries in our customer base [or the FYE 31 December 20 13 and as such, we are not dependent on Shenzhen Yuemao or any particular intermediary to supply our oil palm EFB fibre and value-added products to China. 6. BUSINESS OVERVIEW (Cont’d) 6.13  SUPPLIERS  6.13.1  Types, Sources and Availability of Materials  The breakdown of our major raw materials purchases, which are all sourced locally, for the past three (3) FYE 31 December 2011 to 2013 are as follows:

Biomass Materials Added Products Coconut husks Oil palm EFB Chemicals(l)  and  Value­ 3,675 1,071 2,604  79.96 23.30 56.66  1,666 4,596 1707 7,969  Mattresses and Related Products Foam and span Chemicals Fabric Other~F)  [,205 800 974 1,531 4,510  Packing materials (3)  92l  20.04  1,447  Total  4,596  100.00  13,926
11.96 33.00 12.26 57.22  1,640 3,848 1,291 6,779  lO.58 24.81 8.32 43.71  8.65 5.75 7.00 10.99 32.39  2,243 1,690 1,276 1,824 7,033  J4.46 10.90 8.23 11.77 45.36  10.39  1,695  10.93  100.00  15,507  100.00 I
Notes:  (I) (2) (3)  Chemieals are used in the production ofcoconutjibre sheet as a form ofadhesive to make the fibre sheet more compact. Others include spring. divan and headboard, wire, wood. mattress tape, [alex, polyester, pongee and olher accessories. Packing materials are used/or the packing o.rboth biomass malerials and palue-added products as well as mattresses and related products.
The purchase prices of these raw materials have remained fairly stable over the past three (3) years from FYE 31 December 2011 to 2013. In the event that our raw materials costs increase substantially, we are able to pass on the costs to our customers. We have not experienced any major difficulty in sourcing for our raw materials as our production facilities are situated strategically within the vicinity of multiple oil palm plantations and palm oil mills.
6. BUSINESS OVERVIEW (Crmt’d) 6.13.2 Major Suppliers Our major suppliers (those who contributed 10% or more of our total purchases) over the past three (3) FYE 31 December 2011 to 2013 are as follows: , )” .· •• TYJle~t~~t~~j~’i~’: zm~~~~n~(tc. .~~~~;’~7~~”~~~t~~··~”jlPi.E$1J>~ternber·——“,,—-,—–> 1~;0·;;·PUh:lin:sEfd·.<‘:R~llitionship· .. 2011 2012 2013 …….••. ;,’)( . . Years ,.ro\1;boo· .’. . % RM’OOO % RM’@O %
Total purchases 4596 100.00 13926 100.00 15507 100.00 AKSB Oil palm EFB 4 897 19.52 636 4.57 191 123 Yip ShUll Trading Sdn 3 772 16.80 701 5.03 664 4.28Oil palm EFB
Bhd Total 1,669 36.32 1337 9.60 855 5.51 Total no. of suppJiel’s 41 129 134 AKSB and Yip Shun Trading Sdn Bhd are our major suppliers who accounted for 19.52% and 16.80% respectively of our total purchases for the FYE 31 December 2011. However, for the FYE 31 December 2012 and 2013, we do not have any major suppliers who contributed 10% or more of our Group I s total purchases. We are of the opinion that mailltaining a diversified supplier base for our raw materials mitigates our dependence on any single suppliers and have increased our supplier base from 15 suppliers in 2009 to 134 suppliers in 2013. The significant increase in our supplier base for the FYE 31 December 2012 and 2013 was mainly due to the inclusion of supplier base from our mattresses and related products division pursuant to the Fibre Star Reorganisation. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK [company No. 969678-~ 6. BUSINESS OVERVIEW (Cont’d) 6.14 MAJOR LICENCES, PERl’VIITS AND REGISTRATIONS Our major licences, permits and registrations as at the LPD together with the conditions attached and the status of compliance are as follows:

HK Fibre MITl 14.10.2013 01.04.2012 Pioneer Certificate No. 4344 .. The value-added production of Complied to (for 70% tax exemption on the company must reach at least 31.05.2017 statutory income for 5 years for 67%; pioneer activity involving coconut fibre sheet) .. The total amount of staff at the Complied management, technical and supervision level must reach at least 15% of the total employment of the company; and Complied.. The account for the approved production with pioneer status for small industrial scale and the account for the approved production without pioneer status shall be kept separately.
HK Fibre MaJ'[is Daerah Bachok 02.04.2014 01.01.2014 Factory Premises License Nil Not applicable Bandar Pelancongan to (Ref. No. MDB.382/12) Islam 31.12.2014 Pioneer Certificate No. 3729 -.. The value·added products must Complied (for 100% ta.x exemption on achieve at least 80% of the statutory income for 10 years proposed target; and for pioneer activity involving fibre from palm biomass) .. The company must carry out its Complied project using palm biomass.

