Business Overview

5. INFORMATION ON OUR GROUP 5. INFORMATION ON OUR GROUP OUR HISTORY Our Company was incorporated under the Act on 14 December 2006 as a public limited company under its current name. We subsequently converted to a private limited company on 15 May 2012, to facilitate the Acquisitions and converted back to a public limited company on 25 June 2012. Our group structure upon listing is as follows:
Our principal activities are as follows: Company Principal Activities ..:……._——–”—-~————–­Leon Fuat  Investment holding  LF Hardware  Trading and processing of steel products  LF Klang  Trading and processing of steel products  Supreme Steelmakers  Trading and processing of stainless steel and other steel products  ASA Steel  Trading and processing of alloy steel and other steel products
We are primarily in the business of trading and processing of steel products specialising in rolled long and flat products. Our focus is on carbon steel, of which the majority are mild steel and complemented by stainless steel and alloy steel. We also have in-house facilities to undertake cutting, levelling, shearing, profiling, bending and finishing of products as well as production of expanded metal. Our Group was co-founded by our Group Managing Director, Ooi Bin Keong together with our Executive Director, Ooi Kong Tiong and the late Ng Chee Tiang, all of whom are siblings and have contnbuted significantly to the development, growth and success of our Group_ Ooi Bin Keong has been instrumental in developing the strategic direction of our Group bringing with him approximately forty (40) years of

experience in the steel industry. The history of our business can be traced back to 1972 with the establishment of Leong Huat Trading & Co., a partnership. Its initial business activity was mainly involved in the trading of steel products. Subsequently in 1982, LF Hardware was incorporated to take-over the existing business of Leong Huat Trading & Co. to streamline our business operations. LF Hardware’s current business activity is mainly in the trading of long steel products focusing on carbon steel. In addition to trading, LF Hardware undertakes minor processing of steel products namely cut-to-length long products. LF Hardware was initially operating in Sungai Besi prior to moving to its current premises bearing the address Lot 401-405, Jalan Tiga, Off Jalan Chan Sow Lin, Kuala Lumpur, in 1997. 5. INFORMATION ON OUR GROUP (Cont’d) In 1983, we incorporated LF Klang to undertake trading and processing of steel products in a rented premise in Sungai Rasa, Klang to initially service customers in Klang before expanding its business to other areas. Initially, LF Klang was mainly involved in the trading and processing of carbon steel only and over the years evolved to include other steel products such as stainless steel and alloy steel in its offerings. LF Klang’s current business activity is mainly in the trading and processing of flat steel products. In addition, LF Klang also undertakes trading and processing of long steel products on a smaller scale. In 1985, LF Holdings was established as an investment holding company to consolidate our promoters’ investments including our subsidiary companies, specifically, LF Hardware and LF Klang in 1991, and Supreme Steelmakers and ASA Steel in 1995. In 1991, LF Klang acquired a freehold land measuring approximately 116,928 sq. ft. bearing the address No.6, Lorong Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam, for the construction of our new plant and office premises. The new plant and office premises known as Wisma Leon Fuat was completed in 1996 and in 1997, LF Klang moved into Wisma Leon FUa!. In 1991, LF Hardware acquired a piece of leasehold land measuring approximately 30,591 sq. ft. with an existing factory building bearing the address No. 6A, Jalan Tiga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur. In 1993, LF Hardware started reconstruction of a single storey detached factory on this land. It is currently occupied by Supreme Steelmakers. As part of our expansion plans, we incorporated Supreme Steelmakers in 1991 to focus on trading of stainless steel products in Sungai Besi, Kuala Lumpur. The company commenced operations in the same year. In 1995, Supreme Steelmakers expanded its business activities to include processing of stainless steel. In 2003, Supreme Steehnakers acquired a leasehold industrial land bearing the address No.8, Jalan Tiga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur with a land area of approximately 40,106 sq. ft. In line with our intention to increase the variety of steel traded, we incorporated ASA Steel in 1995 which commenced operations in the same year in Sungai Besi, Kuala Lumpur. The principal activities of ASA Steel is in trading and processing of alloy steel products and other steel products such as carbon steel. Some of the types of alloy steel and carbon steel products that we carry in ASA Steel include among others, carbon and alloy steel bars and plates. As part of our product portfolio, we also carry high tensile and abrasion resistant quenched and tempered steel plates. Within ASA Steel, we are equipped with processing facilities including bandsaw machines and portable oxy-gas cutting machine. In 2004, LF Klang obtained ISO 9001:2000 certification for the distribution of steel products and provision of cutting services from BSI Singapore. In the same year, through LF Klang, we acquired another freehold land adjacent to the existing premises bearing the address No. I I, Lorong Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam with a land area of approximately 179,736 sq. ft. In 2008, the construction of the new plant including office and factory building on the said land was completed and in the same year, we expanded our factory operations into this new plant. In 20I0, we completedthe construction ofanadditional factory building onthe saidland,which commenced operatlons in the same year. Within LF Klang, we are equipped with various machines and equipment to undertake processing including coil levelling machines, shearing machines, oxy-gas cutting machine with optical tracer, CNC oxy-gas cutting machines, CNC plasma cutting machines, CNC oxy-gas and plasma cutting machine, CNC laser cutting machines, portable plasma cutting machine, pOltable oxy-gas cutting machines, expanded metal machines and bandsaw machines. In 2007, Supreme Steelmakers expanded its facilities and constructed a single storey factory with a four (4) storey office building on its existing land acquired in 2003. As at LPD, Supreme Steelmakers’ operational facilities in Sungai Besi is equipped with various automated cutting machines including among others, CNC laser cutting machines, CNC plasma cutting machine, CNC waterjet cutting machine, high precision CNC press brake machine, shearing machines, surface grinding machine and bandsaw machines. Through our processing facilities at Supreme Steelmakers, we are able to meet the designs and specifications of customers for industrial applications in various industry sectors. 5. INFORMATION ON OUR GROUP (Conl’d) In 2009, LF Klang upgraded its ISO certification from ISO 9001:2000 to ISO 9001:2008 for the distribution of steel materials and provision of cutting services from BSI Singapore. As part of our product expansion plans, we commenced the production of expanded metal through LF Klang in 2010. Our expanded metal is mainly used in industrial applications in the building and construction and engineering and rubrication sectors. In the same year, Supreme Steelmakers and ASA Steel obtained ISO 900 I :2008 certification for the distribution of steel materials and provision of cutting and other value-added services from BSI Singapore. In 2012, we purchased a piece of freehold industrial land with an existing detached building with annexed office building with land area measuring approximately 130,680 sq. It bearing the address No.16, Lorong Keluli I B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam where we intend to build our new processing plant with warehousing facilities. The land with building is located directly opposite our head office at Wisma Leon FUa!. On 2 January 2013, we completed the Acquisitions which saw the formation of Leon Fuat Group, by acquiring the entire equity interest in LF Hardware, LF Klang, Supreme Steelmakers and ASA Steel from LF Holdings and streamlining the operations ofthe said companies under our Company. Since we started our business in 1972, we have made a concerted effort to position ourselves as a reputable supplier of steel and processed steel products with supporting facilities in Malaysia. For the past four (4) FYE 31 December 2009 to 2012, our Group achieved revenues totalling RM355.42 million, RM474.92 million, RM542.94 million and RM437.20 million and a corresponding PAT ofRM17.04 million, RM20.59 million, RM25.16 million and RM24.ll million respectively. For the FYE 31 December 2012, our trading activities and processing activities contributed to 37.21% and 62.68% of our Group’s total revenue respectively. 5.2 SHARE CAPITAL Our present authorised share capital is RM500,000,000 comprising 1,000,000,000 ordinary shares of RM0.50 each, of which RMI25,345,000 comprising 250,690,000 Shares are issued and credited as fully paid-up. Upon completion of our IPO, our issued and paid-up share capital will increase to RM155,000,OOO comprising 310,000,000 Shares. The changes in our issued and paid-up share capital since our incorporation are as follows: Date of  No. of Shares  Cumulative  Allotment  Allotted  Par Value  Consideration  Total  RM  RM  14.12.2006  2  1.00  Cash  2  24.08.2007  4  0.50  *  2  02.12.2009  2  0.50  Cash  3  02.01.2013  250,689,994  0.50  Issued  as  consideration  for  the  125,345,000  Acquisitions
Note: , Subdivision ofthe 2 existing issued ordinary shares ojRMl.OO each into 4 ordinary shares ofRMO.50 each. There are no discounts, special tenns or instalment payment terms applicable to the payment of consideration for the above allotments. As at LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in our Company. 5. INFORMAnON ON OUR GROUP (Con/’d)

