6. BUSINESS OVERVIEW 6. BUSINESS OVERVIEW
6.1 OUR HISTORY We are an investment holding company. Through our subsidiaries, we are principally involved in the provision of engineering and project management services including engineering design, project management, construction supervision and BIM services. In 1988, our founders, Datuk Ir. Kunasingam AIL V. Sittampalam and the late Datuk Ir. Santhakumar AIL C. Sivasubramaniam, incorporated HSSI which was registered under the REA to provide civil and structural engineering consultancy services. The REA regulates the provision of professional engineering services in Malaysia and required a sole trader, partnership or body corporate providing professional engineering services to be registered as an engineering consultancy practice under the REA, and prior to 2015, required such entities to be wholly-owned by professional engineers (as defined under the REA). As business grew, HSSI began to offer new solutions such as the use of design reports and computer aided design software, namely AutoCAD. The early adoption of the AutoCAD software allowed HSSI to execute engineering designs through the use of 2D computer aided design platforms. Further, the use of Total Stations (an electronic instrument used in modern surveying and bUilding construction) enables the digital topographic survey of project sites, and aids in construction planning and actiVity. By 1989, HSSI had a workforce in excess of 100 employees. The business continued to grow and in 1992, HSSI was appointed as the Master Plan Study and Detailed Design Consultant for infrastructure for the Kuala Lumpur International Airport 1 project, for which HSSI was awarded a contract of RM69.0 million in value. This was a major milestone given the competition from larger, more reputable market participants. In 1996, HSSI introduced and adopted value engineering and risk management methodologies in its engineering design processes. HSSI’s objective in adopting value engineering is to maximise the value of the project through optimisation of the design and materials used. The risk management methodologies involve structured processes being carried out to manage any foreseeable risks over the entire project duration. In 1997, HSSI further adopted 3D design capabilities into its engineering design services. HSSE was established in 2001 with the objective of entering the international markets where the REA does not apply, particularly on the restriction on equity structure and multidisciplinary services by a single firm. In such markets, service proViders offer full complementary services, including architectural, engineering and quantity surveying. Consequently, in 2001, all of HSSI’s operating assets including employees were transferred to HSSE, which is not registered under the REA. Thereafter, HSSI collaborated exclusively with HSSE, wherein HSSE provided Support Services to HSSI. In 2004, HSSME was established and registered under the REA to provide mechanical and electrical consultancy services. Similar to HSSI, HSSME also collaborated exclusively with HSSE. The Collaboration between HSSE, HSSI and HSSME has continued to this day and is now governed by the Teaming and Support Services Agreement. Please refer to Section 6.2.1 for full details of the Teaming and Support Services Agreement.
6. BUSINESS OVERVIEW (Cont’d) Separately, on 19 June 2015, HSSE has also executed the Shareholding Agreements with all the shareholders of HSSI and HSSME. The Shareholding Agreements with HSSI was supplemented on 6 April 2016 to replace the late Datuk Ir. Santhakumar NL C. Sivasubramaniam with Dato’ Ir. Nitchiananthan AIL Balasubramaniam. The Shareholding Agreements grants HSSE priority in acquiring the shares in HSSI and HSSME in the event of a loss of shareholder in HSSI and HSSME or if the REA is amended to allow HSSE to own shares in HSSI and HSSME. The Shareholding Agreements also restrict any issuance of new share and the sale or transfer of any shares in HSSI and HSSME without the prior consent of HSSE. This is to ensure the continuity of the Collaboration, the orderly succession or transition in the control of HSSI and HSSME as well as to secure HSSE’s interests. For further information of the Shareholding Agreements, please refer Section 6.2.2 of this Prospectus. The diagram below depicts the Collaboration between the parties under the Teaming and Support Services Agreement:/f I I I I I I I I I I I \ , Award projects Award projects Client ,~———————————————, Date’Ir. Khairudin Bin Sidek (1)60% I Datuk Ir. Kunasingam
AIL V. Sittampalam (1)20% I t HSSI Reqistered under the REA Date’Ir. Nitchiananthan AIL Balasubramaniam
(1)20% I Date’Ir. Khairudin Bin Sidek (1)50% I ‘\ , Ir.Azman Bin Ab. Rahman (1)50% ~ HSSME I
‘,———————————————-~, Not registered under the REA HEB I ~——‘ I100% ~ I Collaboratipn via the Collaboratbn via the Teaming land SupportTeaming Fnd Support HSSE Services Agreement onServices J\weement on an exc!us)Ve basisan exc!usive”basis <“‘<l* Note:(1) Prior to the Acquisition of HSSI and Acquisition of HSSME 6. BUSINESS OVERVIEW (Cont’d) Through the Collaboration, we continued to expand our portfolio of projects including notable ones such as MRT Line 1, MRT Line 2, Kwasa Damansara Township Development, LRT Ampang Line Extension, North-South Expressway (proposed fourth lane widening between Nilai (U) Interchange and Seremban Interchange), West Coast Expressway from Tg. Karang to Banting, Westports expansion and temporary common camp facilities and infrastructure for refinery and petrochemicals integrated development project in Pengerang, Johor. In 2012, our Group adopted BIM, a computer-aided design and modelling technology which encompasses all areas of design, build and project management. In tandem with this development, both BGV and HBS were incorporated in the same year. BGV was incorporated specifically to provide BIM services to our Malaysian clientele, while HBS which was incorporated in Chennai, India is poised to tap the vast international market, particularly in the Indian sub-continent and Middle East markets. HBS houses our BIM operations including coding and modelling, and is our outsourcing centre for the continued development and expansion of our BIM services. India was chosen as the location for our outsourcing centre for the development and expansion of our BIM services due to the available and affordable engineering talent pool in India as compared to Malaysia which yields us cost savings mainly arising from wage differentials between India and Malaysia. In 2015, the REA was amended pursuant to the Registration of Engineers (Amendment) Regulations 2015 where at least seventy percent (70%) of shares of a body corporate registered as an engineering consultancy practice under the REA must be held by Professional Engineers (as defined by the REA) and that at least two third (2/3) of the board of directors are Professional Engineers (as defined by the REA). As such, on 30 May 2016, HSSE completed the Acquisition of HSSI and Acquisition of HSSME after which HSSI and HSSME became our 30%-owned associated companies. Please refer to Section 5.3.6 for further details on the above mentioned acquisitions. 6.2 DETAILS OF THE COLLABORATION 6.2.1 Teaming and Support Services Agreement Pursuant to the Teaming and Support Services Agreement, both HSSI and HSSME are bound under an exclusive arrangement to collaborate, co-operate and work together with HSSE to bid for, procure, obtain, or otherwise prOVide engineering and project management services. HSSE currently derives all of its revenues from HSSI and HSSME via the Teaming and Support Services Agreement. Under the Teaming and Support Services Agreement, HSSE shall identify, source and select potential projects and prOVide the support services to HSSI and HSSME; whereas HSSI and HSSME, each an engineering consultancy practice registered under the REA, shall provide professional engineering services for the projects. (a) Sharing of Project Income All revenues, income, payments, fees, and charges whatsoever accrued, received, or resulting from Collaboration and the projects (“Project Income”) shall be utilised, paid, shared, and distributed between the parties in accordance with the provisions set out in the Teaming and Support Services Agreement. In consideration of the services provided by HSSE to HSSI and HSSME, HSSE is entitled to:(i) 98.75% of the total professional fees; and
(ii) 100.0% of all other monies such as reimbursable and disbursement payments and all allowances and other payments including overtime payments incurred by HSSE and billed to the client;
6. BUSINESS OVERVIEW (Cont’d) earned from every project undertaken through the Collaboration pursuant to the Teaming and Support Services Agreement. The balance 1.25% of the total professional fees will be retained by HSSI and HSSME subject to a combined maximum retention of RM1,250,000 per annum. Prior to FYE 2014, HSSI and HSSME charged a fee calculated based on a fixed percentage of 2.5% applied to all billings except for reimbursable income invoiced by HSSE. As HSSE’s revenue continued to grow, the Board saw the need to adjust the retention amount to HSSI and HSSME. The adjusted retention rate of 1.25% was arrived at based on the following factors:(i) an expected annual revenue of RM100 million based on our historical revenue growth;
(ii) an estimation of the overheads of HSSI and HSSME which comprises amongst others, directors fees, legal and professional fees, REA license fees, registration fees for memberships, ISO certification annual audit fees payable to SIRIM, software support charges and other statutory compliance fees. For the past three (3) FYEs 2015, the annual overheads of HSSI and HSSME amounted to an average of RM390,000 and RM 10,000 respectively; and
(iii) additional profits to be retained with HSSI and HSSME as consideration for their responsibilities in the Teaming and Support Services Agreement as well as to reflect good individual financial standing when bidding for projects. The maximum retention amount of RM1,250,000 was set in anticipation of our revenue growing beyond RM100 million. The DDWG and our Directors (save for Datuk Ir. Kunasingam AIL V. Sittampalam, Dato’ Ir. Nitchiananthan AIL Balasubramaniam and Dato’ Ir. Khairudin Bin Sidek) are of the view that the retention amount by HSSI and HSSME is reasonable having considered the following:(i) HSSI’s and HSSME’s scope of work under the Teaming and Support Services Agreement which include the review, approval, sign off, and submission of plans, drawings, scheme, proposals, reports, designs or studies to any person or relevant authority in Malaysia within their area of expertise in accordance with and subject to the REA and all other applicable laws, rules and regulations;
(ii) Both HSSI and HSSME are the contracting parties with clients and subconsultants and hence, will be the first party to face potential claims I litigation, credit risks and other liabilities. As HSSI and HSSME are appointed by clients and responsible for the provision of services governed by the REA, HSSI and HSSME are exposed to non-monetary contingent liabilities which cannot be recovered from HSSE even if the fault lies with HSSE, solely or partially. These contingent liabilities include inter-alia, cancellation or suspension of registration by the Board of Engineers Malaysia, investigation by the Board of Engineers Malaysia following a complaint, including having to attend hearing(s), loss I damage to reputation, image and goodwill, loss of future potential income, and conviction of criminal offence(s) or any other offences under applicable statutory provisions (not limited to only the REA) which carry imprisonment for the directors I shareholders of HSSI and HSSME in their capacity as registered engineers signing off on any plans, drawings, scheme, proposals, reports, designs or studies; and
6. BUSINESS OVERVIEW (Cont’dj (iii) The risks and liabilities of HSSI and HSSME will increase in tandem with the contract value of the projects undertaken and hence a fixed percentage of the total professional fees are a fair basis for revenue sharing. Furthermore, the monies retained by HSSI and HSSME are subject to a maximum of RM1,250,000 per annum. It is also necessary for HSSI and HSSME to demonstrate their financial standing and financial growth when tendering for new projects. (b) Support Services The support services provided by HSSE to HSSI and HSSME under the Teaming and Support Services Agreement include but are not limited to the following:(i) Administration and human resource;
(ii) Finance and accounting;
(iii) Management support; (iv) Marketing and sales (including identifying, sourcing and selecting potential projects);
(v) Technical support and related manpower support in the preparation of all tender, bids, or procurement documents;
(vi) Project management;
(vii) Construction supervision services; (viii) Providing lead, expertise, and input in all commercial and legal negotiations; (ix) Legal support; and
(x) BIM services.
The DDWG and our Directors are of the view that the provisions in the REA do not prohibit an engineering consultancy practice duly registered under REA to enter into an exclusive arrangement with a third party to procure support services, including those being provided by HSSE to HSSI and HSSME under the Teaming and Support Services Agreement. (c) Other Salient Terms The other salient terms of the Teaming and Support Services Agreement are as follows:
Term The Teaming and Support Services Agreement shall take effect from the date of the agreement and shall continue unless otherwise terminated in accordance with the provisions of the agreement.
6. BUSINESS OVERVIEW (Cont’d) Responsibilities ofHSSE (i) For Support Services that are directly in connection with any matter under the purview and responsibility of HSSI and/or HSSME under the Teaming and Support Services Agreement, HSSE will at all times carry out the Support Services strictly in accordance with the direction and instructions given by HSSI and/or HSSME and always under HSSI’s and/or HSSME’s direct supervision.
(ii) It shall be responsible to procure and maintain all approvals, permits, and licenses (if any) necessary and/or incidental for the due and lawful performance of the Support Services and its obligations under the Teaming and Support Services Agreement.