I Company No. 969678-D 1 6. BUSINESS OVERVIEW (Cont’d)
HK Kitaran  MPSP  19.07.2013  02.08.2012  License for processing palm  Nil  Not applicable  to  fibre (Bill No: 06113/02601)  02.08.2014  HK Kitaran  MPSP  16.08.2013  24.08.2011  License for processing palm  Nil  Not applicable  to  fibre (Bill No: 06/13/02708)  24.08.2014  HK Kitaran  MITI  08.05.2012  Manufacturing license -No.  •  The Plot No. 2945 (Plot A2),  Complied  A018656  Jalan Sungai Baong, MK 5,  14200 Sungai Bakap, Seberang  Perai Selatan, Pulau Pinang is  subject to the approval from the  relevant State Authority and  Department of Environment.  •  Notification must be given to  Noted  MITI and MIDA for any  disposal of shares in the  company;  •  Training must be given by the  Complied  company to Malaysian citizens  so that technology and expertise  can be channeled to all levels of  employment; and  •  The company shall implement  Complied  its projects as approved and in  accordance with the rules and  regulation in Malaysia.
[i:0mpany No, 9696~ 6. BUSINESS OVERVIEW (Cont’d)
HK Kitaran MITI 08.05.2012 Manufacturing license ~ No. • The Plot No. AOOl, Jalan Sungai Complied AOl8657 Baong 14200, Sungai Bakap, Seberang Perai Selatan, Pulau Pinang is subject to the approval from the relevant State Authority and Department of Environment. • Notification must be glven to Noted MITl and MlDA for any disposal of shares in the company; Complied• Training must be given by the company to Malaysian citizens so that technology and expertise can be channeled to all levels of employment; and
• The company shall implement Complied its projects as approved and in accordance with the rules and regulation in Malaysia.

 

I Company No, 9696~ 6. BUSINESS OVERVIEW (Collt’d) HK Kitaran Jabatan Alam Sekitar Pulau Pinang (“DOE Penang”)
. Validity. Issue D~ti\;}le~itJd…..

09,01.2013 Approval for installation of Biomass Fired Steam Boiler, multicyclone air pollution control equipment and chimney at No. 2945, Plot A2, Kawasan Perindustrian Perabot Sungai Baong, Mukim 5, 14200 Sungai Bakap, Pulau Pinang Conditiuns for installation of fuel burning equipment and chimney are, inter alia, as follows: • The constructed facilities shall be in accordance with the drawing/plan submitted and certified by the Professional Engineer Ir. Abdul Talib Din (Mechanical-8908).
• The concentration of the black smoke shall not exceed the colour No. 1 in the Ringelmann Chart. Smoke density meter and alarm system must be installed.

The concentration of dirt, dust and solid • particles emitted from the chimney shall not exceed 0.05 gmlNm3• For other parameters, emission shall comply with Standard C, Rules of Environmental Quality Regulations (Clean Air) 1978. The installation of multicyclone system • must be in accordance with the arrangement and specifications submitted by HK Kitaran’s consultant, Greentage Sdn Bhd and certified by the Professional Engineer, If. Abdul Talib Din (Mechanical -8908). Complied Complied Complied Complied
‘——~~————————————————————–­
I Company No, 969678-D 6. BUSINESS OVERVIEW (Cont’dj
:f< ‘ ‘”.” ;,r,:, ::,;,.”:,V,.:,”p’,;a,”elri’dl,’o}”,,tyd”‘••,;,’t~~p,~:1~,::I~s’ ue D~t~ ,,’ ‘,r”,’ ‘,,’,’, “, Per’nu””t”I’ , ,” :’o;: , ‘,”,’ Complied.. Sampling of the chimney must be conducted 3 times a year (4 months once) in accordance to MS 1596:2003 Detennination of Concentration and Mass Flow of Particulate Matter in Flue Gas for Stationary Sources and the report must be submitted to DOE Penang. The first report shall be submitted within 1 month of the operation of the steam boiler. • Any changes made to the chimney in the Noted future shall be subject to prior written consent from the Director General of DOE Penang. Conditions for installation of multicyclone air pollution control equipment and chimney are, inter alia, as follows: Cyclonic air pollution control system specifications • Any new additional factory equipment that Noted causes emission of dust is subject to prior approval from DOE Penang, .. NotedAny modification made to the centrifugal type fan and fan motor shall not modify the proposed design in the application made by HK Kitaran dated 26 June 2012 which has been accepted and approved by DOE Penang, DOE Penang must be informed within one month of any modification being carried out.
6. BUSINESS OVERVIEW (Cont’d)
• Perfonnance monitoring equipment such as  Complied  magnehelic gauge shall be installed as  shown in the plan dated June 2012.  Operation  • Sampling of the chimney must be  Complied  conducted 3 times a year (4 months once)  in accordance to MS 1596:2003  Determination of Concentration and Mass  Flow of Particulate Matter in Flue Gas for  Stationary Sources and the report must be  submitted to DOE Penang. The first report  shall be submitted within 1 month of the  operation of the cyclone.  • The emission of solid particles from the chimney shall not exceed 0.05 gmlNm3 .  Complied  For other parameter, emission shall comply  with Standard C, Rules of Environmental  Quality Regulations (Clean Air) 1978.  Complied  • Competent operator shall be appointed to  handle and maintain the operation of the  cyclone. The name and qualification of this  operator shall be submitted to DOE  L  Penang.
~pany No. 969678-D 6, BUSINESS OVERVIEW (Cont’d)
.Coin HK Kitaran DOE Penang 04.04.2013 Approval for installation of Biomass Fired Steam Boiler, multicyclone air pollution control equipment and chimney at No. 2940, Plot AOO I, Kawasan Perindustrian Perabot Sungai Baong, Mukim 5, 14200 Sungai Bakap, Pulau Pinang • Components that are prone to wear or plugging including component structure, housing and hoods must be inspected every quarter or half a year. Written record of the inspection and any action taken shall be kept for the purpose of inspection.
• Any changes made to the air pollution control system is subject to prior approval of the Director General of the DOE Penang.

