Industry Overview

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT SMITH ZANDER INTERNATIONAL SDN BHD (1058128-\1) Suite 23-3, Level 23, Office Suite, Menara 1MK, SlvtITH ZANDER 1 Jalan Kiara, Mont’ Kiara, 50480 Kuala Lumpur, Malaysia. T +603 6211 2121 2 2 NOV 2016 The Board of Directors HLT Global Berhad Third Floor, 1\10. 79 (Room A) Jalan SS21/60, Damansara Utama 47400 Petaling Jaya Selangor Dear Sirs/Madam, Executive Summary of the Independent Market Research Report on the Rubber Glove Industry and the Glove-dipping Line Industry This Executive Summary of the Independent Market Research Report on the Rubber Glove Industry and the Glove-dipping Line Industry has been prepared by SMITH ZANDER INTERNATIONAL SDN BHD (“SMITH ZANDER”) for inclusion in the Prospectus in conjunction with the listing of HLT Global Berhad on the ACE Market of Bursa Malaysia Securities Berhad. For and on behalf of SMITH ZANDER:
DENN~-‘–­MANAGING PARTNER
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d) 1 INTRODUCTION Objective and Scope This Executive Summary of the Independent Market Research (“IMR”) report has been prepared in conjunction with the listing of HLT Global Berhad on the ACE Market of Bursa Malaysia Securities Berhad. The opjective of this Executive Summary of the IMR report is to provide an independent view of the industry and market(s) in which HLT Global Berhad operates through its sole sUbsidiary, HL Advance Technologies (M) Sdn Bhd (“HL Advance”), and to offer a clear understanding of the industry and market dynamics. Rationale for the Scope of Work HLT Global Berhad is a glove-dipping line manufacturer, principally involved in the design, fabrication, installation, testing and commissioning of glove-dipping lines. HLT Global Berhad’s glove-dipping lines cater for the manufacturing of specific types of rubber gloves based on customers’ end-product requirements. HLT Global Berhad is capable of producing glove-dipping lines for natural rubber gloves as well as for synthetic rubber gloves. Customers of HLT Global Berhad are mainly rubber glove manufacturing companies involved in the production of natural and/or synthetic rubber gloves used across various sectors inclUding medical, manufacturing, industrial and food processing. The scope of work for this Executive Summary of the IMR report will thus address the following two (2) areas: (i) The end-user market served by HLT Global Berhad, namely the Rubber Glove Industry; and
(ii) The industry in which HLT Global Berhad operates, namely the Glove-dipping Line Industry in Malaysia and the Glove-dipping Line Industry in Thailand.

This Executive Summary of the IMR report will conclude with a summary of the future growth prospects for HLT Global Berhad in relation to the future outlook of (i) and (ii) above. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)

2 THE RUBBER GLOVE INDUSTRY Introduction Rubber gloves are protective garments designed to be worn over the hands to protect the wearer from physical, biological, chemical or mechanical hazards. They are mainly used in the healthcare industry but are also commonplace in other sectors such as industrial, food processing, semiconductor and electronics, as well as beauty. There are thus many types of gloves available in the market to conform to the needs of the user(s), based on the contaminants the user will come into contact with and the level of protection needed. Generally, there are two (2) categories of rubber gloves, i.e. natural rubber (“NR”) gloves and synthetic rubber (“SR”) gloves: • NR gloves NR or latex gloves are popular due to their durability, flexibility, tactile sensitivity, comfort and superior barrier protection. Latex, which is the sap of rubber trees called Hevea brasiliensis, is harvested by carving a rubber tree and collecting its sap in a cup. The latex is centrifuged to separate it from water, proteins and impurities, after which chemicals are added to aid the vulcanization process to make its properties more stable and less susceptible to temperature changes. Rubber possesses many properties that render it useful in the manufacturing of a wide range of products. It is highly elastic, durable, water-resistant, can be easily moulded to a variety of shapes, and does not dissolve easily. Malaysia’s tropical climate is conducive to growing rubber trees, due to the abundance of sunlight and rain. Furthermore, its proximity to several other top rubber-producing countries means that transportation costs are lower, making it more cost-effective to procure raw materials for NR glove manufacturing. Historically, global production of NR gloves has varied from year to year as a result of vulnerability of market prices of latex and other factors affecting production of latex such as weather conditions, natural disasters as well as shortage of skilled rubber tappers. In 2014, Southeast Asia experienced a drought which affected the agricultural sector in the highest rUbber-producing countries in the region, namely Malaysia, Indonesia and Thailand. Rubber production decreased and the volatile supply of latex led to higher prices of NR gloves. • SR gloves SR gloves are close substitutes for NR gloves in a variety of applications due to its inherent characteristics in terms of stability and physical properties, with the added advantage of being able to cater to users with latex allergies and the absence of dependency on the availability and prices of NR. The development of SR gloves was spurred during World War II when the United States of America (“USA”) and Germany experienced supply shortages of NR, leading to vast improvements in varieties of SR gloves for military use. Anti-vesicant SR gloves were used to provide protection during chemical warfare, where blistering agents such as sulphur mustard were used to incapacitate the enemy by causing burns, nausea, breathing difficulties and even death. SR gloves were developed to improve the physical and chemical properties of NR gloves in order to tailor it to specific industry applications. NR gloves mainly comprise polymers of isoprene that occur naturally. SR gloves are artificially produced through the polymerisation of monomers such as butadiene, isoprene, styrene and chloroprene, which are derived from plants and/or petrochemicals. This has led to a wide range of SR glove varieties in the market, with different physical and chemical properties and applications. There are over 200 varieties of SR available commercially, with the most consumed forms for glove­making being polyurethane (“PU”), polyvinyl chloride (“PVC”), neoprene, acrylonitrile butadiene 3 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
rubber (“NBR”) (i.e. nitrile rUbber), styrene butadiene rubber (“SBR”) and styrene ethylene butadiene styrene (“SEBS”). The most popular kind of SR gloves are nitrile gloves which are made from NBR, a crude oil by­product. Nitrile gloves are gaining popularity among medical professionals and those who work with chemicals or infectious material, due to their superiority in terms of puncture-resistance and protection against chemicals and oils, in addition to having a longer shelf life. They also tear easily once there is a puncture, alerting the wearer that there is a compromise. However, they are more expensive and less flexible than I\JR gloves. Nitrile gloves are mostly powder-free as they are not as difficult to don as latex gloves. Rubber glove industry segmentation (Global), 2016 Rubber gloves
Rubber gloves are manufactured using a glove-dipping line, which is a production line consisting of components such as conveyor chain tracks, former holders, ceramic formers, dipping tanks, heating system, oven and beading brushes. A glove-dipping line is designed to allow raw materials, such as coagulant, and natural or synthetic liquid latex, to undergo the required sequential steps in glove-making to produce rubber gloves. The glove-making process begins with the cleaning of formers or hand-shaped moulds. Next, these formers are dried before being dipped in a coagulant, and then dried in an oven. Following this, the formers are dipped in natural or synthetic liquid latex, which turns into a film after going through a heated oven. The gloves on the moulds are then pre-leached in water to remove residual proteins and chemicals. Subsequently, the gloves are then dipped in polymer, which will coat the inner surface of gloves to ease donning. Beading brushes are then used to push back the cuffs on the gloves for added strength and to ease donning. The gloves go through a vulcanization process in the main oven, which involves heating the glove films to enhance strength and elasticity, thus preventing them from tearing easily. After that, they are post-Ieached/ cooled to remove any chemicals or proteins that have bloomed to the surface. Traditionally, the next step is powdering the gloves by dipping them in a slurry of corn starch to ensure that they do not stick to other gloves after they have been stripped from the formers. However, to produce powder-free rubber gloves, this step is replaced with chlorination or polymer coating to lubricate the rubber gloves, followed by hot water rinsing and lubrication coating. Both of these rubber glove types will then be dried in the slurry oven. For polymer coated powder-free rubber gloves, rubber gloves will be dried in the slurry oven once it has been post-Ieached/ cooled. At the final stages of the glove-making process, rubber gloves are dried, stripped from the formers, and inspections are carried out to ensure 4 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
that there are no visual defects, air leaks or water leaks, as well as to test tensile strength, before they are packed. Rubber glove manufacturing process
Rubber gloves are used in a variety of end-user industries, including medical, industrial, food processing, semiconductor and electronics, beauty and retail industries. One of the largest end·user industries for rubber gloves is the medical industry, where rubber gloves are typically used for medical examinations or surgical purposes. There are also rubber gloves that provide extra protection for those who administer chemotherapy drugs and radiation therapy. During industrial processes, rubber gloves are used for protection against electrical shock, mechanical hazards, chemicals, liquids, cuts and abrasions, thermal heat hazards and manual handling injuries. The use of disposable rubber gloves in the food processing industry is becoming routine as people have higher standards regarding hygiene practices during food preparation, distribution and service. In the semiconductor and electronics industry, rubber gloves are required during manufacturing of semiconductors and electronics in c1eanroom environments, as well as in laboratories, to minimise exposure to pollutants. Rubber gloves are also used to prevent infections in beauty salons, spas, hair salons and tattoo studios. Description of rubber glove uses in end-user industries (Global), 2016 …..End-user indust Medical examination, surgery, chemotherapy, radiation therapy Electrical safety, mechanical protection, chemicals, liquids, cuts and abrasions, Medical Industrial thermal protection, manual handling -Food preparation, distribution and service Semiconductor and Food processing Assembly and testing of semiconductor components in c1eanroom facilities and electronics laboratories Beauty Beauty salons, spas, hair salons, tattoo studios -<_.-7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Industry Performance, Size and Growth -Global The rubber glove industry is a vibrant and growing industry, as evidenced by global rubber glove demand which has grown from 65.3 billion pairs in 2009 to 88.0 billion pairs in 2014, registering a compound annual growth rate (“CAGR”) of 6.1 %. Much of this growth was driven by the growing end-user industries, particularly the healthcare industry where rubber gloves playa significant role. SMITH ZANDER forecasts rubber glove demand to increase from an estimated 94.2 billion pairs in 2015 to 107.9 billion pairs in 2017, at a CAGR of 7.0% during the period. Rubber glove demand (Global), 2009-2017(f)
Notes: Latest available information is as at 2014
(e) -estimate
(f) -forecast