5.3 SUBSIDIARY COMPANIES 5.3.1 LF Hardware (i) History and Business LF Hardware was incorporated on 15 March 1982 in Malaysia under the Act as a private limited company and commenced operations in the same year. It is principally involved in trading and processing of steel products. (ii) Share Capital LF Hardware’s present authorised share capital is RM5,000,000 compnsmg 5,000,000 ordinary shares of RM1.00 each, of which RM2,000,000 comprising 2,000,000 ordinary shares of RM 1.00 each have been issued and fully paid-up. The changes in the issued and paid-up share capital of LF Hardware since its incorporation are as follows: Date of No. of Ordinary Cumulative Allotment Shares Allotted Par Value Consideration Total RM RM 15.03.1982 3 1.00 Cash 3 15.06.1982 39,997 1.00 Cash 40,000 11.11.1982 178,000 1.00 Cash 218,000 04.09.1987 82,000 1.00 Cash 300,000 02.06.1989 100,000 1.00 Cash 400,000 13.06.1990 200,000 1.00 Cash 600,000 08.04.1992 300,000 1.00 Cash 900,000 15.05.1995 500,000 1.00 Cash 1,400,000 15.05.1995 600,000 1.00 Bonus Issue 2,000,000 There are no discounts, special tenns or instalment payment terms applicable to the payment of consideration for the above allotments. As at LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in LF Hardware. (iii) Shareholders and Directors LF Hardware is our wholly-owned subsidiary and its Directors are Ooi Bin Keong, Ooi Kong Tiong, Ng Lam Keong and Ng Kok Teong. (iv) Subsidiary and Associated Companies LF Hardware does not have any subsidiary or associated company.
5.3.2 LF Klang (i) History and Business LF Klang was incorporated on 17 March 1983 in Malaysia under the Act as a private limited company and commenced operations in the same year. It is principally involved in trading and processing of steel products. 5. INFORMAnON ON OUR GROUP (Conl’d) (ii) Share Capital LF Klang’s present authorised share capital is RMIO,OOO,OOO comprising 10,000,000 ordinary shares of RMI.OO each, of which RMIO,OOO,OOO comprising 10,000,000 ordinary shares of RMI.OO each have been issued and fully paid-up. The changes in the issued and paid-up share capital of LF Klang since its incorporation are as follows: (iii) (iv)
(i)
(ii)

