Business Overview

6. BUSINESS OVERVIEW 6. BUSINESS OVERVIEW
6.1 OUR HISTORY Our Group is primarily a bUilding contractor with more than 25 years of operating history in the construction industry in Malaysia. We have completed more than 110 building construction projects mainly in the Klang Valley and Johor. We are capable of building various types of building including residential, commercial, industrial and leisure properties. Our Group typically acts as the main contractor for our building construction projects. Sungai Muhibah Sdn Bhd, our wholly-owned and principal operating subsidiary, now known as Inta Bina Sdn Bhd was incorporated on 10 December 1987. In 1988, one of our Promoters, Lim Ooi Joo and his brother-in-law, Chua Teong Chai became directors of Sungai Muhibah Sdn Bhd. In the same year, all the shares in Sungai Muhibah Sdn Bhd were acquired by two family members of Lim Ooi Joo, namely his late sister, Lim Ah Hean @ Lim Chai Tong and Chua Teong ChaL Prior to the entry of Lim Ooi Joo and Chua Teong Chai into Sungai Muhibah Sdn Bhd, the company was dormant. Upon their entry, Sungai Muhibah Sdn Bhd was used by Lim Ooi Joo and Chua Teong Chai as a family vehicle to venture into the business of providing building construction works in Malaysia. In 1990, Chua Teong Chai disposed his entire shareholdings in Sungai Muhibah Sdn Bhd to several other family members of Lim Ooi Joo and in 1992, Lim Ooi Joo emerged as one of the major shareholders (29.0%) of Sungai Muhibah Sdn Bhd. In 1996, Chua Teong Chai retired and resigned from the Board of Directors of Sungai Muhibah Sdn Bhd. Lim Ooi Joo has been instrumental in driving the growth in the construction business of Sungai Muhibah Sdn Bhd since he became an Executive Director of the company in 1988. As at the LPD, save as disclosed in Section 8.5 of this Prospectus, there are no family relationships between or amongst our Promoters, substantial shareholders, Directors and key management. Sungai Muhibah Sdn Bhd’s business was initially set-up to cater for residential projects with contract value below RM1.0 million. In 1989, Sungai Muhibah Sdn Bhd successfully secured a project valued at RM8.5 million from Unitin Engineering & Construction Sdn Bhd for the construction of a factory and its related infrastructure such as the road and drains in Shah Alam, Selangor. On 14 July 1992, the name Sungai Muhibah Sdn Bhd was changed to ADSB as it expanded its business operations to cater for projects involving the construction of residential and industrial properties with contract value ranging from RM1.0 million to RM10.0 million. On 22 December 1995, Teo Hock Choon, one of our Promoters joined Apexjaya as a Non­Executive Director and joined ADSB as an Executive Director. On 16 January 1996, ADSB became the wholly-owned subsidiary of Apexjaya. Prior to Teo Hock Choon’s appointment as Executive Director of ADSB, he had a working relationship with Lim Ooi Joo as both of them were in the construction industry and Lim Ooi Joo invited him to join Apexjaya and ADSB. As the Executive Director of ADSB, he assisted Lim Ooi Joo in the strategic planning of ADSB, seek new businesses and supervise the day-to-day management of the business operations. On 16 January 1996, Lim Ooi Joo together with all his family members sold their entire direct shareholdings in ADSB to Apexjaya in consideration for Apexjaya shares. As a result, ADSB became a wholly-owned subsidiary of Apexjaya. In the same year, Teo Hock Choon purchased an initial stake of 2.35% in Apexjaya. His shareholdings in Apexjaya gradually increased to 10.0% by 2003. 6. BUSINESS OVERVIEW (Cont’d) On 4 October 1996, Apexjaya entered into an agreement to sell a 60.0% stake in ADSB to PJD Construction Sdn Bhd, which is a wholly-owned subsidiary of PJ Development Holdings Berhad. ADSB was subsequently renamed PJD Builders Sdn Bhd on 12 March 1997. This allowed us to leverage on the track record of a public listed construction group with project management experience as well as financial resources. During the same year, PJD Builders Sdn Bhd was awarded its first high-rise condominium bUilding project from PJ Development Holdings Berhad known as Endah Ria, comprising 3 blocks of condominium bUildings (with 18-storey, 19-storey and 20-storey for each block) totalling 752 units in Sri Petaling, Kuala Lumpur. This was a significant milestone for us as it was our first high-rise project as well as our first project with contract value of more than RM60 million. Between 1997 to 2000, we secured various projects from PJ Development Holdings Berhad including 64 units of 3-storey shop houses in Taman Putri Kulai, Johor (1997), 170 units of double-storey terrace houses at Mukim Senai, Johor (1998), as well as the earthworks and foundation works for Oakleaf Park, a 3-block condominium project in Bukit Antarabangsa, Ampang, Selangor (2000). During this time, we also started to take on projects requiring the use of precast concrete wall panels in particular the Acotec brand of wall panels developed by PJ Development Holdings Berhad. The projects mainly involved the use of precast concrete wall panels and tunnel form system which gave us hands-on experience in the handling of IBS components. In 2000, PJ Development Holdings Berhad decided to dispose its indirect 60.0% stake in PJD Builders Sdn Bhd to focus its construction activities via its wholly-owned subsidiary, PJD Construction Sdn Bhd, instead of spreading its resources over 2 companies involved in similar construction activities. This led to the management buyout of PJD Builders Sdn Bhd spearheaded by our Promoters, Lim Ooi Joo and Teo Hock Choon, resulting in the acquisition by Apexjaya of 60.0% stake in PJD Builders Sdn Bhd. During such time when PJD Builders Sdn Bhd was a subsidiary of PJ Development Holdings Berhad, our Promoters, Lim Ooi Joo and Teo Hock Choon were responsible to manage the overall operations and business growth of PJD Builders Sdn Bhd. They gained experience in corporate management including exposure to financing and management systems in a systematic corporate framework and were also able to expand their networks within the local construction industry. The name PJD Builders Sdn Bhd was subsequently changed to IBSB on 2 November 2000. Our Group achieved another key milestone in 2005 when we successfully participated in a building construction project assessed under COI\lQUAS namely the RP6 Phase 2B project of the Kota Kemuning township development consisting of 74 units of terrace house. CONQUAS is a recognised and accepted benchmarking tool to measure the quality of building projects among the industry players in Malaysia. Building contractors under CONQUAS assessed bUilding projects are typically given targets to achieve in terms of the quality of their completed building (that reflects their workmanship standard) assessed by the Building and Construction Authority Singapore. As at LPD, we have obtained an average CONQUAS scoring of 78.2% for all our CONQUAS assessed projects and the industry average for CONQUAS assessed projects in Malaysia is 76.0%. The industry average was computed based on the total of 541 projects assessed in Malaysia since 2001 as listed under the Building and Construction Authority Singapore’s website as at the LPD, (https://www.bca.gov.sg/Professionals/IQUAS). Our continued active participation in projects assessed under CONQUAS has further underscored our commitment to quality and help us to build our reputation in the local construction industry. Please refer to Section 6.13.4 of this Prospectus for further details on CONQUAS. 6. BUSINESS OVERVIEW (Cont’d) In 2014, our Group made further inroads in our pursuit of good track record in quality excellence as we became involved in projects assessed under a local quality assessment system for workmanship quality in building construction. To date, we have participated in 4 QLASSIC assessed projects. The first building construction project assessed under QLASSIC participated by our group is The Twin Palm Kemensah Phase 1A-2 and Phase 1B project at Bukit Palma Kemensah, Hulu Kelang comprising 35 units of bungalow in 2014. A QLASSIC score of 80.0% was given for this project. Please refer to Section 6.13.4 of this Prospectus for further details on QLASSIC. As a responsible contractor, we are mindful of the needs for the safety and health of our workers to be protected all the time. In 2015, we participated in projects assessed under SHASSIC namely the Puteri Harbour Parcel 1A Package 3 and 4 project in Johor comprising 67 units and 96 units of terrace house respectively. We have obtained 3 stars out of 5 stars for our SHASSIC assessment. Please refer to Section 6.13.5 of this Prospectus for further details on SHASSIC. In 2016, we increased the adoption of IBS in our construction project when we utilised the aluminium system formwork in our construction activities. As at the LPD, we own approximately 11,421m2 of aluminium system formwork. We have been utilising 7,228m2 of aluminium system formwork in the ongoing construction of 2 blocks medium-cost apartments comprising 750 units, car parks, shops, management office and facilities at Eco Majestic, Semenyih, Mukim Beranang, Daerah Hulu Langat, Selangor as at the LPD. Approximately 50.0% to 70.0% of the remaining 4,193m 2 aluminium system formwork will be utilised for the construction of 2 blocks apartments (with 30-storey and 31-storey for each block), car parks, shops and facilities at Gravit8, Mukim Klang, Daerah Klang. This represents the standard sized formwork such as wall panels and slab panels which are usually the bigger pieces of the formwork where the structure is similar (ie. same wall height and length). The balance 30.0% to 50.0% which were used in our earlier project, are miscellaneous sized formwork which are not of standardised specification and cannot be reused. These will be sold to the formwork suppliers. We have since 2000 and 2012 been registered as a Grade 7 (or commonly known as G7) contractor with CIDB for the categories of B04 (BUilding General Works) and CE21 (General Civil Engineering Works) respectively. The G7 registration allows us to tender for construction projects in Malaysia that are of unlimited value. Our client portfolio includes a diversified pool of property developers. Our clients are subsidiaries of various public listed and non-public listed property developers in Malaysia such as Eco World Development Group Berhad, Engtex Group Berhad, Gamuda Berhad, l”1ah Sing Group Berhad, Paramount Corporation Berhad, Plenitude Berhad, Selangor Dredging Berhad, Tropicana Corporation Berhad, S P Setia Berhad (government linked property developer) and UEM Sunrise Berhad (government linked property developer), notable non-public listed property developers such as Perdana ParkCity Sdn Bhd and Mitraland Group Sdn Bhd as well as a public listed company in Singapore namely Lum Chang Holdings Limited.

6. BUSINESS OVERVIEW (Cont’d) 6.2 COMPETITIVE STRENGTHS Our business is supported by the following competitive strengths: 6.2.1 Established track record Since 1988, our Group has focused on building a good operating track record and establishing our presence in the local construction industry. With more than 25 years of operating history, we have been through various economic down cycles as well as financial crisis which indicate that our presence in the local construction industry is for the long term. We already have a proven track record by completing more than 110 building construction projects. We strive to be a reliable partner of property developers in constructing buildings. Please refer to Section 6.5.2 of this Prospectus for further details on our completed projects. We have not experienced any non-completion of our projects save for one industrial project which was terminated by us in 1999 due to the developer’s default in payment. As at the LPD, our Group has successfully completed more than 110 building construction projects of varying sizes, building types and contract values. Over the years, in line with our business expansion, we have also developed our capability in undertaking larger and more complex construction projects, as reflected by the gradual upgrades in our CIDB registrations which have allowed us to participate in the tender for projects that are of higher value. Year Grade Category 1997-2000 G6 B: Building Construction G4 CE: Civil Engineering Construction 2000-2003 G7 B: Building Construction G5 CE: Civil Engineering Construction 2003-2006 G7 B04: Building General Works G5 CE21: General Civil Engineering Works 2006-2009 G7 B04: Building General Works G5 CE21: General Civil Engineering Works 2009-2012 G7 B04: Building General Works G5 CE21: General Civil Engineering Works 2012-2018 G7 B04: Building General Works G7 CE21: General Civil Engineering Works The G7 is the highest grade for registrations issued by CIDB, which enables our Group to undertake bUilding construction and civil engineering construction projects of any size, and of unlimited project values within Malaysia. At the same time, our Group has also built a reputation for upholding the quality of our workmanship. Approximately 67.9% of our projects completed within the last 10 years have been assessed for their qualities by quality assessment systems such as CONQUAS and QLASSIC. Please refer to Section 6.13.4 of this Prospectus for further details on CONQUAS and QLASSIC.