(iii) The Support Services shall be performed in compliance with all applicable laws, enactments, orders, and regulations and further, it shall not do or cause any act or thing to be done which will cause HSSI and/or HSSME to be in breach of the provisions of the REA or any other applicable law, enactment, orders, or regulations. (iv) Not represent itself in any manner as having authority to act as professional engineers in Malaysia and duly registered under the REA or any other applicable laws.
Responsibilities ofHSSI and HSSME The Directors of HSSI and HSSME are solely responsible to discharge all the responsibilities of the respective company under the Teaming and Support Services Agreement. However, given the division of work for each projects secured by HSSI and HSSME pursuant to the Teaming and Support Services Agreement, the employees are employed by HSSE. The responsibilities of HSSI and HSSME are as follows:(i) They shall be responsible to procure and maintain all approvals, permits, and licenses (if any) necessary and/or incidental for the due and lawful performance of their obligations under the Teaming and Support Services Agreement.
(ii) They shall furnish all pertinent data and information and provide clear unambiguous instructions and direction to HSSE in respect of the Support Services to be performed, in particular instructions and directions connected With, related to, or involves any matter under their purview and responsibility under the Teaming and Support Services Agreement, and shall further render all such assistance as shall be reasonably required by HSSE for carrying out its obligations under the Teaming and Support Services Agreement.
(iii) They are each an engineering consultancy practice duly registered under the REA to provide professional engineering services and shall at all times observe and comply with the provisions of the REA and all other applicable laws, rules, and regulations governing or having authority over them and further, they shall not do or cause any act or thing to be done which will cause HSSE to be in breach of the provisions of the REA or any other applicable law, enactment, orders, or regulations. 6. BUSINESS OVERVIEW (Cont’d) (iv) Each of them shall be solely responsible to approve, sign off on, and submit any plans, engineering surveys, drawings, schemes, proposals, reports, designs, or studies to any person or relevant authority in Malaysia within their area of expertise in accordance with and subject to the REA and all other applicable laws, rules, and regulations.
Project Income (i) HSSI and HSSME shall procure the Project Income to be credited into a bank account nominated by HSSE (“Bank Account”).
(ii) The mandate for the Bank Account shall include a mandatory signatory of HSSE and such mandate cannot be changed, amended or revoked without HSSE’s prior written consent.
(iii) HSSI and HSSME shall procure that the monies be transferred into HSSE’s nominated bank account within fourteen (14) days of receipt by HSSI and HSSME of the monies. HSSE shall thereafter make the necessary payments of each HSSI’s and HSSME’s revenue share into each of their nominated bank account.
Termination HSSE may terminate the Teaming and Support Services Agreement without the need to assign any reason for such termination by giving sixty (60) days written notice. Only HSSE has the contractual right to terminate the Teaming and Support Services Agreement.
Exclusivity and Restrictions (i) As HSSE has invested significant amount of resources in developing the Support Services and the capacity and capability in providing the Support Services, HSSE shall be the sole and exclusive proVider of the Support Services for the Collaboration and the projects and no other party shall be appointed to provide any services which are similar, related, or ancillary to the Support Services.
(ii) HSSI and HSSME agree, that during the continuance of the Teaming and Support Services Agreement, they shall carry out their respective businesses solely and exclusively within and for the Collaboration between the parties therein and the projects, and further undertakes not to appoint or be engaged by any third party, directly or indirectly resulting in their said respective business to be in competition with the Collaboration.
(iii) Pursuant to the restrictions imposed upon them under this section, HSSI and HSSME covenant that during the continuance of the Teaming and Support Services Agreement, they will not without the consent of HSSE in writing first had and obtained:(aa) Undertake or permit any merger, consolidation or re-organisation whatsoever which may prejudice the continuation of the Collaboration; (ab) Change the nature of their businesses; 82 6. BUSINESS OVERVIEW (Cont’d) (ac) Enter into any arrangement, partnership, joint venture or arrangement whereby control including management and operational control, of HSSI and/or HSSME is transferred to or, assumed or undertaken by any other person who is not controlling or managing HSSI and/or HSSME as at the date of the Teaming and Support Services Agreement, which may prejudice the continuation of the Collaboration; (ad) Permit any change of their Board of Directors, key personnel (including its registered professional engineers), senior management, and present shareholding structure or shareholders; (ae) Form any subsidiaries or have any interests (whether direct or indirect) in any other party, entity, or company (whether through equity participation or otherwise); or (af) Amend, add to, delete or vary its Memorandum and Articles of Association in any manner which would be inconsistent with the provision of the Teaming and Support Services Agreement. (iv) HSSI and HSSME further covenant and undertake with HSSE that without the prior written consent of HSSE, they will not either on their own account or in conjunction with or on behalf of any other person, firm or company, directly or indirectly, for a period of two (2) years commencing from the termination or expiry of the Teaming and Support Services Agreement:(aa) Solicit or endeavour to entice away from dealing with HSSE, any person who was at any time a customer or supplier of HSSE; (ab) Hire, employ, or endeavour to entice away from being employed or hired, any employee(s) of HSSE; and (ac) Seek to circumvent the restrictions of this section in any other way including but not limited to providing confidential information, assistance, expertise, knowledge, or know how to any third party. 6.2.2 Shareholding Agreements HSSE had entered into:(a) (i) a shareholding agreement dated 19 June 2015 with HSSI and all the shareholders of HSSI at the time, namely, Datuk Ir. Kunasingam A/L V. Sittampalam, the late Datuk Ir. Santhakumar A/L C. Sivasubramaniam and Dato’Ir. Khairudin Bin Sidek;
(ii) supplemental shareholding agreement dated 6 April 2016 with HSSI and all the current shareholders of HSSI, namely Datuk Ir. Kunasingam NL V. Sittampalam, Dato’ Ir. Nitchiananthan A/L Balasubramaniam, and Dato’ Ir. Khairudin Bin Sidek; and
(b) a shareholding agreement dated 19 June 2015 with HSSME and all the shareholders of HSSME, namely, Dato’ Ir. Khairudin Bin Sidek and Ir. Azman Bin Ab. Rahman,
to secure the interests of HSSE under the Teaming and Support Services Agreement, the continuity and the continued Viability of projects undertaken pursuant to the Teaming and Support Services Agreement. 6. BUSINESS OVERVIEW (Cont’d) The Shareholding Agreements shall be binding on the estates, heirs, administrators, executors, lawful successors, receivers or managers, lawful representatives, and legal assigns of HSSI, HSSME and all the shareholders of HSSI and HSSME. The key features of the Shareholding Agreements are set out below:(a) Restriction on the shares in HSSI and HSSME No new allotment or issuance of shares in HSSI or HSSME shall be carried out without the written consent of HSSE. No shares held by the shareholders in HSSI and HSSME may be sold, transferred, assigned, disposed, or dealt with without the written consent of HSSE. In addition, the shareholders of HSSI and HSSME have also undertaken not to pledge, charge, or howsoever encumber their shares in HSSI and HSSME. (b) Grant of Option to HSSE to Purchase Shares of HSSI and HSSME (“Share Option”) (i) Each shareholder of HSSI and HSSME (“First Option Grantor”) has granted HSSE an irrevocable and exclusive option to purchase (“First Share Option”) all the HSSI and/or HSSME shares held by the First Option Grantor (“First Option Shares”). The First Share Option shall be exercisable by HSSE or its nominee against a First Option Grantor after the occurrence of any Trigger Event (as hereinafter defined) affecting that First Option Grantor. For the purposes of the First Share Option, a “Trigger Event” shall mean anyone of the following:(aa) the death of any of the shareholder of HSSI and HSSME; (ab) the incapacity of any of the shareholder of HSSI and HSSME (including any mental or physical incapacity or disability); and (ac) the deregistration or suspension of any of the shareholder of HSSI and HSSME or the revocation of any licenses or approvals granted to any of the shareholder of HSSI and HSSME as a registered engineer under the REA or under any applicable laws which results in or which prohibits any of the shareholder of HSSI and HSSME from continuing to hold the shares in HSSI and/or HSSME. (ii) Each shareholder of HSSI and HSSME (“Second Option Grantor”) has granted HSSE an irrevocable and exclusive option (“Second Share Option”) to purchase such number of HSSI and HSSME shares held by each of them to the maximum aggregate number of HSSI and HSSME shares permitted to be purchased and held by HSSE pursuant to the REA or under any applicable laws (“Second Option Shares”). The Second Share Option shall be applied to each Second Option Grantor in proportion to the HSSI and HSSME shares held by them vis-a-vis each other. (iii) There shall be no limit in time for HSSE to exercise the First Share Option or Second Share Option; (iv) The price for the First Option Shares or Second Option Shares shall be determined based on the latest audited NA of the relevant company (i.e. HSSI / HSSME) at the time the respective share option is exercised; 6. BUSINESS OVERVIEW (Cont’d) (v) Where applicable, HSSE shall be entitled to purchase or to nominate a registered engineer of its choice to purchase the First Option Shares (subject always to compliance with the requirements of the REA or any other applicable laws); and
(vi) The shareholders of HSSI and HSSME have granted irrevocable power of attorney to HSSE for the purpose of enabling HSSE to transfer the First Option Shares or Second Option Shares in the event the respective share option is exercised.
In the event that the REA is further amended to allow non-professional engineers to hold more than thirty percent (30%) shares in an engineering consultancy practice, HSSE shall be entitled to further exercise the Second Share Option up to the maximum aggregate number of HSSI and HSSME shares permitted to be purchased and held by HSSE pursuant to the REA, as amended from time to time. 6.2.3 Conflict of Interest The DDWG and our Directors (save for Datuk Ir. Kunasingam NL V. Sittampalam, Dato’Ir. Nitchiananthan AIL Balasubramaniam and Dato Ir. Khairudin Bin Sidek) are of the view that the Teaming and Support Services Agreement and Shareholding Agreements do not result in any conflict of interest between HSSE, HSSI and HSSME as the commercial objectives of the Collaboration is to maximise the potential revenues and financial incomes for the benefit of all parties under the Collaboration. Furthermore, the Teaming and Support Services Agreement does not preclude HSSE from collaborating with any other party if the opportunity arises whereas the same is not afforded to HSSI and HSSME who is bound under the Teaming and Support Services Agreement to carry out its business solely and exclusively for the Collaboration, and that HSSI and HSSME shall not work With, for, or be engaged by any other third party, directly or indirectly, which will result in their respective businesses being in competition with the Collaboration. Although not all deliverables by HSSI and HSSME to its clients are REA-regulated, the terms of reference for most contracts awarded by their clients involve the provision of both REAregulated and non-regulated services. In few instances where there was a separate contract for non-regulated services, it usually stems from a prior contract which involves the provision of REA-regulated services. As such, for non-regulated services where our Group has the technical expertise and capacity, we can bid for the projects directly. 6.3 COMPETITIVE STRENGTHS Our business is supported by the follOWing competitive strengths to sustain the business as well as to support our growth:6.3.1 Experienced Key Management Team As a service provider, our ability to compete effectively lies, amongst others, with the strength of our key management team. Our Group has assembled an experienced management team comprising qualified professionals with extensive management, operating and tacit industry expertise and experience in their respective fields. In addition, our Executive Directors have an average of more than thirty (30) years of experience in the engineering consulting services industry. 6. BUSINESS OVERVIEW (Cont’d) Please refer to Section 8.3.3 of this Prospectus for further details of the credentials of our key management team. Our management team is a key factor contributing to the quality of our service delivery. Our experience and combined expertise has enabled us to execute projects in accordance to project specifications, safety procedures, time and cost, as well as allowing us to submit knowledgeable, accurate and realistic cost (estimates) to the client, based on our accumulated experience in value engineering solutions. By engaging us either directly or through the Collaboration, clients will have access to our key management’s experience, resources and knowledge. Through their experience in various types of construction projects in sectors like roads, highways, transportations, township design and development projects, we are able to offer different expertise and skillsets to the clients. This, together with our ability to collaborate as a team have contributed positively to our operations and growth as it plays a large role in garnering repeat business and new clients, which are reflected in our financial performance over the years. [ The rest of this page is intentionally left blank] I Company No.: 1128564-U I
6. BUSINESS OVERVIEW (Cont’d) 6.3.2 Established and Proven Track Record Through the Collaboration, we have contributed to HSSI’s and HSSME’s success in the engineering and project management services market which has contributed well to their reputation and goodwill in various industries and sectors in Malaysia. The consistent track record has earned HSSI and HSSME many recurring clients and new ones through favourable referrals and recommendations from existing clients. We have participated, through the Collaboration, in providing the contracted services via HSSI and HSSME to top ten (10) clients in 2015 who have relationships with HSSI and HSSME spanning an average of twelve (12) years. Some of the notable projects we have participated include the following whereby we have provided the Support Services through the Collaboration and BIM services:-Timeline of Contract our scope of Sector Project Project Description Scope of work value work RM’ million Start End Project Management Railway MRT Line 1 • Client: Mass Rapid Transit Corporation Support Services to HSSI for its 100.6 Feb 2017 Sdn Bhd appointment as the 2011 • MRT Line 1 connecting Sg. Buloh to independent consultant Kajang engineer to provide • Pass through KL City Centre independent engineering review • 51 km during the following stages: • Integrates with existing KTM • Pre-Design & planning stage Komuter, Ampang LRT Line and • Design stage Kelana Jaya LRT Line • Pre-Construction & tender • 24 elevated stations stage • 2 depots • Construction stage • Involves facilities and systems works
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Sector Project Railway MRT Line 2 Township Kwasa Damansara Township DevelopDevelopment ment Project Description • Client: Mass Rapid Transit Corporation Sdn Bhd
• MRT Line 2 connecting Sg. Buloh to Putrajaya
• 52.2 km
• Integrates with existing KTM Komuter, Ampang LRT Line, Kelana Jaya LRT Line, MRT Line 1 and future high speed rail
• 36 stations
• 2 depots (including a shared depot with MRT Line 1 at Sg Buloh)
• Involves facilities and systems works
• Client: Kwasa Land Sdn Bhd
• Township development over 2,330 acres of land in the vicinity of Kota Damansara and Petaling Jaya
• Projected 150,000 in residential households and commercial work force
Timeline of Contract our scope of Scope of work value work
RM’ million Start End support Services to HSSI for its 186.2 Apr March appointment as the 2015 2022 independent consultant engineer to provide independent engineering review during the following stages: • Pre-Design & planning stage • Design stage • Pre-Construction & tender stage • Construction stage Support Services to HSSI for its 12.1 Jul 2020 engagement to provide project 2014 management services for the proposed common infrastructure works for the development in the Shah Alam areas. • Planning and design management • Procurement management and contract administration • Construction management
I Company No.: 1128564-U I
6. BUSINESS OVERVIEW (Cont’d) Timeline of Contract our scope of Sector Project Project Description Scope of work value work RM’ million Start End • Environmental monitoring and enforcement
• Interface management
• Risk management
Engineering Services -Design and Construction Supervision Railway LRT Ampang Line Extension • Client: Prasarana Malaysia Bhd Support Services to HSSI for its 183.5 Dec 2016 • Extension from existing Sri Petaling engagement to provide the 2008 station to a new station in Putra following:Heights • Preliminary stage (i.e.