Malaysia is the world’s largest producer of rubber gloves, with its total local production meeting an estimated 63.1 % of global demand in 2015. Malaysia is also among the largest producers of NR in the world. Please refer to Chapter 3 -The Glove-dipping Line Industry in Malaysia (Demand Conditions: Key Growth Drivers) of this Executive Summary of the IMR Report for further details of the world’s producers of NR. In 2000, the world’s top exporter of rubber gloves was Malaysia, standing at USD876.1 million (RM3.3 billion) or 45.0% of the world export share. This was followed by Thailand (USD358.5 million or RM1.4 6 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Collt’d)
billion, 18.4%), USA (USD85.0 million or RM323.0 million, 4.4%), Mexico (USD82.5 million or RM313.4 million, 4.2%) and Indonesia (USD66.4 million or R1Vl252.3 million, 3.4%). By 2014, Malaysia’s share of world exports for rubber gloves had increased to 50.0%, exporting USD3.3 billion (RM1 0.7 billion) worth of rubber gloves. Thailand and Indonesia remained top exporters in 2014, with export values of USD1.1 billion or RM3.7 billion (17.1%) and USD236.4 million or RM773.8 million (3.6%) respectively. China (USD541.9 million or RM1.8 billion, 8.3%) and Germany (USD241.0 million or RM788.8 million, 3.7%) were new entrants to the list of top exporters. Top exporters of rubber gloves (Global), 2000 and 2014
-~:o~ort-v~,u~r~xp~:v~~::::.~rl–::=-T Exp:va,ueT~=er::ar
partner SO ‘000) (RM ‘000) value (%) partner (USO ‘000) (RM ‘000) value (%) Malaysia
45.0 3,270,636876,114 3,329,233 Malaysia 10,706,753 50.0 Thailand
358,547 1,362,480 18.4 Thailand 1,116,339 17.1 USA
3,654,446 85,011 323,041 4.4 China 541,889 1,773,928 8.3 Mexico
313,407 4.2 Germany 240,96682,476 788,827 3.7 Indonesia
66,398 252,311 3.4 Indonesia 236,377 773,802 3.6 Note: Latest available information is as at 2014
In 2014, USA was the largest consumer of rubber gloves in the world, with an estimated 31.0% share of the global rubber glove market. This was followed closely by Europe which held 30.0% of the global rubber glove market share. Other large consumers were Asia (18.0%), Latin America (9.0%) and others (12.0%). In 2000, the top importer of rubber gloves was USA with USD964.4 million (RIVl3.7 billion) worth of rubber gloves or 44.4% of the world market share. The second largest importer was the United Kingdom (“UK”) with USD128.6 million (RM488.7 million) or 5.9%. This was followed closely by Germany (USD126.7 million or R1Vl481.6 million, 5.8%), Japan (USD102.9 million or RM391.1 million, 4.7%) and Italy (USD97.4 million or RM370.3 million, 4.5%). USA remained the top importer of rubber gloves in 2014 with 30.9% of the global market share, valued at USD2.0 billion (RM6.7 billion). Germany (USD554.2 million or R1Vl1.8 billion, 8.4%), Japan (USD365.7 million or RM1.2 billion, 5.5%) and UK (USD287.1 million or RM939.9 million, 4.4%) remained top importers with significant increase in import value. Brazil was the fifth largest importer in 2014 (USD214.4 million or R1Vl701.8 million, 3.3%). Source: Comtrade Rubber glove market (Global), 2014(e) Others,
Note: Latest available information is as at 2014
Source: Koncept Analytics 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Top importers of rubber gloves (Global), 2000 and 2014
USA 964,410 128,594UK Germany 126,724 102,932Japan Italy 97,443 3,664,760 488,658 481,551 391,142 370,284 44.4 5.9 5.8 4.7 4.5 USA Germany Japan UK Brazil 2,040,146 554,163 365,693 287,103 214,372 6,678,621  30.9  1,814,107  8.4  1,197,132  5.5  939,861  4.4  701,768  3.3
Note:  Latest available information is as at 2014  Source: Comtrade  The growth of the medical and healthcare industry is a key demand driver for rubber gloves, as indicated by  Rubber glove exports by usage (Global), 2014
global rubber glove exports in 2014, whereby 89.0% of exports consisted of examination rubber gloves and 3.0% consisted of surgical rubber gloves. The remainder of rubber glove exports comprised rubber gloves for the c1eanroom (2.0%), household (1.0%) and industrial (5.0%) sectors.
Note: Latest available information is as at 2014
Industry Performance, Size and Growth -Malaysia Malaysia is the world’s largest manufacturer of rubber gloves, with its local production of rubber gloves meeting an estimated 63.1 % of global demand in 2015. Malaysia’s rubber gloves are more competitively priced than its closest competitor, Thailand, as production costs are lower due to higher labour productivity, efficient transportation system and lower fuel costs. Malaysia dominates the global rubber glove industry as the largest producer and exporter, producing 59.4 billion pairs and exporting 658,016.0 tonnes of rubber gloves in 2015. Malaysia is the sixth largest producer of NR in the world, in addition to importing raw materials from neighbouring Thailand and Vietnam to boost its rubber glove industry. Aside from the abundance of raw material, Malaysia holds advantage in terms of advanced infrastructure, research and development (“R&D”) programmes, development of supporting industries and support from government agencies. As the rubber glove industry is a major contributor to the Malaysian economy, the government has taken measures to boost 8 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
the development of this industry. The Tun Abdul Razak Research Centre (“TARRC”) is a unit of the Malaysian Rubber Board and promotes the Malaysian rubber and rubber product industries, besides researching on advancement of the industry through science and technology, processing and design. Demand for rubber gloves is growing due to its significance to the healthcare industry, which is enhanced by epidemic and pandemic disease outbreaks. In 2003 and 2004, the number of gloves manufactured increased by 23.4% and 20.6% respectively, due to outbreaks of H5N1 bird flu and Severe Acute Respiratory Syndrome (“SARS”). There was a 13.5% growth in 2010 because of a worldwide H1 N1 swine flu pandemic, which carried over to 2011, increasing production by 17.7%. In 2013, there was a surge of

9.1 % in production to cope with the outbreaks of H7N9 bird flu and Ebola virus disease (“Ebola”). The outbreak of Middle East Respiratory Syndrome (“MERS”) in South Korea contributed to the growth in rubber glove production in 2015. Rubber glove production of Malaysia grew by 5.5% to 59.4 billion pairs in 2015, from 56.3 billion pairs in 2014. Moving forward, SMITH ZANDER forecasts the rubber glove industry in Malaysia to grow by 8.5%, from the estimated 64.6 billion pairs in 2016 to reach 70.1 billion pairs in 2017. This is expected to be driven by the on-going outbreak of the Zika virus disease, which began in 2015. Rubber glove production (Malaysia), 2000-2017(f} 80 70 60 c:: 0 :+: 50l,) .g~ o ~ …..-40 c.. III Ole. > c:: 0.2 30 (5:: …. .0 .0 Ol~ 20 .0 :::l
c::: 10 0