5.3.3 Date of  No. of Ordinary  Cumulative  Allotment  Shares Allotted  Par Value  Consideration  Total  RM  RM  17.03.1983  3  1.00  Cash  3  29.03.1985  199,997  1.00  Cash  200,000  02.06.1989  100,000  1.00  Cash  300,000  24.09.1990  100,000  1.00  Cash  400,000  15.05.1995  400,000  1.00  Cash  800,000  15.05.1995  1,200,000  1.00  Bonus Issue  2,000,000  15.10.2001  6,000,000  1.00  Capitalisation  of  8,000,000  amount  due  to  LF  Holdings  27.12.2004  2,000,000  1.00  Capitalisation  of  10,000,000  amount  due  to  LF  Holdings
There are no discounts, special terms or instalment payment terms applicable to the payment of consideration for the above allotments. As at LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in LF Klang. Shareholders and Dn’ectors LF Klang is our wholly-owned subsidiary company and its Directors are Ooi Bin Keong, Ooi Kong Tiong, Ooi Seng Khong, Ooi Pek Kuan, Ng Kok Wee and Ooi Shang How. Subsidiary and Associated Companies LF Klang does not have any subsidiary or associated company. Supreme Steelmakers History and Business Supreme Steelmakers was incorporated on 3 January 1991 in Malaysia under the Act as a private limited company and commenced operations in the same year. It is principally involved in trading and processing of stainless steel products and other steel products. Share Capital Supreme Steelmakers’ present authorised share capital is RM5,000,000 comprising 5,000,000 ordinary shares of RM 1.00 each, of which RM2,000,000 comprising 2,000,000 ordinary shares ofRMI.OO each have been issued and fully paid-up. The changes in the issued and paid-up share capital of Supreme Steelmakers since its incorporation are as follows: 5. INFORMATION ON OUR GROUP (Cont’d) Date of No. of Ordinary Cumulative Allotment Shares Allotted Par Value Consideration Total RM RM 03.01.1991 3 1.00 Cash 3 30.12.1995 999,997 1.00 Cash 1,000,000 15.10.2001 1,000,000 1.00 Capitalisation of 2,000,000 amount due to LF Holdings There are no discounts, special terms or instalment payment terms applicable to the payment of consideration for the above allotments. As at LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in Supreme Steelmakers. (iii) Shareholders and Directors Supreme Steelmakers is our wholly-owned subsidiary company and its Directors are Ooi Bin Keong, Ooi Kong Tiong and Ng Kok Teong. (iv) Subsidiary and Associated Companies Supreme Steelmakers does not have any subsidiary or associated company.
5.3.4 ASA Steel (i) History and Business
ASA Steel was incorporated on 7 June 1995 in Malaysia under the Act as a private limited company and commenced operations in the same year. It is principally involved in trading and processing of alloy steel products and other steel products.
(ii) Share Capital

ASA Steel’s present authorised share capital is RM5,000,OOO comprising 5,000,000 ordinary shares of RM1.00 each, of which RMI,800,000 comprising 1,800,000 ordinary shares of RM1.00 each have been issued and fully paid-up. The changes in the issued and paid-up share capital of ASA Steel since its incorporation are as follows: Date  of  No. of Ordinary  Cumulative  Allotment  Shares Allotted  Par Value  Consideration  Total  RM  RM  07.06.1995  4  1.00  Cash  4  02.08.1995  99,996  1.00  Cash  100,000  12.12.1995  400,000  1.00  Cash  500,000  16.01.2004  600,000  1.00  Cash  1,100,000  27.12.2004  700,000  1.00  Capitalisation  of  1,800,000  amount  due  to  LF  Holdings
There are no discounts, special tenns or instalment payment terms applicable to the payment of consideration for the above allotments. As at LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in ASA Steel.

 

5. INFORMATION ON OUR GROUP (Con/’d) (iii) Shareholders and Directors ASA Steel is our wholly-owned subsidiary company and its Directors are Ooi Bin Keong, Ooi Kong Tiong and Ng Kok Teong. (iv) Subsidiary and Associated Companies ASA Steel does not have any subsidiary or associated company.
5.4 LISTING SCHEME In conjunction with and as an integral part of our Listing, we proposed a Listing Scheme which was approved by the SC on 21 November 2012. The Listing Scheme involves the following: 5.4.1 Acquisitions LF Hardware Leon Fuat acquired the entire equity interest in LF Hardware of RM2,000,000 comprising 2,000,000 ordinary shares of RMI.OO each for a total purchase consideration of RM28,978,000 satisfied entirely by the issuance of 57,956,000 Leon Fuat Shares at an issue price of RMO .50 per Share. Pursuant to the conditional share sale agreement dated 18 June 2012, Leon Fuat acquired the entire equity interest in LF Hardware from the existing shareholder of LF Hardware as follows: Number of  % of Issued  No. of Leon  ordinary shares  and Paid-Up  Purchase  Fuat Shares  Shareholder  acquired  Share Capital  Consideration  Issued  RM  LF Holdings  2,000,000  100  28,978,000  57,956,000
The purchase consideration of RM28,978,000 was arrived at on a willing buyer-willing seller basis and represents approximately the audited NA of LF Hardware as at 31 December 2011 ofRM28,977,130. LF Klang Leon Fuat acquired the entire equity interest in LF Klang of RM10,000,000 comprIsmg 10,000,000 ordinary shares of RMI.OO each for a total purchase consideration of RM76,793,997 satisfied entirely by the issuance of 153,587,994 Leon Fuat Shares at an issue price ofRMO.50 per Share. Pursuant to the conditional share sale agreement dated 18 June 2012, Leon Fuat acquired the entire equity interest in LF Klang from the existing shareholder ofLF Klang as follows: Number of  % oflssued  No. of Leon  ordinary shares  and Paid-Up  Purchase  Fuat Shares  Shareholder  acquired  Share Capital  Consideration  Issued  RM  LF Holdings  10,000,000  100  76,793,997  153,587,994

 