Conditions for installation of fuel burning equipment and chimney are, inter alia, as follows: • The constructed facilities shall be in accordance with the drawing/plan submitted and certified by the Professional Engineer Ir. Abdul Talib Din (Mechanical-8908).
• The concentration of the black smoke shall not exceed the colour No. I in the Ringelmann Chart. Smoke density meter and alarm system must be installed.

The concentration of dirt, dust and solid particles emitted from the chimney shall not exceed 0.05 gmfNm3 . For other parameters, emission shall comply with Standard C, Rules of Environmental Quality Regulations (Clean Air) 1978. Complied Noted Complied Complied Complied
I Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d)
The installation of muiticyclone system Complied must be in accordance with the arrangement and specifications submitted by HK Kitaran’s consultant, Greentage Sdn Bhd and certified by the Professional Engineer, Ir. Abdul Talib Din (Mechanical -8908). • Sampling of the chimney must be Complied conducted 3 times a year (4 months once) in accordance to MS 1596:2003 Determination of Concentration and Mass Flow of Particulate Matter in Flue Gas for Stationary Sources and the report must be submitted to DOE Penang. The first report shall be submitted within 1 month of the operation ofthe steam boiler. Any changes made to the chimney in the Noted future shall be subject to prior written consent from the Director General of DOE Penang. Conditions for installation of multicyclone air pollution control equipment and chimney are, inter alia, as follows: Cyclonic air pollution control system specifications Noted • Any new additional factory equipment that causes emission of dust is subject to prior approval from DOE Penang.
[ Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d)
Issue Dafe Ic~
• Any modification made to the centrifugal Noted type fan and fan molor shall not modify the proposed design in the application made by HK Kitaran dated 26 June 2012 which has been accepted and approved by DOE Penang. DOE Penang must be informed within one month of any modification being carried out.
• Performance monitoring equipment such Complied as magnehelic gauge shall be installed as shown in the plan dated June 2012.

Operation • Sampling of the chimney must be Complied conducted 3 times a year (4 months once) in accordance Lo MS1596:2003 Determination of Concentration and Mass Flow of Particulate Matter in Flue Gas for Stationary Sources and the report must be submitted to DOE. The first report shall be submitted within I month of the operation of the cyclone. The emission of solid particles from the Compliedchimney shall not exceed 0.05 gmfNm3. For other parameter, emission shall comply with Standard C, Rules of Environmental Quality Regulations (Clean Air) 1978.
~ny No. 969678-D 6. BUSINESS OVERVIEW (Cont’d)
Competent operator shall be appointed to  Complied  handle and maintain the operation of the  cyclone. The name and qualification of  this operator shall be submitted to DOE  Penang.  Components that are prone to wear or  Complied  plugging including component structure,  housing and hoods must be inspected  every quarter or half a year. Written  record of the inspection and any action  taken shall be kept for the purpose of  inspection.  Noted  Co  Any changes made to the air pollution  control system shall be subject to prior  approval of the Director General of the  DOEPenang.  HK Kitaran  Department of  09.09.2013  09.09.2013  Certificate of Fitness for steam  Nil  Not applicable  Occupational Safety  to  boiler (Registration No. : PMD  and Health  12.11.2014  6476)  HK Kitaran  Department of  27.02.2014  27.02.2014  Certificate of Fitness for steam  Nil  Not applicable  Occupational Safety  to  boiler (Registration No. : PMD  and Health  02.05.2015  8020)
6. BUSINESS OVERVIEW (Conl’d)
HK Palm MlTI 02.06.2014(1) 01.10.2009 Pioneer Certificate No. 3508 • At least 60% of the company’s shares must Complied Fibre to (for 100% tax exemption on be acquired and held by Malaysian 10.05.2012 statutory income for 5 years for citizens; pioneer activity involving fibre from oil palm biomass) (I) • The value-added production of the Complied company must reach at least 15%; and Complied• Not more than 20% of the shares of this company can be acquired and held by holding company! related company (whether controlled directly or indirectly) having a shareholder’s fund which exceeds RM500,000.00.
HKPalm MITl 25.07.2012 Manufacturing license -No. • The Plot Lot 713, Mukim Sungai Batu, Complied Fibre (1) A018775 09810 Daerah Bandar Barn, Selama, Kedah is subject to the approval from the relevant State Authority and Department of Enviroument. • Notification must be given to MITI and Noted MIDA for any disposal of shares in the company; • Training must be given by the company to Complied Malaysian citizens so that technology and expertise can be channeled to all levels of employment; and
• The company shall implement its projects Complied as approved and in accordance with the rules and regulation in Malaysia.