 

 

6. BUSINESS OVERVIEW (Cont’d) 6.2.2 Commitment to quality In the provision of our services, our Group strongly believes in delivering superior quality products to meet our clients’ reqUirements and to ensure property buyers’ satisfaction. In addition, we also believe that our stringent QMS will allow us to be better positioned to deliver quality works within the contract period, thereby strengthening our case to be a capable and reliable bUilding contractor in Malaysia. To this end, we have established a QMS that meets the requirements of MS ISO 9001. In 2000, our QMS was assessed and certified to have complied with the reqUirements of MS ISO 9002:1994 for the scope involVing the provision of construction services for high and low rise residential, commercial and industrial bUildings. In 2003, our Group’s QMS obtained the ISO 9001:2000 accreditation for the same scope. The accreditation was subsequently updated to MS ISO 9001:2008 in 2009 and renewed in 2012 and 2015. Our MS ISO 9001:2008 accreditation for the provision of construction services for high and low rise residential, commercial and industrial buildings underscores our Group’s commitment to consistently prOVide services that meet the applicable statutory and regulatory requirements. The application of MS ISO 9001:2008 aims to enhance client satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformity to client and applicable statutory and regulatory reqUirements. In addition, our Group has been actively participating in building construction projects that are assessed under both CONQUAS and QLASSIC by Building and Construction Authority Singapore and CIDB respectively. As at the LPD, we have successfully participated in 51 CONQUAS assessed and 4 QLASSIC assessed projects. The number of COI\lQUAS and QLASSIC assessed projects represented 80.00%, 72.72% and 100.0% of our total number of projects completed in FYE 2014, FYE 2015 and FYE 2016 respectively. In terms of project value, the total value of COI\lQUAS and QLASSIC assessed projects represented 77.29%, 83.08% and 100.0% of our total project value completed in FYE 2014, FYE 2015 and FYE 2016 respectively. The distributions of CONQUAS scores obtained by us for our 51 CONQUAS assessed projects vis-a-vis the industry are set out in the follOWing table. The Board wishes to highlight that each project and company which makes up these industry statistics is different in terms of each project’s technical aspects, development size and contract value as well as each company’s size, know-how and operating and financial capabilities, amongst others. IBGB Group Asa  percentage of  total CONQUAS  CONQUAS  No. of  assessed  CONQUAS score within each band  scores  projects  projects  Highest  Lowest  Average  Less than 70.0%  1  2.0%  67.7%  67.7%  70.0% to 80.0%  33  64.7%  79.9%  70.7%  76.8%  Above 80%  17  33.3%  83.5%  80.2%  81.6%  Total  51  100.0%  83.5%  67.70/0  78.20/0
6. BUSINESS OVERVIEW (Cont’d) Industry(!) Asa  percentage of  total CONQUAS  CONQUAS  No. of  assessed  CONQUAS score within each band  scores  projects  projects  Highest  Lowest  Average  Less than 70.0%  57  10.5%  69.9%  50.1%  66.4%  70.0% to 80.0%  370  68.4%  80.0%  70.0%  75.6%  Above 80%  114  21.1%  91.4%  80.1%  81.9%  Total  541  100.0%  91.4%  50.1%  76.0%
Note: (1) Based on the total of 541 projects assessed in l”1alaysia since 2001 up to the LPD as listed under the Building and Construction Authority Singapore’s website, (https:/Iwww.bca.gov.sq/ProfessionalsIIQUAS). Based on the tables above, a majority of our CONQUAS assessed projects (64.7% or 33 out of 51 projects) falls within the band of 70.0% to 80.0%. Similarly, a majority of the CONQUAS assessed projects in the industry representing 68.4% or 370 out of 541 projects also falls within this band. In comparison to the total industry average, our average score for all our COI\lQUAS assessed project is 78.2% as compared to the industry average of 76.0% as at LPD. We believe that our prospective clients consider the quality of our work as indicated by the CONQUAS scores to be an important factor when contracting with us. As such, we intend to continue to implement and strengthen our quality control mechanisms to ensure consistent delivery of high-quality products and services and satisfactory scoring for our CONQUAS and QLASSIC assessed projects to strengthen our competitive position when bidding for new projects. In certain projects, if a COI\lQUAS score of 80.0% and above is achieved, we will be rewarded by our clients with an incentive ranging from 0.25% to 1.00% of the contract sum. Todate, we hav~ obtained CONQUAS scores of 80.0% and above for 17 of our CONQUAS assessed projects. We have received such incentives in cash amounting to RMO.59 million, RM0.32 million and RM0.48 million for FYE 2014, FYE 2015 and FYE 2016 respectively. In relation to the QLASSIC assessment, QLASSIC scores of above 80.0% were obtained for 3 out of 4 of the projects that we were involved in. These accreditations serve to highlight our Group’s on-going commitment in providing quality construction services and have further strengthened our clients’ loyalty and faith in our capabilities. Please refer to Section 6.13.4 of this Prospectus for further details on CONQUAS and QLASSIC. 6.2.3 Established relationship with clients With our motto “Your Partner in Construction”, our Group places great emphasis on the relationship with our clients, and believes that maintaining a good rapport with them is key to sustaining our Group’s performance. Our Group strives to complete projects within the contract period and at the same time maintain high quality of works in order to foster trust and further entrench our relationship with existing clients. 6. BUSINESS OVERVIEW (Cont’d) The quality of our work has been recognised by our clients, for which we believe has enabled us to maintain more than 10 years working relationship with our clients who are subsidiaries of various property developers including Engtex Group Berhad, Gamuda Berhad and S P Setia Berhad. This network of clients and the relationship that we have established serves as a good foundation for us to develop and grow our business. Our clients stated in the above paragraph have appointed us for more than one construction projects over the years of our working relationship with them. In addition, we have also established working relationship with other property developers including Eco World Development Group Berhad, Lum Chang Holdings Limited, Mah Sing Group Berhad, Mitraland Group Sdn Bhd, Paramount Corporation Berhad, Plenitude Berhad, Perdana Parkcity Sdn Bhd, Selangor Dredging Berhad, Tropicana Corporation Berhad and UEM Sunrise Berhad. Due to our track record of repeat work for our existing clients which includes 26 projects awarded by Gamuda Berhad and 12 projects awarded by Horizon Hills Development Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad) since our incorporation, we believe that we are well-positioned to sustain and develop our business and capture additional opportunities from these returning clients. At the same time, we believe that the goodwill generated among these existing clients may also be converted to potential business opportunities through recommendations to other prospective clients. Furthermore, our past collaboration with various companies within the property development industry as stated in the above paragraph also helps to strengthen our reputation in the local construction industry. Please refer to Section 6.5.2 of this Prospectus for further details of the past projects. 6.2.4 Experienced key management team Our ability to compete effectively lies, amongst others, with the strength of our key management team. Our Group has in place, an experienced key management team comprising capable and qualified professionals with extensive management, operating and in­depth industry knowledge and hands-on experience in their respective fields. Our Group is led by our Managing Director and Deputy Managing Director, Lim Ooi Joo and Teo Hock Choon, who each has more than 30 years of working experience in the construction industry. Our Group has benefitted from their leadership, along with their network of business contacts built throughout the years of working in the industry. With their hands-on experience in the construction industry, Lim Ooi Joo and Teo Hock Choon have a better understanding of our clients’ requirements and needs, which enables us to build good rapport with our clients. They are supported by our key management team consisting of qualified personnel, each possessing varying years of experience in their respective fields including project management, health and safety, financial control, contracting, administrative works and purchasing. Their presence and leadership within our Group can help to ensure smooth internal operations and sound business decision making process. At the same time, the key management team also comprises a balanced mix of experienced personnel and young personnel, of which some are being groomed for future leadership positions as part of our internal succession plans. Please refer to Sections 8.2.2 and 8.3.3 of this Prospectus for further details of the credentials of our Directors and key management team. 6. BUSINESS OVERVIEW (Cont’d) 6.3 FUTURE PLANS AND PROSPECTS Our business objectives are to maintain sustainable growth in our business and create long­term shareholder value. To achieve our business objectives, we will implement the following future plans over a period of 12 to 24 months from the date of our Listing: 6.3.1 Improve our profile by tendering for more building construction projects The aggregate number and size of projects that we are able to undertake at any point in time depend largely on the availability of working capital as: (a) All our clients require us to provide tender bonds and performance bonds usually in the form of bank guarantees issued by banks in such amount representing a certain percentage of the contract sum in favour of our clients. In such circumstances, some banks may require collaterals which include fixed deposit to secure the value of the bank guarantees. This results in the lock-up of a portion of our capital during the duration of the project, thereby affecting our liquidity for that duration; and
(b) During the course of our construction projects, there may be instances of mismatch in the timing of our cash flows due to time lags between making payments to our subcontractors and suppliers and receiving payments from our clients.

If we are to expand our business and undertake more projects, we must continue to increase our available financial resources in order to satisfy the various working capital reqUirements mentioned above. The net proceeds from the IPO will strengthen our available working capital. By applying a portion of the proceeds from the IPO to satisfy the various working capital requirements associated with undertaking contract works, our Group will be in a better position to tender for more building construction projects of higher contract values. This may increase our chances of securing more high contract value jobs which will then improve our profile in the construction industry. In addition, a larger working capital can also enable us to purchase a sizeable volume of construction materials in order to stand a chance to enjoy a higher bulk discount rate. Furthermore, we may also be able to opt for cash payment of our construction materials supplies in order to enjoy cash discounts. Such discounts will improve our cash flows position and working capital management to allow us to tender and undertake more projects. In addition, our status as a public listed company will also improve our public profile and provide us the additional credential to gain our clients’ confidence in relation to our services, financial capability and corporate governance, and to attract more subcontractors, suppliers and human capital that give us an advantage over our privately held competitors. We also intend to leverage on our stature as a public listed company to seek opportunities to work with more government-linked property developers in Malaysia. By tendering for more building construction projects and successfully completing these projects, we stand to gain more recognition from both our eXisting clients as well as new potential clients, which will enhance our Visibility and market reputation in the local construction industry. Our Group also intends to establish a footprint in the affordable housing segment which we believe has growth potential and is receiving favourable attention from the Malaysian Government and gaining traction in the local property market. Our strategy to constructing affordable housing projects efficiently is through the usage of aluminium system formwork. 6. BUSINESS OVERVIEW (Cont’d) As affordable housing projects generally involve mass construction of buildings with similar and repetitive designs, we believe the usage of aluminium system formwork is best suited for these projects. We have allocated a portion of our proceeds raised from our IPQ to purchase more aluminium system formwork. Please refer to Section 6.3.2 of this Prospectus for further details on aluminium system formwork. We plan to take a more active approach in tendering for affordable housing projects in the Klang Valley from private housing developers under the federal and state affordable housing initiatives such as Rumah Mampu Milik Wilayah Persekutuan and Rumah Selangorku. In this respect, we intend to also leverage on our relationships with existing clients to penetrate into this segment.

 

6.3.2 To enhance our capability via the capital expenditure spending In order to support our business expansion, we intend to purchase the following: (a) Additional aluminium system formwork for use in our future projects We intend to make further inroads in the adoption of IBS in our projects. As at the LPD, we own approximately 1l,421m2 of aluminium system formwork. We have been utilising 7,228m2 of aluminium system formwork in the ongoing construction of 2 blocks medium-cost apartments comprising 750 units, car parks, shops, management office and facilities at Eco Majestic, Semenyih, Mukim Beranang, Daerah Hulu Langat, Selangor as at the LPD. Approximately 50.0% to 70.0% of the remaining 4,193m2 aluminium system formwork will be utilised for the construction of 2 blocks apartments (with 3D-storey and 31-storey for each block), car parks, shops and facilities at Gravit8, Mukim Klang, Daerah Klang. This represents the standard sized formwork such as wall panels and slab panels which are usually the bigger pieces of the formwork where the structure is similar (ie. same wall height and length). The balance 30.0% to 50.0% which were used in our earlier project, are miscellaneous sized formwork which are not of standardised specification and cannot be reused. These will be sold to the formwork suppliers. We intend to purchase an additional 3,000m2 of aluminium system formwork from local manufacturer(s) at an estimated cost of RM500/m2 or RM1.50 million in aggregate. Formwork is a temporary mould, into which concrete is poured to form a permanent concrete building structure. There are various types of formworks for example, timber formwork and engineered formwork. The aluminium system formwork that we intend to purchase is a type of engineered formwork, whereby the formwork is built out of prefabricated modules with aluminium metal frames. The aluminium system formwork replaces the conventional method of timber formwork. Aluminium system formworks have various advantages over the conventional method of timber formworks, including inter-alia: (i) The repeated use of the aluminium system formwork is higher than timber formwork. A set of aluminium system formwork can be re-used 300 cycles as compared to timber formwork which can only be re-used between 3 to 6 cycles. Such repeated use of aluminium system formwork will reduce the average cost of the formwork;
(ii) The assembly of aluminium system formwork is simple and convenient. The aluminium panels are clearly labelled to ensure that they are easily identifiable on site and can be easily assembled using the formwork modulation drawings. Due to simplicity of the assembly, only semi-skilled

6. BUSINESS OVERVIEW (Cont’d) labour is required with minimal supervision. On the contrary, timber formwork which are nailed together manually requires high degree of precision and as such, is only undertaken by skilled labour; (iii) Aluminium system formwork is faster to assemble and remove. This reduces the project labour requirement and shortens the construction period; (iv) The quality of the exposed concrete surface is smooth after removing the aluminium system formwork. This eliminates the need for additional plastering work and the walls can be directly painted with a minimal skim coat, all these resulting in cost savings; and
(v) Aluminium system formwork is also more environmentally friendly than timber formwork as the repeated usage of aluminium system formwork reduces the need for timber. Furthermore, less timber debris is generated at the construction site which then reduces the need for manual clearing of debris. This in turn enhances the safety and health of the construction workers.