• 18 km
• 13 stations (2 have been deferred) • Preliminary design
• 7 stations with park & ride facility • Detailed design
• Depot with heavy and Iight • Specifications and maintenance facilities procurement
• New operating control centre • As-built drawings
• Involves facilities and systems works • Construction supervision
Highway North-South Expressway • Client: Projek Lebuhraya Usahasama Support Services to HSSI for its 26.0 Jul 2016 Proposed fourth lane Bhd engagement to provide the 2011 widening between Nilai (U) • Approximate length is 27 km following:Interchange and Seremban consisting of 2 Packages:-• Preliminary design Interchange (from 3 lanes to -Package D : 5 km • Detailed design 4 lanes) -Package E: 22 km • Specifications and procurement • Construction supervision
• As-built drawings
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Sector Highway Port Project West Coast Expressway from Tg. Karang to Banting (excluding section from Sg. Rasau to NNKSB1 interchange) Construction and Completion i. Land Reclamation works at CT6, CT7, CT8 and CT9 ii. 600m Wharf each at CT6, CT7, CT8 and CT9 and Access Bridges iii. CT6 Yard (Zone Q, R & 5), CT7 Yard (Zone T & U), CT8 Yard (Zone W & X) and CT9 Yard (Zone Y &Z)
Project Description • Client: IJMC-KEB Joint Venture
• 93.80 km
• 9 interchanges
• 2 rest and service area
• Approximately 42 bridges (including road, river and railway bridges)
• The alignment is divided into three (3)
phase as listed below: Phase 1 : Section 3 & 5 Phase 2 : Section 1,2 & 6 Phase 3 : Section 7
• Client: Westports Malaysia Sdn Bhd
• Reclamation works inclusive of revetment, dredging and ground improvement works
• Extension of total 2,400m wharf structure from CT6 Terminal to CT9 Terminal
• 8 access bridges from Land Side to Wharf Structure
• Stacking area for container boxes in Yard with associated pavement and structural work
• Associated mechanical and electrical works (ie. Water Supply, Fire Fighting, Power Supply & 11 kV Substation)
90 Scope of work Support Services to HSSI for its engagement to provide the following:• Conceptual & preliminary design
• Detailed design
• Specifications and procurement
• Construction supervision
• As built drawings
Support Services to HSSI for its engagement to provide the following:• Preliminary design
• Detailed design
• Construction supervision
• As-built drawings
Contract value RM’ million 39.8 41.1 Timeline of our scope of work Start End Jun 2019 2011 2010 2017 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Sector Project Petro Temporary Common Camp chemical Facilities and Infrastructure for Refinery and Petrochemicals Integrated Development Project (“RAPID”), Pengerang, Johor
BIM Services Project Description • Client: UEMB -PROPEL Consortium
• Area: 535 acres (out of approximately 7,000 acres of RAPID total area).
• The camp to serve apprOXimately 70,000 workers
• Camp development comprising of accommodation and various facilities such as sport complex, cinema, central medical facilities, fire station, barber, laundry facility and canteen
Scope of work Support Services to HSSI for its engagement to provide the following:• Preliminary design
• Detailed design
• Specifications and procurement
• Construction supervision
• As-built drawings
Contract value RM’ million 9.8 Timeline of our scope of work Start End Oct 2016 2014
Railway MRT Line 1 • Client: Mass Rapid Transit Corporation BGV was appointed to provide 7.8 Apr Feb Sdn Bhd BIM services covering the 2013 2016 • MRT line connecting Sg. Buloh to follOWing stages:- Kajang • Design • Pass through KL City Centre • Analysis • 51 km • Construction • Integrates with existing KTM Komuter, Ampang LRT Line and Kelana Jaya LRT Line • 24 elevated stations • 2 depots
6. BUSINESS OVERVIEW (Cont’d) 6.3.3 Extensive and Diverse Experience and Capabilities in Engineering and Project Management Through the Collaboration, we have longstanding experience in project design and project management, construction management and turnkey implementation for a wide array of sectors including, but not limited to, building and structures, urban infrastructure, roads and highways, railways and metro systems, airports, ports and harbours, transportation planning, power generation and distribution, water resources and supply, and sewerage and public health. The undertaking and successful completions of such a diverse range of projects have endowed us with multiple in-depth and tacit industry knowledge and strong technical capabilities. In addition, we have also expanded and successfully undertaken projects abroad and as such, are not confined solely to serving the domestic market. The extensive and diverse portfolio of engineering and project management experience and capabilities have also given us the flexibility to pursue various types of projects across industries and sectors under the Collaboration, thereby minimising any overdependence on any single industry or sector. The same flexibility also allows us to capitalise on opportunities arising from changing market conditions. 6.3.4 Emphasis on Human Capital Development We value our employees as our most important asset, being the driving force to the success of our Group since inception. Our Group’s principal business activity revolves around the provision of professional services and therefore requires a competent workforce. As at LPD, more than a third of our workforce consists of engineers. In order to proVide excellent service to clients, we have identified the importance of continuously improving the quality of our workforce through our commitment towards proViding the necessary training in areas such as computer technologies, relevant technical knowledge, regulatory / statutory requirements, legal documentation, quality control and management, safety and finance. Having a diversified workforce and talent within our Group, we recognise the internal breadth of knowledge, experience and expertise which can be leveraged. Therefore, we encourage cross functional and inter-company collaboration / cooperation which enables knowledge transfer across our Group. Our Group is also an authorised Autodesk Training and Certification Centre in India as we fulfilled the following criteria:(a) Training centre should be equipped with the relevant hardware and software tools in accordance to the training modules proVided;
(b) Trainers are degree holders with at least three (3) years of experience in software utilisation and training or have hands on industry experience; and
(c) Approval is required from local municipality.
The Autodesk certification programme was developed to objectively validate the skills and knowledge of anyone-student or professional-who uses Autodesk software. The Autodesk certification can enhance the competitive edge and reputation of organisations that adopt its use, while proViding an industry-accepted credential that students and professionals can use to achieve academic success and advance their careers. 6. BUSINESS OVERVIEW (Cont’d) Autodesk Inc. (“Autodesk”) is an American multinational software company, a leading company in 3D design, engineering and entertainment software. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries use Autodesk software to design, visualise, and simulate their ideas before they are built or created. Since its introduction of the AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of state-of-the-art 3D software for global markets. Their top products include the AutoCAD and Revit software. Our Autodesk Training and Certification Centre specialises in the training of the Autodesk Revit software, which is a BIM software for architects, structural engineers, mechanical, electrical and plumbing engineers, designers and contractors. The Autodesk Revit software allows users to design a bUilding and structure and its components in 3D, annotate the model with 2D drafting elements, and access bUilding information from the bUilding model’s database. The Autodesk Revit software enables engineers to plan and track various stages in the bUilding’s Iifecycle, from concept to construction and later demolition. Our Group being an authorised Autodesk Training and Certification Centre in India is able to maximise potential within our workforce by providing the Autodesk Training Programme to our employees. As the Autodesk Training Programme is also available to university students, we are able to scout for talented individuals from the pool of university students that apply for the training course. This provides us with an advantage over our competitors as we will have greater chance of securing competent individuals into our workforce. We have set up an authorised Autodesk Training and Certification Centre in Malaysia in December 2015. Through our human capital development efforts, we currently have a professional team of over 100 experienced professionals of which thirty (30) of them are certified Autodesk professionals. Our professional team has accumulated vast experience through the execution of over 150 projects including residential, commercial, institutional, hospitality spaces and others. The team of professionals is also adept in the provision of modelling services, including presentations for clients. 6.3.5 Application of the Latest Technologies Our Group has always placed importance to adopt latest technologies in order to maintain our competitive edge within the industry. Over the years, we have introduced and adopted new technologies and methodologies into our business operations which have enabled greater efficiency and performance in service delivery while at the same time adding value to our services. Our history in introducing and applying new solutions began back in late 1980s when HSSI began using what was at that time a relatively new solution, the AutoCAD for design reports and 2D drawings and Total Stations for surveying. In 1996, HSSI adopted and implemented value engineering and risk management methodologies into its engineering processes. HSSI adopted and incorporated 3D design capabilities in 1997. The continuous and early adoption of new design tools or methods allowed us to stay ahead of competition while at the same time offering value added services to clients. More recently, in 2012, our Group introduced and successfully incorporated the use of BIM technology as part of our principal service offering. The adoption of BIM as part of our service offerings played a contributing role which enabled us to secure major landmark projects such as the MRT Line 1, Kwasa Damansara township, various development projects by Malaysian Resources Corporation Berhad and the exclusive Banyan Tree Signatures development. The use of BIM allows us to manage projects in a more effective manner from design and documentation, to implementation and even in support/facilities management. 6. BUSINESS OVERVIEW (Cont’d) The continued track record in successful adoption of such technologies as BIM is testament to our Group’s ability to evolve and capitalise on the latest development in engineering and project management solutions, and this correspondingly, puts us in good stead to continue profiting from the early adoption of the competitive edge offered as well as enabling us to attract and retain clients through value-added service offerings and deliveries. 6.3.6 Established Relationships with Clients Our Group places great importance in maintaining strong relationship with our existing clients and those of HSSI and HSSME. Our Group believes that our success in completing projects within the predetermined deadlines and budget, while maintaining a high quality of work has helped build trust with the clients. This has resulted in the establishment of strong and mutually beneficial relationships with the clients. The strong relationship between us, HSSI and HSSME with clients has resulted in recurring sales throughout our years of business operations as we, HSSI and HSSME have been receiving invites for the clients’ new projects. For the past three (3) years, HSSI and HSSME have been successful in securing projects with eight (8) of the major clients who have been dealing with us, HSSI and HSSME for ten (10) years or more. We, HSSI and HSSME also receive new clients through recommendations and referrals of the clients, hence ensuring a constant flow of incoming projects. 