 

I Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d) .’, ” ,,’ Is’sfi~Date”

 

HK  Palm  Jabalan Alam  04.06.2013  Approval  for  installation  of  Fibre  Sekitar Negeri  chirrmey from bag filter system  Kedah (“DOE  at Lot 7 I3, MK Sungai Barn,  Kedah”)  09810  Daerah  Bandar  Bam,  Selama, Kedah
Conditions for installation of chimney from bag filter system are, inter alia, as follows: • Any new additional factory equipment that causes emission of dust is subject to prior approval from DOE Kcdah.
• Any modification made to the bag filter, centrifugal type fan and fan motor shall not modify the design proposed in the HK Palm Fibre’s application dated 3 April 2013. DOE Kedah must be informed within one month of any modification being carried out.
Installation of the bag filter and chimney must be in accordance with the pLans dated 17 April 2013 and 14 May 2013 and the specification certified by Tertib Alam Enterprise and confirmed by II. Tan Boon Khong (12835 -Mechanical).
• Performance monitoring equipment such as pressure gauge and others must be installed in accordance with the plan.
Building Stage
• DOE Kedah shall be informed in writing as soon as the construction of the air pollution controller system is complete and ready for inspection for the purpose of commissioning.

In progress (3) Noted Noted In progress (3) In progress (3) Noted
I Company No. 969678-D ] 6. BUSINESS OVERVIEW (Cont’d) Com any
Fibre Star MITI 06.09.2012 Manufacturing license -No. A018830 Operation •  The emission of dust or solid particles from the chimney shall not exceed Standard C, Rules of Environmental Quality Regulations (Clean Air) 1978 at all times.  •  Sampling of the chimney must be conducted 3 times a year in accordance to MS1596:2003 Determination of  Concentration and Mass Flow of Particulate Malter in Flue Gas for Stationary Sources and the report must be submitted to DOE Kedah.  •  Competent operator shall be appointed to handle and maintain the operation of the bag filter. The name and qualification of this operator shall be submitted to DOE Kedah.  •  Any changes made to the air pollution control system shall be subject to prior approval of the Director General of DOE Kedah.  •  The Plot No. 3843, MK I I, Luar Desa Jawi, 14200 Sungai Jawi, Pulau Pinang is subject to the approval from the relevant State Authority and Department of Environment.
In progress (3) In progress (3) In progress (3) Noted Complied
I Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d) Company Fibre Star Fibre Star  Issuino-Authoritv MPSP MPSP  Issue Date 03.01.2014 20.02.2014  Validity Period 08.06.2002 to 27.01.2015 20.02.2014 to 19.02.2015  Type of Licensel Registrationl Permit! Certificati.lri Conditions lmposed .•. <…. .’,Status of ComiJIianc¢ • Notification must be given to MITI and MIDA for any disposal of shares in the company; • Training must be given by the company to Malaysian citizens so that tecbnology and expertise can be chanoeled to all levels of employment; and • The company shall implement its projects as approved and in accordance with the rules and regulation in :tYlalaysia. License for processing cushion Nil and mattress (Bill No: 06114/00049) License for processing mattress Nil and accessories from fibre products (coconut! oil palm) (Bill No: 04113/04459) Noted Complied Complied Not applicable Not applicable
Notes: (i) Based on the previous Pioneer Certificate dared 7May 2010, HK Palm Fibre is enliIied /0 tax exemption for the periodfrom , October 2009 to 30 September 2014. However, pursuant to the Acquisition ofHK Palm Fibre, the company has !lot compiied with the third condiaon. In view altha!, MIDA has revised the tax exemption period ofHK Palm Fibre from I October 2009 to /0 May 2012. Hence, HK Palm Fibre no longer enjoys its pioneer status effective 1I May 2012. The revised Pioneer Certificate dated 2 June 20 I4 was issued to HK Palm Fibre via AffDA’s leller dated 4 June 2014.
(2) HK Palm Fibre has yet to obtain a processing licence for Plant 5 and has been advised by the local authority, MDBB thal a planning pennission folloH’ed by a CCC would need to be obtained prior to app(ving for a processing licence. HK Palm Fibre has, on 19 November 2012 applied to MDBB for planning permission for Plant 5 and has subsequently obtained MDBB’s conditional approval for the planning permission on 5 .March 2013. As at the LPD, the compan.v is in the process offulfilling the conditions imposed under the planning permission. This will then be foilowed by (he application for a CCc. The CCC is estimated to be issued within six (6) to nine (9) months from the date ofsubmission ofapplication. Upon obtaining the CCc. HK Palm Fibre will apply for the processing licence which is eApected to be issued within three 0) months from the date ofsubmission ofapplication. Further details are as disclosed in Section 6. I 7.2 ofthis Prospectus. As at the LPD, there have been no actions being taken by MDBB pursuant to HK Palm Fibre operating without a processing licence.
(3) HK Palm Fibre is in the process ofins/ailing the chimney and bagfilter system. The aforesaid installations are required by DOE Kedah pursuant to its confirmation offlO objection /0 HK Palm Fibre ‘5 application for a preiiminQl)’ site assessment for Plant 5.

Company No, 969678-D 6. BUSINESS OVERVIEW (COIl/’tl) 6.15  INTELLECTUAL PROPERTY RIGHTS  As at the LPD. we own the following trademarks:  ~rademarkLo 0  A  Iicant  Class No.*  . Descriptioltof ClassHeadlngO(: .•(TradN….e..o.. ~••’… ark Trademark . .’ ‘..  Vali4tty I’eri’~d’