5. INFORMATION ON OUR GROUP (Cont’d) The purchase consideration of RM76,793,997 was arrived at on a willing buyer-willing seller basis and represents approximately the audited NA of LF Klang as at 31 December 20 J J of RM76,793,113. Supreme Steelmakers Leon Fuat acquired the entire equity interest in Supreme Steelmakers of RM2,000,000 comprising 2,000,000 ordinary shares of RM1.00 each for a total purchase consideration of RM 12, 188,000 satisfied entirely by the issuance of 24,376,000 Leon Fuat Shares at an issue price of RMO.50 per Share. Pursuant to the conditional share sale agreement dated 18 June 2012, Leon Fuat acquired the entire equity interest in Supreme Steelmakers from the existing shareholder of Supreme Steelmakers as follows: Number of  % of Issued  No. or Leon  ordinary shares  and Paid-Up  Purchase  Fuat Shares  Shareholder  acquired  Share Capital  Consideration  Issued  RM  LF Holdings  2.000.000  100  12,188,000  24.376,000
The purchase consideration of RM 12, 188,000 was arrived at on a willing buyer-willing seller basis and represents approximately the audited NA of Supreme Steelmakers as at 31 December 201 I ofRMI2,187,381. ASA Steel Leon Fuat acquired the entire equity interest in ASA Steel of RM 1,800,000 comprising 1,800,000 ordinary shares of RM 1.00 each for a total purchase consideration of RM7,385,000 satisfied entirely by the issuance of 14,770,000 Leon Fuat Shares at an issue price of RMO.50 per Share. Pursuant to the conditional share sale agreement dated 18 June 2012, Leon Fuat acquired the entire equity interest in ASA Steel from the existing shareholder of ASA Steel as follows: Number of  % of Issued  No.orLeon  ordinary shares  and Paid-Up  Purchase  Fuat Shares  Shareholder  acquired  Share Capital  Consideration  Issued  RM  LF Holdings  1,800.000  100  7.385,000  14,770,000
The purchase consideration of RM7,385,000 was arrived at on a willing buyer-willing seller basis and represents approximately the audited NA of ASA Steel as at 31 December 2011 of RM7,384,320. 5. INFORMATION ON OUR GROUP (Conl’d) 5.4.2 IPO Public Issue In conjunction with our Listing, we will undertake a public issue of 59,310,000 new Shares, representing approximately 19.13% of our enlarged issued and paid-up share capital at the IPO Price to be allocated in the following manner: (i) Public Tranche
15,500,000 Public Issue Shares, representing approximately 5.00% of our enlarged issued and paid-up share capital, have been reserved for application by the Public, of which at least 50% shall be set aside for Bumiputera investors including individuals, companies, societies, co-operatives and institutions;
(ii) Pink Form Tranche

10,000,000 Public Issue Shares, representing approximately 3.23% of our enlarged issued and paid-up share capital, have been reserved for application by our eligible Directors, employees and persons who have contributed to the success of our Group; and (iii) Placement Tranche 33,810,000 Public Issue Shares, representing approximately 10.91% of our enlarged issued and paid-up share capital, have been reserved for placement to selected investors. The Public Issue Shares shall rankparipassu in all respects with our existing issued and paid­up Shares, including voting rights and the rights to all dividends and other distributions that may be declared subsequent to the date of allotment thereof. Offer for Sale In conjunction with our Listing, the Offeror will offer up to 31,000,000 Offer Shares, representing approximately up to 10.00% of our enlarged issued and paid-up share capital to Bumiputera investors approved by the MITl.

5.4.3 Listing on Bursa Securities The approval for the admission and the listing of and quotation for our entire enlarged issued and paid-up share capital of RMI55,000,000 comprising 310,000,000 Shares on the Main Market of Bursa Securities was obtained from Bursa Securities on 23 January 2013. 5. INFORMATION ON OUR GROUP (Cont’d)

5.5 KEY ACHIEVEMENTS AND MILESTONES Our key achievements and milestones since inception are as follows: Year Key Achievements And Milestones 1972 • We commenced our steel business through Leong Huat Trading & Co and its initial business activity was mainly trading of steel products. 1982 • Incorporation of LF Hardware to take over the existing business of Leong Huat Trading & Co. to streamline our business operations. 1983 • Incorporation of LF Klang to undertake trading and processing of steel products in a rented premise in Sungai Rasa, Klang. 1985 • Incorporation of LF Holdings to consolidate our promoters’ investments including our subsidiary companies, specifically, LF Hardware and LF Klang in 1991, and Supreme Steelmakers and ASA Steel in 1995. 1991 • LF Klang acquired No.6, Lorong Keluli IB, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam, for the construction of our new plant and office premises. • Incorporation of Supreme Steelmakers and commencement of business in trading of stainless steel products. • LF Hardware acquired No. 6A, Jalan Tiga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur. 1995 • Supreme Steelmakers expanded its business activities to include processing of stainless steel products. • Incorporation of ASA Steel and commencement of business in trading and processing of alloy steel and other steel products. 1996 • Completion of the construction of Wisma Leon Fuat bearing the address No.6, Lorong Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam. 1997 • LF Klang moved into Wisma Leon Fuat. 1998 • LF Hardware completed the reconstruction of its factory hearing the address No. 6A, Jalan Tiga, off Jalan Sungai Besi, Kuala Lumpur. 2003 • Supreme Steelmakers acquired a piece of land bearing the address No.8, Jalan Tiga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur. 2004 • LF Klang obtained ISO 900 I :2000 certification. • LF Klang acquired a piece of land bearing the address No. 11, Lorong Keluli lB, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam. 2007 • Supreme Steelmakers expanded its facilities on its existing land on No.8, Jalan Tiga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur. 2008 • Construction of a new plant including office and factory building on tbe existing land in No. II, Lorong Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam was completed. 5. INFORMAnON ON OUR GROUP (Cont’d) Year 2009 2010 2012  Key Achievements And Milestones • LF Klang upgraded from ISO 900 I:2000 to ISO 900 I:2008 certification • Supreme Steelmakers and ASA Steel obtained ISO 9001:2008 certification. • LF Klang commenced the production of expanded metal products. • Completed the construction of an additional factory building on the existing land bearing the address No. 11, Lorong Keluli I B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam, which commenced operations in the same year. • We purchased a piece of freehold industrial land with an existing detached building with annexed office building bearing the address No.16, Lorong Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, Shah Alam to house our new processing plant with warehousing facilities.
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6. BUSINESS OVERVIEW 6.1 OUR PRINCIPAL BUSINESS ACTIVITIES OUf Group’s business model is summarised as below: –~–~-­(
–pmeeSSing ~;–]Trading of _B_u_si_ne_s_s_F_O_cu_s_a_n_d…..J<[.I./•• Steel Products Steel Products ~Core Revenue Streams L t,-_M_a_,”_c_u_st_o_m_e_,_Ba_s_e–l{ Manufacturers of Metal Products and Components  Fabricators of Machinery. Equip~nl and Metal Structures  Companies in Building, Construction and Infrastructure Industries  Hardware Wholesalers and Retailers
,r J'[S I[ In·Hause Steel CompetiUve Advantages Proven Track I, Diversity in Economies of Large Customer Processingand Key Slrengths 1 Record I Product Range Scale Facilities Base ‘———‘ \, ‘ ‘-.._~ L_______ IL , , (a) Business Focus and Core Revenue Stream We are primarily in the business of trading and processing of steel products specialising in rolled long and flat products. Our focus is on carbon steel, of which the majority are mild steel and complemented by stainless steel and alloy steel. We also have in-house facilities to undertake cutting, levelling, shearing, profiling, bending and finishing of products as well as production of expanded metaL Within our trading activities, we carry a wide portfolio of steel products including flat products such as coils, plates, sheets, and welded tubes and pipes, welded rectangular and square sections, and long products such as bars, rods, shafts, sections, angles and channels and seamless tubes and pipes. As part of our value-added activities, we also undertake processing activities including cutting, levelling, shearing, profiling, bending, finishing as well as production of expanded metal to service the needs of our customers in different industry sectors and for various applications. A small proportion of our revenue is derived from trading of specialised steel materials such as tool steel and non-ferrous metal products such as bronze, brass, aluminium and copper. (b) Main Customer Base Our customer base mainly comprises the following: • Manufacturers ofmetal products and components;
• Fabricators ofmachinery, equipment and metal structures;
• Companies within the building, construction and infrastructure industries; and
• Hardware wholesalers and retailers.