6.3.7 Focus on High Quality Service Delivery Our Group strongly believes in upholding superior service quality and ensuring client satisfaction. Through the Collaboration, we have long established reputation as a reliable and trustworthy engineering and project management service provider, whereby we are capable of delivering quality services in line with client’s requirements in a timely manner. While striving to provide excellence of quality to clients, we place great importance on the health and safety practices in our operations. We seek to ensure construction activities carried out under our supervision comply with the environmental regulations of the respective country. As testament to our commitment towards delivering superior, quality services and solutions, please refer to Sections 6.14 and 6.15 of the Prospectus for HSSE’s notable recognitions received. We strictly enforce these ISO policies to ensure that our quality standards are consistent and to ensure that all our business operations do not violate any laws and regulations of the region. 6.3.8 Positioning in the Industry -Comprehensive Engineering and Project Management Services Construction and building industry requires participation of various professionals from engineering and non-engineering sector. The engineering sector can be divided into two (2) main categories, core and non-core. Core category includes engineering design and construction supervision, project management services, BIM services and facility management. Meanwhile, non-core category includes planning, architectural services, quantity survey, interior design, environmental study, traffic consultancy, bUilding valuation and survey and land survey. Non-engineering sector includes legal, financial analysis and management and market research. 6. BUSINESS OVERVIEW (Cont’d) The involvement of various professionals providing such core and non-core services within the engineering sector would be dependent on whether the project is primarily an infrastructure or building project. There could be instances wherein the project is a combination of infrastructure and bUilding. The four (4) core services in the construction and building industry (i.e. where there is full involvement in both the infrastructure and building spectrum) are engineering services, project management, BIM and facility management. We are currently involved in engineering services, project management services and BIM services. Hence, our plan is to pursue facility management as part of our future plans. Please refer to Section 6.4.2 of this Prospectus for further details. 6.4 FUTURE PLANS AND PROSPECTS The following plans will assist us to leverage on our strengths to capture future growth opportunities locally and abroad. Our future plans set out in this Section 6.4 are expected to be fully implemented within three (3) years from the date of our Listing. We have allocated RM24.0 million of the proceeds raised from our Public Issue to realise part of our future plans as set out in this Section 6.4 in particular our geographical expansion to India, as well as our venture into the provision of Support Services to the water and power generation sectors in Malaysia. Further details of our proposed utilisation of proceeds are set out in Section 3.10.1 of this Prospectus. We estimate that the timeline for our future plans to materialise as and when the respective opportunities arise. As such, the precise timing of our future plans are uncertain at the moment. However, we do expect to utilise the proceeds of our IPO within the stipulated timeframe as set out in Section 3.10.1 of this Prospectus, which will mark the beginning of our future plans. We may finance the additional requirements for our future plans via a combination of future fund raising in the capital market, internally generated funds, bank borrowings and/or issuance of new securities to our prospective partners, as and when such future plans are realised. 6.4.1 Geographical Expansion via Local and/or Foreign Acquisitions Including Strategic Partnerships Our Group eXisting operations are primarily focused in Malaysia, which contributed approximately 97.5% of our Group’s revenue for the FYE 2015. To reduce the dependence on a single market and to ensure long term sustainability, we intend to extend our market presence internationally by expanding our business operations in India, Middle East and ASEAN regions (listed in terms of priority). Our geographical expansion model is to acqUire eXisting companies or to establish strategic partnership/joint venture with companies which are already operating in India, Middle East and ASEAN regions. The choice of partnership and acquisition is borne out of the need to ensure a fast and effective market penetration given that local companies are likely to have already established an existing presence and network in their respective countries. The selection of countries was based on our internal analysis of demographic and other economic data as well as that of the IMR Report. These analyses focus on the various opportunities available to us based on the economic growth and development of these countries. To successfully do so, we believe the experience and knowledge of local strategic partners in each respective region will be reqUired. 6. BUSINESS OVERVIEW (Cont’d) The following factors explain in detail how each region’s development translates to opportunities for us. Particularly, we choose to expand our operations in India, the Middle East and Indonesia:(a) We have targeted India as one of the countries for our expansion due to its growing population and urbanisation. Based on the IMR Report, the Indian government is poised to spend a total investment of USD1.2 trillion over the next twenty (20) years in development of the country. This will likely result in various development projects for the years to come, and present an attractive opportunity to us to partake in, especially in the sectors of transportation, energy and public security. Please refer to Section 3.10.1 for further details on our utilisation of proceeds to expand our operations in India. Our plans to expand in India also follow closely the “Make-in-India” vision as per the India Union Budget 2015 which is intended to boost the domestic manufacturing industry and attract foreign investors to invest into the Indian economy by providing incentives. Please refer to Section 7 of this Prospectus for further details of the growth potential in India as well as its population growth factors. (b) We will continue to selectively expand our presence in the Middle East region, in particular UAE, Saudi Arabia and Qatar and expect to do so via local strategic partnerships. Our past involvement in notable design projects in UAE will serve as strong testimonies of our capabilities in this region. With our partners, we expect to be able to bid for various contracts for the ongoing and future development plans in the region such as the King Abdullah Economic City development in Saudi Arabia which is currently in development and is expected to be completed in 2035; the World Cup 2022 to be held in Qatar; and the Expo 2020 Dubai which is expected to involve USD7 billion in spending. These developments are expected to involve many construction projects such as cities, commercial buildings and facilities, which will require project management and/or engineering services. (Source: IMR Report) Please refer to the IMR Report for further details of the developments in the countries mentioned above. (c) We also intend to progressively develop our market presence regionally in ASEAN as it is expected that the construction industry in ASEAN especially in emerging countries will witness growth in the near future with significant public investments in large-scale transportation infrastructure construction projects, private sector development and overall economic development. Within the ASEAN region, we have prioritised the establishing of our presence particularly in Indonesia due to the recognised need for major infrastructure development, which is an area where we have significant experience in. We have premised our expansion plans based on the opportunities described in the IMR Report. The Indonesian government is reportedly to continue its focus on improving the state of public infrastructure in Indonesia. At the same time, population growth and urbanisation are also driving demand for residential and commercial property. 6. BUSINESS OVERVIEW (Cont’d) In particular, under the National Medium Term Development Plan (2015 -2019), the Indonesian government intends to push an estimated infrastructure investments of IDR4,886 trillion whereby IDR3,386 trillion are earmarked for strategic infrastructures and IDR1,500 trillion for basic infrastructures. Please refer to the IMR Report for further details. The opportunities in (a) to (c) above span various developments in each respective region, which would translate to the need for our services for the projects arising therefrom. We expect to be bidding for contracts in this respect and intend to rely on our past track record in this region as well as those of the local partners’ to strengthen our bids. We have in the past successfully secured various projects internationally in collaboration with various strategic partners, some of which are as follows:Year to date Project revenue I Projects under Profit Strategic Type of collaboration contribution Partners I Collaboration I I Scope of Contract to HSS Alliances Alliance work value Group Project timeline RM’ 000 RM’ 000 Start End Synergy Strategic Post Office 1,000.0 879/88.0 Nov Feb Property partnership to Towers, Abu 2014 2017 Development collaborate on real Dhabi / Services Pvt estate and Provision of BIM Ltd, India infrastructure services development projects in Malaysia, India and rest of Asia
AutoDesk Asia Master Disease 150.0 150.0/15.1 Sep Nov Pte Ltd, subcontract Prevention & 2013 2014 Singapore agreement to Screening provide BIM Centre, Abu services Dhabi / Provision of BIM services International 199.1 199.1/20.0 Sep Jul Convention 2014 2015 Centre, Saudi Arabia / Provision of BIM services Cadnet Limited, Strategic Battersea power 51.1 51.1/5.2 Dec Jan UK partnership to station, UK / 2014 2015 collaborate on Provision of BIM building projects services in UK The scope of work of the above projects relates to the provision of BIM services on a nonexclusive basis, a new growth area which we have embarked on since 2012. Our present collaborations with various strategic partners are geographical and/or industry/sector focused, and are not project specific. 6. BUSINESS OVERVIEW (Cont’d) 6.4.2 Continuous Expansion on our Three (3) Existing Core Services and Proposed Venture into a Fourth (4th) Core Service i.e. Facility Management (a) Our Group’s primary thrust moving forward is to continue expanding within the engineering services, project management services and BIM consultancy services market. Through the Collaboration, HSSI and HSSME have been repeatedly engaged by existing clients (a few with relationships spanning more than twelve (12) years). This is testimony of their stature as a reliable and quality engineering and project management services provider which stems from our provision of Support Services to HSSI and HSSME. We therefore intend to leverage on the existing list of clients for us, HSSI and HSSME to tender for more projects from them. In addition, we intend to capture more business opportunities through their recommendations to other prospective clients. Below are a few of the latest projects which have been secured by HSSI for which we are providing the Support Services:• Project management work package for the East Klang Valley Expressway (EKVE) project with a contract value of RM6.1 million which had commenced in April 2015 and is expected to be completed by 2019;
• Construction supervision services for the West Coast Expressway -Tanjung Karang -Banting section. The project has a total contract value of RM19.2 million which had commenced in December 2015 with an expected completion date of 2019; and
• Independent consultant engineer services for the MRT Line 2 project. Our estimated fees for this project is RM186.2 million. Our services had commenced in April 2015 and the project is expected to complete by 2022.