Heng Huat  Class 22  Padding and stuffing materials of coconut  2012051167  28.02.2012 to  fibres and palm fibres; all included in Class  28.02.2022  22.  Heng Huat  Class 20  Cushion; included in Class 20  2012050532  31.01.2012 to  31.01.2022  Fibre Star  Class 20  Mattresses, Bolster, Pillow and Cushion;  07019842  09.10.2007 to  all included in Class 20.  09.10.2017  Fibre Star  Class 20  Cushion, Pillow, Bolster and Mattress; all  95000678  20.01.1995 to  included in Class 20  20.01.2022
Note. ~ Products whichfall under Class 20 and Class 22 oflhe trademark classifications are as/allows: Class  Descriptio/l  20  Furniture, mirrors, piclureframes: goods (not included in other classes) ofwood, cork, reed, cane, wicker. horn, bone, ivory, whalebone, shell. amber. mOlher-of­pearl, meerschaum and subsl{/ules lor a/llhese materials. or olplaslics.  12  Ropes. slrings, nels. Irmls. awnings, larpaulins, sails, sacks and bags (1101 incfuded in other crosses): padding and Sluffing malerials (except ofrubber or plastics); raw fibrous lexlife materials.
6.  BUSINESS OVERVIEW (Cont’d)  6.16  DEPENDENCY ON PATENTS, INTELLECTUAL PROPERTY INDUSTRIAL, COMMERCIAL OR FINANCIAL CONTRACTS  RIGHTS,  LICENCES,  6.16.1  Dependency on Intellectual Property Rights  Save as disclosed in Section 6.15 of this Prospectus, our Group is not dependent on any patents or intellectual property rights for our business operations.  6.16.2  Dependency on Major Licences  Save as disclosed in Section 6.14 of this Prospectus, our Group is not dependent on any major licences for our business operations.  6.16.3  Dependency on Industrial, Commercial and Financial Contracts  Our Group is not dependent on any material contracts or agreements including industrial, commercial and financial contracts, which are material to our business or profitability.
THERESTOF THIS PAGEHASBEENINTENTIONALLYLEFTBLANK I Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d) 6.17  PROPERTY  6.17.1  Own Properties  As at the LPD, we own the following properties:

HK Kitaran (1 )(2)(3) Title: No. H.S.(D) 6714 Lot 2940, Mukim 4 Daerah Seberang Perai Selatan Pulau Pinang Address: No AOO 1, Jalan Sungai Baong Kawasan PerinduSlrian Perabut Sungai Baong, Mukim 5 14200 Sungai Bakap Seberang Perai Selatan Penang (“Plant 1”)
Double storey office Freehold The land is 239,580/ 8.165 17.05.1999 building annexed with currently charged 78,000 a single storey to United detached factory Overseas Bank building! Used for oil (Malaysia) Berhad palm EFB fibre manufacturing ~any No. 969678-D
6. BUSINESS OVERVIEW (C()Ilt’d) Registeredl . Beneficial Owner
HK Tille: Double storey office Freehold The land is 178,160/ 7,744 04.04.2012 Kitaran(4) No. H.S.(D) 6719 building annexed with a currently charged 80,000 Lot 2945, Mukim 4 single storey detached to AmBank (M) Daerah Seberang Perai Selatan factory/ Used for oil Berhad Pulau Pinang palm EFB fibre
manufacturing Address: Lot 2945 (Plot A2) Jalan Sungai Baong Kawasan Perindustrian Perabut Sungai Baong, Mukim 5 14200 Seberang Perai Selatan Penang (“Plant 2”)

Fibre Star(5} Title: Single storey factory Freehold The land is 69,696/ 2,857 12.08.2013 No. H.S.(D) 8763 building! Temporarily currently charged 30,000 Lot No. 2489, Mukim 5 used as warehouse to Hong Leong Daerah Seberang Perai Selatan Bank Berhad Pulau Pinang Address: Lot 2489, Lorong Bakau Kawasan Perindustrian Perabut Sungai Baong, Mukim 5 14200 Sungai Bakap Seberang Perai Selatan Penang (“Plant 4”)

Company No. 969678-D 6. BUSINESS OVERVIEW (eollt’d) Registered! Beneficial Owner Title/Address
HK Fibre(6) Title: A portable cabin 99 years, The land is currently 89,690/ 1,461 14.03.1996 HSM 2/97A, PT 345 office and a single Expiring charged to Maybank 40,483 Kg Kemayang, Mukim Senak storey detached on Islamic Berhad Jajahan Bachok factory/ Used for 18.08.2096 Kelantan Darnl Nairn coconut fibre, coconut (“Plant 6”) peat and coconut fibre sheets manufacturing Address: Lot 345, Kg. Kemayang Tawang 16020 Bachok Kelantan Darnl Naim