Although the initial cost of aluminium system formwork is significantly higher than timber formwork, the long term advantages that can be reaped from its usage outweighs its costs. The proceeds from the IPO will therefore provide us with the opportunity to acquire additional aluminium system formwork and drive our efforts in increasing the adoption of IBS construction. Aluminium system formwork is suitable for mass construction of buildings with repetitive design. As such, our proposed acquisition of the additional aluminium system formwork can also support our plan to penetrate into the affordable housing segment. (b) Additional construction machinery and equipment We have allocated RM3.50 million from the IPO proceeds to acquire additional material handling equipment such as telehandlers, backhoes and scaffolding and its related accessories from local suppliers. Such acquisition is intended to support our business expansion and to replace the fully-depreciated machinery and equipment. 6.3.3 Prospects of our Group Our Group operates within the construction industry in Malaysia, and our prospect remains favourable in relation to the outlook of the industry. According to the IMR Report, the outlook for the construction industry is positive for the immediate term, and steady growth is projected throughout the forecast period from 2017 to 2021. For 2016, the market size (revenue) of the construction industry in lV1alaysia stood at RM50.09 billion and it is expected to grow at a CAGR of 8.9% for the 2017 to 2021 period. On a closer look, the outlook for the real estate construction industry is also positive for the immediate term and is expected to post moderate growth throughout the period from 2017 to 2021. The market size (revenue) of the Malaysian real estate construction market is expected to expand from RM27.55 billion in 2016 to RM34.84 billion in 2021, registering a CAGR of 4.8% from 2017 to 2021 based on the IMR Report. The market is also expected to benefit from government-led initiatives and spending particularly on affordable housing schemes. In addition, the market is expected to be further boosted by the ongoing and/or future implementation of large-scale projects such as the Bukit Bintang City Centre and Forest City projects.

6. BUSINESS OVERVIEW (Cont’d) The Bukit Bintang City Centre is located at the former Pudu Jail site and is proposed to be a mixed development project comprising retail malls, an entertainment hub, a hotel, strata offices and serviced apartments. The RM8.7 billion Bukit Bintang City Centre is expected to take 8 to 10 years to complete. The Forest City project is located along the Straits of Johor and adjacent to Singapore’s Tuas Second Link. It is proposed to be a mixed development project comprising four man-made islands, which consists of a high technology industrial zone, a central business district and tourism zone, financial and economic districts and a conference and forum zone. The Forest City project, with estimated gross development value of RM450 billion, is expected to take 20 to 30 years to complete. Moving forward, we believe that our business plans as set out in Sections 6.3.1 to 6.3.2 will help us to sustain our business and provide growth opportunities for our Group. 6.4 KEY ACHIEVEMENTS AND MILESTONES Our key achievements and milestones are as follows: Period Achievement or Milestones 1988 Assumed management of Sungai Muhibah Sdn Bhd, our wholly-owned subsidiary now known as IBSB, to cater for small-scale (below RM1 million) residential projects 1989 Secured our first industrial property project for the construction of a factory and its related infrastructure such as the road and drains in Shah Alam, Selangor 1992 Change of name from Sungai Muhibah Sdn Bhd to ADSB 1997 • ADSB became a 60%-owned subsidiary of PJ Development Holdings Berhad held under its wholly-owned subsidiary, PJD Construction Sdn Bhd • Secured our first high rise residential construction project known as Endah Ria/ with contract value over RM60 million
• Change of name from ADSB to PJD Builders Sdn Bhd

2000 • Management buyout of PJD Builders Sdn Bhd spearheaded by our Promoters, Lim Ooi Joo and Teo Hock Choon • Change of name from PJD Builders Sdn Bhd to IBSB 2000 Registered as G7 contractor with CIDB for the category of B04 (Building General Works) 2001 Secured our first project from a property developer, Hicom-Gamuda Development Sdn Bhd (an associated company of Gamuda Berhad) 2005 Participated as main contractor in our first CONQUAS assessed project which scored 67.7% under the ‘Architectural’ category 2008 A score of more than 80.0% under the ‘Architectural’ category was achieved in our CONQUAS assessed projects for the first time 2009 Obtained Contractor Project Team Quality Excellence Award 2009 -Residential awarded by S P Setia Berhad in recognition of excellent performance in delivering quality products and excellent service 2010 Recorded revenue surpassing the ‘RM100 million’ mark for the first time 84 6. BUSINESS OVERVIEW (Cont’d) Period Achievement or Milestones 2012 • Recorded revenue surpassing the ‘RM200 million’ mark for the first time • Registered as a G7 contractor with CIDB for the category of CE21 (General Civil Engineering Works) 2013 Our project, a 2 Blocks (21 units) 5-storey condominium with 2-storey basement in Ampang Hilir, Kuala Lumpur known as Amarin Wickham (where we were the main contractor) was awarded “Gold Plus” by Building and Construction Authority Singapore Green Mark. Building and Construction Authority Singapore Green Mark is a green building rating system to evaluate a building for its environmental impact and performance 2014 • Obtained our first QLASSIC certification for 35 units of bungalow Phase 1A-2 and Phase 1B project at Bukit Palma Kemensah, Hulu Kelang known as The Twin Palm Kemensah with a score of 80.0% • Awarded a High QLASSIC Achievement in conjunction with QLASSIC Excellence Awards by CIDB for The Twin Palm Kemensah project 2017 • Obtained OHSAS 18001 : 2007 certification, an internationally recognised standard for occupational health and safety management system
6.5 DESCRIPTION OF OUR BUSINESS 6.5.1 Principal business activities Our Group is a building contractor. We construct residential and non-residential bUildings. Residential buildings include bungalows, cluster houses, terrace houses, semi-detached houses, townvillas, condominiums and apartments. Meanwhile, non-residential buildings include commercial buildings (e.g. purpose-built offices, SOHO and shops), industrial buildings (e.g. factories) and leisure properties (hotels and clubhouses). Our Group is also involved in the provision of civil construction works which are embedded in our bUilding construction contracts such as local infrastructure works which includes road works, drainage works, sewerage, water reticulation works and M&E infrastructure for those projects undertaken by us. As a main contractor, we are involved in the day-to-day management and implementation of construction projects awarded to us. We generally perform all mCljor aspects of the construction project, including building construction, substructure and external infrastructure works. We also engage subcontractors to provide specialist construction works such as aluminium works, M&E works, painting works, mild steel works, timber works and marble finishes. In addition, we coordinate the work of all parties at the construction project sites, procuring construction materials and ensuring that the construction project is on schedule. In the past 3 financial years under review, save for 1 project where we were the main subcontractor, we were the main contractor for all other construction projects. The landed construction projects generally require not more than 2 years to complete whereas projects involving at least 10­storey high generally require between 2 to 3 years to complete. 6. BUSINESS OVERVIEW (Cont’d) We participate in the construction industry mainly via the submission of our bids through project tenders at the invitation of property developers, consultants (architects or quantity surveyors), corporate entities and/or high net worth individuals. We also adopt the IBS construction by utilising the blockwork system, steel framing system (roof trusses) and aluminium system formwork in our projects. We have experience in constructing luxury homes for affluent residents. Luxury homes typically have more elaborated architectural designs with high quality construction materials and fittings used and command relatively higher selling prices. Moving forward, we intend to expand our building portfolio into the affordable housing segment which we believe its growth is gaining traction in the property market in Malaysia. Our strategy to constructing affordable housing projects efficiently is through the use of aluminium system formwork, which is best suited for mass construction of bUildings with repetitive designs. Please refer to Section 6.3.2 of this Prospectus for further details on the advantages of aluminium system formwork. [ The rest of this page is intentionally left blank] I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) 6.5.2 Selected projects (a) Completed projects Over the years, we have completed a number of residential and non-residential projects, some of which are illustrated below. Our non-residential projects can be segmentalised into commercial, industrial, leisure or mixed development. Mixed development is a type of development  that  may  include  any  combination  of  residential,  office,  retail,  medical,  recreational,  commercial  or  industrial  components.  Commencement  datel  Original  CONQUAS  Completion  contract  IQLASSIC  Project details  Client  date  Role  value  score  RM’OOO  (%)  Residential projects:  (i)  752 units 18-, 19-& 20-storey condominium known  as  Soon Tiek  June 1997/  Main  63,135  (1)_  Endah Ria at Sri Petaling, Kuala Lumpur  Development Sdn  April 1999  contractor  Bhd (a subsidiary  of PJ  Development  Holdings Berhad)  (ii)  339 units 18-, 21-& 22-storey condominium known  as  KEN Grouting Sdn  September 2000/  Main  26,524  (1)_  KEN Damansara at Petaling Jaya, Selangor  Bhd (a subsidiary  August 2002  subcontractor  of KEN Holdings  Berhad)
(iii) 118 units double-storey terrace house and 2V2-storey Harum Intisari September 2004/ Main 24,867 74.2 house, Phase 17-B at Bandar Botanik, Klang, Selangor Sdn Bhd (a May 2006 contractor (CONQUAS) subsidiary of Gamuda Berhad) (iv) 34 units of 3-storey terrace house, 24 units of 3-storey Setia Duta One April 2005/ Main 36,500 71.5 cluster house, 12 units of 3V2-storey terrace house at Sdn Bhd (a January 2007 contractor (CONQUAS) Duta Tropika (Parcell), Kuala Lumpur subsidiary of S P Setia Bhd) 87 6. BUSINESS OVERVIEW (Cont’d) Project details (v) 43 units of bungalow on Lot 12991, PT 14534, PT 14533 (KD1) and PT 14532 (KD2), Bukit Indah, Mukim Hulu Kelang, Gombak, Selangor
(vi) 136 units of double-storey and 3-storey terrace house (Sector F -Amelia) at Desa Parkcity, Kuala Lumpur