It is likely that the Iiberalisation of services in Malaysia under the General Agreement on Trade in Services (GATS) will result in consolidation and rationalisation within the engineering and project management services industry. To maintain our competitive edge within Malaysia with the increasing participation by foreign firms, we are taking a proactive approach to identify other major industry players in Malaysia for possibility of potential merger or acquisition to expand our existing core services. (b) Our proposed venture into the fourth (4th) core service i.e. facility management will enable our Group to position ourselves as a total engineering and project management service provider and to build a steady recurring income business model. Facility management is a professional service encompassing multiple disciplines to ensure the functionality of the built environment by integrating people, place, process and technology. Facility management is also an elaboration of the engineering services pertaining to the air conditioning, refrigeration, sanitary and pollution control, etc. We are well-positioned to provide facility management services given our existing multi-disciplinary engineering expertise and involvement from conception to commissioning. Our involvement in the conception stage of a project allows us to define the optimum requirements before and during the project’s development. Hence, we are naturally positioned to venture into facilities management as a natural progression towards services that continue after the completion/commissioning of a project. The foregoing explains how facility management is complementary to our existing capabilities and competencies. 6. BUSINESS OVERVIEW (Cont’d) We shall provide multi-disciplinary services focused on the on-going management and operations of infrastructure, building and plant assets. Our aim is to provide a single point of accountability, enabling clients to reduce and control operating costs by leveraging on our engineering expertise in order to maximise the value of their assets. Towards achieving this goal, we would be using BIM as an enabler to complement facility management throughout the project life cycle. Please refer to the Section 7 of this Prospectus for an outlook of the demand for facilities management services as well as a detailed explanation of facilities management services as a part of the overall engineering and project management services market. 6.4.3 Venturing into the provIsion of Support Services to the Water and Power Generation Sectors in Malaysia Currently, most of the projects our Group has participated in revolve around highways and transportation sectors with 75% revenue contribution for the FYE 2015. However, we have also provided Support Services in respect of several projects in both the water and power generation sectors undertaken by HSSI, but with relatively lower contract value as compared to our other projects. Below are a few of such projects:Contract Timeline of our scope Sector Project Scope of work value of work RM’ Commence-Commillion ment pletion Drainage and Sungai Muar Support Services 8.5 Oct 2008 2010 Irrigation Flood Mitigation provided to HSSI for Works, Johor engineering design master plan and detailed design Drainage and AI-Abdally Farm Support Services 0.8 Jan 2012 May Irrigation Irrigation, provided to HSSI for 2012 (Overseas) Kuwait engineering services design and construction management Power Plant Balance of Plant Support Services 6.6 July 2013 Feb 2015 for the 100 provided to HSSI for megawatts Coal engineering design Fired Power detailed design for Plant Extension civil, structural, mechanical and electrical Power Plant Panglima Support Services 0.9 Feb 2001 Apr 2002 Combined-Cycle provided to HSSI for Gas Turbine engineering design Power Plant, engineering Melaka consultancy services Water Pipes Support Services 3.6 Apr 2005 Apr 2006 Replacement provided to HSSI for Works To engineering services Reduce Non–detailed design and 6. BUSINESS OVERVIEW (Cont’d) Contract Timeline of our scope Sector Project Scope of work value of work Revenue-Water construction For Districts Of supervision Kuala Selangor, Kuala Langat & Sepang Water Kuantan Port Support Services 0.4 (part of Dec 2014 2016 Expansion provided to HSSI for RM5.0 Package 1 -One engineering services million for (1) Elevated -detailed design and Kuantan Water Storage construction Port Tank (R9), supervision Expansion) Pipelines And All Associated Works
We believe that there are ample opportunities for us to further venture into other sectors and have accordingly, identified water and power generation sectors in Malaysia. Based on the outlook described in Section 7 of this Prospectus, both sectors are expected to continue receiving strong government support given their strategic importance to the country. The following illustrates certain opportunities available to us in the water and power generation sectors in Malaysia based on, among others, government spending and local utility company budget plans, which are further detailed in the IMR Report:(a) A higher demand for water services in Malaysia will translate to greater expansion in water treatment and sewerage facilities. The Malaysian government continued to exert strong support to the water service industry during the 10MP period. For example, as outlined in lOMP, the capacity of Pantai 2 sewage treatment plant is set to upgrade from its existing design and is expected to be completed in 2017. In addition, a total of RM1.26 billion is also allocated in the implementation of Mengkuang Dam Expansion Enlargement project. The llMP reiterated the government’s commitment for the continued expansion and investment in new water and sewerage networks and treatment capacity. Under the same plan, continued emphasis will be placed towards extending provision of rural basic infrastructure including expanding coverage of access to clean and treated water. Focus will also be given to a holistic non-revenue water reduction programme and improving the performance of the sewerage system. (b) The government has targeted solar power to contribute a minimum of 220 megawatts by 2020 as outlined under the National Renewable Energy Policy. The government has also highlighted in the ETP on the need to build approximately 4 gigawatts of additional power capacity in Peninsular Malaysia in ensuring an adequate power supply and a healthy power reserve margin in long term. Tenaga Nasional Berhad, being the main utility in Peninsular Malaysia, has invested RM10.8 billion in its capital expenditure in 2015. Approximately half of the capital expenditure was allocated towards ensuring system efficiency, security and reliability through investments in system maintenance and enhancements. The remaining expenditure was spent on generation projects towards meeting future capacity requirement. 6. BUSINESS OVERVIEW (Cont’d) Under the llMP, a total of RM28.0 billion will be allocated to build three (3) coal plants in Johor, Perak and Negeri Sembilan, and two (2) gas plants in Penang and Johor. These power plants, upon completion, will top up a total of 7,626 megawatts of electricity generation to the nation. Based on the above, we can expect growing opportunities for us to provide Support Services to the water and power generation sectors in Malaysia in the future and we plan to use our relevant expertise and existing track record together with those of local or foreign partners to bid for new projects. We are currently identifying suitable targets and/or partners that have the requisite track record and experience in the water sector for potential joint venture or acquisition. As disclosed in Section 3.10.1 of this Prospectus, RM6.0 million is allocated towards this purpose, whereby the target company should have experience in areas such as water resources study, water and waste water engineering, dam and hydroelectric power plant engineering, flood mitigation and drainage. In terms of our proposed venture into the provIsion of Support Services to the power generation sector, we are currently seeking to collaborate with local/foreign partners with the relevant expertise and track record for projects within this sector. With the acquired knowledge and track record, we plan to establish a power division within our Group. RM3.0 million is allocated towards this purpose, which will be utilised towards the minimum staffing and rental of office space for this division. The size of the team will be determined according to assessment of the division’s business potential, in terms of complexity and value of projects. As evident from our track record in other sectors, we had and continue to participate in Malaysia’s large infrastructure projects, which have helped to build our, HSSI’s and HSSME’s positive image and good relationship with various government agencies. Hence, we are confident that we would be able to leverage on that track record, experience and capabilities to secure more projects within the power and water sector, which are expected to provide recurring income to us. To this effect, we would undertake more efforts to ensure successful expansion into these sectors whereby we expect accelerated growth in these two (2) sectors as existing and on-going water and power development projects will not be able to meet the increased demands due to population growth and industrialisation. [ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (Cont’d) 6.4.4 Prospects of our Group Our Group operates within the engineering and project management services market in Malaysia, and our prospect remains favourable in relation to the outlook of the industry. According to the IMR Report, the outlook for the engineering and project management services market remains positive throughout the forecast period of 2015 to 2020 with an estimated CAGR of 6.5% throughout the said period. Growth within the engineering and project management services market is likely to stem from government-led initiatives and spending, sustained economic growth to support spending and investment in properties, steady population growth, increasing participation by professionals into the provision of engineering and project management services and the strategic need for project management services. According to the IMR Report, moving forward, growth momentum in the Malaysian construction industry is expected to moderate slightly to 7.9% in 2016, with much of its prospects hinging upon the effective implementation of various projects identified under the llMP and ETP, along with the continued execution of various public-private partnership (PPP) projects. The Malaysian Government expects private investment to play a more significant role in economic development going forward, and PPP will continue to be one of the key instruments in helping the country achieve growth and development not just until the year 2020 but also beyond. The Government noted that PPP is only possible through smart partnership ventures between private and public sector with high level commitment from the Government. To this effect, the Government’s commitment is clearly manifested with the establishment of Unit Kerjasama Awam Swasta (UKAS) as a dedicated agency responsible for PPP implementation in Malaysia and the allocation of RM20.0 billion for the Facilitation Fund to encourage private sector investment in strategic key economic areas. We possess extensive experience and track record from our previous participation in government funded projects as detailed in Section 6.3.2 of this Prospectus. For the FYE 2015, as much as 71% of our Group’s revenue was contributed from government funded projects. Leveraging on our past track record and reputation in this segment, we expect ample opportunities for us to expand our current revenue base in relation with the shift in government spending towards PPP. Furthermore, we have adopted BIM technology since 2012 and it became a key element to our core service offerings since then. The adoption of BIM technology represents our ability to capitalise on the latest technology development. More importantly, we are able to reap the benefit of early adoption of the competitive edge offered should the proposed mandatory BIM submission for architect and engineering in 2017 and 2018 materialise. Moving forward, we have in place a series of business plans that are focused in expanding our presence and service offerings both domestically and overseas in India, Middle East and the ASEAN regions (listed in terms of priority). These future plans will help us to sustain our business and provide growth opportunities for our Group. Prospect of the Indian Construction Industry The construction industry in India remains favourable in long term; growth is likely to stem from various government-led initiatives and policies for industrialisation, urbanisation and economic development. More importantly, the Indian population is projected to continue flourishing to 1.35 billion by 2022 from the estimated 1.28 billion in 2016. Accordingly, this would spur the demand for shelter and better infrastructures. The large amounts allocated by the Indian government for spending in the development of smart cities, construction of industrial and economic corridors, as well as investment in the power and transportation infrastructure are anticipated to spur the demand for activities and services within the construction industry. 6. BUSINESS OVERVIEW (Cont’d) Being one of the mega infrastructure projects in India, the development of Delhi-Mumbai Industrial Corridor (DMIC) which encompasses nine (9) mega industrial zones, high speed freight line, three (3) ports, six (6)-lane intersection-free expressway connecting Mumbai and Delhi, and a 4,000 megawatts power plant are planned and spread in two (2) phases. In addition to DMIC, another four (4) corridors have been conceptualised for the same purpose, namely the Bengaluru-Mumbai Economic Corridor, the Amritsar-Kolkata Industrial Development Corridor, the Chennai-Bengaluru Industrial Corridor and the Vizag-Chennai Industrial Corridor. Other major transportation projects in India include the development of Kochi Metro with its first phase being planned for a distance of 25 km with 22 stations running from Aluva to Petta. The Indian government also strives to increase the electricity supply to rural population. Accordingly, the Indian government aims to generate 100,000 megawatts of solar power, 60,000 megawatts of wind power, 10,000 megawatts of small hydro power and 5,000 megawatts of biomass-based power by 2022. In terms of funding, the ease of access to foreign direct investment is expected to have a positive impact on the construction industry in India. Its latest Consolidated FDI Policy Circular of 2015, the Indian government targets to attract more investment by allowing foreign direct investment of up to 100.0% for the construction, operation and maintenance of railway infrastructure. (Source: IMR Report) Prospect of the Construction Industry in the Middle East The construction industry in the Middle East continued to expand until the second half of 2014 when dipping oil prices, political succession in the Kingdom of Saudi Arabia and heightened geopolitical tensions resulted in business uncertainties and restrained its growth. As the downward pricing trend persisted in 2015, investors sentiments were adversely affected thus resulting in cancellation and deferment of construction projects for budget revision. Nonetheless, major developments in the Middle East include those from countries leading the growth in the region -including the Kingdom of Saudi Arabia, Qatar and the UAE, are expected to provide the impetus to the industry’s growth in the long run. Announced in 2005, the King Abdullah Economic City development in the Kingdom of Saudi Arabia is a measure outlined to reduce their dependency on the oil industry. This mega project is developed on an area of 168 square km with an estimated cost of USD95 billion. The construction work of the said development has commenced since 2006, and is targeted to complete by 2035. Meanwhile, the construction industry in Qatar has seen the implementation of various developments as preparations begin for the World Cup 2022. Amongst the preparation, the Lusail City is a massive planned community encompassing a 80,000 seat Lusail Iconic Stadium for the final game. Other developments in pipeline include four (4) exclusive islands and nineteen (19) multi-purpose residential, mixed use, entertainment and commercial districts. The total estimated capacity of Lusail City is estimated to reach 450,000 people. Likewise in the UAE, the hosting right of the 2020 World Expo in Dubai (also known as Expo 2020 Dubai) provides the impetus to grow within the local construction. With an estimated spending of USD7.0 billion, the expo, like those in the past, enables the sharing of ideas in architecture, science and technology, and other fields by countries across the world. World Expo was first held in London in 1851, and the event was subsequently hosted in different countries at irregular intervals of time before 2000, and every five (5) years thereafter. 6. BUSINESS OVERVIEW (Cont’d) Furthermore, the population in the Middle East and North Africa region is projected to escalate from 440 million in 2010 to 618 million by 2040. Accordingly, the construction industry in the Middle East is set to witness increasing demand for properties and infrastructure demand in long term. (Source: IMR Report) Prospect of the Indonesian Construction Industry The Indonesian construction industry registered an expansion of 6.7% in 2015, on the back of increased spending in infrastructure by the government. Growth within the construction industry is also supported by improved investor sentiment subsequent to the introduction of the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development. Launched in 2011, the Masterplan outlines various strategies, among others, encouraging private sector participation to develop the country towards achieving the status of developed nation by 2025. Various highway and railway projects were also introduced in order to improve the connectivity in the country. The proposed construction of the Jakarta Mass Rapid Transportation project constituting the North-South line and the East-West line stretches across over 110 km is expected to complete by 2027. Other infrastructures development in the pipeline, among others, are the construction of the 2,600 km Trans-Sumatra Highway, the 1,000 km Trans Jawa Highway, the 4,325 km Trans-Papua highway, the 2,168 km TransSumatra Railway, the 2,428 km Trans-Kalimantan Railway, and the 145 km Trans-Sulawesi Railway. The construction industry in Indonesia is also set to benefit from the strong government support towards developing its energy infrastructure in order to meet its increasing energy demand subsequent to economic expansion, rapid urbanisation and population growth. With a current population of around 250 million, the Indonesian population is projected to exceed 290 million by 2045, with majority living in urban areas. (Source: IMR Report) 6.5 KEY ACHIEVEMENTS AND MILESTONES Our key achievements and milestones are as follows:Period Achievement or Milestones 2001 • HSSE commenced operations 2008 • Successfully secured contract to provide Support Services for the LRT Ampang Line Extension project via HSSI 2011 • Successfully secured contract to provide Support Services for MRT Line 1 project via HSSI 2012 • BGV was incorporated and commenced operations 2012 • HBS was incorporated and commenced operations 2012 • Successfully incorporated BIM services into principal activities 2012 • Successful registered as Autodesk Subcontractor for BIM project deliveries 2013 • Registered turnover of more than RM100 million 2015 • Successfully awarded the ISO 9001:2008 for quality management system, ISO 14001:2004 for environmental management system and occupational health and safety policies OHSAS 18001: 2007 6. BUSINESS OVERVIEW (Cont’d) Period Achievement or Milestones 2015 • Successfully secured contract to provide Support Services for the MRT Line 2 project via HSSI 6.6 DESCRIPTION OF OUR BUSINESS Our Group is principally involved in the provision of comprehensive engineering and project management services from conception to commissioning including geotechnical survey, feasibility studies, master planning, environmental impact/economic/financial assessments, preliminary and detailed design, computer modelling (BIM), construction supervision and project management. Currently, our total staff strength amount to approximately 600 employees of which 250 of them are engineers. We operate from three (3) main offices namely Kuala Lumpur, Penang and Chennai. We have longstanding experiences in wide array of sectors including, but not limited to, building and structures, urban infrastructure, roads and highways, railways and metro systems, airports, ports and harbours, transportation planning, power generation and distribution, water resources and supply, and sewerage and public health. We provide our services on a global scale, and have completed projects both locally and internationally in countries such as India and the Middle East. Our range of services can be segmented into three (3) core services categories:(a) Engineering services comprising:
(i) Engineering design;
(ii) Construction supervision;
(b) Project management; and
(c) BIM services.