Year 2000 2001 2002 2003 2004 2005 2006 2007 _. 2008 Number of rubber gloves manufactured Year-on-year growth (billion pairs) (%)I
20.1 21.2 21.2 26.1 31.5 32.3 35.6 -36.6 39.1 -5.7 -0.4 23.4 20.6 2.6 10.4 2.7 6.9 8″ 2.640.1 2010 13.545.5
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)

Note: (f) -forecast Source: Malaysian Rubber Board, Department of Statistics Malaysia Malaysia’s export of rubber gloves include both NR and SR gloves used in multiple industries, such as healthcare, industrial and general purpose rubber gloves. In 2010, Malaysia exported 526,519.7 tonnes of rubber gloves valued at RM8.9 billion. By 2015, this figure had grown to 658,016.0 tonnes at the value of RM13.1 billion, registering a CAGR of 4.6%. Rubber glove exports (Malaysia), 2010-2015 Year 2010  ] I 1  .  Quantity (kilograms) 526,519,723  I .  Value (RM million) 8,915.5  2011  486,775,101  9,891.6  2012  567,102,697  10,560.0  2013  845,357,887  10,533.4  2014  781,021,191  10,705.1  2015  658,015,979  13,097.0  CAGR (2010-2015)  4.6%  –
Source: Malaysian Rubber Glove Manufacturers ASSOCiation (MARGMA”), Department of Statistics Malaysia ” [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Collt’d)
In 2015, the top destination for rubber gloves manufactured in Malaysia is the USA where 34.3% of locally manufactured rubber gloves are exported to. This is followed by Germany (7.5%), Japan (6.1 %), UK (4.8%), Brazil (3.6%), Italy (2.8%), Top export destinations for rubber gloves manufactured in China (2.6%), Belgium (2.3%), France Malaysia (Global), 2015 (2.3%), Spain (2.2%) and others (31.4%). The Malaysian Rubber Board implemented a certification program known as Standard Malaysian Gloves (“SMG”) in 1998 which applies to latex or NR medical examination gloves. Rubber glove manufacturers in Malaysia who apply for this certification will need to undergo testing on their products to determine whether they meet international standards in terms of quality, protein levels and barrier effectiveness. After being awarded this certificate, regular auditing will be conducted to ensure continuous compliance. Rubber glove
manufacturers in Malaysia who are Source: MARGMA interested in exporting their products to developed countries will first have to be certified. The purpose of this certification program is to ensure that exported rubber gloves meet the regulatory requirements and standards set by the USA Food and Drug Administration (“FDA”) and ASTM International. As of 2016, there are over 60 rubber glove companies in Malaysia. The major rubber glove manufacturers in Malaysia consist of both public listed companies as well as smaller private companies. The majority of these manufacturers produce rubber gloves exclusively. Examples of identified major rubber glove manufacturers in Malaysia are shown as follows: • Careplus Group Berhad
• Hartalega Holdings Berhad

Kossan Rubber Industries Berhad Latexx Partners Berhad Rubberex Corporation (M) Berhad Supermax Corporation Berhad • Top Glove Corporation Berhad Malaysia’s position as the world’s largest manufacturer and exporter of rubber gloves provides a strong customer base for glove-dipping line manufacturers, as there are a large number of rubber glove producers in Malaysia, including some of the world’s largest producers. Over the years, the glove-dipping line industry in Malaysia has developed in support of the domestic rubber glove industry, and has grown to serve overseas rubber glove manufacturers as well. 11 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
3 THE GLOVE-DIPPING LINE INDUSTRY IN MALAYSIA Definitions and Segmentation A glove-dipping line is a production line that manufactures rubber gloves and consists of components such as conveyor chain tracks, former holders, ceramic formers, dipping tanks, heating system, oven and beading brushes. Additional modules can be installed, such as pneumatic air jets to automate stripping of the rubber gloves from the formers, water tightness testing machine or special packing equipment for sterile rubber gloves. A centralised control panel can be put in to monitor and set the parameters for the production process. The dipping line is designed and built based on customer-specified requirements such as speed, length, type of heating system, production output, thickness and type of rubber glove to be produced. The size and design of the machinery is also based on the factory layout and floor space available. The structure is fitted piece by piece, with an engineer on-site to monitor installations. The entire dipping line goes through a dry run, followed by a wet run to ensure that everything is working smoothly before being handed over to the customer. Components of glove-dipping lines (Global), 2016 Component Function A former washing system cleans formers before the start of the next production cycle and it consists of the following components:­• acid tank, which contains nitric acid for the purpose of removing residues from the surface of formers from the previous production cycle;
• hot water rinse tank, which serves to wash away acid from the surface of

formers; Former cleaning system
• alkaline tank, which contains alkaline cleaning solution for the purpose of neutralising formers after washing from acid tank as well as removing non­rubber and other organic residues from the surface of formers; and
• rotational and horizontal brush tank, which contains nylon brushes for mechanical scrubbing for the purpose of removing remaining residues from the surface of formers.

Dipping tanks serve to contain chemical solutions such as coagulant, latex, polymer and corn starch slurry, and will be installed at different stages of a glove­Dipping tank dipping line. As formers pass through, they will be dipped into the solution contained in the dipping tanks for coating purpose. Water tanks, such as hot water rinse tank, cooling tank, pre-leaching tank and post­Water tank leaching tank, serve to contain water for the purpose of rinsing and cooling, and will be installed at different stages of a glove-dipping production line. There are three (3) types of fibreglass tanks, i.e. neutraliser tank, soak rinse tank and chlorination tank. A neutralizer tank serves to ensure excessive chlorine solution is neutralised before proceeding to the post-leaching process, while a soak Fibreglass tank rinse tank washes away excessive chlorine solution from the surface of rubber gloves. A chlorination tank serves to subject rubber gloves to chlorine solution at controlled concentration for the purpose of surface treatment to provide a slippery effect on the surface of rubber gloves to ease donning. I——-·—–f-::;:—–;-;-;-c—;—:-c:–;–;–:=o–__;___;_–~__;_-__;_;___;_–_;__;_;____;_;c___;___:_;___I Ovens will be installed at different stages of a glove-dipping production line for the purpose of drying formers before coagulant dipping and after coagulant and latex Oven dipping. It also facilitates the eventual vulcanisation process, which serves to dry and vulcanise the latex film on formers into a more durable material. A beading station rolls the cuff of rubber gloves to form a bead for added strength Beading station to prevent tearing and to ease removal of rubber gloves from formers. The main steel structure of the entire glove-dipping production line, including-~ Main steel structure of the ancillary components attached (such as steel platforms, staircases, piping support entire glove-dipping and tank support), which forms the mainframe which holds up all of the glove­production line dipping line components. _. . -.L. –‘ 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Component Function I Centralised control panel  A centralised control panel, which forms the control unit of a glove-dipping line, serves to control the entire rubber glove manufacturing process based on predetermined parameters.  Conveyor chain and conveyor chain track Former holder track, former holders and formers  A conveyor chain is a chain-driven mechanical handling component of a glove-dipping line, which will be fitted onto the conveyor chain track. It serves to carry and move former holders together with formers in a uniform circular motion throughout the glove-dipping line on a continuous basis powered by main drive motors. A former holder track runs in parallel with the conveyor chain track and it serves as a resting track for former holders. A former holder attaches former to the conveyor chain and can be arranged in single or double rows, depending on whether it is a single or double former glove-dipping line.  Main drive motor  An electric motor converts electrical energy into kinetic energy thereby powering the conveyor chain of a glove-dipping line.  I
The glove-dipping line industry supports the rubber glove industry, where glove-dipping line manufacturers design and build glove-dipping lines in order to enable rubber glove industry players to manufacture rubber gloves. There are no differing segments within the industry. Industry Performance, Size and Growth The glove-dipping line industry comprises companies which are involved in the design, fabrication, installation, testing and commissioning of glove-dipping lines. Among the key industry players in the glove-dipping line industry in Malaysia are Control Instruments (M) Sdn Bhd, HLT Global Berhad, Kendek Products Sdn Bhd, KSG Engineering Sdn Bhd, MPMT Industries Sdn Bhd, RIPCOL Industries Sdn Bhd, Sama Kejuruteraan Sdn Bhd and Xin Xin Engineering Sdn Bhd. The glove-dipping line industry size can be computed based on revenues of identified glove-dipping line industry players in Malaysia. The glove-dipping line industry in Malaysia demonstrated a healthy CAGR of 14.8%, growing from RM124.4 million in 2009 to RM284.2 million in 2015. The industry grows in tandem with rubber glove demand, as rubber glove manufacturers typically increase their capital expenditure on glove-dipping lines to expand their production capacity during the period when demand for rubber gloves is high. As such, the surge in the Malaysian rubber glove production in 2010 due to a worldwide H’IN1 swine flu pandemic led to a spike in demand for glove-dipping lines during the period, where the glove­dipping line industry in Malaysia recorded an increase of 44.6% between 2009 and 2010. Similarly, the increase in the Malaysian rubber glove production in 2013 due to the outbreaks of H7N9 bird flu and the Ebola virus in Central Africa, resulted in an increase of 44.7% in glove-dipping line industry size between 2012 and 2013. The glove-dipping line industry in Malaysia is estimated to illustrate positive growth in 2016. Moving forward, SMITH ZANDER forecasts the glove-dipping line industry in Malaysia to grow at a healthy CAGR of 15.2%, from an estimated RM326.5 million in 2016 to RM575.9 million in 2020. This is expected to be driven by the growing end-user industries and particularly the healthcare industry, due to the outbreak of the Zika virus disease. Please refer to Chapter 3 -The Glove-dipping Line Industry in Malaysia (Demand Conditions: Key Growth Drivers) of this Executive Summary of the IMR report for further details on key demand drivers. 13 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Glove-dipping line industry size (Malaysia), 2009-2020(f)
2009 2010 2011 2012 2013 2014 2015(p) 2016(f) 2017(f) 2018(f) 2019(f) 2020(f) Notes: (p) -preliminary
(f) -forecast