Our customer base which includes operators from various industries reduces our reliance on anyone industry and provides us with a number of areas ofgrowth and opportunities. 6. BUSINESS OVERVIEW (Conl’d) (c) Competitive Advantages (i) A Proven Track Record
We have a proven track record with a history that spans approximately 40 years since the establishment of Leong Huat Trading & Co. in Malaysia. This provides us an established customer base whereby six (6) of our top ten (10) customers for the FYE 31 December 2012 has been dealing with us for at least 17 years. Our long business relationships with our customers are also an indication of the assurance of reliability and quality in our products and services.
(ii) Diversity in Product Range

We carry a range of products of various steel materials, including carbon steel, stainless steel and alloy steel. Our steel products consist of flat products such as coils, plates, sheets, welded tubes and pipes, sections (such as welded rectangular and square sections) and long products such as bars (such as round, square, flat and hexagon bars), rods, shaft, sections (such as rolled 1­beams), angles and channels (such as rolled angle bars and lip channels) and seamless tubes and pipes. As at LPD, we have a diverse range of steel products based on types of materials and shapes, which enables us to meet the varied requirements of our customers. 1n addition to trading, we are supported by our in-house facilities to process steel products of various types of materials including carbon steel, stainless steel and alloy steel. We have the capabilities to process steel products including cutting of long products, levelling, shearing, profiling and bending of flat products, finishing in terms of surface polishing and production of expanded metal. A variety of our steel materials for our trading operations such as steel coils, plates, sheets, bars, rods and shafts are also used as materials for our processing operations. For the FYE 31 December 2012, 0.11% of our revenue is derived from trading of specialised steel materials such as tool steel and non-ferrous metal products including brass, bronze, aluminium and copper. The diversity in our product range also provides us with considerable synergies for cross selling as we will be able to provide our existing and new customers with a range of trading and processing products. (iii) Economies of Scale We are able to obtain economies of scale due to the quantity of orders of steel products in our trading and processing business. We buy in bulk to obtain volume discounts, where we subsequently break bulk to sell in smaller quantities to other end-users, wholesalers and retailers. We also break bulk and add value by processing some of our purchases through shearing, cutting or profiling before selling to end-users as well as wholesalers and retailers. For the FYE 31 December 2012, our revenue amounted to RM437.20 million with customer base of approximately 3,700 active customers, which we are able to cross-sell our product range. 6. BUSINESS OVERVIEW (Conl’d) (iv) In-House Steel Processing Facilities We have in-house processing facilities and equipment to meet the requirements of our customers. As at LPD, our plants are equipped with an extensive range of cutting, levelling, shearing, profiling, bending, finishing and expanded metal machinery including the CNC oxy-gas and plasma cutting machine, oxy-gas cutting machine with optical tracer, CNC oxy-gas cutting machines, CNC laser cutting machines, CNC waterjet cutting machine, CNC plasma cutting machines, portable plasma cutting machine, portable oxy-gas cutting machines, bandsaw machines, high precision CNC press brake machine, expanded metal machines, shearing machines, surface grinding machine as well as coil levelling machines. Our CNC laser cutting machines are able to handle up to 25mm thickness and CNC waterjet cutting machine is able to handle single or multi-layer steel materials up to 200mm thickness with an edge finishing and minimal burr. Our in-house steel processing facilities enable us to meet our customers’ needs, which provide us with a competitive advantage over other operators who may have limited range of facilities or outsource the processing to third parties. Our in-house steel processing facilities also enable us to control quality from handling of input material to processing and finally delivery to customers. Having in-house steel processing facilities also enables us to meet our clients’ product specifications and requirements in a prompt manner as we do not need to send to third parties for processing. (v) Large Customer Base The diversity of our steel products enables us to meet the needs of a large customer base for a wide range of industry applications. For FYE 31 December 2012, 89.24% of our total revenue was contributed by our top 500 customers while we had a customer base of approximately 3,700 active customers. This large customer base will provide us with the platform to sustain and grow our business. In addition, it mitigates any over reliance on one or a small group of customers. 6.2 OUR PRODUCTS AND SERVICES Our core business activities comprise: • Trading ofsteel products; and
• Processing ofsteel products.