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6. BUSINESS OVERVIEW (Cont’d) study, utilities mapping, infrastructure conditions survey, preliminary financial modelling, financial feasibility study and risk assessment / management. We will formulate the terms of references for the conduct of these surveys and studies, and assist the client in procuring the surveyors. If the project is feasible, a conceptual design or master plan will be prepared based on the client’s requirements and the results of the said surveys and studies. All the necessary documentation for submission to the relevant authorities for the required approvals are prepared simultaneously which will be reviewed and endorsed by HSSI or HSSME. An environmental impact assessment may also be undertaken to assess any impacts to the environment caused by the project including identifying mitigating steps. (ii) Preliminary and Detailed Design The design team will work with HSSI or HSSME to prepare a detailed design which includes civil, structural, mechanical and electrical design. From there, a total cost estimation will be established and value engineering performed to explore possible areas to minimise cost and maximise efficiency. HSSI or HSSME will review and endorse all the necessary documentation we prepare for submission to the relevant authorities for the required approval. Depending on the complexity of a project, we may be required to prepare a preliminary design before proceeding with a detailed design. (iii) Specification and Procurement Contracts, bill of quantities and tender documents will be prepared by our contract department, collating all the relevant specifications and procurement activities of the project as required according to the design. Assistance is also offered to the client during the procurement process, including evaluation of tender submissions received by the client. (b) Construction Supervision In proViding construction supervision services we seek to ensure, inter alia, the following:• Works performed are in compliance with the approved drawings and specifications, and the prescribed guidelines;
• Work completion and handover is done in accordance with the agreed work programme / implementation schedule; and
• Monitoring the construction process to ensure that the project cost is in accordance with the approved budget.
6. BUSINESS OVERVIEW (Cont’d) The scope of construction supervision services provided by us is generally as below:(i) Quality and Safety (aa) Inspect (including sampling, checking, and testing) all materials and workmanship to ensure that the completed works comply with the approved draWings and specifications. Report and monitor the remedial of any defects or deficiencies, including result of quality control tests; (bb) Monitor all personnel on site to ensure compliance to the prescribed safety and environment policy / programmes that is implemented; (cc) Ensure all works is performed in accordance with the prescribed guidelines and policies to minimise inconvenience to the public within the affected areas; (dd) Collect information on daily labour and equipment utilisation; and (ee) Make recommendations to the client for any changes to the approved drawings, specifications and/or work programme / implementation schedule which will benefit the client or the project. (ii) Work Progress, Finance and Coordination (aa) Monitor, supervise and report on progress of all works at agreed intervals; (bb) Assist HSSI and HSSME to liaise with all relevant authorities and government agencies, whenever necessary; (cc) Coordinate activities of all the contractors and other parties which may be working within the same vicinity or location; (dd) Report on critical issues and any causes of delay, and recommend remedial / mitigating steps; (ee) Assess any request for extension of time by contractors and make recommendation to the client; (ff) Advise the client of any requirement for a variation including any potential incremental costs; (gg) Check and verify quantities of accepted works for preparation of certification in respect of any payment due; (hh) Issue recommendation to HSSI or HSSME for the issuance of Take-Over Certificate and Certificate of Completion and Compliance; (ii) Prepare list of defective works and outstanding works, and issue recommendation to HSSI or HSSME for the issuance of Certificate of Making Good Defects; Uj) Monitor the execution and completion of defective and outstanding works to ensure all are completed within the agreed period; and (kk) Vet through the final account prepared by the contractors before certification by the client. 6. BUSINESS OVERVIEW (Cont’d) 6.6.2 Project Management We are also involved in the provision of project management and construction management services. We have diversified project experiences and are able to undertake and cater for a wide array of sectors. All project management solutions are tailor made to best suit each project, thus producing efficient and effective results. For each project, we will assemble a dedicated project management team to oversee and manage the execution of the project. We provide a total project management solution from pre-implementation to completion phase, including turnaround management solutions for projects which are under performing. Notwithstanding our technical expertise and capacity, in light of Malaysia’s regulatory framework as elaborated in Section 6.1 of this Prospectus, our local services offering is limited to providing the Support Services which forms a significant portion of project management services. Through the Collaboration with HSSI and HSSME, we assist HSSI and HSSME to deliver comprehensive project management services to their clients. The scope of project management services throughout a typical project cycle is as detailed below which may be customised according to the client’s needs and the project’s requirements:(a) Planning and Design Management The dedicated project management team will work closely with the client to establish the client’s requirements and develop the project master implementation plan which includes all the project’s milestones and the budget allocated. All the design deliverables (including all relevant studies) submitted by the client’s design consultants will be reviewed to ensure its technical compliances are met and the functionality and practicality of the same, and the client’s requirements are fulfilled. The project management team will oversee the value engineering exercise by the design consultant to explore areas where cost can be minimised and efficiency maximised. We will liaise with the relevant authorities and other stakeholders for approvals and/or feedbacks. Based on the approved designs, drawings, calculations and proposals, a cost estimation will be prepared which is used to maintain control over the project’s total cost. (b) Procurement Management and Contract Administration Based on the project master implementation plan, a procurement strategy will be prepared to establish the various contract of services which will need to be procured for the project and a project budget will be prepared for monitoring purposes. This exercise is critical so as to ensure efficient execution of the project, in terms of time and cost. Suitable contractors, consultants and suppliers are identified to be invited for the bidding. Contract documents, bill of quantities and tender documents will be prepared by our contract department. The project management team will evaluate all bids received and make recommendations to the client based on the bidder’s capacity, capability, bidding price and track record. It will be at the client’s sole and absolute discretion to accept or reject any recommendations made by the project management team. All documents submitted by the bidder which include drawings, product data, samples and other submissions will be reviewed by the project management team. The materials specified will also be reviewed by the project management team through means of material testing to ensure that all information, description and particulars are consistent with those specified in the contract. 6. BUSINESS OVERVIEW (Cont’d) The project management team will continually review and update the budget and make recommendations in respect of any payment requests / certificates from the appointed contractors, consultants and suppliers to ensure the same accurately reflect their completed services and consistent with agreed payment schedule. (c) Construction Management The project management team is responsible to ensure that the project is completed within the agreed time period and the established project budget. The team will provide administrative and management services to facilitate coordination of the work between all parties. A constructability assessment will be undertaken which involves the review of the construction methods / implementation programme prepared by the appointed contractors, consultants and suppliers. A project schedule will be established and the team will set up an effective communication system to allow clear communication between all parties involved. The project management team will monitor and supervise the progress of the project and the project schedule will be regularly updated to reflect the progress of the project. The project management team will formulate a safety and health programme which conforms to the related law and regulations. Each process and works done during the construction will be studied to identify potential hazards and dangers. Proper safety and health measures will be implemented to mitigate the dangers to any personnel. Where testing and commissioning are necessary, the project management team will oversee the same. In consultation with the client and any other relevant party(ies), the project manager will determine the time at which each phase is completed, upon which appropriate completion certificate (if any) will be issued. Where necessary, a list of defective / outstanding works will be prepared, and the project manager will monitor to ensure that the same are completed within the agreed period. (d) Interface Management The project management team is required to manage the interface between various parties which are detailed below but may not be limited to the following:• client;
• regulatory authorities / stakeholders;
• design consultants;
• contractors; and
• suppliers & vendors.
During this time, the project management team will maintain a tracking sheet indicating all the various official correspondences between all parties and the current status of any application or discussions held. (e) Risk Management During the project life cycle, the project management team maintains and monitors a risk register which identifies potential technical issues that may cause delays in the implementation of the project. The project management team will highlight these potential issues to the client and propose mitigation / corrective measures to address them. The risk register is updated on a monthly or fortnightly basis and circulated to the client and any relevant stakeholders for reference and records. 6. BUSINESS OVERVIEW (Cont’d) For projects with multiple stakeholders, other than the client, for example, the government, regulatory agencies and financiers, an independent engineering review of the project may be required to ensure all the stakeholders’ interest is protected. In these circumstances, HSSI may be appointed to undertake such a review in the capacity of an Independent Consultant Engineer. Our role is to provide Support Services to HSSI for the review of identified deliverables by the client’s consultants and contractors involved in the project against the terms of reference provided to HSSI. Below is a typical scope of independent engineering review services which may vary according to the terms of reference provided by the c1ient:(i) Pre-Design I Planning Stage Review the following prepared by the consultant(s) appointed by the c1ient:• The client’s requirements;
• Value engineering strategies and design optimisation adopted;
• Master implementation plan;
• Project budget; and
• Procurement strategy.
(ii) Design Stage Review the following prepared by the consultant(s) appointed by the c1ient:• Conceptual design;
• Preliminary and detailed design;
• Technical specifications;
• Quality assurance plan;
• Safety and compliance standards; and
• Constructability of the works based on the design.
(iii) Pre-Construction and Tender Stage Review:• Contract documents, bill of quantities and tender documents prepared by the client’s consultant(s);
• Tender evaluation criteria prepared by the client’s consultant(s);
• Tender submissions by the bidders; and
• Risk management plan prepared by the client’s consultant(s).
(iv) Construction Stage • Verify all progress payment requests from all the client’s consultant(s) and contractor(s);
• Monitor the works and undertake performance and material audits;
• Review and issue Statement of No Objection for factory acceptance test / site acceptance test submitted by the client’s consultant;
• Review the testing & commissioning plan and operational readiness plan prepared by the client’s consultant; and
• Review operational plans and procedures prepared by the client’s consultant.
6. BUSINESS OVERVIEW (Cont’d) (ii) Documentation and Fabrication After all rectification in the 3D model, shop drawings will be created based on client standards. The 2D or 3D drawings can be extracted out of the 3D model. The drawings generated will be useful for contractors, fabricators, suppliers and manufacturers as it is detailed enough to use for workshop fabrication, on-site installations and procurement. The 3D model will also allow accurate information on the manufacturing and procurement with quantity take-off. The quantity take-off is detailed and tabulated as per client requirement. As it is software generated, any updates will be done automatically based on the latest 3D model. (d) Construction (i) Construction 40/50 With the 3D model, we will produce a simulation of the entire construction of the project. Any complications which might cause delay to the project will be projected and extra cost such as labour cost can be calculated using 4D/5D model. Through simulation, the most efficient method of construction will be identified and the actual construction will commence according to the simulation. (ii) Construction Logistics The logistics of all the materials from the warehouse to the construction site as well as how the building materials should be placed or elevated to the proper location during construction will also be calculated and decided upon through simulation. The simulated logistics will be applied in the actual construction process to maximise efficiency. (e) Operation and Maintenance Similar for the construction stage, the operation and maintenance post-completion can also be simulated. The structure will be tested through the simulation to see if it serves its intended purpose. The detailed look and feel of the intended architecture as well as its functionality will be tested using the simulation. The building operations will be simulated over time and any wear and tear of the construct will be noted. Cost of maintenance of the building can also be estimated in this process. (f) Demolition and Renovation Finally, any demolition or renovation can also be simulated using the 3D model. The demolition or renovation process can be simulated to allow the involved parties to understand the implication faced in case of any decision to demolish or renovate based on the present design. This includes cost, logistics, and other structural constraints.