Source: Suruhanjaya Syarikat Malaysia (“SSM’) Demand Conditions: Key Growth Drivers Growth in demand for rubber gloves resulting from growing end-user markets The glove-dipping line industry relies on the growth of the rubber glove industry, and the global rubber glove industry is expected to grow at a CAGR of 7.0% between 2015 and 2017. The increasing demand for rubber gloves has led, and will continue to lead, to a need for rubber glove production capacity expansion, thereby increasing demand for glove-dipping lines. Malaysia dominates the rubber glove industry, having produced 59.4 billion pairs in 2015. The growth of the industry is attributed to low production costs, easy access to raw materials and stringent testing to meet international standards, making Malaysian-produced rubber gloves reliable and cost-effective. The Malaysian Government recognises the rising demand from end-user markets and has invested in R&D and infrastructure to support the rubber glove industry. Please refer to Chapter 2 -The Rubber Glove Industry (Industry Performance, Size and Growth) of this Executive Summary of the IMR Report for further details on the growth in rubber glove production. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Much of the growth in the rubber glove industry is attributable to the growing end-user markets: (i) Growth in the global and domestic healthcare industry Healthcare expenditure is defined as the provision of public and private healthcare products and services. Healthcare expenditure has been growing across global regions, illustrating that there is growing accessibility to healthcare services. Overall, the global healthcare services industry grew, in terms of healthcare expenditure per annum, from USD4.3 trillion (RM16.3 trillion) in 2004 to USD7.8 trillion (RM25.5 trillion) in 2014, registering a healthy CAGR of 6.1 % during the period. Healthcare expenditure (Global), 2004·2014
Note: Latest available information is as at 2014
Source: World Bank Epidemics and pandemics are outbreaks of a contagious disease that occur across a large geographical area or even worldwide. Various strains of influenza, Ebola, SARS and MERS can spread quickly by air or through bodily fluids, which increases the need for protective measures such as wearing rubber gloves and face masks when coming in contact with an infected person. In many cases, these diseases are transmitted to healthcare staff, which has led to more stringent regulations regarding infection prevention. Governments are taking preventive health measures before diseases spread and also increasing people’s awareness about how to protect themselves from getting infected. In Malaysia specifically, the Ministry of Health (“MOH”) Malaysia plays a pivotal role in increasing health awareness in Malaysia by diligently organising various health-oriented campaigns and events to educate and create awareness of the importance of controlling the spread of contagious disease and the methods that can be employed to prevent infection. In many public spaces, hand-sanitizing gel is provided so that people can reduce the risk of infection. Airports also screen passengers for raised temperatures in order to prevent the spread of communicable diseases such as influenza or Ebola. Healthcare workers are educated on the importance of protecting themselves by wearing disposable medical rubber gloves when treating patients. Consumption of rubber gloves increases drastically when there is a major disease outbreak. Rubber gloves are the most basic form of protective equipment used by hospitals when there are cases of 15 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
diseases that are highly contagious. In developed countries, rubber gloves are seen as a basic necessity to contain the disease and avoid an increase in the number of fatalities. As such, there will usually be a spike in demand for medical rubber gloves during major incidences of disease outbreaks, leading to a surge in production. In February 2003, the first case of SARS was identified in Hanoi, Vietnam. There were a total of 8,096 reported cases worldwide including Asia, Europe, North America, Africa and Australia. The virus was successfully contained by July 2003, but with 774 casualties. Avian influenza H5N1, more commonly known as bird flu, spreads from poultry to humans. It first infected humans in 1997 in Hong Kong and re-emerged in 2003 and 2004, spreading from Asia to Europe and Africa. As a result of these outbreaks, Malaysia’s rubber glove production increased by 23.4% and 20.6% in 2003 and 2004 respectively. The H’II\11 swine influenza pandemic occurred from 2009 to 2010. The outbreak started in Mexico in March 2009 and spread worldwide. The confirmed figure for H1N1 deaths is 18,449 but the USA Centers for Disease Control and Prevention estimates the number of deaths at more than 284,000. This is because many of the people who died of flu-related causes were not tested for the virus. This resulted in a 13.5% growth in Malaysia’s rubber glove production in 2010, which carried over to 2011, increasing production by 17.7%. In March 2013, the first case of H7N9 bird flu was reported in China. There have been 571 reported cases, including 212 deaths as of February 2015. These cases all occurred in China, as well as several cases of travellers from China to Canada and Malaysia. Rubber glove production in Malaysia increased by 9.1 % in 2013 to cope with this outbreak. A major outbreak of Ebola started in March 2014 in Guinea and is ongoing. There were 27,479 reported cases with 11,222 deaths. The disease spread quickly in Africa, along with several cases in Europe and USA. Due to the lack of healthcare infrastructure and shortage of protective equipment in Africa, many health workers became infected when treating patients. Malaysia donated over 20 million rubber gloves to West Africa following the Ebola outbreak to help curb the spread of infection. MERS was first detected in Saudi Arabia in 2012, spreading throughout the Middle East and to Asia, USA and Africa. There was an outbreak in May 2015 in South Korea, with 182 confirmed cases and 1 in China, resulting in 32 deaths so far. This has contributed to the growth in rubber glove production numbers in 2015. Towards the end of 2015, there was an outbreak of the Zika virus disease which has led to serious neurological birth defects. Since then, the virus has spread to 58 countries and territories, and is likely to continue spreading to new areas. This pandemic is expected to influence rubber glove production in 2016. Furthermore, the increasing incidence of chronic lifestyle diseases is mainly attributed to the leading of more stressful lifestyles, consumption of processed food with higher saturated fat content and lower nutritional values, and a more sedentary lifestyle with lack of regular exercise. Rapid urbanisation has also led to a change in lifestyle of the Malaysian population, to becoming increasingly bUsy as more women join the labour workforce and people work longer hours. As a result, chronic diseases such as hypertension, cancer, diabetes and obesity are becoming more prevalent. This growing change in lifestyle is a concern in all developing countries as people find it difficult to balance their health with their stressful lifestyles, leading to high morbidity rates. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
An ageing population is defined as a shift in the distribution of a country’s population towards an older age group, which is mainly caused by the ageing of the baby boomers1, who are moving into retirement age, and further exacerbated by low birth rate, low mortality rate and improved life expectancy. The world’s population aged above 80 has been increasing at a rate of approximately 3.0% over the past 20 years. Malaysia’s percentage of young population (0 to 14 years) has decreased from 27.4% in 2010 to 25.0% in 2015 while the ageing population (65 years and above) has increased from 5.0% of the total population in 2010 to 5.9% of the total population in 2015. Low birth rate is attributed to urbanisation, increasing costs of raising a child and better employment opportunities for women. Low mortality rate and improved life expectancy are primarily the result of better living conditions from increased wealth, access to better nutrition, healthcare and sanitation, as well as political stability. Malaysia is a newly industrialised country with a growing economy and increasing wealth. The country is . .. •• • •• supported by a large productive I I 2010 2015(p) population (aged 15 to 64 years) and a high employed segment, which contributes to the increasing wealth of the population and a growing middle income group. Its gross domestic product (“GDP”) per capita is higher than in most Southeast Asian countries with the 0-14 years (%) 27.4 25.0 exception of Singapore and Brunei. —-;~——–+–,——–=:::–:-’15-64years(%) 67.6 69.1 As the average age of the—,—=—————————————————­65 years and above (%) 5.0 5.9 population increases, medical and healthcare facilities such as nursing homes are anticipated to increase Total Employed (million) 11.1 14.1 Household Income their expenditure for disposableDistribution(a): gloves in order to accommodate’=–::-:::-::–;-;–;——-­RM2,999 and below 24.3% growing patient volumes. The ——————————————~———————————————————-­increased cases of illnesses andRM3,000-RM7,999 54.1% diseases within the country areRM8000 and above ————2-1.6<‘7;———, _____________________________________________L _ expected to lead to greater demand Notes: for healthcare services, thus (a) The only publicly available data is as at 2014. benefitting the healthcare industry. (p) -preliminary Furthermore, as the country Source: Department of Statistics Malaysia develops further, rising disposable income will increase the purchasing powerofMalaysians, incl udingforhealthcareservices. Duringthe1O-yearperiodfrom2005to2014, total healthcare expenditure in Malaysia, comprising public and private healthcare expenditure, steadily increased from RM17.9 billion in 2005 to RM46.1 billion in 2014, at a CAGR of 11.1 %.
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Healthcare expenditure (Malaysia), 2005-2014
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: Latest available information for total healthcare expenditure is in 2014
Source: World Bank Likewise, the ageing population has led to increased demand for healthcare services on a global level. This is evidenced by global healthcare expenditure per annum having grown from USD4.3 trillion (RM16.3 trillion) in 2004 to USD7.8 trillion (RM25.5 trillion) in 2014 at a CAGR of 6.1%. China has abolished their one-child policy as the low birth rates have led to increasing healthcare expenditure for the growing ageing population, in addition to a shrinking workforce and gender imbalance as a result of preference for male heirs. As rubber gloves are indispensable to the healthcare industry, the growth of the global ageing population will continue to drive the demand for rubber gloves. (ii) Increasing demand arising from other end-user markets such as manufacturing Other than the healthcare industry, there is increasing demand for rubber gloves from other manufacturing industries such as food processing, refined petroleum products, chemicals and chemical products and pharmaceutical products, fabricated metal products, machinery and equipment, computers and peripheral equipment, electrical equipment, electronic components and boards, communication equipment and consumer electronics, as well as motor vehicles and transport equipment. Globally, manufacturing activities have been increasing over the years, as a result of an increase in demand for products contributed by the growth in world population. Global manufacturing activities have increased by a CAGR of 3.3%, from USD9.8 trillion (RM34.5 trillion) in 2009 to USD11.5 trillion (RM37.6 trillion) in 2014. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Notes: 1. Value added is the net output of a sector after adding up all outputs and SUbtracting intermediate inputs.
2. No deductions are made for depreciation of fabricated assets or depletion and degradation of natural resources.
3. Latest available data is in 2014. Source: World Bank