Notes: (I) Plaw I was previously occupied by our Group as a rented factory. Fol!owing the signing ofa Sale and Purchase Agreement on 9 May 2012 between HK Kitaran and Praccom Sdn Bhd, which was subsequently completed on 17 August 20/2. ‘he property is now owned by our Group. As described in Sections 3.6 and 6.18. I(iv) of this Prospectus, we wiIJ be constructing a single storey faclOry building adjacent to the existing Plant I. The said factory building will have a bUi/t-up area ofapproximately 80,000 sq ft which will be used to accommodate the production and warehousing ofour current andfuture products. We It’ill also refurbish the existing buildings in Plant I in COI!;ul1ction with the canslruclion ofthe saidfactOlY building,
(2) The express condilioll in Ihe {and Ii/Ie afPlanl / states that/he landshall b2 usedfor the purpose affurniture (wood) faclory only. Notwithstanding this, the use ofPlant 1for ehemanufacturingofOllroilpalm£FBfibreisinaccordancewiththepermittedcategory oflanduse,i.e.fnduserial(PerusahaalllPerindustrian),the DCforPlant Ihas been ohtained and a processing licence has also been issued by MPSP to HK Kitaran. HK Kitaran has on 20 March 2014, through its land surveyorlconsultant, written and are awaiting a formal reply from the Penwdbir Tanah Daerah to clarify whether Ihe company is allowed to use Ihe land for Ihe manufacturing ofoil palm £FB fibre. HK Kilaran has rmderlaken 10 applyfor a varialion oflhe express condition, ifrequired. and in the event the said variation is nol approved by the Pentadbir Tanah Daerah, we shall relocate Ollr opera/ions in Plan{ I to afu{/y compliant rented building. Further, HK Ki/aran has undertaken to promptly rectify any non-compliance in relation to Plant 1 and do all sllch things necessary to ensure that Plant I will be in compliance wilh af{ such conditions af/ached to its land title as weI! as the National Land Code 1965 and aliter applicable laws, niles and r2gulation. Further details are as disclosed in Seclion 4.1 (xO oflhis ProspeclUs.
(3) As al the LPD, there are two (2) movable container cabins which are lIsed as slOffaccommodation located on the land ofPlant I. The company’s appointed consultant had on j November 2012 being informed by MPSP that the movable container cabins localed on the said land do nol require any temporary perm!1 or approval from A1PSP as they are not pennanent stmclUres.

I Company No. 969678-D 6. BUSINESS OVERVIEW (Cont’d) (4) There is on extended shed attached to Plant 2’sfactory building (“Extellsion”). Application/or approval/or the Extension was submitted to MPSP on /9 July 20/3. We have subsequently received a lellerfrom MPSP dated 23 October 20/3 wherein MPSP infOrmed that based on its record, the building structure ofPlant 2 has been approved by MPSP and CCC has been issued. Based on AfPSP’s inspection, al! the building slrnclure ofPlant 2 has obtained the approval and consent from MPSP and as such, MPSP has no objection as to the operation ofPlant 2.
(5) Following the signing ofa Sale and Purchase Agreement on JJ May 20/2 between Fibre Star and HH Furniture which was subsequently completed on 7 February 2013, the property (i.e. Plant 4) is now owned by our Group. We intend to use metal sheet to enclose the building structure ofPlant 4 which wi/! be used to accommodate a production area and a warehouse. The enclosure ofthe building strncture is subject to the local authorities’ approval, and is estimated to be obtained within three (3) to six (6) months from the date ofsubmission. Fibre Star wil! submit a building renovation plan to the building department ofMPSPfor approvalprior to the set up ofthe production area. For production, Plant 4 will be used eitherfor mattress production orfor the production ofoil palm EFB fibre/coconut fibre products. Further details on the production and the required licenses are asfollows:
(6) Plant 6 was previously occupied by our Group as a rentedJactory. Following the signing oja Sale and Purchase Agreement on 24 April 2012 between HK Fibre and Keloil Sdn Bhd which was subsequently completed on 25 February 2013, the property is now owned by our Group.

TVDe oforoduction  Licence required  Status ofapplication oflicence  (a) lvfattress production Note: In the event that an OC is not issued for Plant 3 (please refer to Secaon 6.17.2 of this Prospectus for further details on Plant 3), Fibre Star’s production operations in Plant 3 will be relocated to Plant 4 within three (3) to six (6) months after obtaining the manufacturing and processing licences.  • Manufacturing licence from MITI; and iii License for processing cushion and mattressfrom MPSP  As disclosed in Section 6.14 ofthis Prospectus, the existing manufacturing operations ofFibre Star in Plant 3 are licensed by MITI and MPSP. In the event ofrelocation of Fibre Star’s operations from Plant 3 to Plant 4, fresh applications need to be submitted to the MITI and MPSP as the licences granted by them are location specific. Fibre Star has on 20 February 2014 obtained the processing licence from MPSP for the processing ofmattress and accessoriesfrom fibre products (coconut/ oilpalm).  (b) Production of other value-added products ofoil palm EFB fibre/coconulfibre Note: In the event that Fibre Star’s mattress production operations in Plant 3 need not be relocated to Plant 4, Plant 4 will be used for the production of our other value-added products of oil palm EFB/coconutfibre.  • llAanufacturing licence from MITI; and <z Processing licence Jor production of oil palm EFB fibre/coconut fibre products jromMPSP  In the event that Plant 4 is usedfor the production ofoilpalm EFBfibre/coconutfibre products, Fibre Star will apply and obtain a manufacturing license and processing licence for production ofoil palm EFB fibre/ coconut fibre products for Plant 4, if required, prior to commencement ofthe production.
I Company No. 969678-D 6. BUSINESS OVERVIEW (Coni’d) 6.17.2 Rented Properties In addition, as at the LPD, we also rent the following properties for our operations:

Fibre  HH  Title:  Two  (2)  storey  office  block  16.06.2012  288,000  74,548/  II)  Star  Furniture  PM513, Lot 1223  with  a  single storey detached  to  60,000  Mukim 11 Jawi Village  factory warehouse/ Used  for  15.06.2014  Daerah Seberang Perai Selatan  mattress  production  and  Pulau Pinang  warehouse  Address:  No 3843 (Lot 1223)  Mk. 11, Luar Desa Jawi  14200 Sungai Jawi  Seberang Perai Selatan  Pulau Pinang (“Plant 3”)  HKPalm  AKSB  Title:  A single storey office annexed  (2)  72,000  149,274/  (3)  Fibre  GM2092, Lot 2660, Mukim Sungai Batu, Daerah Bandar Baharu  with a single storey detached factory/ Used for oil palm EFB fibre manufacturing  70,041  Kedah Daml Aman  Address:  Lot 713, Mukim Sungai Batu,  09810 Daerah Bandar Baham  Selarna, Kedah Daml Arnan  (“Plant 5”)
[ Company No. 969678-D I 6. BUSINESS OVERVIEW (Cant’d)
HK Kitaran HK Alliance Title: A vacant land! 01.11.2013 120,000 98,4451 Not Applicable SdnBhd (4) to Not Applicable No. Geran Mukim 956 01.11.2015Lot 2151, Mukim 4
L Daerah Seberang Perai Selatan Pulau Pinang
—————–‘ Notes: (I) O,rrel7tly, the rented property does not !rave an DC. 0,11′ landlord, HH Furniture, has on 15 October 20/2 applied to MPSP for planning permissioll /01′ Plallt 3. HH Furniture has subsequently on 4 March 20/3 received a conditional approval from MPSP for the planning permission and is currently in the process 0//ulfilling the conditions imposed. This will be/ollowed by application/or DC upon obtaining the approvalfrom j’y!PSP for the planning permission. In this regard, the OC is estimated to be issued wilhin six (6) to nine (9) mOl1lhs from the date 0/submission ofapplication. i.e. by December 2014. In the event that an OC is issued, we will continue to rent and operate in Plant 3, /ailure 0/ which. we will relocate our operations in Plant 3 to Plant 4 (as described in Section 6.17.1 o.fthis Prospectus) or 10 a fully compliant rented property, ijnecessary. in the ellefllthat Plant 4 is not ready/or occupation and operations.

(2) HK Palm Fibre is using and occupying Plant 5 pursuanr to an agreement dated 22 June 2009 between HK Palm Fibre and AKSB in relation to supply ofoil palm EFB by AKSB 10 HK Palm Fibre, and letters daled 29 June 2009. 28 Augllsr 2012, 23 October 2012 and 3 December 2012 as supplemental to the said agreement. Pursuant to Ihe collaboralion arrangement between HK Palm Fibre and AKSB under this agreement, AKSB has given to HK Palm Fibre Ihe n”ght to use and occupy the property /01′ a periodoften (10)yearscommencingfrom thedate 0/theagreementandAKSBshalfgranttoHKPalmFibretheoption toextendtheduration andvalidity 0/theagreement /01′ afurther ten (10) yearsfrom the date ofexpiry. Pursuant to the supplemental letter dated 3 December 2012. HK Palm Fibre is required to pay a rental ofRM6,000 per month with effectfrom I November 2013.
(3) HKPalmFibre, withtheconsen( o.fAKSB, wi!!beapplying foraCCCforPlant 5 which is used for HK Palm Fibre’s operations, for purposes ofobtaining a processing licence for its operations in the premise. HK Palm Fibre has on 19 November 2012 applied to MDBB for planningpermission for Plant 5. HK Palm Fibre has subsequently on 5 March 2013 received the conditional approval from MDBB /01′ the planning permission and is cwre11tly in the process a/fulfilling the conditions imposed. This will be followed by the application/or CCC upon approval by MDBB for the planning permission. In this regard. the CCC is estimated to be issued within six (6) to nine (9) months from the date a/submission ofthe application, i.e. by December 2014. Upon obtaining the CCC, HK Palm Fibre wii! apply /01′ the processing licence which is expected to be i~sued within three (3) monthsfrom the date 0/submission. Further details are as disclosed in Note (2) ofSection 6.14 ofthis Prospectus.