(vii) 2 Blocks (21 units) 5-storey condominium with 2-storey basement known as Amarin Wickham at Jalan Wickham, Ampang Hilir, Kuala Lumpur (viii) 85 units of 3-storeys bungalow, Precinct 3, on Lot 45619 (partial) (PT 26775), on Zone Flagship Cyberjaya, Mukim Dengkil, Daerah Sepang, Selangor (ix) 46 units of bungalow on Lot 564 & 565, Taman Melawati (Phase 2),  Mukim  Hulu  Kelang,  Daerah  Gombak,  Selangor  (x)  46  units  of  4-storey  terrace  house  known  as  Tiara
Residences at Bandar Baru Selayang, Selangor Client Syarikat Kemajuan Jerai Sdn Bhd (a subsidiary of S P Setia Berhad) Perdana Parkcity Sdn Bhd Amarin Wickham Sdn Bhd Myvilla Development Sdn Bhd (a subsidiary of Mah Sing Group Berhad) SDB Properties Sdn Bhd (a subsidiary of Selangor Dredging Berhad) Engtex Properties Sdn Bhd (a subsidiary of Engtex Group Berhad) 88 Commencement date/ Completion date March 2007/ February 2009 February 2008/ July 2009 January 2010/ December 2012 September 2010/ December 2012 September 2010/ October 2012 September 2011/ May 2013 Role Main contractor Main contractor Main contractor
Main contractor
Main contractor
Main contractor
Original CONQUAS contract /QLASSIC value score RM’OOO (%)
46,475  78.1 (CONQUAS)  56,436 41,977  73.3 (CONQUAS) 79.5 (CONQUAS)  60,720  75.8 (CONQUAS)  65,353  81.0 (CONQUAS)  34,445  74.0 (CONQUAS)
I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Project details (xi) 17 units of bungalow and 20 units of semi-detached house (Phase 4A) at Kinrara Residence, Puchong, Selangor (xii) 75 units of 3-storey terrace house at Symphony Hills on Zone Flagship Cyberjaya, Mukim Dengkil, Daerah Sepang, Selangor (xiii) 92 units of 2-storey and 3-storey of cluster house (Phase 2D2) at Horizon Hills, Mukim Pulai, Johor (xiv) 81 units of townvilla and 36 units of apartment at Taman Melawati, Mukim Hulu Kelang, Daerah Gombak, Selangor Client Legend Grand Development Sdn Bhd (a subsidiary of Mah Sing Group Berhad) Symphony Hills Sdn Bhd (a subsidiary of UEM Sunrise Berhad) Horizon Hills Development Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad) Mitraland Melawati Sdn Bhd (a subsidiary of Mitraland Group Sdn Bhd) Commencement date/ Completion date June 2012/ March 2015 June 2012/ October 2014 December 2012/ January 2015 April 2013/ August 2015 Role Main contractor Main contractor
Main contractor
Main contractor
Original contract value RM’OOO 34,900 45,500 35,997 85,784 CONQUAS /QLASSIC score (O/o) 77.1 (CONQUAS) 78.1 (CONQUAS) 79.7 (CONQUAS)
78.4 (CONQUAS) I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Project details (xv) 120 units of 2-storey and 3-storey cluster house (Phase 3C) at Horizon Hills, Mukim Pulai, Johor (xvi) 45 units of bungalow (Phase 2) at Bukit Palma Kemensah, Mukim Hulu Klang, Daerah Gombak, Selangor (xvii) 2 blocks of 14-storey apartment (Phase 2) at Jade Hills, Kajang, Selangor (xviii 56 units of 2V2-storey terrace houses (M-Residence 1 ­Phase 6B) at Rawang, Selangor (xix) 150 units of 2-storey and 3-storey terrace houses (Phase 2C) at Puchong, Selangor Client Horizon Hills Development Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad) Venus Capital Corporation Sdn Bhd (a subsidiary of Lum Chang Holdings Limited) Jade Homes Sdn Bhd (a subsidiary of Gamuda Berhad) Semai Meranti Sdn Bhd (a subsidiary of Mah Sing Group Berhad) Plenitude Permai Sdn Bhd (a subsidiary of Plenitude Berhad) 90 Commencement date/ Completion date July 2013/ September 2015 January 2014/ November 2015 June 2014/ November 2016 March 2015/ January 2017 April 2015/ October 2016 Role Main contractor Main contractor
Main contractor
Main contractor
Main contractor
Original contract value RM’OOO 52,999 42,741 69,769 21,800 56,888 CONQUAS /QLASSIC score (DID)
78.0 (CONQUAS) 82.0 (QLASSIC) (2)_ (2t (2t I Company No.: 1134880-W I  6.  BUSINESS OVERVIEW (Cont’d)  Project details  Client  Commencement date! Completion date  Role  Original contract value RM’OOO  CONQUAS !QLASSIC score (%)  (xx)  38 units and 40 units of semi-detached houses (Phase 5A1 and 5A2) at Horizon Hills, Mukim Pulai, Johor  Horizon Hills Development Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad)  July 2013/ March 2016  Main contractor  55,868  Phase 5A1 -80.9 Phase 5A2 -81.4 (CONQUAS)  (i)  Non-residential projects: ll-storey wholesale distribution centre cum office block and 1 level and sub-basement car park at Bandar Menjalara, Kepong, Kuala Lumpur  Tiaraview Management Sdn Bhd  December 2001/ November 2003  Main contractor  958,678 23,880  (it  (ii)  36 units of 4-storey shop office at Section 8, Petaling Jaya, Selangor  Intelek Kekal (M) Sdn Bhd (a subsidiary of Metro Kajang Berhad)  November 2005/ August 2007  Main contractor  22,265  (it  (iii)  4 blocks of single and double-storey clubhouse at Desa Parkcity, Kuala Lumpur  Perdana Parkcity Sdn Bhd  April 2007/ April 2009  Main contractor  15,930  70.7 (CONQUAS)
6. BUSINESS OVERVIEW (Cont’d) (iv)  Project details 4 blocks, comprising basement car park, shops, SOHO units, restaurants, and hotel suites known as Emerald Avenue on Lot 25670-25686 & 2346 Bandar Selayang, Mukim Batu, Daerah Gombak, Selayang, Selangor  Client Engtex Emerald Sdn Bhd (a subsidiary of Engtex Group Berhad)  Commencement date! Completion date ——­October 2012/ February 2015  Role —–­Main contractor  Original contract value RM’OOO 57,590  CONQUAS !QLASSIC score (0/0) (1)_  119,665  Note:  (1)  These projects were neither assessed by CONQUAS or QLASSIC.  (2)  These projects are pending assessment by CONQUAS or QLASSIC.  [ The rest of this page is intentionally left blank]
I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) (b) Projects in-progress As at the end of FYE 2016, our order book comprise 16 projects for general building works. The total unbilled contract value based on the original contract sum is approximately RM555.23 million as at 31 December 2016 and RM486.16 million as at 31 March 2017. Our unbilled contract value as at 31 March 2017 may reduce by RM40.25 million to RM445.91 million if the project set out in item (iii) below is not resumed. The project set out in item (iii) below represents 8.28% of our unbilled contract value as at 31 March 2017. Our unbilled order book will be billed progressively in the next 2 financial years. Notwithstanding our order book of 14 projects as at LPD, we set out in the table below only ongoing projects with contract value above RM20.00 million: Unbilled Unbilled contract contract Commencement Original value as at 31 value as at datej Expected contract December 31 March Project Client name completion date Role value 2016 2017 RM’OOO RM’OOO RM’OOO Residential projects: (i) 67 units of 2-storey and 3-storey Bandar Nusajaya August 2014/ Main 59,789 24,173 22,861 terrace house (Parcel 1A -Package 3) Development Sdn (l)June 2016 contractor at Puteri Harbour, Johor Bhd (a subsidiary of
UEM Sunrise Berhad)
(ii) 96 units of 2-storey terrace house Bandar Nusajaya October 2014/ Main 68,236 27,069 22,056 (Parcel 1A -Package 4) at Puteri Development Sdn (l)August 2016 contractor Harbour, Johor Bhd (a subsidiary of

UEM Sunrise Berhad) I Company No.: 1134880-W I  6.  BUSINESS OVERVIEW (Cont’d)  Unbilled  Unbilled  contract  contract  Commencement  Original  value as at 31  value as at  datej Expected  contract  December  31 March  Project  Client name  completion date  Role  value  2016  2017  RM’OOO  RM’OOO  RM’OOO  (iii)  26  units  of 3-storey  semi­ detached  Fabulous Range  Section 1 ­ Main  Section 1­ Section 1­ Section 1­ house  and  2  units  of  3-storey  Sdn Bhd (a  November 2014/  contractor  27,851  11,288  8,720  bungalow (Phase 4A) (Section 1) and  subsidiary of Lum  (2)May 2016  Chang Holdings  18  units  of  3-storey  semi-detached  Limited group)  house  and  3  units  of  3-storey  Section 2-yet to  Section 2 ­ Section 2 ­ Section 2 – bungalow (Phase 4A) and 24 units of  be determined/  31,530  31,530  31,530  3-storey semi-detached house (Phase  (2)February 2017  3B-2)  (Section  2)  at  Mukim  Cheras,  Daerah  Hulu  Langat, Selangor known  as  Twin Palms Sungai Long  (iv)  158 units of 2-storey terrace house  Tropicana Kajang  January 2015/  Main  77,849  21,524  13,504  and 36 units of 3-storey cluster house  Hill Sdn Bhd (a  (3)February 2017  contractor  at Tropicana Heights Kajang (Phase 2  subsidiary of  Parcell)  Tropicana  Corporation  Berhad)  (v)  104 units of 2-storey terrace house P2­ Eco Sanctuary Sdn  December 2015/  Main  45,500  26,099  20,275  1A at Kota Kemuning, Selangor  Bhd (a subsidiary of  August 2017  contractor  Eco World  Development Group  Berhad)
I Company No.: 1134880-W I  6.  BUSINESS OVERVIEW (Cont’d)  (vi)  Project 150 units of 2-storey terrace house (Phase 2-1B) at Kota Kemuning, Selangor  Client name Eco Sanctuary Sdn Bhd (a subsidiary of Eco World Development Group Berhad)  Commencement datel Expected completion date December 2015/ August 2017  Role Main contractor  Original contract value RM’OOO 70,150  Unbilled contract value as at 31 December 2016 RM’OOO 42,442  Unbilled contract value as at 31 March 2017 RM’OOO 32,794  (vii)  38 units of 3-storey semi-detached house and 2-storey and 3-storey terrace house at at Cyber 9, on Zone Flagship Cyberjaya, Mukim Dengkil, Daerah Sepang, Selangor (Sejati Residences -Phase 2A&3C)  Paramount Property (qaya) Sdn Bhd (a subsidiary of Paramount Corporation Berhad)  January 2016/ July 2017  Main contractor  35,853  22,847  17,359  (viii)  38 units of 3-storey semi-detached houses (Phase 3 Parcell) at Tropicana Heights Kajang  Tropicana Kajang Hill Sdn Bhd (a subsidiary of Tropicana Corporation Berhad)  July 2016/ June 2018  Main contractor  26,973  22,814  20,098  (ix)  2 blocks medium-cost apartments comprising 750 units, car parks, shops, management office and facilities at Eco Majestic, Semenyih, Mukim Beranang, Daerah Hulu Langat, Selangor  Eco Majestic Sdn Bhd (a subsidiary of Eco World Development Group Berhad)  October 2016/ September 2018  Main contractor  89,415  85,313  80,357  315,099  269,554  95
I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Unbilled  Unbilled  contract  contract  Project  Client name  Commencement date! Expected completion date  Role  Original contract value  value as at 31 December 2016  value as at 31 March 2017  (i)  Non-residential project: 2 blocks commercial suites known as Amanja at Sri Damansara, Selangor  Ivory Progression Sdn Bhd (a subsidiary of  May 2015/ May 2017  Main contactor  48)41  11,907  588  Engtex Group Berhad)
(ii) 2 blocks apartments (with 30-storey Vibrantline Sdn Bhd December 2016/ Main 192,000 191J90 188,088 and 31-storey for each block), car (a subsidiary of April 2019 contractor parks, shops and facilities at Gravit8, Mitraland Group Mukim Klang, Daerah Klang Sdn Bhd) 203,697 188,676 Notes: (1) Based on our client’s request and pending finalisation, the proposed extended completion date is such that we handover an aggregate of 70 units of terrace house in May 2017 and the balance to be handover in August 2017. (2) Section 1: Based on our client’s request, the construction works for this project will be held in abeyance at the end of October 2016 due to slower than anticipated sales. The estimated percentage of completion is 35.0%. The first supplemental agreement was signed on 1 September 2016, whereby the parties agreed to suspend works on the project for a period not exceeding 1 year from the date of the first supplemental agreement. Parties are now negotiating on the terms of the second supplementary agreement to re-commence work and to review the costing and timing of the project arising from the changes in scope of works. As at the LPD, the date of re­commencement of works and the new completion date have yet to be determined by our client. We expect to re-commence works before September 2017 but there can be no assurance that there will be no further delay in the date of re-commencement. The unbilled contract value for this section of the project represents only 1.79% of our total unbilled order book as at 31 March 2017. I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Section 2: Concurrent with Section 1 above, works on Section 2 has also been suspended. As at the LPD, the date of re-commencement of works and the new completion date have yet to be determined by our client. The unbilled contract value for this section represents 6.49% of our total unbilled order book as at 31 March 2017, (3) We will apply for an extension of time at the client’s request to extend the completion date to August 2017 to facilitate the installation of underground electrical cables by Tenaga Nasional Berhad. (c) Projects tendered From January 2017 up till the LPD, we have 9 projects where we have submitted tenders and are still awaiting decision from the client. These tenders include residential and non-residential projects located in the Klang Valley and Johor with total tendered sum of RM434.0S million. These tendered projects, if awarded to us will further increase our order book. Although our current unbilled order book will be gradually billed in the next 2 financial years, tadate, we are still actively participating in project tenders. Some of our existing clients are still actively launching new property projects and have continuously invited us to participate in their project tenders. [ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (Cont’d) 6.5.3 Business process Our business process as a main contractor in respect of construction projects for general building works includes identifying potential projects, tendering as well as project management and execution. We have developed an operating framework which covers the entire business process, including pre-tender analysis, tender preparation and submission, project management, project control, project completion and project handover. Effective execution of construction projects is dependent on the project collaboration between us with the client and its various consultants as well as our subcontractors and suppliers, which impacts factors such as timely delivery of services and materials, health, safety and environmental compliance, building quality as well as cost and overruns. The general flow of our business process is outlined as follows:
Preparation of
Award of
Defect liability identification Project contract
periodtender Pre-tender Tender Project Performance ~ analysis :g submission/ c commencement § :g warrantyo’C 8 interview/c :g Project ~~ Preparation of e negotiation{!!.I D. lrl management C. ~ final accounts f l-~ Project g:E Final settlementeuD. ‘C 1j completion and uO c …. .~ handover Ul{!!. oe D. D. (a) Pre-tender We maintain regular contacts with our clients and other participants in the construction industry such as architects and quantity surveyors to keep abreast of market development and potential business opportunities. Based on our approach, we are able to identify potential projects from a variety of sources, such as invitations from existing clients, referrals from existing clients and leads generated from other participants in the construction industry. Once a project is identified, our decision on whether to pursue the project and to participate in the tender process is based on a variety of factors including the scope, complexity and specification of the projects, achievability of the project timetable, prior experience, current order book, the nature and amount of skills and resources required, background of potential clients and whether our available working capital is sufficient to cope with the estimated cash flow requirements in undertaking the project. (b) Tender process If we decide to pursue the potential project after our initial assessment, we will commence preliminary work for the preparation of tender submissions such as understanding the specifications and contract requirements of the project, performing site visits, estimating the cost of labour, construction materials, machinery and equipment required, and assessing the amount of manpower and the duration of the project. 6. BUSINESS OVERVIEW (Cont’d) All tender invitations and referrals received by our Group are handled by our Contract Department, which is responsible for preparing the requisite documents. For our preparation of tender submissions and quotations, and to ensure that our tender is accurately priced while maintaining its competitiveness, we draw reference to various historical construction cost items maintained in our database, the materials price trend, wage trend, our previous tender records and the awarded tender prices of similar jobs (if any). We will also obtain current prices through quotations from our suppliers and subcontractors. This preparation phase usually lasts 2 to 4 weeks. During this period, we will prepare our tender price, proposed master work programme (including proposed timeline for each major construction activity), proposed site organisation chart and method statement (including proposed construction methodology and use of machinery and equipment). Once our tender documentations are complete, we will submit our tender to the potential clients together with a tender bond. A tender bond amount is usually specified in the tender document as determined by the client and its validity is dependent on the tender validity period of 3 to 4 months. Based on the past 3 financial years under review, our tender bond amount ranges between RMS,OOO to Rl1i1120,OOO per tender. Potential clients may call on the tender bond if we reject the Letter of Acceptance. Subsequently, if we are shortlisted for the tender interview, we will be invited to a tender clarification meeting by the prospective clients and/or consultants to understand their needs, requirements and constraints of the project. Other items to be discussed during the tender clarification meeting include our technical capabilities and quality control, related project experience, availability of resources, project budgeted costs and timeline. After the tender clarification meeting, we may need to submit a revised tender that takes into consideration any changes in the requirement /specification / design of the project. The process of submitting revised tender(s) may be repeated until the Letter of Acceptance is issued by the client. (c) Project execution Project commencement The Letter of Acceptance issued by our clients or architects for general building works will usually specify the following terms: Project title The details of the project including the location, number of units and type of building for which construction works are to be carried out Scope of works The general scope of works under the contract such as piling works, construction of the type of buildings, local infrastructure works or any other details as may be specified in the tender documents Contract sum The contract amount for the scope of works as specified in the Letter of Acceptance Contract period The contract period to complete the scope of works as specified in the Letter of Acceptance 99 6. BUSINESS OVERVIEW (Cont’d) Retention sum A portion of progress payment to be withheld by the client for securing the due performance of the contractor. The retention sum for each project is generally to a maximum of 5.0% of the total contract sum. The retention sum generally is withheld by the client for 24 months after certified practical completion of the project. liquidated damages The amount of liquidated damages will be specified. Defect liability period Subject to regulatory requirements, the defect liability period generally ranges from 24 to 36 months after certified practical completion of the project. Performance bond The contractor is usually required to provide a performance bond issued by a bank in favour of the client. The amount of performance bond required for each project is generally 5.0% of the total contract sum. The performance bond will generally expire after the issuance of practical certificate of completion. Project management We will form a project management team to ensure that each project is executed effectively and efficiently. Our project management team will normally comprise a project manager and/or site agent, engineers, contract executives, M&E supervisor, site supervisor and safety supervisor/officer. All of them are led by the project manager and/or site agent for on-site supervision and overall coordination of the day-to-day operation of the project. Throughout the execution of the project, our project management team will also have regular meetings with our clients and consultants to review the work progress and to resolve any issues identified. The project management process includes devising detailed construction plan and master work programme, coordinating the works of subcontractors, liaison with the client and its consultants, verification of work done for payments to the subcontractors, ensuring compliance to quality standards as well as health and safety standards and to take charge in the overall management of these works. Separately, our Contract Department will be responsible for preparing and submitting our progress claims to the architects, preparing subcontractors’ claims, attending site meetings and sourcing for subcontractors. Our Contract Department will work closely with our project management team to prepare our progress claims and subcontractors’ claims. Master work programme A master work programme will be prepared by the project manager and/or our Executive Director in charge of projects according to the project requirements. The site activities in the master work programme will be broken down into details such that each individual task can be monitored. The master work programme will show the sequence of the works and incorporate the key milestone which will be closely monitored by the project management team during the execution of the project. 6. BUSINESS OVERVIEW (Cont’d) Based on the master work programme, the project management team will determine the schedule for award of the subcontractors, material delivery schedule, shop drawing submissions and material sample submission schedule. The above schedules will be used to monitor the actual construction work progress and to ensure that the overall construction works are implemented in a timely manner. In the event of any variation of works required, a revised master work programme will be prepared to accommodate those changes. Procurement of construction materials and deployment of resources We adopt a centralised procurement system. Our Contract Department will provide details of the material requirement and specifications to our Purchasing Department, which is responsible for all our project procurement activities. Separately, the project manqgement team will determine the required manpower, machinery and equipment as well as the proposed materials delivery schedule for the entire project. Based on the above information, our Purchasing Department will source for the requisite materials, invite quotations, conduct price evaluation and negotiation, undertake procurement of construction materials, purchase or hire of machinery and equipment (if required) and allocate such resources for all our projects. Our centralised procurement system under the purview of our Purchasing Department enables us to make bulk purchases (whenever possible, depending on our projects deliverable timeline) in order to achieve cost saving. Our Purchasing Department also coordinates and deploys our existing machinery and equipment amongst different construction sites in order to maximise utilisation of resources. The major purchases required for our business are construction materials, which mainly consist of steel bars, ready-mixed concrete, tiles, timber and plywood, bricks, reinforced mesh, cement, sand and sanitary items sourced locally. We purchase our construction materials on a project-by-project basis. All of our construction materials are delivered directly to the project sites according to the project deliverable timeline for use thereon. Apart from nominated suppliers, we normally select our suppliers from our pre­qualified list of suppliers and only listed suppliers are invited to submit quotations. From time to time, we also source for new suppliers. We undertake annual assessment of each supplier to ensure quality of service and also product quality. In cases where we purchase certain construction materials for use by our subcontractors, the relevant costs of the materials will be deducted accordingly from our payments due to the subcontractors. Procurement and hiring of machinery and equipment l”lost of our construction projects for general building works require the use of machinery and equipment, such as telehandlers, backhoes, skid loaders, back pushers, forklifts, mobile cranes, tower cranes, passenger hoists and excavators etc. We also require the use of lorries for our construction activities. 6. BUSINESS OVERVIEW (Cont’d) The project management team will determine the type of machinery and equipment required, the duration and quantity of the machinery and equipment required to be deployed at the project site during the various stages of construction works. The project management team will take into consideration the project size and nature of project in determining the type and quantity of machinery and equipment required. Depending on the type of machinery and equipment, frequency of usage and costs, we may purchase or hire machinery and equipment for use in our projects. Subcontracting Depending on the nature of the project, availability of our internal resources, cost effectiveness, Iicensing/ specialist reqUirements, level of complexity, we will outsource certain part of the construction works to sUbcontractors. Different subcontractors will be engaged to carry out different activities such as: (a) Domestic subcontractors (those appointed by us)
• Labour only subcontractors such as carpenter, bricklayer, plasterer, bar bender, tiler, concretor and drainlayer; and
• Labour and material subcontractors such as plumbing works, electrical works, air conditioning works, sewerage works, roof truss works, aluminium works, painting works, timber flooring works, granite and marble works.