In Malaysia, GDP from the manufacturing industry has grown from RM192.5 billion in 2010 to RM263.7 billion in 2015, registering a CAGR of 6.5%. The rapid growth of this industry translates into opportunities for growth in the rubber glove industry as well, since many manufacturing facilities use rubber gloves during their processes. One of the manufacturing subsectors with the highest potential for advancing the growth of the rubber glove industry is food processing, which grew from RM8.4 billion in 2010 to RM12.1 billion in 2015, at a CAGR of 7.6%. The demand for hygienic food practices has seen an increase in the use of disposable rubber gloves to prevent contamination during food preparation and service. The refined petroleum products division grew from RM28.0 billion to RM34.2 billion, at a CAGR of 4.1 %. When manufacturing products such as petrol, liquefied petroleum gas, diesel and kerosene, workers are prone to industrial accidents and chemical exposure. Rubber gloves are a necessity in protecting workers from burns, abrasions and chemical contaminants. Chemicals, chemical products and pharmaceutical products manufacturing increased from RM21.0 billion in 2010 to RM30.7 billion in 2015, at a CAGR of 7.8%. Employee safety is a top priority when working with chemical substances, which calls for protective garments such as rubber gloves to safeguard against these hazards. As for pharmaceutical products which are produced in a c1eanroom environment, rubber gloves must be worn at all times to prevent contamination and maintain the highest level of hygiene. The fabricated metal products subsector grew from RM8.5 billion in 2010 to RM14.4 billion in 2015, at a strong CAGR of 11.0%. The manufacturing process involves labour-intensive processes such as forging, stamping, machining and welding to transform metal into useful products such as structural metal parts for building or machinery. During these processes, workers have to wear rubber gloves for protection against electrical shock, mechanical hazards, burns and manual handling injuries. The manufacturing of machinery and equipment grew from RM5.7 billion in 2010 to RM8.1 billion in 2015 at a CAGR of 7.4%. The manufacturing processes involve manual handling and working with machinery, leaving workers exposed to mechanical and physical hazards. To reduce the risk of accident and injury, workers need to wear protective garments such as rubber gloves. The computers and peripheral equipment subsector declined at a CAGR of 6.2% from RM6.1 billion to RM4.5 billion. This could be due to lower manufacturing costs in other countries such as China. Nevertheless, it is still a sizeable market and production processes require the usage of rubber gloves to avoid oils transferring to electronic components. The electrical equipment manufacturing industry grew from RM3.4 billion in 2010 to RM4.6 billion in 2015 at a CAGR of 6.1 %. In this industry, one of the preventive measures to protect workers from electrical shock and physical hazards is by wearing rubber gloves. 19 [Company No.: 11633if!-!J 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
The largest subsector within the manufacturing industry is electronic components and boards, communication equipment and consumer electronics, which grew from RM33.2 billion in 2010 to RM49.4 billion in 2015, at a CAGR of 8.3%. The manufacturing of electronics is done in controlled environments called cleanrooms which are designed to maintain a low level of pollutants such as dust and microbes. Therefore, workers are required to wear protective garments such as rubber gloves, face masks and booties to minimise environmental contamination. The GOP for manufacturing of motor vehicles and transport equipment grew from RM17.9 billion in 2010 to RM26.7 billion in 2015, at a CAGR of 8.3%. Rubber gloves are a necessity in production lines that involve mechanical and chemical hazards. As technology progresses, production capacity will constantly improve to meet increasing demand for motor vehicles, which will affect the consumption of rubber gloves as well. GDP by economic activity at current prices (Malaysia), 2010-2015(p)
Refined petroleum products  28,022  Chemicals & chemical products and pharmaceutical products  21,043  IFabricated metal products  8,535  Machinery and equipment  5,653  Computers and peripheral equipment  6,146  Electrical equipment  3,406  Electronic components &boards,  communication equipment and consumer  33,189  electronics  Motor vehicles and transport equipment  17,889
Others (a) [ 60,231 Total manufacturing I 192,493 Notes: (e) -estimate 33,881 24,941 10,645 6,231 4,367 3,845 32,468 17,391 69,397~ 212,618 37,325 26,587 12,238 6,630 4,178 4,047 69,898 224,730 36,468 26,671 13,510 6,741 4,367 4,076 70,870 232,659 38,162 [ 34,239 I 4.1 I 29,261 I 30,668 I 7.8 I 11.013,950 14,378 8,091 7.47,524 4,463 4,473 -6.2 4,365 I 4,588 6.1
49,408 I 8.3 26,70-j 8.3 75,807 79,102 5.6 253,337 263,717 6.5 20 33,743  36,677  42,993  19,496  22,350  25,130
~”re’.l~ Z~~~ ..”‘ 100 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
(p) -preliminary
(a) Others include other economic activities that may not be relevant to the rubber glove industry. These economic activities include the manufacture of vegetable and animal oil and fats, beverages, tobacco products, textile and wearing apparel, leather and related products, wood products, printing and reproduction of recorded media, non­metallic mineral products, basic metals, fabricated metal products, manufacture of medical, precision and optical instruments, watches and clocks, furniture and other manufacturing repair and installation of machinery and equipment.