Our Group is currently in the business of trading and processing a wide range of steel products of different shapes, dimensions and grades to meet the requirements ofcustomers. Our trading operations focus on buying and selling flat and long steel products. Our processing operations focus on providing various value added services to flat and long steel products in the fonn of cutting, levelling, shearing, profiling, bending and finishing as well as production of expanded metal to meet our customers’ requirements. Our trading business is synergistic to our processing operations as some ofour customers who buy our trading products would also require us to process them, for example cutting into various lengths which may incorporate levelling, shearing and bandsaw cutting. Our trading and processing operations are synergistic as we are able to buy in larger quantity for both operations to enjoy bulk discounts and obtain better service and commercial terms. 6. BUSINESS OVERVIEW (Cont’d) For the FYE 31 December 2012, 0.11 % of our revenue is derived from trading of specialised steel materials such as tool steel and non-ferrous metal products including bronze, brass, aluminium and copper products. Overview of Our Products Our Group supplies steel products of various types and dimensions. Following is an overview of the main products commonly traded and processed by our Group:
Coils  Min: 0.5 Max: 16.0  Min: 1,219 Max: 1,524  Sheets  Min: 0.5 Max: 16.0  Min: 1,219 Max: 1,524  Min: 2,438 Max: 6,096  Plates  Min: 4.5 Max: 203.0  Min: 1,219 Max: 2,500  Min: 2,438 Max: 12,192  Welded rectangular and  Min: 1.0  Min: 9  Min: *  square sections  Max: 12.0  Max: 300  Max: 6,000  Welded tubes and pipes  Min: 1.6 Max: 7.9  Min: * Max: 6,000  Stainless Steel  Coils  Min: 1.2 Max: 12.0  Min: 1,219 Max: 2,000  Sheets  Min: 0.4 Max: 12.0  Min: 1,219 Max: 2,000  Min: 2,438 Max: 6,096  Plates  Min: 8.0 Max: 105.0  Min: 1.000 Max: 2,438  Min: 1,900 Max: 6,096  Welded rectangular and  Min: 1.2  Min: 12.7  Min: *  square  sections  Max: 2.0  Max: 50.8  Max: 6,000  Welded tubes and pipes  Min: 1.2 Max: 9.5  Min: * Max: 6,000  Alia  Steel

Min: 6.0 Max: 550.0 Min: 13.7 Max: 508.0 6. BUSINESS OVERVIEW (Cont’d) Steel Products  Thickness (mm)  Width (mm)  Length (mm)  Diameter (mm)  Cross Sectional Area (sq. mm)  I -Beam  Min: 4.6 Max: 10.2  Min: 89 Min: 152  Min: * Max: 6,000  ..  Polish hexagon bars  ,  I  Min: 3,660 Max: 6,500  Min: 6.4 Max: 76.2  Polish flat bars  Min: 3.0 Max: 25.4  Min: 12.7 Max: 203.2  Min: 3,660 Max: 4,000  I  Polish square bars  Min: 3.0 Max: 75.0  Min: 3.0 Max: 75.0  Min: 3,000 Max: 4,000  Polish round bars  I  Min: 3,660 Max: 6,100  Min: 4.763 Max: 101.6  Stainless Steel  Round bars/shafts  ,’,  [I  Min: * Max: 6,000  Min: 3.2 Max: 355.6  Angle bars  Min: 3.0 Max: 12.0  Min: 20 Max: 100  Min: * Max: 6,000  F]at bars  Min: 3.0 Max: 25.4  Min: 16 Max: 150  Min: * Max: 6,000  Square bars  Min: 4.8 Max: ]01.6  Min: 4.8 Max: 101.6  Min: * Max: 6,000  Hexagon bars  Min: * Max: 6,000  :  Min: 4.8 Max: 44.5  Channels Seamless tubes and pipes  Min: 4.0 Max: 8.0 Min: 1.25 Max: 25.0  Min: 40/]00 Max: 80/200  .  Min: * Max: 6,000 Min: * Max: 6,000  , ” Min: 10.3 Max: 323.9  Alloy Steel  Round bars  .  Min: * Max: 8,000  Min: 13.0 Max: 853.0  i  Hexagon bars  I  .  Min: * Max: 6,000  I  ..  Min: 20.0 Max: 63.0
Notes: Min Minimum Max Maximum • Minimum size is based on customer specification Not applicable
(a) Trading We are engaged in the trading of steel products through our subsidiary companies. However, each of our subsidiary companies specialises in certain steel products to achieve cost synergies. The bulk of the products that are carried by our subsidiary companies are as follows: Subsidiary Product Focus by Material LF Hardware  Carbon steel  LF Klang  Carbon steel  Supreme Steelmakers  Stainless steel  ASA Steel  Alloy steel
6. BUSINESS OVERVIEW (Cont’d) Our portfolio of products mainly includes the following: Flat Steel Prodncts: Carbon steel coils, sheets and plates; Carbon steel welded tubes and pipes; Carbon steel welded rectangular and square sections; Stainless steel coils, plates and sheets; Stainless steel welded tubes and pipes; Stainless steel welded rectangular and square sections; and Alloy steel plates.
Long Steel Products: • Carbon steel bars (including round, square, flat and hexagon bars) and rods;
• Carbon steel angles and channels (including rolled angle bars and lip channels);
• Carbon steel sections (including rolled I-beams);
• Carbon steel shaft;
• Carbon steel seamless tubes and pipes
• Stainless steel bars (including round, square, flat and hexagon bars);
• Stainless steel angles and channels (including rolled angle bars and lip channels);
• Stainless steel shafts;
• Stainless steel seamless tubes and pipes; and
• Alloy steel bars (including round and hexagon bars).