 

(b) Nominated subcontractors (those appointed by clients)

• Labour and material subcontractors such as lift and escalator, electrical and plumbing, aluminium and curtain wall, swimming pool services, landscape and security system. The agreements that we enter into with our subcontractors generally contain key terms and conditions including the scope of works, the completion date, retention sum, liquidated damages and defects liability period. Apart from nominated subcontractors, we select domestic subcontractors from our pre-qualified list of subcontractors. We have long working relationship with our pre­qualified domestic subcontractors, most of which spanning more than 10 years. Such relationship has enabled us to have comprehensive assessment of the subcontractors over the years, ensuring the quality and timeliness of their deliverables. From time to time, we also source for new subcontractors to be included into our pre-qualified domestic subcontractors’ database. We do not enter into any long-term contract with our subcontractors and each subcontracting agreements are on a project to project basis. For any given project, we select our domestic subcontractors based on a number of factors including their quotations, our previous subcontracting experience with them, their capacity to meet our project timeline and their product compliance with the project specifications. 6. BUSINESS OVERVIEW (Cont’d) As main contractor, we are liable to our clients for the performance of our subcontractors. In order to ensure the works of our subcontractors meet the requirements as prescribed in the contracts, we assess regularly the performance of our subcontractors during the course of our projects. Our project management team conducts regular site meeting to ensure compliance by our subcontractors. Separately, we also conduct annual performance appraisal on our listed subcontractors and we assess their overall performances including workmanship, quality control, safety and financial resources. Subcontractors that fail to meet our pre-determined evaluation criteria or remedy any violation to our satisfaction within a reasonable period will be delisted from our pre-qualified list of subcontractors and will not be considered for future construction projects. Progress billings I payments We normally receive progress payment from clients on a monthly basis throughout the duration of the project. Every month, the contract executives from our Contract Department will submit our monthly progress claim to our client’s consultants. Thereafter, we will arrange a project site visit together with the said consultants to verify the progress of the construction work done. Based on the joint assessment, the consultants will proceed to prepare the monthly progress claim recommendation based on the amount of work done. Such recommendation will be submitted to the project architect for certification of payment and for onward submission to the clients. Each of our subcontractors is required to submit their progress claim to us for our evaluation on a bi-weekly or monthly basis. Once we have verified the subcontractor’s progress claim against the actual work done, we will release the payment to them based on the credit honouring period. Variation order(s) The project’s architects may, in the course of project execution, instruct variation orders which are variation to part of the works that is necessary for the completion of the project. Variation orders may include additions, omissions, substitutions, alterations and changes of work scope. A variation order will usually be notified to us in writing from the architect describing the detailed variation works and/or enclosing the revised drawings. We will submit the cost and time of the variation work to the architect for their approval. The principal terms and settlement of the variation orders are generally the same as those specified in the main contract. Project completion and handover The typical contract period for the landed construction projects in which we act as a main contractor generally require not more than 2 years to complete whereas projects involVing at least 10-storeys high generally require between 2 to 3 years to complete. However, depending on the nature and complexity of a project as well as the occurrence of any unforeseen circumstances (such as inclement weather, variation orders requested by architect, delay in site possession by client, if any), the actual time required for the completion of construction works could extend beyond the initial contract period. 6. BUSINESS OVERVIEW (Cont’d) Our construction works are practically completed when: (a) In the opinion of the architect, our client can have full use of the works for their intended purposes, notwithstanding that there may be works and defects of a minor nature still to be executed and as main contractor, we have given to the architect a written undertaking to make good and to complete such works and defects within a reasonable time specified by the architect; and
(b) Other requirements expressly stated in the contract as a pre-requisite for the issuance of the Certificate of Practical Completion have been complied with.
When the works are practically completed, we shall give notice to the architect who shall within 14 days do either one of the follOWing:
(a) If the architect is of the opinion that the works are not practically completed, the architect shall give written notice to us stating the reasons for its opinion; or
(b) If the architect is of the opinion that the works are practically completed, the architect shall issue the Certificate of Practical Completion. The date of the practical completion shall be:
(i) The date of receipt of our written undertaking to make good and to complete works and defects of a minor nature, if any; or
(ii) The date of receipt of our written notice, where there are no more works to be done and no defects of a minor nature.

 

(d) Post completion obligations Defects liability period Defects liability period is a common feature in all construction contracts in Malaysia. The defects liability period will begin from the date of issuance of the Certificate of Practical Completion. During the defects liability period, as main contractor for the project, we are bound to rectify defects that appear between the period the Certificate of Practical Completion is issued and the expiry of the defects liability period. Any defects, shrinkages or other faults arising during this period due to defective materials or workmanship must be made good by us. Defects can be classified into 2 main categories, patent defects and latent defects. Patent defects are defects that can be discovered by normal examination or testing during the defects liability period. Latent defects are by its very nature concealed and may not manifest itself for many years. Latent defects can extend beyond the defects liability period and it is perpetual with no expiry date. Depending on the nature and the scale of the project, the length of the defects liability period generally ranges from 24 to 36 months after certified practical completion of the project. Any defects in the works which appear within the defects liability period shall be specified by the architect in a schedule of defects to be delivered to us not later than 14 days after the expiration of the defects liability period. 104 6. BUSINESS OVERVIEW (Cont’d) We will apply to the architect to issue the Certificate of Making Good Defects upon expiry of the defects liability period and complete rectification of all known defects as specified in the schedule of defects provided by the architect. The architect shall within 14 days of our application do either one of the following: (a) If the architect is of the opinion that there is no defects or we have made good all defects, the architect shall issue the Certificate of Making Good Defects and the date of making good defects shall be the date of receipt of our application; and
(b) If the architect is of the opinion that the defects have not been made good, the architect shall give us a written notice stating reasons for non-issuance of the Certificate of Making Good Defects.