Source: Department of Statistics Malaysia Continued growth in the global economy, leading to greater spending power amongst consumers and thus benefiting the end-user industries Overall, the GDP in most economies have been growing, albeit a dip in 2008 and 2009 due to the global financial crisis during that period. Higher growth is witnessed in Asia, as many countries within this region are emerging and developing economies. The following chart illustrates the historical and forecast GDP growth rates for the World, Europe, Asia, Middle East and Africa, and the Americas between 2005 and 2015, and the GDP per capita in 2005, 2010 and 2015 for Europe, the Americas, Middle East and Africa, and Asia.
210.0 81 .c ~ e t’ D­C t’ -10.0 World, Europe, Asia, Middle East and Africa, and the Americas

—–World  -~Europe  –Asia  -­Middle East and Africa  – – – The Americas
35 Europe, the Americas, Middle East and 0′ 1CAGR Africa, and Asia ~ 30·, 3.2% c I en 251,2. ‘ CAGR~ I 3.2%’g. 20 ‘,I’, CAGR CAGR
c: 15 .. 3.8% 8.8% ~ 10 J g ! 5j I _B_Il__ i!o ,L .. Europe The Americas Middle East Asia and Africa .2005-:; 201 0 .2015 Notes: 1, GOP growth rates are based on GOP in constant prices
2. CAGRs in the GOP per capita chart pertain to the period from 2005 to 2015.
3. Data in the GOP per capita chart is based on GOP per capita data in current prices in USD