We also carry a range of quenched and tempered steel which is highly wear resistant with high hardness and structural strength. These are used in various industries where these attributes are essential such as the mining industry, paper manufacturing industry, heavy engineering industry, transportation industry and building and construction industry. While we have a diversified range of metal products, the bulk of our trading revenue is derived from carbon steel long and flat products. For FYE 31 December 2012, trading of carbon steel and other steel represented 30.97% and 6.24% ofour total Group revenue, respectively. Some of the steel products that we carry are as follows: FLAT PRODUCTS
Carbon steel coils Carbon steel sheets 6. BUSINESS OVERVIEW (Cont’d)
Carbon steel plates Stainless steel sheets
Stainless Steel Welded Tubes and Pipes LONG PRODUCTS
Carbon steel bars in various sizes Carbon steel round shafts
pipes
Carbon steel I-beams Stainless steel flat bars 6. BUSINESS OVERVIEW (Conl’d) (b) Processing Our Group is engaged in the processing of steel products through our following subsidiary companies: LF Hardware; LF Klang; Supreme Steelmakers; and ASA Steel. \Ve have in-house expertise and facilities to undertake processing activities for flat and long steel products of various types of steel materials as follows: • Carbon steel;
• Stainless steel; and
• Alloy steel.

We have various specialised machines to undertake processing including cutting, levelling, shearing, profiling, bending and finishing as well as production of expanded metal. Someofour processing machinery and activities are depicted as follows:
CNC oxy-gas cutting
CNC plasma cutting 6. BUSINESS OVERVIEW (Cont’d)
CNC Laser cutting machine
Profiling using laser cutting machine
Cutting using portable oxy-gas Shearing process cutting machine 6. BUSINESS OVERVIEW (Cont’d)
Wateljet cutting process
Horizontal Bandsaw Cutting Process Each of OUf subsidiary companies undertakes different processing activities depending on the capabilities of the various types of machineries that they have. These activities are as described below:  (i)  LF Hardware  LF Hardware has 5 units of bandsaw machines with the capabilities to cut long products. Its processing facility is located in Sungai Besi, Kuala Lumpur.
6. BUSINESS OVERVIEW (Con/’d) (ii) LF Klang LF Klang has the most extensive range of processing machineries within our Group. Its processing facility is located in Shah Alam, Selangor and it undertakes the following types of processing: • Processing of steel coils
3 units ofcoil levelling machines.
• Processing of steel sheets/plates (profile, rectangle, round)

1 unit ofCNC oxy-gas and plasma cutting machine; 1 unit of oxy-gas cutting machine with optical tracer; 4 units ofCNC oxy-gas cutting machines; 3 units of CNC plasma cutting machine; 2 units of CNC laser cutting machine; 7 units ofshearing machines; 1 unit of portable plasma cutting machine; and 8 units ofportable oxy-gas cutting machines.
• Processing of long products
10 units of bandsaw machines.
• Production ofexpanded metal

2 units ofexpanded metal machines. Expanded Metal LF Klang is an ISO 9001:2008 certified company for the distribution of steel materials and provision of cutting services from BSI Singapore. (iii) Supreme Steelmakers Supreme Steelmakers’ processing facility is located in Sungai Besi, Kuala Lumpur. It specialises in the processing of stainless steel: • Processing of stainless steel plates/sheets 3 units of CNC laser cutting machines; 1 unit of CNC waterjet cutting machine; I unit of CNC plasma cutting machine; 2 units of shearing machines; and 1 unit of high precision CNC press brake machine.

 

6. BUSINESS OVERVIEW (Conl’d) • Polishing ofstainless steel plate surface 1 unit ofsurface grinding machine.

• Processing ofstainless steel long products

4 units of bandsaw machines. As Supreme Steelmakers also undertakes a small proportion of processing of carbon steel, some ofour machinery used for processing of stainless steel sheets and plates including CNC waterjet cutting machine, CNC plasma cutting machine, CNC laser cutting machines and high precision CNC press brake machine are llsed in conjunction with the processing of carbon steel sheets and plates. Supreme Steelmakers is an ISO 9001 :2008 certified company for the distribution of steel materials and provision of cutting and other value-added services obtained from BSI Singapore. (iv) ASA Steel ASA Steel’s processing facility is located in Sungai Besi, Kuala Lumpur. The types of processing activities undertaken and the machineries used by ASA Steel are as follows: • Processing of steel sheets and plates 2 units of portable oxy-gas cutting machine.
• Processing of long steel Products 3 units of bandsaw machines. ASA Steel is an ISO 9001:2008 certified company for the distribution of steel materials and provision ofcutting and other value~added services from BSI Singapore.

For FYE 31 December 2012, processing of carbon steel and other steel represented 48.30% and 14.38% ofour total Group revenue, respectively. (c) Other Business Activities We also trade specialised steel materials including tool steel and non-ferrous metal products including bronze, brass, aluminium and copper products. These are mainly undertaken by LF Klang. For FYE 31 December 2012, other business activities accounted for 0.11 % of our total Group revenue. 6. BUSINESS OVERVIEW (Cont’d) 6.3 OUR PRINCIPAL MARKETS 6.3.1 Revenue Segmentation by Business Activities The breakdown ofour Group’s revenue by business activities for the FYE 31 December 2012 is as follows: Revenue  Trading of Steel Prodncts  Flat Carbon Steel Other Steel (1) Long Carbon Steel Other Steel (1) Processing of Steel Products (2)  Flat Carbon Steel Other Steel (I) Long Carbon Steel Other Steel (1) Others (3) Total
FYE 31 December 2012 RM’OOO % 93.638 21.42 12,303 2.81 105,941 24.23 41,745 9.55 15,015 3.43 56,759′ 12.98 162,700 37.21 196,417 44.93 48,390 11.07 244,807 55.99′ 14,745 3.37 14,478 3.31 29,224′ 6.68 274,031 62.68′ 472 0.11 437,203 100.00 Notes: Total does not add-up due to rounding. (1) Includes stainless and alloy steel.
(2) Processing refers to one or more of the following activities including CUlling, levelling, shearing, profiling, bending and finishing of steel products as well as produclion 0/ expanded metal. Revenue derived from processing ofsteel products is mainly in the form ofsales afprocessed material.
(3) Trading ofspecialised steel materials including tool steel and non-ferrous metal products including bronze, brass, copper and aluminium products.