Upon receipt of the Certificate of Making Good Defects, we will be released from our obligations under the contract and will be able to claim for the balance retention sum. Performance warranty In addition to defects liability, we also warrant the work that we perform including the work of our subcontractors. Our performance warranties include external paint work and water proofing work which may run for up to 5 and 10 years respectively from the date of certified practical completion of the project. Any defects arising during this period due to defective materials or workmanship must be made good by us. Preparation of final account We are required to send to the architect and quantity surveyor all documents supporting the draft final accounts within 6 to 12 months after the issuance of the Certificate of Practical Completion. The final account shall be completed and issued by the architect subject to receipt of all the necessary documents from us, assessment and approval by the quantity surveyor and negotiations with the client in respect of all variation orders. Final settlement and release of retention sum Our clients are entitled to hold a retention sum from the progress payment. The purpose of such retention sum is to protect the clients in the event the contractor fails or defaults in its performance under the contract, such as abandonment or the works is of poor or defective quality. Our clients are entitled to retain 10.0% of each progress claim up to a maximum limit of 5.0% of the contract sum. When a maximum limit of 5.0% of the contract sum has been retained, no further amount shall be retained by the client. Generally, 2.5% of the contract sum is released to us upon the issuance of the Certificate of Practical Completion and the balance 2.5% of the contract sum is released to us upon the issuance of the Certificate of Making Good Defects. We also hold a retention sum in our subcontract agreements with our subcontractors. Similarly, we will release the retention sum to our subcontractors upon issuance of the Certificate of Practical Completion and the Certificate of Making Good Defects. 6. BUSINESS OVERVIEW (Cont’dj 6.5.4 Interruption in the business Our Group has not experienced any interruption in the form of major operational breakdowns or trade disputes that had a significant effect on our operations during the past 12 months preceding the LPD. [ The rest of this page is intentionally left blank] I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) 6.5.5 Types, sources and availability of major raw materials or input costs The main components of our cost of sales are as follows: (a) The cost of construction materials used in our construction projects such as steel bars, ready-mixed concrete, tiles, timber and plywood, bricks, reinforced mesh, cement, sand and sanitary items. While all of our construction materials are directly sourced from local suppliers, such suppliers may import the raw materials from other countries. Construction materials imported by our suppliers include marble, timber materials and ironmongery, of which these products’ country of origin include China, Myanmar, Iran, Thailand, Indonesia, Germany and Oman;
(b) The cost of labour employed directly by us and those outsourced from domestic labour subcontractors;
(c) The cost of engaging domestic labour and materials subcontractors and/or nominated subcontractors. Most of our subcontract agreements are to local subcontractors; and
(d) The cost of hiring machinery and equipment and the related maintenance expenses.

We have not faced acute shortages or major price differentials for any of our required construction materials as well as major price differentials for our labour wages in the past FYEs 2014 to 2016 which has materially affected our financial performance. In addition, we have not experienced major cost differentials for any of our subcontract agreements in the past FYEs 2014 to 2016 which has materially affected our financial performance. Purchase value As a percentage of total cost of sales FYE 2014 FYE 2015 FYE 2016 FYE 2014 FYE 2015 FYE 2016 Major cost item RM’OOO RM’OOO RM’OOO 0/0 0/0 0/0 Construction materials: • Steel bars 8J40 13,381 9,329 3.92 5.43 4.06
• Ready-mixed concrete 13,417 18,421 16,992 6.02 7.48 7.39 (3)11 760
• Tiles 4,934 6J96 , 2.21 2.76 5.12
• Timber & plywood 5,382 5,915 4,678 2.42 2.40 2.03
• Bricks 4,813 4,534 4,344 2.16 1.84 1.89
• Reinforced mesh 2,336 3J68 4J58 1.05 1.53 2.07
• Cement 4,330 3,998 4,366 1.94 1.62 1.90
• Sand 4,982 4,252 5,355 2.24 1.73 2.33

I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Purchase value As a percentage of total cost of sales FYE 2014 FYE 2015 FYE 2016 FYE 2014 FYE 2015 FYE 2016 Major cost item RM’OOO RM’OOO RM’OOO 0/0 % 0/0—-…,……..,,=­• Sanitary items 3,725 5,569 3,505 1.67 2.26 1.52
• Others(4) 13,329 16,149 17,830 5.98 6.55 7.76 Direct labour cost 38,715 38,290 34,288 17.37 15.54 14.92 Subcontractors cost 83,100 91,522 (3)77,252 37.29 37.15 33.60

Total major cost items 187,803 212,595 194,457 84.27 86.29 84.59 Preliminaries(l) 35,036 33,785 35,427 15.73 13.71 15.41 Total cost of sales(2) 222,839 246,380 229,884 100.00 100.00 100.00 Notes: (1) Included in preliminaries is the cost of hiring machinery and equipment and the related maintenance expenses. (2) Does not include the effect of discounting of trade payables. In compliance with the MFRS, the total trade payables are fair valued at the financial year end. The value of the non-current trade payables is discounted to its present value at the financial year end. Please refer to Section 11 of this Prospectus for further details. (3) Prior to FYE 2016, a portion of tiles were purchased by our subcontractors and included as subcontractors’ costs. However, since FYE 2016, we purchased most of the tiles directly and as such, the purchase value for tiles increased whilst the subcontractors’ costs decreased. (4) Includes roof tiles, ironmongery, crusher run, precast drains and metal door frames etc. For further discussions of the year to year variation in our cost of sales, please refer to Section 11.2.2 of this Prospectus. 6.5.6 Property, plant and equipment Please refer to Section 5.7 of this Prospectus for further details of the property, plant and equipment of our Group. [ The rest of this page is intentionally left blank] 108 6. BUSINESS OVERVIEW (Cont’d)
6.6 PRINCIPAL MARKETS Malaysia is our sole principal market for the past FYEs 2014 to 2016 as we generate all our revenues locally.
6.7 SALES AND MARKETING We believe that our ability to procure new projects is dependent on our track record which we have established over the years in the local construction industry. Our Group’s track record as a reliable construction company with good product/service quality and workmanship has helped to ensure clients’ satisfaction resulting in good relationship and repeated businesses from these clients. Moving forward, our track record and goodwill with satisfied clients is expected to continue to draw in new business opportunities either through recurring business or recommendations to other prospective clients. All of our projects are being secured through invited tenders from repeat clients, past client referrals and new client referrals from consultants/architects. We usually participate in selective tenders and occasionally in open tenders. The selective tenders represent more exclusive opportunities with higher success rate. Our Group is also committed to bUilding new business relationship, whereby our Executive Directors actively engage in the sourcing for new clients to generate and follow up on new business leads. Our Contract Department will act on potential leads generated by our Executive Directors. [ The rest of this page is intentionally left blank] I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) 6.8 MAJOR CLIENTS Our major client segments can be divided into the following categories: (a) Public listed property developers
This group is our main client segment. The property developers that we work for are all based in Malaysia, with involvement in the development of various types of properties, including townships, landed and high-rise residential properties as well as commercial properties.
(b) Non-public listed property developers

We selectively undertake construction projects for non-public listed property developers based on their track record e.g. Mitraland Group Sdn Bhd and Perdana Parkcity Sdn Bhd. Major clients which have contributed 10.0% or more of our revenue for each of the past FYEs 2014 to 2016 are set out as below: FYE 2014 FYE 2015 FYE 2016 Country of Length of Rank Client(l) origin Revenue contribution Revenue contribution Revenue contribution relationship RM’OOO (2)0/0 RM’OOO (2)0/0 RM’OOO (2)0/0 Years (1) Horizon Hills Development Malaysia 58,909 23.87 45,121 16.48 11,789 4.55 7 Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad)
(2) Engtex Group Berhad Malaysia 46,807 18.97 20,593 7.52 25,669 9.91 16
(3) UEM Sunrise Berhad Malaysia 21,265 8.62 43,180 15.77 33,109 12.78 5
(4) Lum Chang Holdings Singapore 50,019 20.27 41,710 15.23 10,086 3.89 5 Limited
(5) Mitraland Group Sdn Bhd Malaysia 39,391 15.96 32,976 12.04 –4
(6) Gamuda Group Malaysia 14,091 5.71 37,209 13.59 19,406 7.49 16
(7) Tropicana Corporation Malaysia –23,929 8.74 41,645 16.07 2 Berhad

I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) FYE 2014 FYE 2015 FYE 2016 Country of Length of Rank Client(1) origin Revenue contribution Revenue contribution Revenue contribution reJationship RM’OOO (2)0/0 RM’OOO (2)0/0 RM’OOO (2)% Years (8) Eco World Development Malaysia 52,828 20.39 1 Group Berhad
(9) Plenitude Berhad Malaysia 15,944 5.82 33,177 12.80 2

Total 230,482 93.40 260,662 95.19 227,709 87.88 Notes: (1) Our clients include their respective subsidiaries. (2) Computed based on gross revenue from each major customer excluding the effect of discounting of trade receivables. In compliance with the MFRS, the total trade receivables are fair valued at the financial year end. The value of the non-current trade receivables are discounted to its present value at the financial year end. Please refer to Section 11 of this Prospectus for further details. Revenue contribution from clients varies from year to year given the nature of our business. This is mainly due to the difference in the timing and value of project(s) secured from each client as well as timing difference in the issuance of progressive billings for the construction works completed in anyone particular financial year. Over the past FYEs 2014 to 2016, our revenue was contributed mainly by: (i) Horizon Hills Development Sdn Bhd (a joint venture between UEM Sunrise Berhad and Gamuda Berhad), whose revenue contribution was 23.87% in FYE 2014, 16.48% in FYE 2015 and 4.55% in FYE 2016. Such revenue contribution was mainly arising from our work undertaken for the Horizon Hills projects in Mukim Pulai, Johor, namely the 92 units of 2-storey and 3-storey of cluster houses (Phase 202) at Horizon Hills which was completed in January 2015, the 120 units of 2-and 3-storeys cluster houses (Phase 3C) at Horizon Hills which was completed in September 2015 and the 38 units and 40 units of semi-detached houses (Phase 5A1 and 5A2) at Horizon Hills which was subsequently completed in March 2016. The gradual decrease in revenue contribution from Horizon Hills Development Sdn Bhd was in line with our progress of work undertaken for the said projects; I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) (ii) Lum Chang Holdings Limited, whose revenue contribution was 20.27% in FYE 2014, 15.23% in FYE 2015 and 3.89% in FYE 2016, arising from our work undertaken for the 36 units of 3-storey semi-detached house and 1 unit of 3-storey bungalow (Phase 3B-1a and Phase 3B-1b) at Mukim Cheras, Daerah Hulu Langat, Selangor which was completed in May 2015 and September 2015 respectively for both phases, 45 units of bungalow (Phase 2) at Bukit Palma Kemensah, Mukim Hulu Klang, Daerah Gombak, Selangor which was completed in November 2015 and 44 units of semi-detached house and 5 units of bungalow (Phase 4A) and 24 units semi-detached house (Phase 3B-2) at Mukim Cheras, Daerah Hulu Langat, Selangor which is currently held under abeyance but expected to resume in second quarter of 2017; (iii) Engtex Group Berhad whose revenue contribution was 18.97% in FYE 2014, 7.52% in FYE 2015 and 9.91% in FYE 2016, mainly arising from our work undertaken for the 4 blocks, comprising basement car park, shops, SOHO units, restaurants, and hotel suites known as Emerald Avenue on Lot 25670-25686 & 2346 Bandar Selayang, Mukim Batu, Daerah Gombak, Selayang, Selangor which commenced in October 2012 and completed in February 2015 and 2 blocks commercial suites known as Amanja at Sri Damansara, Selangor which is still ongoing. The gradual decline in revenue contribution was in line with our progress of work undertaken for the said projects; and (iv) Eco World Development Group Berhad, whose revenue contribution was 20.39% in FYE 2016, mainly arising from our work undertaken for 6 units 2-storey terrace show houses at Eco Grandeur, Puncak Alam, Mukim Ijok, Daerah Kuala Selangor which was completed in February 2017, 104 units (Parcel 2-Package 1A) & 150 units (Parcel 2 -Package 1B) 2-storey terrace houses at Eco Sanctuary, Kota Kemuning, Mukim Tanjung Dua Belas, Daerah Kuala Langat, and 2 blocks medium-cost apartment comprising 750 units, car parks, shops, management office and facilities at Eco Majestic, Semenyih, Mukim Beranang, Daerah Hulu Langat, Selangor which are still ongoing. Notwithstanding the completion of certain projects undertaken for Horizon Hills Development Sdn Bhd, Lum Chang Holdings Limited, Engtex Group Berhad and Eco World Development Group Berhad between FYEs 2014 up till the LPD , our existing order book still comprise other new construction projects from these 4 property developers, which construction works are still ongoing as at the LPD. 6.9 MAJOR SUPPLIERS The key partners in our supply chain are as follows: (a) Subcontractors As a main contractor, we are involved in the day-to-day management and implementation of construction and maintenance projects awarded to us. [iimpany No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) While some of the construction activities are directly undertaken by our Group, we also outsource some aspects of the construction activities such as M&E components, plumbing, painting, roofing and installation of glass railings to other subcontractors. Outsourcing is common in the local construction industry, and is usually undertaken to secure additional resources in order to undertake more projects, increase productivity and efficiency, offer a broader range of skills, as well as to achieve better flexibility as opposed to hiring permanent employees. (b) Construction material suppliers We procure various types of construction materials such as steel bars, ready-mixed concrete, tiles, timber and plywood, reinforced mesh, cement, sand and sanitary items from various suppliers. These construction materials are widely available in Malaysia and from a large base of suppliers. Price, product quality and availability are key considerations when selecting our construction material suppliers. (c) Machinery & equipment suppliers We rely on construction machinery and equipment for our daily operations. Such construction machinery and equipment can be purchased outright or hired from various suppliers in Malaysia. There was no subcontractor who has accounted for 10.0% or more of our subcontractor cost for FYE 2015 and FYE 2016. Subcontractors who have accounted for 10.0% or more of our subcontractor cost for the FYE 2014 are set out as below: FYE 2014 FYE 2015 FYE 2016 Country Type of Length of Rank Subcontractor of origin services Subcontractor cost Subcontractor cost Subcontractor cost relationship (1)0/0 (1)0/0 (1)0/0RM’OOO RM’OOO RM’OOO Years (1) CGV Alliance Malaysia Air conditioning 8,367 10.07 –3,153 4.08 6 Sdn Bhd and electrical Note: (1) Computed based on gross subcontractor cost excluding the effect of discounting of trade payables. In compliance with the MFRS, the total trade payables are fair valued at the financial year end. The value of the non-current trade payables are discounted to its present value at the financial year end. Please refer to Section 11 of this Prospectus for further details. I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Apart from subcontractors, construction material suppliers who have accounted for 10.0% or more of our raw material cost for the FYE 2014 and FYE 2015 are set out as below: FYE 2014 FYE 2015 FYE 2016 Purchase Purchase Country Type of value Purchase value Value Length of Rank Supplier of origin products (Delivery cost) (Delivery cost) (Delivery cost) relationship ~~oo (~% RM’OOO (1)% RM’OOO (1)0/0 Years (1) Engtex Malaysia Steel bars, ~272 6.47 9,087 10.98 5,264 6.35 15 Marketing Sdn reinforced mesh, Bhd tiles and
sanitary items
(2) Gamuda Trading Malaysia Steel bars, 16,016 24.27 16,227 19.60 3,195 3.85 16