In Ihe eFent (hat we are required EO vacate Plant 5 by MDBB pending the issuance ofthe CCC or a CCC is not issued/or prant 5, we will relocate our operations in Plant 5 to a fully compliant rentedproperty, ifnecessary.
(4) II is the company’s intention to use the land /01′ slaf/ accommodation by placing movable container cabins on the said land in due course. The company’s appointed consultant has on 13 Febmary 2014 being informed by MPSP that movable container cabins located on the said land do not require any temporary permit or approva(from A1PSP as they are not permanent structures and there is no local authority guideline governing it at thisjllncture. 97
6. BUSINESS OVERVIEW (Cont’d) 6.17.3 Regulatory Requil’ements And Environmental Issue Save as disclosed in Sections 4.I(xi), 6.]4, 6.17.1 and 6.17.2 of this Prospectus, as at the LPD, we are in compliance in respect of all regulatory requirements (including land ntles and building regulations) and environmental issues which may materially affect OUf Group ‘8 operations and/or utilisation of assets. 6.17.4 Interruptions To Business And Operations We have not experienced any material intenuption in business which had a significant effect on our operations during the past twelve (12) months preceding the LPD. 6.18 FUTURE PLANS, STRATEGIES AND PROSPECTS 6.18.1 Future Plans and Strategies Our future plans and business strategies to further strengthen Our competitive advantages are as follows: (i) Expansion of our Produet Offerings In addition to the introduction of Briquette, we intend to further broaden our product offering with the production of Geotextile. Geotextile is mainly used in civil engineering works for separation or stabilisation of soil to strengthen slopes, erosion control and reinforcement of soft soil foundation in constnlction. Geotextile is also mainly used in plantations for soil improvement, soil protection and upon its biodegradation, serve as a natural fertiliser. As at the LPD, we have installed one (1) Geotextile production line with a monthly capacity of 500 mt of Geotextile in our Plant 2 as part of our development effort in the manufacture of Geotextile. We plan to commence pilot production for our Geotextilc in the second quarter of 20 14 and thereafter commercialise our Geotextile production by the fourth quarter of20i4. (ii) Enhancement of our Product Offerings Currently, our Briquette is mainly supplied to the local market, with minor supply to China intermediaries. As part of our strategy to enhance our competitive strength, we intend to better serve our customers with provision of Briquette customisation services to meet the requirements of customers from various industries. Through our process development efforts, we strive to continuously improve the quality of our Briquette. i.e. the density and moisture content, in order to better penetrate the China’s Briquette market and increase our supply of Briquette to China. Meanwhile, the recent banning of new coat-fired plants in Beijing, Shanghai and Guangzhou of China is likely to spur demand for cleaner, altenlative source of energy including Briquette (Source: IMR Report by Proteg(~ Associate.)). As such, we envisage a potential rising demand for Briquette in the China market moving forward. We believe the improved quality of our Briquette will enhance market acceptance of our Briquette in the China market and thereby our revenue. 6. BUSINESS OVERVIEW (Cotll’d) (iii) Green Power Generation Utilising Short Fibre Short fibre produced from our biomass materials is currently used for biomass energy generation using steam boiler to operate the production of our biomass materials and value­added products, and as raw material for Briquette production. In addition to the abovementioned, we intend to move towards zero waste production with the installation of a boiler turbine system which will enable the utilisation of wastes produced as by-product of OUf operation to power our production process. As compared to existing boiler which produces steam. the proposed new boiler turbine system will generate electricity from the incineration of short fibre and is estimated to enable us to achieve further cost savings of up to approximately Rl\13.00 million per annum in woodchips, electricity and maintenance and operation costs. Based on the preliminary study conducted, the purchase and installation of the boiler turbine system is estimated to cost approximately RM6.50 million, which wc intend to finance via bank botTowings and/or internally generated funds. We target to install the boiler turbine system by the fourth quarter of 20 IS and thc installation process is estimated to take approximately fourteen (14) months. (iv) Expansion of Our Production Facility In line with our product and market expansion plans, we intend to extend our production facility with the construction of a new production facility. The new production facility will be a single storey factory building constructed adjacent to Plant I with a built-up area of approximately 80,000 sq ft and will be used as a warehouse and/or to house new production lines. Besides that, we also intend to install the boiler turbine system in our new production facility. The construction of the new production facility is expected to commence in the third quarter of2015 upon obtaining the relevant authorities approval for the building plan and is expected to be completed within a period of fifteen (15) months from the date of commencement. The construction of the new production facility is estimated to cost approximately RM3.20 million, which we intend to finance entirely from the Public Issue proceeds. (v) Obtaining ISO Certification for Our Subsidiary Compauies
One of our wholly-owned subsidiary companies, HK Kitaran has been accredited with ISO 9001:2008 in April 2012. In view that ISO is an international standard recognised by 163 countries, we intend to apply for ISO accreditation for HK Palm Fibre and Fibre Star in the fourth quarter of 2014 and fourth quarter of 2015 respectively. The accreditation process is expected to take approximately six (6) to twelve (12) months. Our compliance to internationally recognised standards is expected to provide us with better opportunities to penetrate overseas market such as Europe and USA.
(vi) Market Expansion

As part of onr market expansion plans and in line with our increasing exposure in the China market, we intend to incorporate a subsidiary company in the southern region of China in view of China’s continuous use and growing demand for oil palm EFB fibre conpled with our ability to supply large quantities of oil palm EFB fthre to customers in China. With the setting up of a subsidiary company in China, we will be able to obtain primary knowledge on the market trends and further expand our market presence in China. As at the LPD, we are in the midst of locating an ideal place for the set up of the subsidiary company as well as sourcing for human resources. Subject to obtaining the relevant regul<ttory approvals from the China authorities, we intend to set up the subsidiary company in China by the first quarter of20l5. 6. BUSINESS OVERVIEW (Colll’d) 6.18.2 Prospects The biomass materials market for coconut fibre and oil palm EFB fibre in Malaysia is forecasted to grow at a CAGR of 14.3% from 2013 to 2018 to reach RM180A million in 2018. This growth is expected to be driven by the following demand and supply conditions as set out in Section 7 of this Prospectus: Demand conditions Ii Rising demand from China; Ii Population growth and greater affluence sputTing demand for end-products; and
• Growing applications of natural fibre. Supply conditions Ii Strong government support; • Increasing domestic and foreign investments and initiatives;
• Increase of oil palm production under the ETP; and II Legislation enforcement on environment protection.

 

(Source: IMR Report by Protege Associate,) Based on the expected growing demand for coconut fibre and oil palm EFB fibre as well as our future plans and strategies and our competitive strengths as set out in Sections 6.18.1 and 6.11 of this Prospectus respectively, our Board is of the view that we are well positioned to enjoy positive growth in foreseeable future. Whilst we recognise the existence of market challenges in the industry and the various risk factors as set out in Section 4 of this Prospectus, we are committed to our business and our growth strategies which have been put in place to propel us to be a stronger biomass materials and valued-added products manufacturer. THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

 

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