Source: World Economic Outlook (“WEO’) Database, April 2016 published online by the International Monetary Fund (“IMF’) An increase in wealth implies a trend towards the improvement of basic living standards, including better nutrition, sanitation and healthcare. Growth rates in GDP per capita appear to be fastest in Asia (8.8%) between 2005 and 2015, particularly driven by newly developed and emerging economies such as China, Bangladesh, Indonesia, India, Malaysia and Singapore. A surge in disposable income will result in a more affluent population with greater spending power and higher standards not only towards healthcare, but also in other areas such as hygienic food processing. Availability of raw materials utilised in the manufacturing of rubber gloves Global production of rubber increased from 22.8 million tonnes in 2008 to 26.3 million tonnes in 2014 at a CAGR of 2.4%. During the same period, the production of NR increased from 10.1 million tonnes to 12.1 million tonnes while the production of SR increased from 12.7 million tonnes to 14.2 million tonnes. 21 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Globally, the key producing countries of NR are China, India, Indonesia, Malaysia, Thailand and Vietnam. Between 2008 and 2014, Thailand has consistently emerged as the top producing country of NR, growing at a CAGR of 5.3% from 3.2 million tonnes to 4.3 million tonnes. Indonesia is the second largest NR producing country, growing at a CAGR of 2.3% from 2.8 million tonnes to 3.2 million tonnes over the same period. During this period, China witnessed the highest growth rate as its NR production increased from 0.5 million tonnes to 0.8 million tonnes at a CAGR of 7.4%. While Malaysia remains a key NR producing country, its NR production volume contracted at a rate of 7.6% from 1.1 million tonnes to 0.7 million tonnes, largely as a result of the declining planted areas for rubber due to the continued preference for the oil palm crop. Thailand, Indonesia, Vietnam, India, China and Malaysia collectively produced 10.6 million tonnes in 2014, comprising 87.8% of global I’JR production volume in the said year. Global production of SR grew at a rate of 1.8% from 12.7 million tonnes in 2008 to 14.2 million tonnes in 2014. SR is produced through the polymerisation of petroleum-derived monomers and most SRs are made up of two (2) or more monomers, thereby creating superior properties for this compound. There are over 200 varieties of SR available in the market. Key producers of SR globally are China, Germany, Japan, and Russia. China was the world’s largest producer of SR during this period where its production volume increased from 3.0 million tonnes to 5.5 million tonnes at a strong CAGR of 10.9%. In addition to production trends and market prices of its substitute I\IR, global production of SR is also dependent on the availability of butadiene feedstock, a by-product of ethylene and propylene during the crude oil refinery process. Crude oil prices have been dropping since mid-2014, which has a direct impact on the price of raw materials and enables manufacturers to sell nitrile gloves at competitive prices. Supply of SR is also less volatile than NR, which is an important contributor to the growth of the nitrile glove market as demand increases. Production volume of NR and SR (Selected key rubber producing nations), 2008-2014 CAGRCountry ~~=iOT~o~e~~2013T2014” (%) ­NR Thailand 3,090 3,349 3,6253,167 3,052 3,863 4,324 5.3 Indonesia 2,751 2,440 2,735 2,990 3,012 3,153 2.33,108 752Vietnam 660 711 790 877 949 954 6.3 India 862 705865 831 800 900 900 -3.4 China 619 691548 751 802 865 840 7.4 Malaysia 1,072 857 939 996 923 826 668 -7.6 1,477Rest of world 1,035 1,175 1,362 1,540 1,706 1,472 6.0 Total 9,723 10,393 11,216 11,61610,098 12,217 12,115 3.1 SR China 2,749 3,1952,960 3,671 3,974 4,088 5,496 10.9 Japan 1,651 1,595 1,644 1,599 -0.51,300 1,611 1,627 Russia 1,173 1,121 1,379 1,447 1,443 1,482 1,319 2.0 1,027 958Germany 1,076 1,077 1,033 1,149 1,269 3.6 Rest of world 5,936 6,879 7,298 7,012 -4.56,281 7,108 4,496 Total 12,747 12,409 14,124 15,104 15,089 15,471 14,179 1.8 Note: Latest available data is in 2014, as at 21 November 2016
Source: The Thai Rubber Association, Rubber Association of Indonesia, The Vietnam Rubber Association, Rubber Board India, Malaysia Rubber Board, Association of Natural Rubber Producing Countries, International Rubber Study Group, Food and Agriculture Organization (“FAO”), National Bureau of Statistics of China, Federal Statistical 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Office of Germany, Statistics Bureau of Japan, Russian Federal State Statistics Service, United Nations Industrial Commodity Statistics Database Continuous technological advancements of glove-dipping lines, leading to a need for modifications of existing glove-dipping lines The glove-dipping line industry experiences continuous developments in terms of performance and technology. This is a result of the continuous need for rubber glove manufacturers to reduce cost and achieve economies of scale, in order to remain competitive in the rubber glove industry. One of the most common aspects of technological advancements in glove-dipping lines is the increase in performance of glove-dipping lines. Continuous R&D is typically performed by established glove-dipping line manufacturers, in order to increase the number of rubber gloves manufactured in an hour through a single glove-dipping line. Another common aspect involves the manufacture of energy-saving glove-dipping lines, where glove-dipping line manufacturers are constantly undertaking R&D activities to reduce the energy and utility resources required to fuel their glove-dipping lines. Glove-dipping lines also undergo technological advancements to cater for the increasing application of rubber gloves, and for the increasing needs and demands from consumers. For instance, certain glove­dipping lines can now also manufacture scented rubber gloves so as to prevent any latex odour on consumers’ hands after wearing the rubber gloves. The continuous technological advancement of glove-dipping lines opens the glove-dipping line market to the possibility of machinery modifications for existing glove-dipping lines (to the extent possible) and the manufacturing of new glove-dipping lines using the advanced technology. This thus indicates that there will be continuous demand for glove-dipping lines from rubber glove manufacturers, as they strive to remain relevant to the latest trends in the market, contributing to the growth of the glove-dipping line industry. Supply Conditions and Dependencies Availability of labour and equipment for the manufacturing of glove-dipping lines The manufacturing of glove-dipping lines requires human labour and in most cases, the use of equipment. Equipment utilised in the manufacturing of glove-dipping lines include, amongst others, welding machinery, laser-cutting machinery, and punching, drilling and bending equipment. As many industry players typically manufacture more than one (1) type of product in accordance with the needs of their customers, human labour is still required to transfer the materials from one equipment to another, and to assemble the different components and parts to form the final product. Both equipment and labour required in the manufacturing of glove-dipping lines are readily available, with equipment available for purchase from local or foreign suppliers and manufacturers, and domestic and foreign workers hired as labour for the manufacturing process. Availability of raw materials and supplies The raw materials and supplies used in the manufacturing of glove-dipping lines are primarily steel materials such as steel plates, sheets, tubes and bars. Components and parts such as conveyor chains, ceramic formers and beading brushes are also essential to the manufacturing of glove-dipping lines. Most of these raw materials and supplies are generally readily available, and glove-dipping line manufacturers source these raw materials and supplies from local suppliers as well as foreign distributors or manufacturers. However, glove-dipping line manufacturers must ensure the quality of these raw materials and supplies as the product manufactured must meet the expectations and safety requirements set out by their customers. 23 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Product/Service Substitution Glove-dipping lines are essential for the production of rubber gloves, with no alternative production equipment or methods. As such, there are no effective product substitutes for glove-dipping lines. Reliance and Vulnerability to Imports The value of imports of machinery and parts of machinery for working rubber/plastics or for the manufacture of products from these materials2 was USD143.3 million (RM504.8 million) in 2009 and grew to USD170.2 million (RM664.9 million) by 2015, at a CAGR of 2.9%. It is important to note that these machinery and machine parts do not just encompass glove-dipping lines, but also machinery and machine parts for other rubber and plastic-based products. Nevertheless between 2009 and 2015, the glove-dipping line industry illustrated a higher CAGR (i.e. 14.8%) relative to the CAGR of imports of these machinery and machine parts of 2.9%. This illustrates that the domestic glove-dipping line industry is growing faster than imports of foreign glove-dipping lines into Malaysia, thus indicating that demand for domestic glove-dipping lines are growing at a faster rate relative to demand for foreign glove-dipping lines. As such, it can be deduced that there is a reducing vUlnerability of the glove-dipping line industry in Malaysia to imports as the domestic glove-dipping line industry in Malaysia grows. Imports of machinery and machine parts for rubber and plastic-based product manufacturing (Malaysia), 2009-2015
Note: Exchange rates from USD to RM between 2009 and 2015 were converted based on average annual exchange rates extracted from published information from Bank Negara Malaysia:
2009: USD1 =RM3.5236
2010: USD1 = RM3.2182
2011: USD1 = RM3.0594
2012: USD1 = RM3.0898 2013: USD1 = RM3.1511 2014: USD1 = RM3.2736 2015: USD1 =RM3.9073 Source: Comtrade 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Relevant Laws and Regulations Environmental Quality Act 1974 Malaysia’s Department of Environment (DOE) is responsible for the implementation and monitoring of Malaysia’s environmental regulations and policies. The Environmental Quality Act 1974 prohibits industrial activities which cause air, sound, soil and water pollution without obtaining a valid license. Therefore, the burning of waste or rubbish or any open burning without obtaining the necessary licenses or permits is prohibited. Under this Regulation, effluent shall not be diluted, whether raw or treated, at any time or point after it is treated, without first obtaining a written authorisation which approves treatment of effluent according to terms and conditions of the authorisation. Industrial Co-ordination Act 1975 The Industrial Co-ordination Act 1975 is an Act introduced with the objective of maintaining the coordination, orderly development and growth of Malaysia’s manufacturing sector. As the glove-dipping line industry is part of the manufacturing sector, thus a license is required for the manufacturing of glove­dipping lines. The Act requires manufacturing companies with shareholders’ funds of RM2.5 million and above or engaging 75 or more full-time employees in Malaysia to apply for a manufacturing license for approval by the Ministry of International Trade and Industry (“MITI”). Applications for the manufacturing license are to be submitted to the Malaysian Industrial Development Authority (“MIDA”), in which it will subsequently be approved and issued by MIT!. The licenses are non­transferable without prior approval obtained from MIT!. Occupational Safety and Health Act 1994 The manufacturing industry, which includes the glove-dipping line industry, is also regulated by the Occupational Safety and Health Act 1994. As part of the manufacturing industry, all glove-dipping line manufacturers possess a general duty of care to their employees, to provide and maintain production facilities and systems that are practicable, safe and without risks or hazard to employees’ health and safety. It is also the obligation of the employer to provide employees with the training, knowledge, information and supervision, in providing a safe working environment without risks to their health, safety and welfare. The Department of Occupational Safety and Health (“DOSH”) is mandated by the Government of Malaysia to ensure that companies take proper steps to ensure a safe working environment for their employees. DOSH also stipulates that for most manufacturing industries, including the glove-dipping line industry, companies that employ more than 500 employees are required to appoint a safety and health officer, who will be responsible for ensuring due observance of the statutory obligations with regards to workplace health and safety as well as the promotion of a safe and healthy working environment. A health and safety committee should also be formed to monitor the implementation of the safety measures during work, to promote and also plan measures to ensure employees’ safety and health. Factories and Machinery Act 1967 DOSH also requires compliance with the Factories and Machinery Act 1967. The Factory and Machinery Act 1967 provides for the regulation of factories with respect to matters relating to the safety, health and welfare of employees, and also the registration and inspection of facilities. Under this Act, it is stated that no person shall operate or be permitted to operate any machinery in respect of which a certificate of fitness is prescribed, without first obtaining a valid certificate of fitness. This approval needs to be obtained from DOSH. 25 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’dj
Employment Act 1955 The Employment Act 1955 stipulates the rights and welfare benefits that employees are entitled to, and which all employers are required to comply. This Act also states that an employer is required to obtain a license to import legal foreign workers under the contract of services, and ensure their welfare and rights are fulfilled in terms of wages, working hours, rest days, and sick and annual leaves. The Ministry of Human Resources is responsible for monitoring and ensuring that companies are in compliance with this Act and protecting the welfare of employees. Competitive Overview The glove-dipping line industry is a niche industry in Malaysia, where industry players manufacture specialised machinery for the production of rubber gloves in which they are required to have in-depth knowledge of the rubber glove industry. Due to the specialised nature of the industry, the competitive landscape in Malaysia comprises a select group of manufacturers, and as such, the industry is moderately competitive. Industry players generally compete on technical expertise, product quality, customer service levels and pricing. The industry is in its growth stage, and as such the industry size is expected to grow in line with the growing demand for local glove-dipping lines from both domestic and international markets. Key Industry Players For the purpose of this report, glove-dipping line manufacturers include all companies which have been identified to be involved in the design and fabrication of glove-dipping lines and are deemed comparable companies to HLT Global Berhad. A list of identified glove-dipping line manufacturers in Malaysia is shown as follows: [The rest of this page is intentionally left blank] [COillpany No.: 11633i±!iJ 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
SMITH ZANDER 61,515.1 I 5,008.0 I 8.14 12.52 I 7,009.2 I 11.39 I 0.44 I 1.68 I 17.11 I 32.63 75,697.3 15,223.31 20.11 I 16.03 12,134.0 16.03 0.05 I 2.12 I 23.15 I 41.46I I Ii iI I 74,764.8 13,943.2 I 18.65 12.14 7,098.5 9.49 0.13 2.29 7.56 I 11.55 ! i I I I I 7.07 0.14 8.32 i 51.1123,677.4d 5,248.6 22.17 9.51 1,674.5 1.17 ; I 27  e==me:::  107
Control Instruments (M) Sdn Bhd HLT Global Berhad Kendek Products Sdn Bhd I~SG
IEngineering i Sdn Bhda (subsidiary of K Seng Seng Corporation Berhad) ~m” Contracting and I assembling industrial control instruments and engineering equipment Involved in the design, fabrication, installation, testing and commissioning of glove-dipping production lines Manufacturing of component parts, machinery and I equipment and provision for turnkey engineering and production solution for the dipped latex industry Engineering works, fabrication and installation of glove dipping line and trading of glove dipping line parts namely former holders, tanks, connecting links, bearings, motor, speed reducer, sprocket gear, belting pulley, coupling and others ~ ‘”27£4 31 Malaysia December I 2015 31 Malaysia December 2015 31Malaysia DecemberI 2015 I 31 Malaysia December 2014 I Company No.: 1163324-H I 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
MPMT Industries Sdn Bhd  Manufacturing machines for automation and metal fabrication  Malaysia  31 December 2014  I  2,671.3 I  322.3 I  12.07  0.46  14.8  0.55  1.91  2.55  4.04  Trading engineering  RIPCOL Industries Sdn Bhd Sama Kejuruteraan Sdn Bhd  products and air pollution control systems and rendering of engineering services Manufacturing machineries and machinery components  Malaysia Malaysia Thailand  31 December 2014 31 December 2011 b  11,882.9″ I 31,786.9  2,955.2 I 2,539.0  24.87 7.99  I  2.59 1.99  216.6 I 419.4 I  1.82 I 1.32 I  2.69 I 0.65 I  1.05 j  I 1 I  2.23 I 11.96 ,J 4~7  Xin Xin Engineering Sdn Bhd  Trading and machineries engineering construction works  Malaysia  30 June 2015  39,496.0  6,860.8  17.37  4.33  1,248.5  3.16  0.35  1.23  8.04  36.67  Average  16.42  7.45   6.35  0.64  1.62  8.83  24.29
Notes: The key identified glove-dipping line manufacturers include all glove-dipping line manufacturers that were identified by SMITH ZANDER based on sources available, such as the internet,
published documents and industry directories. However, there may be companies that have no online and/or published media presence, or are operating with minimal public
advertisement, and hence SMITH ZANDER is unable to state conclusively that the list of industry players is exhaustive.
a Financial information does not include manufacturing and sale of conveyor chains as HLT Global Berhad does not undertake the manufacturing of conveyor chains. KSG Engineering
Sdn Bhd’s detailed financial information for the FYE 31 December 2015 is not yet publicly available, save for revenue for the FYE 31 December 2015 of RM17,364, 719, which has been included in the industry size. b Latest pUblicly available financial information is for the FYE 31 December 2011. C Revenues of all industry players, except for HLT Global Berhad, may include revenue from other types of engineering and fabrication works, as well as services. d Based on financial information before intra-group elimination. e RIPCOL Industries Sdn Bhd’s revenue for the FYE 31 December 2014 was based on a 15-month period. f Computed based on gross profit over revenue, and multiplied by 100%. 9 Computed based on PBT over revenue, and multiplied by 100%. h Computed based on PATover revenue, and multiplied by 100%. 28 108 [COmPany No.: 1163324-H 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
i Computed based on total borrowings over total equity. j Computed based on total current assets over total current liabilities. k Computed based on PAT over total assets, and multiplied by 100%. I Computed based on PA T over total equity, and multiplied by 100%. ** Not applicable as MPMT Industries Sdn Bhd does not have any outstanding borrowings.
Source: SSM HLT Global Berhad recorded a revenue of RM75.7 million in the FYE 2015, outperforming other industry players. Compared to the industry average for PAT margin of 6.35%, HLT Global Berhad’s PAT margin of 16.03% was 9.68 percentage points higher than that of the industry average. Among some of the possible reasons HLT Global Berhad has achieved a higher profit margin include:­• their gross profit margin of 20.11 %, which is above the industry average of 16.42%;
• their PBT margin of 16.03%, which is significantly higher than the industry average of 7.45%, due to lower overhead costs compared to other industry players; and
• their tax as a percentage of PBT of 0.03%, which is significantly lower than the industry average of 20.80%.