6. BUSINESS OVERVIEW (Cont’d) (iii) Evaluate the availability of manpower and other resources according to the project timeline and schedule; and (iv) Internal costing and budgetary evaluations on sub-consultant(s) costs, service providers reimbursable and overheads to determine the pricing of bid. The final pricing of the bid quoted in the submission is determined after having evaluated all the related costs, including indicative prices sub-consultant(s) and service providers. Once our management has confirmed the bid price, the bid will be submitted to the client, on or before the prescribed submission deadline. (c) Negotiations Before the Letter of Award is awarded, the client will generally call for an interview for clarification on details on the proposed bid. Among the issues to be discussed are our technical capabilities and quality control, related project experience, availability of resources, project-budgeted cost and timeliness. Upon satisfactory clearance of all the issues mentioned above, the negotiation is completed and finalised. (d) Contract Award Upon successfully securing the contract, we will generally be notified through the issuance of the Letter of Award within sixty (60) to ninety (90) days from the final date of bid submission. (e) Project Launch Once the Letter of Award is received, our project team will be assembled for the planning of project implementation. Depending on the project scope, the project management team will proceed to have meetings with stakeholders to discuss project design, execution, or other related matters. (f) Project Execution After the commencement of the project, our project team through the use of various software, will monitor the project’s progress to ensure it is moving according to schedule and that sufficient resources are made available until the completion of the project. The project team will work closely with the service providers to ensure that the quality of work is up to the established standard. Weekly reports on the progress of the project will be monitored by our project manager. Meetings with the client’s representative will be done periodically to discuss the progress of the project, changes, and issues. In the event of any changes to the original scope, a variation order must be drafted by the client to make any amendments to the previously agreed terms of the project. (g) Sign-off A sign-off indicates the successful handover of a project. Project sign-offs are usually conducted by the client or the client’s representative and there may be more than one (1) sign-off required depending on the terms and conditions stated in the Letter of Award. I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) 6.6.5 Engineering Services, Project Management and BIM Projects For the past three (3) FYEs 2013 to 2015, we have completed various infrastructures and building construction projects of varying size, scope and contract value. The table below highlights our completed projects within the past three (3) FYEs 2013 to 2015 and major on-going projects:Past Projects (Completed within FYEs 2013 to 2015) (a) Support Services for Engineering and Project Management Services The table below highlights the projects within the engineering and project management services segment which were completed within the past three (3) FYEs: Project details South Klang Valley Expressway (SKVE) Clients (1) SKVE Holdings Sdn Bhd Contract value (RM’million) 20.8 Commencement/ Completion Date October 2006/ September 2015 HSSE’s role is to provide Support Services for the following scope Project Management (RM20.8 million) Lebuhraya Kajang -Seremban (LEKAS) wer Construction Sdn Bhd and IJM Construction Sdn Bhd 19.4 April 2004/ July 2014 Engineering Design (RM12.0 million) and Construction Supervision (RM7.4 million) LCer-New Cost Carrier Terminal Malaysia Airports Holdings Berhad 9.7 December 2009/ October 2015 Engineering Design (RM6.0 million) and Construction Supervision (RM3.7 million) East Coast Railway East Coast Economic Region Development Council (ECERDC) 8.7 December 2009/ December 2015 Engineering Design (RM8.7 million) Manjung Power Plant Mudajaya Corporation Sdn Bhd 6.7 September 2011/ December 2015 Engineering Design (RM5.1 million) and Construction Supervision (RM1.6 million) Structural Assessment and Condition Monitoring for LRT -Kelana Jaya Line -Civil & Structural Prasarana Malaysia Bhd 3.5 July 2008/ July 2013 Engineering Design (RM3.3 million) and Construction Supervision (RMO.2 million)
117 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Project details Construction of a New 1kea Store Clients (1) 1kano Cochrane Sdn Bhd Contract value (RM’million) 3.0 Commencement! Completion Date July 2013/ November 2015 HSSE’s role is to provide Support Services for the following scope Project Management (RM3.0 million) Total 71.8 —– Note:
(1) Being clients of HSS1, for which we are providing the Support Services to HSS1 pursuant to the Teaming and Support Services Agreement. (b) BIM Services The table below highlights the project within the B1M services segment which was completed within the past three (3) FYEs:Contract value Commencement! Project details Clients (RM’million) Completion Date BGV’s role Mass Rapid Transit (MRT) Line 1 -Jajaran Sg. Mass Rapid Transit Corporation 4.0 April 2013 / Provision of B1M services Buloh -Kajang Stations/Depots -Northern Sdn Bhd 2014 package [The rest of this page is intentionally left blank] 118 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Major Current Projects (On-going) (a) Support Services for Engineering and Project Management Services The table below highlights the major current projects within the engineering and project management services segment with contract value of above RM1.0 million: Project details Bukit Raja -Integrated Township Clients (l) Sime Darby USJ Development Sdn Bhd Contract value 16.0 Accumulated billings up to 31 December 2015 RM’million 14.2 Unbilled as at 31 December 2015 1.8 Commencement / Completion Date ——December 1999 / 2020 HSSE’s role is to provide Support Services for the following scope Engineering Design (RM8.4 million) and Construction Supervision (RM7.6 million) LRT -Ampang Line Extension Prasarana Malaysia Bhd 183.5 147.8 35.7 December 2008/ 2016 Engineering Design (RM67.9 million) and Construction Supervision (RM115.6 million) Maju Expressway (MEX) Extension to Kuala Lumpur International Airport Maju Holdings Sdn Bhd 11.1 1.5 9.6 May 2010 /2020 Engineering Design 5,500 Houses for the National Scheme of Brunei Darussalam Housing Brunei Economic Development Board 22.6 22.1 0.5 September 2010 / 2016 Project Management Mass Rapid Transit (MRT) Line 1 -Jajaran Sg. Buloh -Kajang Mass Rapid Transit Corporation Sdn Bhd 100.6 83.2 17.4 February 2011 / 2017 Project Management West Coast Expressway from Tg. Karang to Banting IJMC-KEB Joint Venture 20.6 11.0 9.6 June 2011 / 2018 Engineering Design 119
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Project details Westports Construction and Completion on Land Reclamation works, Wharf and Yard North-South Expressway Fourth Lane Widening between Nilai (Utara) Interchange and Seremban (from 3 lanes to 4 lanes) Sungei Besi -Ulu Kelang Elevated Expressway (SUKE) Implementation of 3 Major Roads Project And Undersea Third Link Tunnel In Penang Metro Project In Northern State (Penang) Temporary Common Camp Facilities and Infrastructure for Refinery And Petrochemicals Integrated Development (RAPID) Project, Pengerang, Johor Kwasa Damansara Township Development Clients (1) Westports Malaysia Sdn Bhd Projek Lebuhraya Utara-Selatan Berhad Turnpike Synergy Sdn Bhd Unit Perancang Ekonomi Negeri Penang Gamuda Bhd UEMB-PROPEL Consortium Kwasa Land Sdn Bhd (a wholly owned subsidiary of Employees Provident Fund) Contract value 41.1 26.0 50.7 19.7 13.0 9.8 12.1 Accumulated Unbilled billings up to as at 31 31 December December 2015 2015 RM’million 28.4 22.4 7.8 7.6 2.5 6.4 2.0 12.7 3.6 42.9 12.1 10.5 3.4 10.1 Commencement I Completion Date July 2010 / 2016 July 2011 / 2016 January 2012 / 2019 October 2014 / 2019 December 2014/ 2018 October 2014 / 2016 July 2014/ 2020 HSSE’s role is to provide Support Services for the following scope Engineering Design (RM36.1 million) and Construction Supervision (RM5.0 million) Engineering Design (RM10.8 million) and Construction Supervision (RM15.2 million) Engineering Design (RM12.7 million) and Construction Supervision (RM38.0 million) Engineering Design Engineering Design Engineering Design (RM6.9 million) and Construction Supervision (RM2.9 million) Project Management 120
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Project details Clients (1) Contract value Accumulated billings up to 31 December 2015 RM’million Unbilled as at 31 December 2015 Commencement / Completion Date - HSSE’s role is to provide Support Services for the following scope East Klang Valley Expressway Ahmad Zaki Sdn Bhd 6.1 1.5 4.6 April 2015/ 2019 Project Management Mass Rapid Transit (MRT) Line 2 -Jajaran Sg. Buloh -Serdang-Putrajaya Mass Rapid Transit Corporation Sdn Bhd 186.2 5.9 180.3 April 2015/ 2022 Project Management West Coast Expressway from Tg. Karang Banting to IJMC-KEB Joint Venture 19.2 19.2 December 2015/ 2019 Construction Supervision
Total 738.3 364.3 374.0 Note:(1) Being clients of HSSI, for which we are providing the Support Services to HSSI pursuant to the Teaming and Support Services Agreement. [ The rest of this page is intentionally left blank] 121
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) (b) BIM Services The table below highlights the major current projects within the BIM services segment:Project details Mass Rapid Transit (MRT) Line 1 -Jajaran Sg. Buloh -Kajang Stations/Depots -Southern Package Mixed Development of Retail Mall, Shop Office And Service Apartment at Mukim Setapak, Kuala Lumpur Serviced Apartment At Kajang Utama Phase 7, Kajang, Selangor Development of High End Condominium at Lot 82 Jalan Kia Peng, Kuala Lumpur Mixed Development of Retail, Hotel, Service Apartment and SOHO at Lots 266 & 349, Brickfield, Kuala Lumpur Clients Mass Rapid Transit Corporation Sdn Bhd Malaysian Resources Corporation Bhd Malaysian Resources Corporation Bhd Malaysian Resources Corporation Bhd Malaysian Resources Corporation Bhd Contract value 3.8 0.5 0.3 0.2 0.8 Accumulated billings up to 31 December 2015 RM’million 2.7 _(1) 0.2 _(1) -Unbilled as at 31 December 2015 1.1 0.5 0.1 0.2 0.8 Commencement I Completion Date December 2013 / 2016 2015/ 2016 December 2014 / 2016 January 2015 / 2016 2015/ 2016 122
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Contract Project details Clients value Accumulated billings up to 31 December UDA Corporate Office & Retail on Lots 3344 & 3345, Section 41, Jalan Sultan Ismail, Kuala Lumpur UDA Holdings Bhd 0.9 Banyan Tree Signature Project BUCG (M) Sdn Bhd 0.6 Development of 13-Storey Office Tower With Basement Carpark At Lot 2C4, Precinct 2, Putrajaya 2 Storey Malaysian Resources Corporation Bhd 0.2
2015 RM’million Unbilled as at 31 December 2015 0.4 0.5 0.4 0.2 _ (1) 0.2
Note:(1) Represents less than RM100,OOO Total 7.3 3.7 3.6 [ The rest of this page is intentionally left blank]
123 Commencement I Completion Date January 2015 / 2016 March 2014/ 2016 August 2015/ 2016
6. BUSINESS OVERVIEW (Cont’d) 6.8 SALES AND MARKETING STRATEGIES Our Group’s sales and marketing strategies are as follows:6.8.1 Track Record and Business Network Through the Collaboration, we have contributed to HSSI’s and HSSME’s success in the engineering and project management services market which has contributed well to their reputation and goodwill in various industries and sectors in Malaysia. The consistent track record has earned HSSI and HSSME many recurring clients and new ones through favourable referrals and recommendations from existing clients. We have participated, through the Collaboration, in providing the contracted services including for their top ten (10) clients in 2015 whom have a relationship spanning an average of twelve (12) years. In addition, our Group continuously looks to generate new business opportunities by leveraging on the established domestic and global network of business contacts that our Group’s Directors and key management have developed over the years. We also proactively create business opportunities by approaching potential clients with our recommendations of plausible projects for which our professional services will be engaged. 6.8.2 Strategic Alliances Our Group has established a global presence and is able to tap the global market through our network of alliances in the region. By leveraging on our strategic alliances, we have successfully secured various overseas projects. Please refer to Section 6.4.1 of this Prospectus for some of the overseas projects that we have undertaken with our strategic partners / alliances. [ The rest of this page is intentionally left blank] I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) 6.9 MAJOR CLIENTS Our top ten (10) clients via the Collaboration and their revenue contribution for the past three (3) FYEs 2013 to 2015 are as follows:Country (2)Length Rank Client of origin (l)Revenue contribution of relationship FYE 2013 FYE 2014 FYE 2015 RM’OOO 0/0 RM’OOO 0/0 RM’OOO 0/0 Years (1) Prasarana Malaysia Berhad Malaysia 36,169 35.7 29,066 27.8 35,268 29.0 22
(2) Mass Rapid Transit Corporation Sdn Bhd Malaysia 19,031 18.8 22,166 21.2 26,679 22.0 6
(3) Unit Perancang Ekonomi Negeri Penang Malaysia –1,059 1.0 9,300 7.7 2
(4) Projek Lebuhraya Utara-Selatan Berhad Malaysia 7,419 7.3 5,662 5.4 5,459 4.5 24
(5) Westports Malaysia Sdn Bhd Malaysia 4,346 4.3 6,340 6.1 4,853 4.0 22
(6) UEMB-PROPEL Consortium Malaysia –597 0.6 4,751 3.9 2
(7) Gamuda Berhad Malaysia 464 0.5 747 0.7 3,202 2.6 3
(8) East Coast Economic Region Development Council Malaysia 1,843 1.8 2,485 2.4 3,098 2.5 7
(9) Kwasa Land Sdn Bhd Malaysia –2,299 2.2 1,972 1.6 3
(10) Sime Darby USJ Development Sdn Bhd Malaysia 1,297 1.3 2,046 2.0 1,525 1.3 19
Total 70,569 69.7 72,467 69.4 96,107 79.1 Notes:(1) Being revenue contribution to HEB Group. (2) Denotes the length of our involvement in various projects undertaken by these clients as well as their predecessors whom were leading and/or managing the said projects. Revenue contribution from clients may fluctuate on an individual basis given the nature of our Group’s business, which is mainly based on projects that are secured from time to time as well as the work in progress of those projects. Over the past three (3) FYEs 2013 to 2015, between 49.0% and 54.5% of our revenue were contributed by Prasarana Malaysia Berhad and Mass Rapid Transit Corporation Sdn Bhd arising from the LRT -Ampang Line Extension and MRT Line 1 and MRT Line 2 projects respectively. 127 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) This is due to the timing and progress of those projects over the last three (3) FYEs 2013 to 2015, details as follows:(a) Work on the LRT -Ampang Line Extension project had commenced since December 2008 and is expected to be completed in 2016 whereas work on the MRT Line 1 had commenced since February 2011 and is expected to be completed in 2017.