Sdn Bhd reinforced mesh, tiles, ironmongery and sanitary items
Total  20,288  30.74  25,314  30.58  8,459  10.20  Note:  (1)  Computed based on gross raw material cost excluding the effect of discounting of trade payables. In compliance with the MFRS, the  total trade payables are fair valued at the financial year end. The value of the non-current trade payables are discounted to its present
value at the financial year end. Please refer to Section 11 of this Prospectus for further details. There was no construction material supplier who has accounted for 10.0% or more of our raw material cost for FYE 2016. Both Gamuda Trading Sdn Bhd and Engtex Marketing Sdn Bhd are our major suppliers for the past FYEs 2014 to 2015 (with the exception of Engtex Marketing Sdn Bhd in FYEs 2014 and 2016 and Gamuda Trading Sdn Bhd in FYE 2016). We are encouraged to purchase from the abovementioned suppliers for projects awarded by companies within their group. Our Group has the capability to purchase the required materials from more than 1 supplier to fulfil our business requirements and thus mitigate the risk of being overly dependent on a single supplier. I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Nevertheless, our Group has established a long-standing relationship with several of these companies as our Group believes that these relationships forged will be beneficial to our purchasing and cost efficiency. In the event we are unable to source for our supplies from these companies, we are still able to source the products from other suppliers in the local market. We have not entered into any long term agreement with our subcontractors and suppliers, as our subcontractors and supply contracts are usually on project to project basis which covers the requirements of the relevant project. 6.10 SEASONAL OR CYCLICAL EFFECTS The construction industry in Malaysia is cyclical in nature and is dependent on the general economic conditions and fiscal policy. However, we believe that there will be continued demand for our services going forward. The construction industry in Malaysia serves as a catalyst in driving the creation of national wealth. At the same time, it has a multiplier effect on other industries, namely the manufacturing, financial services and other professional services industries. The construction industry also helps support the social development of the country through the provision of basic infrastructure and employment opportunities 6.11 TECHNOLOGIES USED OR TO BE USED We use licensed computer software such as the KeyPoint system, Project Costing System Version 7.0, Glodon Takeoff for Architecture and Structure, Microsoft Projects and Microsoft Office to assist in the management of our operations, including our financial accounting system, construction cost measurement, project resources planning and management, project costing, equipment management, preparation of construction programme and procurement management. These licensed computer software also serves as an important tool for our decision making process and helps us to co-ordinate our operating activities between our main office and various construction sites. In addition, we also utilise AutoCAD LT (a software application for 2-dimensional computer-aided design) for the review and verification of construction drawings and preparation of Shop Drawings. Our Group is dependent on construction machinery and equipment as well as tools to sustain our operations and maintain our Group’s competitiveness. In line with our business needs, requirements by our clients and cost efficiency considerations, we have over the years invested in new and used machinery and equipment to enhance our construction capability. We expect that our investment in such machinery and equipment as opposed to hiring them will enable us to undertake our construction projects in a cost effective manner. Our procurement of machinery and equipment is managed by our Purchasing Department. The allocation of our machinery and equipment to each construction project is managed by our project management team. I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) As at LPD, the main machinery and equipment used by our Group in our construction activities are as follows: NBV as at 31 Year made! Total purchase December No Equipment! Machinery Use of equipment! machinery Unites} purchased value 2016 RM’OOO RM’OOO (1) Telehandler Mainly used for loading and 11 Between 2002 3,882 411 unloading of construction to 2014 materials for up to 4-storey building height
(2) Backhoe Mainly used for light transportation 9 Between 2008 lJ90 507 of construction materials, loading to 2014 and unloading of construction materials for up to i-storey building height and digging holes/excavation, heaping of sand and aggregates, site clearing
(3) Skid loader Mainly used for clearing of debris, 5 Between 2003 571 131 horizontal movement of to 2015 construction materials, heaping of sand and aggregates

 

 

I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) NBV as at 31 Year made! Total purchase December No Equipment! Machinery Use of equipment! machinery Unites) purchased value 2016 RM’OOO RM’OOO (4) Tower crane Mainly used in the construction of 4 Between 2014 2,778 1,779 high-rise bUildings for lifting of to 2015 construction materials and equipment and loading and unloading of construction materials
(5) Passenger hoist Construction elevator used in high­4 Between 2013 410 130 rise buildings to carry personnel to 2016 between the ground and higher floors, or between floors. These are twin-cage passenger hoist
(6) Concrete pump Used to pump ready-mixed 2 Between 2012 887 concrete to the designated work to 2015 area

 

 

I Company No.: 1134880-WJ 6. BUSINESS OVERVIEW (Cont’d) NBVas at 31 Year made! Total purchase December No Equipment! Machinery Use of equipment! machinery Unites} purchased value 2016 RM’OOO RM’OOO (7) Air compressor Used to supply high pressure 3 Between 2013 197 110 compressed air for cleaning of to 2015 debris and dust before casting of concrete and for hacking of concrete
(8) Screed pump Used to pump cement mortar to the 2 Between 2013 173 designated work area to 2014

 

 

Engine  mixer  cum  pump  used  to  9  Between 2012  432  123  mix cement,  sand  and  additives  to 2013  and  to  pump the  mortar to  the  designated work area
I Company No.: 1134880-W I  6.  BUSINESS OVERVIEW (Cont’d)  No Equipmentj Machine~ (10) Others (a) Shovel loader  Use of equipmentj machinery Mainly used for horizontal movement of construction materials and heaping of sand and aggregates  Unit(s) 1  Year made j purchased 2011  Total purchase value RM’OOO 90  NBV as at 31 December 2016 RM’OOO  (b) Back pusher  Mainly used for pushing soil, sand, gravel and cleaning of site debris  1  2013  55  20  (c) Mini excavator  Mainly used for earthwork excavation in a constrained area  1  2014  120  80  (d) Forklift  Mainly used for loading, unloading and moving construction materials  1  2016  45  38  (e) Concrete planer  Used to grind building stone and concrete surface  6  2015  28  (f) Single phase mixer  Electrical mixer used to mix cement, sand, additives and water to form mortar  8  Between 2012 to 2013  26  (g) Floor chipping machine  Used as a grinding machine to level up uneven floor surface  5  Between 2011 to 2013  21  (h) Genset  Portable power diesel generator to generate electricity power for use at construction sites  9  Between 2012 to 2015  38  119
I Company No.: 1134880-W I  6.  BUSINESS OVERVIEW (Cont’dj  No  Equipmentj Machinery (i) Portable cabin (office)  Use of equipmentj machinery Temporary offices at construction sites  Unites) 36  Year made j purchased 2013  Total purchase value RM’OOO 245  NBV as at 31 December 2016 RM’OOO  U)  Portable cabin (worker)  Temporary workers accommodation at construction sites  140  2013  630  (k) Portable cabin (storage)  Temporary storage rooms for storing tools, small equipment and selective construction materials at construction sites  15  2013  90  (I)  Scaffolding  Temporary metal framework used as a working platform to support workers or formwork structure during the construction of buildings  24,300  Between 2011 to 2016  2,211  (m) Fogging machine  Used to undertake eliminate mosquitoes  fogging  to  16  Between 2011 to 2016  79  (n) Aluminium system formwork  A temporary mould into concrete is poured into  which  l1,421m2  Between 2016 to 2017  5,931  (1)2,584  (0) High pressure water blaster  A high pressure water jet to remove concrete residue on aluminium system formwork  1  2016  105  103
6. BUSINESS OVERVIEW (Cont’d) Note: (1) Relates to NBV of those aluminium system formwork purchased in FYE 2016 only. The average economic useful life for our machinery and equipment is 4 to 5 years. We conduct periodic inspections and maintenance of our machinery and equipment and undertake certain repair works when necessary. Our maintenance procedures include oiling, corrosion prevention and cleaning. We transport our machinery and equipment to and from project sites mostly by our own lorries. Depending on the type of the machinery and equipment, we also engage independent logistics companies to transport our machinery and equipment to and from project sites. The machinery and equipment that we own are commonly used in the construction industry and are generally available in the local market. [ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (Cont’d)
6.12 INTELLECTUAL PROPERTIES We do not have any intellectual properties as at the LPD.
6.13 QUALITY CONTROL PROCEDURES AND MANAGEMENT Our Group places emphasis on quality control procedures to meet the expectations of clients and architects and to comply with the CONQUAS, QLASSIC or clients’ own quality standards. Proper implementation and stringent execution of quality standards and procedures are undertaken to ensure quality services. We seek formal feedback from our clients and architects in terms of our performance upon each project completion. We undertake a management review of our performance based on the feedback received. 6.13.1 Stringent partner selection To ensure the quality of our Group’s services, our Group has put in place a set of standard procedures in selecting domestic subcontractors and suppliers, which are subcontractors and suppliers appointed by us. New domestic subcontractors and suppliers are evaluated prior to being invited for job tenders through pre-qualification submission such as company profile, track record and financial position. Existing domestic subcontractors and suppliers are invited for tender based on their track record and working history with our Group. We also conduct annual performance appraisal on our list of domestic subcontractors and suppliers and we assess their overall performances including workmanship/product quality, quality control and financial resources.
6.13.2 ISO 9001:2008 compliance Our Group’s QMS was certified with the MS ISO 9002:1994 accreditation in 2000 for the provision of construction services for high and low rise residential, commercial and industrial bUildings. Following the phasing out of the ISO 9002, our Group obtained the ISO 9001:2000 accreditation in 2003 (Note: from 2000 onwards, the QMS of companies can only be certified under ISO 9001 after ISO 9002 and ISO 9003 became obsolete). The accreditation was SUbsequently updated to MS ISO 9001:2008 in 2009 and was renewed in 2012 and 2015. Our Group is committed to: (a) Achieve total client satisfaction with quality products;
(b) Foster teamwork and self-development through continuous training; and
(c) Comply with MS ISO 9001 and continuously improve the effectiveness of our QMS.