SMITH ZANDER is not able to comment further as it does not have sufficient information on the industry players. This is due to the fact that only limited information on these industry players are publicly available. While for the gearing ratio, HLT Global Berhad recorded a lower ratio of 0.05 times, in comparison to the industry average of 0.64 times. HLT Global also showed a strong current ratio of 2.12 times, which was above the industry average of 1.62 times. With regards to return on assets, HLT Global Berhad had a ratio of 23.15%, in comparison to the industry average of 8.83%. HLT Global Berhad’s return on equity was 41.46%, which was also higher than the industry average of 24.29%. 109 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Industry Revenue Share In 2015, the glove-dipping line industry size in Malaysia was approximately RM284.2 million. HLT Global Berhad garnered an estimated industry revenue share of 26.6% in 2015, based on its revenue contribution of RM75.7 million for the FYE 31 December 2015. Estimated industry revenue share (Malaysia), 2015 ————–_.—————­HLT Global Berhad, 26.6%
Note: In the absence of segmental information on local and export sales for all industry players, the industry size has taken into account total revenues derived from these industry players (inclusive of both local and/or export sales). As such, the Group’s industry revenue share is computed based on local and/or export sales. In the absence ofsegmental information on local and export sales for all industry players, industry revenue share is a common approach to demonstrate a company’s industry standing. Source: SSM, HL T Global Berhad [The rest of this page is intentionally left blank]
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
4 OVERVIEW OF THE GLOVE-DIPPING LINE INDUSTRY IN THAILAND Thailand is the world’s top producer of natural rubber. Between 2008 and 2014, Thailand has consistently emerged as the top producing country of NR, growing at a CAGR of 5.3% from 3.2 million tonnes to 4.3 million tonnes. Top NR producers (Global), 2008 and 2014 Thailand  •••••••••••••••1IIi3 .,1.67••••  4,324  ~ c  2,751  §….  Indonesia  3,153  o o E  Vietnam  WJfilliZW _  660 954  ~  Q)  () :l “t:lE! c- India  ~1••~865_ 705 ,  o::  z  g.  China  ……54.8  840  I­ ~2008  Malaysia  ~1,072  _2014
Note: Latest available data is in 2014, as at 21 November 2016
Source: The Thai Rubber Association, Rubber Association ofIndonesia, The Vietnam Rubber Association, Rubber Board India, Malaysia Rubber Board, Association of Natural Rubber Producing Countries, International Rubber Study Group, FA0, United Nations Industrial Commodity Statistics Database Top exporters of rubber gloves (Global), 2014 Indonesia, 3.6% China, 8.3% .~__ Malaysia, 50.0% Thailand,17.1%.-I Note:  Latest available data is in 2014  Source: Comtrade  31
7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
Due to the availability of raw materials, Thailand, along with Malaysia, are major rubber glove producers. Thailand accounted for approximately 17.1 % of global rubber glove exports in 2014, and is among the world’s top five (5) exporters. Since Thailand is a major rubber glove producer, the country is also a major market for glove-dipping lines. Accordingly, the glove-dipping line industry in Thailand is expected to benefit from demand arising from this country. According to the Thai Rubber Glove Manufacturers Association, the competitive landscape in Thailand is largely dominated by foreign glove-dipping line manufacturers from Malaysia. These foreign glove­dipping line manufacturers include HLT Global Berhad, Kendek Industry (Thailand) Co. Ltd. and Sama Kejuruteraan (Thailand) Co. Ltd. There are also local industry players in Thailand which are involved in the manufacturing of glove-dipping lines and/or components such as Poon Engineering & Supply Co. Ltd. and RPM Power Co. Ltd. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (Cont’d)
5 PROSPECTS AND OUTLOOK FOR HLT GLOBAL BERHAD The prospects for growth in the glove-dipping line industry in Malaysia are positive as the industry is expected to continue being driven by the growth in demand for rubber gloves globally as well as domestically. The rubber glove industry is a vibrant and growing industry, as evidenced by global rubber glove demand which has grown from 65.3 billion pairs in 2009 to an estimated 88.0 billion pairs in 2014, registering a CAGR of 6.1 %. In particular, Malaysia dominates the global rubber glove industry as the largest producer and exporter, producing 59.4 billion pairs and exporting 658,016.0 tonnes of rubber gloves in 2015. Much of the growth in the global and domestic rubber glove industry is driven by the growing end-user industries, particularly the healthcare industry where rubber gloves play a significant role. Global healthcare expenditure has demonstrated strong positive growth over the last decade, from USD4.3 trillion (RM16.3 trillion) in 2004 to USD7.8 trillion (RM25.5 trillion) in 2014, representing a CAGR of 6.1% over the period. Meanwhile, total healthcare expenditure in Malaysia also grew from RM17.9 billion in 2005 to RM46.1 billion in 2014, at a CAGR of 11.1 %. Consumption of rubber gloves increases drastically when there is a major disease outbreak. Rubber gloves are the most basic form of protective equipment used by hospitals when there are cases of diseases that are highly contagious. In developed countries, rubber gloves are seen as a basic necessity to contain the disease and avoid an increase in the number of fatalities. As such, there will usually be a spike in demand for medical rubber gloves during major incidences of disease outbreaks, leading to a surge in production. Other than the healthcare industry, there is increasing demand for rubber gloves from other manufacturing industries such as food processing, refined petroleum products, chemicals and chemical products and pharmaceutical prOducts, fabricated metal products, machinery and equipment, computers and peripheral equipment, electrical equipment, electronic components and boards, communication equipment and consumer electronics, as well as motor vehicles and transport equipment. Globally, manufacturing activities have been increasing over the years, as a result of an increase in demand for products contributed by the growth in world population. Global manufacturing activities have increased by a CAGR of 3.3%, from USD9.8 trillion (RI\II34.5 trillion) in 2009 to USD11.5 trillion (RM37.6 trillion) in 2014. In Malaysia, GOP from the manufacturing industry has grown from RM192.5 billion in 2010 to RM263.7 billion in 2015, registering a CAGR of 6.5%. The rapid growth of this industry translates into opportunities for growth in the rubber glove industry as well, since many manufacturing facilities use rubber gloves during their processes. In addition, the rubber glove industry is also expected to be supported by the growing global economy, availability of rubber as a raw materials, as well as the continuous technological advancement of glove­dipping lines. Premised on the above, the glove-dipping line industry in Malaysia is forecast to grow at a healthy CAGR of 15.2%, from an estimated RM326.5 million in 2016 to RM575.9 million in 2020. HLT Global Berhad, as one of the key industry players in the glove-dipping line industry in Malaysia, shows potential to gain from the growing domestic and international demand. In 2015, HLT Global Berhad’s industry revenue share in Malaysia was 26.6% based on its revenue of RM75.7 million for the FYE 31 December 2015. With their track record and technical capabilities, as well as their strong position in the domestic market, HLT Global Berhad is poised to increase its presence in the glove-dipping line industry, as well as capture opportunities in the export markets. 33

 

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