(b) The contract values for the LRT -Ampang Line Extension project is RM183.5 million of which RM147.8 million (or 80.5%) has been billed up to 31 December 2015. The contract value for the MRT Line 1 is RM100.6 million of which RM83.2 million (or 82.7%) has been billed up to 31 December 2015.
Notwithstanding the above, our Group is not materially dependent on any single client for business as we have been able to attract and secure new projects from different clients under the Collaboration. [The rest of this page is intentionally left blank] 128 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) 6.10 MAJOR SUPPLIERS Our top ten (10) sub-consultants via the Collaboration and their sub-consultancy costs for each of the past three (3) FYEs 2013 to 2015 are as follows:Length of SubCountry of relation
Rank consultants origin (l)Sub-consultancy cost -ship services supplied FYE 2013 FYE 2014 FYE 2015 RM’OOO % RM’OOO % RM’OOO 0/0 Years (1) Halcrow Malaysia 12,601 45.1 12,915 52.8 13,126 45.2 17 Provision of LRT system engineering consultancy Consultants services (rail system) for LRT Ampang Line Extension Sdn Bhd
(2) Petar Perunding Malaysia 1,946 7.0 495 2.0 368 1.3 6 Project management and design review sub
Sdn Bhd consultancy services for Brunei Economic Development Board
(3) Chasing Friday Malaysia 295 1.2 164 0.6 6 To carry out all marketing communication services
Sdn Bhd including advertising and public relations for Kidex Sdn Bhd
(4) NRY Architects Malaysia 262 0.9 207 0.8 239 0.8 6 Architectural services for the 12 stations along the LRT Sdn Bhd Ampang Line Extension
(5) Jurukur Malaysia 123 0.4 170 0.7 703 2.4 20 Detailed topographical survey works and preparation of Perunding land acquisition plan for LRT Ampang Line Extension Services Sdn Bhd Land surveyor for the feasibility study for the proposed
East Coast Rail Route Detailed topographical survey, land consultancy and underground utilities detection survey for Kuantan Port Expansion 129
I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Length of Sub-Country of relation
Rank consultants origin (l)Sub-consultancy cost -ship Services supplied FYE 2013 FYE 2014 FYE 2015 RM’OOO 0/0 RM’OOO 0/0 RM’OOO 0/0 Years (6) R&A Geotechnic Malaysia 270 1.0 121 0.5 129 0.4 8 Geotechnical design review consultant for Mass Rapid Sdn Bhd Transit (MRT) Line 1 -Jajaran Sg. Buloh -Kajang Geotechnical analysis and design for Manjung Power Plant, Manjung, Perak Geotechnical and structural engineering consultancy services for Independent structural assessment and remedial proposal for Jacking/Weighing supports and skidtrack supports provided for loadings and skidding/loadout (7) Ace Vector Sdn Malaysia 882 3.2 294 1.2 1,445 5.0 10 Sub-consultancy services for pavement Design for the Bhd Kuala Lumpur-Penang Through Traffic between Ipoh (S) and Jelapang Sub-consultancy services for the Pavement design, supervision and contract administration for North-South Expressway Fourth Lane Widening between Nilai (Utara) Interchange and Seremban (8) PAG Consult Sdn Malaysia 180 0.6 –368 1.3 6 Town planner for the feasibility study for the proposed Bhd East Coast Rail Route
Architect planner for Kuantan Port Expansion
(9) Tony Gee and Hong Kong 172 0.6 –46 0.2 6 Detailed engineering design of “Special Crossing” Partners (Asia) (tentative spans configuration) & Independent design Limited check of Standard Span Viaducts for LRT Ampang Line
Extension Structural design review consultant for the MRT 130 I Company No.: 1128564-U I 6. BUSINESS OVERVIEW (Cont’d) Rank Subconsultants Country of origin FYE 2013 (l)Sub-consultancy cost FYE 2014 FYE 2015 Length of relation -ship Services supplied RM’OOO 0/0 RM’OOO 0/0 RM’OOO 0/0 Years Guideway structures Mass Rapid Transit (MRT) Line 1 Jajaran Sg. Buloh -Kajang Specialist sub-consultant for the Pier Protection Design for the Proposed Bridge Crossing Sungai Pulai (10) Subki Ahmad Architect Malaysia 45 0.2 5 0.0 50 0.2 6 Architectural design review consultant for MRT Line 1 Jajaran Sg. Buloh -Kajang Total 16,481 5 9.0 14,502 59.2 16,638 57.4 Note:
(1) Being sub-consultancy cost of HEB Group via the Collaboration. Our Group is mainly involved in the provision of engineering and project management services and as such, does not need to procure any raw materials. Our Group may however from time to time, depending on necessity, appoint or engage external consultants and experts such as engineers, architects or quantity surveyors for certain specialised services related to the project requirements. Over the past three (3) FYEs 2013 to 2015, Halcrow Consultants Sdn Bhd (“Halcrow”) had accounted for 45.1% to 52.8% of the value of services rendered from sub-contractors. Halcrow is the sub-contractor for the LRT -Ampang Line Extension project. The value of services rendered by Halcrow reflects the work in progress of said project over the past three (3) FYEs 2013 to 2015. Notwithstanding the above, our Group is not dependent on any single supplier as we have a strong pool of suppliers with which we can work with when the need arises. 131 6. BUSINESS OVERVIEW (Cont’d) 6.11 SEASONAL OR CYCLICAL EFFECTS The engineering and project management services market are dependent on the construction industry, which is cyclical in nature and is highly dependent on the general economic conditions and political stability of the country. However, we believe that there will be continued demand for our services because the construction industry is important for national wealth creation and it is depended upon by many other industries namely manufacturing, financial services and other professional services. The construction industry further supports social development of the country through the provision of basic infrastructure and generation of employment opportunities. 6.12 TECHNOLOGIES USED Our Group has long practised advanced methodologies in our business activities to give us a competitive advantage over other players in the industry. The technologies used by our Group are as detailed below:(a) BIM BIM is an advanced process that utilises computer aided designs to allow the engineering and project management of a project to be simulated. The usage of BIM can effectively maximise client’s value. (b) AutoCAD AutoCAD is a design tool developed by Autodesk Inc. that allows designs to be presented using 2D and 3D representations through the use of computer aided design. AutoCAD allows for the engineered design to be simulated digitally and documented for any future use. (c) Total Stations Total Stations is electronic optical equipment which allows the geography of an area to be surveyed. Total Stations improves efficiency when performing building constructions layout and alignment. [ The rest of this page is intentionally left blank]
6. BUSINESS OVERVIEW (Cont’d) (a) Product Realisation Product realisation is a series of processes and sub-processes required to achieve the required results. Planning of the realisation processes shall be consistent with the other requirements of its quality management system and shall be documented in a format suitable for our method of operation. In planning the processes for realisation of products, the following shall be determined, as appropriate:(i) Quality objectives and requirements of the service;
(ii) The need to establish processes and documentation, and provide resources and facilities specific to the services;
(iii) Verification, validation, monitoring, inspection activities, and the criteria for acceptability, compliance with documented procedures and quality plan; and (iv) The records are necessary to provide confidence of conformity of the processes and products meeting the requirements. (b) Measurements, Analysis and Improvement As part of our quality management system, we plan and implement the monitoring, measurement, analysis and continual improvement processes needed to:(i) Demonstrate conformity of the product requirements;
(ii) Assure conformity of the quality management system; and
(iii) Achieve continuous improvement of the effectiveness of the quality management system. As part of these processes, HSSE has a Quality Assurance department which consist of three (3) staff and which is headed by a manager who measures and monitors the characteristics of the service to verify that the requirements for the services are met. The Quality Assurance department also ensures that services, which do not conform to the service requirements, are identified and controlled to prevent unintended implementation. Corrective actions will be taken to eliminate the cause of nonconformities of the services in order to prevent recurrence of the problem. (c) Management Responsibilities Our top management will as part of its commitment to the development and improvement of the quality management systems by:(i) Communicate to the employees the importance of meeting client as well as regulatory and legal requirements;
(ii) Establish the quality policy and disseminating them to its employees;
(iii) Ensure quality objectives are established and displayed openly as a sign of commitment. We will also present both quality policy and quality objectives to new staff during orientation; (iv) Conduct management reviews; and
6. BUSINESS OVERVIEW (Cont’d) (v) Ensure the availability of necessary resources. (d) Resource Management As part of our quality management systems, we determine and provide, in a timely manner, the resources needed:(i) To implement and maintain the quality management systems and continually improve its effectiveness; and
(ii) To ensure client satisfaction.
Our management is committed to the execution of the procedures established in our quality assurance manual whist the quality assurance personnel have complete authority to carry out the quality assurance system to identify control problems, and to initiate, recommend and rectify the problems identified. The quality assurance manual is reviewed as and when necessary to comply with clients’ and our procedures. 6.15 HEALTH, SAFETY & ENVIRONMENTAL POLICIES Our policies on health, safety and environment have also been recognised through the award of OHSAS 18001:2007 and ISO 14001:2004. (a) OHSAS 18001:2007 We have recognised the importance of maintaining health & safety standards to ensure a safe working environment as well as keeping morale among workers high. We are committed to the identification of the potential hazards associated with specific tasks and to set safe work practices as well as proper measures to ensure that these work related hazards are avoided. We have put in place an occupational hazard safety policy which is compliant to the requirements of OHSAS 18001:2007 and which includes:(i) Commitment to the prevention of injury and ill health;
(ii) Appropriateness to the nature and scale of occupational hazard safety risks;
(iii) Commitment to comply with applicable legal requirements to which our group has been subscribed to; (iv) Communication to all persons working under the control of HSSE which includes contractors, vendors, visitors; and
(v) Availability of the policies to the interested parties.
The objective of the policy is to provide a safe environment for employees to work in as well as to aim for a zero accident rate in the work place. 6. BUSINESS OVERVIEW (Cont’d) (b) ISO 14001:2004 We also place importance on the impact caused to the environment from the principal activities carried out by the construction activities. We have put in place an environmental management policy which is compliant to the ISO 14001:2004 which includes:(i) Commitment to the protection of environment;
(ii) Commitment to continue improving the environmental management system;
(iii) Identification of all activities that might cause harm to the environment and set up prevention measure to minimise effect; (iv) Promoting the importance of environmental protection among workforce; and
(v) Availability of the policies to the interested parties.
The objective of the policy is to create awareness and encourage business practices that do no harm to the environment.
6.16 HIGHLY DEPENDENT CONTRACTS Our major subsidiary, HSSE is dependent on the Teaming and Support Services Agreement; and currently derives its revenue mainly from HSSI and HSSME via the Teaming and Support Services Agreement. Further, HSSE has also executed the Shareholding Agreements with all the shareholders of HSSI and HSSME to ensure the orderly succession or transition in the control of HSSI and HSSME. Save for the Teaming and Support Services Agreement and Shareholding Agreements, there are no other contracts, agreements or arrangements which have been entered into by us and by which we are highly dependent on. Further details of the Teaming and Support Services Agreement and Shareholding Agreements are set out in Section 6.2 of this Prospectus.
6.17 INTERRUPTIONS IN BUSINESS We have not encountered any interruptions in our business which has had a significant effect on our operations during the past twelve (12) months preceding the LPD. [ The rest of this page is intentionally left blank]