Our quality management representative is Low Mei Kew, who is also our Administration Manager. She acts as a liaison between our Group and the external quality auditor in respect of all matters relating to MS ISO 9001:2008 quality standard. 6. BUSINESS OVERVIEW (Cont’dj 6.13.3 Internal quality control measures The following summarises the main internal quality control measures that we implement across our construction projects: (a) Inspection of construction materials We are required to obtain prior approval from the architects and/or consultants before procuring most of the construction materials to be used in our construction projects. Our project management team will inspect the construction materials delivered to the project site before unloading to ensure that the delivered materials are in accordance to the project specifications and have been delivered in good order. (b) Training
We have regular training for our project management team and other office staff to ensure their understanding of and compliance with our quality standards, to ensure their understanding of various bUilding materials and to enhance their project management skills. We also send our new staff for training to ensure their understanding of the MS ISO 9001:2008 quality assurance system and CONQUAS and/or QLASSIC assessment systems. Our staff also attends various courses/training programmes/seminars organised by CIDB and the Master Builders Association Malaysia.
(c) Standardised construction methods
We implement construction methods based on our Project Quality Plan (commonly known as PQP). The PQP is a project-specific document submitted to our client, and provides information on our construction methods and processes for each major activity for the project, including our inspection and test plan and quality control procedures. In essence, the PQP documents the activities, standards, tools and processes necessary to achieve the desired quality in the delivery of a project.
(d) Onsite inspections and rectification

We conduct regular inspections on our construction projects, and require our project management team to implement immediate rectification measures in the event the standard of work is not satisfactory. Thereafter, we re-inspect the work to ensure that it is satisfactorily rectified. Some of our clients may also appoint their internal quality personnel to conduct periodical inspections of our construction projects. Inspection results will be documented and the clients’ assessment of our construction quality and construction progress will be conveyed to us for rectification and/or improvement, if required. 6. BUSINESS OVERVIEW (Cont’d) (e) Quality control review We undertake annual review of all our quality standards and services. In addition, after the completion of each project, we request feedbacks from our
clients and architects to assess our overall performance including the quality of work.
(f) Subcontractors

We require our subcontractors to abide by our PQP when performing work for our construction projects. We also conduct regular quality checking on our subcontractors’ work to ensure compliance with CONQUAS/QLASSIC standards. [ The rest of this page is intentionally left blank] [Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) 6.13.4 Quality assessment Our provision of quality construction services is further supported by our successful participation in numerous CONQUAS assessed projects under the ‘Architectural’ category. Our first bUilding construction project assessed under CONQUAS namely the RP6 Phase 2B project of the Kota Kemuning township development consisting of 74 units of terrace house received a score of 67.7% in 2005 under the ‘Architectural’ category. Since then, we have participated in 50 more CONQUAS assessed building projects involving the construction of various types of buildings which included but are not limited to terrace houses, semi-detached houses or cluster houses, bungalow houses, club houses and apartments with the resulting CONQUAS scores obtained under the ‘Architectural’ category. The distribution table of our CONQUAS scores and its comparison with the industry are set out in Section 6.2.2 of this Prospectus. As at LPD, we have obtained an average score of 78.2% for all our CONQUAS assessed projects. Our lowest score so far was 67.7%, obtained for our first CONQUAS assessed project namely the RP6 Phase 2B project of the Kota Kemuning township development consisting of 74 units of terrace house (achieved in December 2005), while our highest score so far was 83.5% for The Serai project comprising 28 units of 3-storey semi­detached house and 2 units of bungalow and 1 units guard house at Mukim Batu, Kuala Lumpur (achieved in August 2010). As at LPD, the average score for CONQUAS assessed projects in Malaysia since 2001 is 76.0%, computed based on the total of 541 projects assessed in Malaysia since 2001 as listed under the Building and Construction Authority Singapore’s website, (https:!!www.bca.gov.sg/Professionals/IQUAS). In addition to CONQUAS assessments, some of our projects are also assessed by CIDB’s QLASSIC assessment. In 2014, our Group participated in our first bUilding construction project assessed under QLASSIC namely The Twin Palm Kemensah Phase 1A-2 and Phase 1B project at Bukit Palma Kemensah, Hulu Kelang comprising 35 units of bungalow. A QLASSIC score of 80.0% was given for this project. Our highest QLASSIC score so far was 82.0% for 45 units of bungalow (Phase 2) at Bukit Palma Kemensah, Mukim Hulu Klang, Daerah Gombak, Selangor, which was recently achieved in April 2016. Since our participation in our first QLASSIC assessment, we have only 1 QLASSIC assessed project that has achieved a QLASSIC score of less than 80.0% which is The Twin Palm Kemensah Phase 1B-2 project at Bukit Palma Kemensah, Hulu Kelang comprising 22 units of bungalow. Moving forward, we are determined to continue producing quality products for all our projects in our aspiration to be the preferred builder in Malaysia. I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) The CONQUAS is a quality assessment system developed by BUilding and Construction Authority Singapore, Singapore whereas QLASSIC is developed by CIDB, Malaysia. CONQUAS was first launched in 1989 whereas QLASSIC was launched in 2006. Both quality assessment systems serve the same function to assess and evaluate the quality of workmanship of a building project based on the approved standard. As such, regardless of CONQUAS and QLASSIC, both act as a benchmark for contractor to achieve and maintain the quality of workmanship. Both the CONQUAS and QLASSIC assessments can only be undertaken by assessors certified by Building and Construction Authority Singapore and aDB respectively. The main components assessed by CONQUAS and QLASSIC are as follows: CONQUAS QLASSIC Architectural works(l) Structural works Architectural works M&E works
Note: (1) The CONQUAS assessment for Malaysian building projects is limited to architectural works only. In Singapore, the CONQUAS assessment is extended to include structural works and M&E works. Both the CONQUAS and QLASSIC assessments use a sampling process to carry out the assessment. The samples are determined based on the gross floor area of the bUilding with a minimum and maximum number of samples, and are selected from the building drawings and plans. The assessment approach for each of the components and allocation of weightages are as follows: Components Assessment approach assessed CONQUAS QLASSIC Structural works  No assessment is made as the CONQUAS Malaysia does not include structural works  assessment  in  (a) The assessment is construction stages.  carried  out  throughout  the  various  (b) The assessment of structural works comprises: (i) Site inspection of formwork, steel reinforcement, prefabricated or pre-cast elements, etc during construction;
I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Components Assessment approach assessed CONQUAS QLASSIC Architectural works (a) The assessment is carried out upon completion of the building project and before handing over of the project.
(b) The assessment of architectural works deal mainly with the finishes and components, and covers:
(i) Site inspection of internal finishes, roofs, external walls and external works; and
(ii) Material and functional tests such as window water­tightness, wet area water-tightness and adhesion to internal wall tiles (not applicable to Malaysia projects).

 

(c) The weightage for the architectural works assessment is as follows:

Architectural elements  Weightage (%)  Internal finishes  56  Roof  4  External wall  11  External work  6  Design, material and functional tests  23  100  127
(ii) Laboratory testing of compressive strength of concrete and tensile strength of steel reinforcement; and  (iii) Non-destructive testing cover of hardened concr of ete.  the uniformity and the  (a) The  assessment  is  carried  out  upon  completion  of the
building project and before handing over of the project. (b) The assessment of architectural works deal mainly with the finishes. Architectural works are works such as floors, internal walls, ceiling, door and window, fixtures and fittings, external wall, roofs, driveway, porch and apron.
(c) The weightage for the architectural works assessment is as follows:

Architectural elements  Weightage (%)  Internal finishes  56  Roof  10  External wall  10  Apron and perimeter drain  4  Material and functional tests  20  100
I Company No.: 1134880-W I 6. BUSINESS OVERVIEW (Cont’d) Components Assessment approach assessed CONQUAS QLASSIC The above weightage may change depending on the type The above weightage may change depending on the type of bUilding assessed. of building assessed. M&E works No assessment is made as the CONQUAS assessment in (a) For completed projects, the assessment is carried out Malaysia does not include M&E works upon completion of the building project and before handing over of the project. (b) For projects in progress, the assessment is carried out throughout the various construction stages.
(c) The assessment of M&E works generally covers electrical works, air-conditioning and mechanical ventilation works, fire protection works, sanitary and plumbing works, lifts, escalator and other basic M&E fittings.

[ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (Cont’d) 6.13.5 Occupational health and safety We are of the view that health and safety are vital parts of the construction business, and if not managed properly, can cause loss of life, monetary damages and disruption of work. As such, we prioritise health and safety during the delivery of our construction process and we are committed to prOVide a safe and healthy working environment for the benefit of our employees, subcontractors and the general public. We also believe that our track record as a quality construction company as evidenced by our above industry average score for CONQUAS assessed projects, will be enhanced through continuous improvement in health and safety performance. We have in 2017 obtained the OHSAS 18001 : 2007 certification, an internationally recognised standard for occupational health and safety management system. To ensure the health and safety of all employees involved in the operations including our subcontractors and the general public, we have a HSE policy which is practised by our project management team. Our HSE policy objectives are: (a) To achieve zero accident at every project site;
(b) To prevent major loss of assets and properties at project site;
(c) To ensure working environment is safe and well equipped to avoid accident; and
(d) In compliance with the rules and regulation of Occupational Safety and Health Act (OSHA 514) and Factory Machinery Act (FMA 1967).

The following summarises the key measures that we implement to ensure the safety of our employees, subcontractors’ employees as well as the general public: (a) Injury caused by falling objects and falling from height
All personnel when entering construction zones are required to wear personal protective equipment such as safety helmets, safety vest and safety footwear. In addition, workers working at height are required to wear safety harness or safety belt. We also install safety nets to prevent falling objects or debris.
(b) Injury caused by operating construction machinery

We only allow competent personnel to operate our construction machinery. We will ensure that they will continue to be provided with adequate training and/or hold valid licences where required. We have also outlined various safety measures which are required to be followed by our personnel, including, amongst others, ensuring that the construction machinery is switched off before being checked or cleaned and that operating construction machinery are properly attended to as well as wearing safety and preventive gears depending on the type of construction machinery operated. 6. BUSINESS OVERVIEW (Cont’d) (c) InjUry caused by electricity
Only electrician who have undergone training and hold relevant licences are permitted to maintain and install electrical wiring. Such personnel are also required to strictly follow our safety procedures.
(d) Injury caused by collapses of soil

Personnel are required to strictly follow our safety procedures for deep excavation including assessing the stability of the soil. In cases of deep excavation, shoring which is a temporary structure to prevent soil collapse is required to ensure the stability of soil. As at LPD, our Safety and Health Committee is headed by Ahmad bin Awi, our Executive Director and consists of a committee secretary and 8 other employees. We will assign our safety supervisor to the required project. The safety supervisor is posted on site and is responsible for monitoring and enforcing the safety policies on all personnel. Weekly inspections will be carried out and safety reports will be made on a monthly basis. Periodical toolbox meeting is also conducted with our site workers and subcontractors’ workers to brief the workers on various safety issues. In case of non-conformity, the safety supervisor will report such instances to the Safety and Health Committee and corrective measures will be taken to ensure effective implementation of HSE policies. On 12 October 2015, as requested by the client, our Group participated in the SHASSIC assessment for our Puteri Harbour Parcel 1A Package 3 and 4 project and was awarded 3 stars out of 5 stars. SHASSIC is an independent method to assess and evaluate the safety and health performance of a contractor in construction works/projects. SHASSIC was developed by CIDB, Malaysia and was first launched in 2008. SHASSIC sets out the safety and health management and practices of contractor for various aspects of the construction work activities. SHASSIC covers 3 main components of assessment such as document check, site/workplace inspection and employees interview covering components such as Occupational Safety and Health (‘aSH”) policy, aSH organisation, hazard identification, risk assessment and risk control, aSH training and promotion, machinery and equipment management, materials management, emergency preparedness, accident investigation and reporting and records management and performance monitoring. Weightage for safety and health performance are allocated in accordance to the 3 assessment components, and the total SHASSIC score shall justify the ranking, which ranges from 1 to 5 stars as per the table below: SHASSIC Star(s) score (%) awarded Justification
85 to 100 5 Potential and significant workplace hazards / high risks areas are managed and documented 70 to 84 4 Potential and significant workplace hazards / high risks areas are managed and documented but there are few low risks work activities which are neglected 55to 69 3 Potential and significant workplace hazards / high risks areas are managed and documented but there are few medium risks work activities which are neglected 6. BUSINESS OVERVIEW (Cont’d) SHASSIC  Stares)  score (%)  awarded Justification  40 to 54  2 Potential and significant workplace hazards /  high risks areas  are partly managed and not properly documented  39 and less  1 Potential and significant workplace hazards / high risks areas  are poorly managed and not properly documented
The SHASSIC assessment is conducted by a SHASSIC assessor who fulfils the CIDB’s criteria. Contractors may engage any qualified assessor to carry out the SHASSIC assessment or alternatively, they can make arrangement with CIDB to carry out the SHASSIC assessment. 6.13.6 Environmental protection We undertake indirect (through clients’ requirements) environmental protection measures relating to environmental issues such as noise control, air pollution control, solid waste disposal and storm water treatment. The following summarises the key environmental protection measures which we have implemented: (a) Noise control
We endeavour to use low-noise machinery and equipment at our project sites. In this regard, we inspect and maintain all machinery and equipment before use to ensure compliance with permitted noise level. We also undertake works within the permitted working hours as specified by the local authority.
(b) Air pollution control

Construction activities that contribute to air pollution include land clearing, operation of diesel engines and demolition. All construction sites generate dust typically from concrete, cement, wood, stone and sand. We control dust particles through the use of water sprays. We also install dust netting around the construction site which is located in close proximity to residential bUilding in order to minimise the spreading of dust. (c) Solid waste disposal Construction waste includes concrete and timber debris and other construction materials wastage. Our waste management initiatives include salvaging and recycling non-hazardous construction waste to the extent possible. We engage waste management companies to dispose construction waste which are not salvageable or recyclable at appropriate landfills designated by local governments. (d) Storm water management We are exposed to storm water in our construction sites resulting from heavy rainfall. This kind of storm water usually carries large amount of sand, grit, mud and other suspended solid particles. In the event the storm water is not properly managed, it will cause potential pollution to the surrounding area. 131 6. BUSINESS OVERVIEW (Cont’d) We channel the storm water to the temporary earth drain which will flow into silt traps. The silt will be collected at the silt traps and cleaner water will be discharged through the overflow pipe. Silt will be periodically removed offsite.

6.14 RESEARCH AND DEVELOPMENT We do not engage in any research and development activity. Nevertheless, we regularly participate in trade shows and exhibitions relating to the construction industry such as the Malaysian International Building Exposition (“MALBEX”) and International Architectural, Interior Design and Building Exhibition l”lalaysia (“ARCHIDEX”) to identify the latest industry products, trend and technologies. From time to time, we also invite specialist suppliers and specialist subcontractors to provide product training or briefing to our staff. [ The rest of this page is intentionally left blank]

 

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