Trading of steel products accounted for 37.21% of our revenue for FYE 31 December 2012, while processing of steel products accounted for 62.68%. Carbon steel as a material accounted for a cumulative 79.27% of our total revenue compared to other steel materials at 20.62%. Flat and long products accounted for a cumulative 80.22% and 19.66% of our revenue respectively. Other revenue which accounted for 0.11 % of our total revenue was mainly derived from the trading of specialised steel material including tool steel and non-ferrous products such as bronze, brass, copper and aluminium products. 6. BUSINESS OVERVIEW (Cont’d) 6.3.2 Revenue Segmentation by Rolled and Other Products For FYE 31 December 2012, our revenue was mainly derived from rolled steel products, which accounted for 96.55% of our revenue. OUf rolled steel products include flat products such as coits, plates and sheets, as well as long products such as bars, shafts, channels, sections and seamless tubes and pipes. These products are hot-rolled and/or cold­rolled from primary steel products. Other products mainly include welded tubes and pipes, welded rectangular and square sections, expanded metal, tool steel as well as non-ferrous metal products such as bronze, brass and aluminium products. 6.3.3 Revenue Segmentation by Geographical Markets We predominantly serve the Malaysian market, contributing approximately 98.13% of Our total revenue in FYE 31 December 2012. The remaining 1.87% of our total revenue was derived mainly from Japan, Singapore and Indonesia. Our revenue contribution by geographical location is as follows: Revenue FYE 31 December 2012 RM’OOO %
Local market 429,047 98.13 Overseas markets 8,156 1.87 Japan 4,218 0.96 Singapore 2,208 0.51 Indonesia 1,701 0.39 Others@) 29 0.01
Total 437,203 100.00 Note: @ Others include Brunei and United States
6.4 SEASONALITY Generally, there are no sharp contrasts in seasonality as our products are for general applications that are not tied to any seasonality factors. 6. BUSINESS OVERVIEW (Conl’d) 6.5 TYPES, SOURCES AND AVAILABILITY OF RAW MATERIALS/INPUT The breakdown of our major materials and services purchased by our Group for our trading and processing activities for the FYE 31 December 2012 are as follows: MATERIALS Flat Steel Materials Carbon steel Stainless steel Alloy steel Loug Steel Materials Carbon steel Stainless steel Alloy steel Other materials (1) SERVICES(‘) Subcontracted services TOTAL Value of Purchases RM’OOO  % of Total Gronp Purchases of Materials and Services %  <—Sources of Supply —> Local Import(2) % %  302,323 244,507 52,876 4,940  80.21 64.87 14.03 1.31  74.00 84.59 22.98 96.12  26.00 15.41 77.02 3.88  72,417’ 46,066 13,829 12,523  19.21 12.22 3.67 3.32  16.96 22.85 6.75 6.57  83.04 77.15 93.25 93.43  447  0.12  65.49  34.51  1,744  0.46  100.00  – 376,931  100.00  63.15  36.85
Notes: Does not add-up due to rounding. (1) Include specialised materials including tool steel and nonferrous metal products including bronze, brass, copper and aluminium.
(2) Refer to materials sourced directly from overseas suppliers.
(3) Comprise slitting, flattening, bending, welding, punching, sand blasting, machining and galvanising subcontracted to external parties.

As we are primarily in the business of trading and processing of steel products, the main materials that we purchased are carbon steel, stainless steel and alloy steeL For the FYE 31 December 2012, 63.15% of our purchases of materials and services were sourced from local manufacturers and suppliers while the remaining 36.85% of our purchases of materials were sourced directly from overseas suppliers. Please refer to Section 4.1.1 and Section 12.2.6 (c) ofthis Prospectus for the impact of fluctuations in prices of materials. 6. BUSINESS OVERVIEW (Conl’d) Imports ofsteel products are required to adhere to certain restrictions, including the following: • Import duties, which are imposed on certain types ofsteel products;
• Import licences from MITI, which are required for certain types ofsteel products; and
• Conformation to the ‘Malaysian Standard’ (MS) and that the import is accompanied by a certificate of approvalora letter ofexemption issued byoron behalfoftheChiefExecutiveOfficer oftheConstruction Industry Development Board (CIDB) for the construction sector or SOOM Berhad for non-construction sector for certain types afiroo and steel products.

For the FYE 31 December 2012, flat steel materials constituted the largest proportion of our total purchases of materials and services at 80.21 %. Of this, 74.00% of our purchases were locally sourced while others were sourced directly from overseas suppliers. The bulk of our purchases of flat steel materials were carbon steel, which contributed 64.87% ofour total purchases of materials and services. This was followed by stainless steel and alloy steel materials, which contributed 14.03% and 1.31% ofour total purchases ofmaterials and services respectively. For the FYE 31 December 2012, long steel materials constituted 19.21 % ofour total purchases of materials and services. Of this, 16.96% of our purchases were locally sourced while others were sourced directly from overseas suppliers. The bulk of our purchases of long steel materials were carbon steel, which contributed 12.22% of our total purchases of materials and services. This was followed by stainless steel and alloy steel materials at 3.67% and 3.32% respectively. For the FYE 31 December 2012, purchases of other materials accounted for 0.12% of our total purchases of materials and services. These comprised primarily specialised steel materials and non-ferrous metal products. Subcontracted services, accounted for the remaining 0.46% of our total purchases of materials and services. These services comprised slitting, flattening, bending, welding, punching, sand blasting, machining and galvanising which we subcontract to external parties as we do not have the facilities to undertake such processing services in-house. Although we have bending equipment, nevertheless, certain bending requirements areoutsidethecapabilities ofourin-housemachines, especiallyplatesthatexceedacertainlevel ofthickness. As at LPD, our Group has not experienced any shortages in the supply of materials and services as mentioned above. 6.6 TECHNOLOGY USED Some ofthe relevant technologies that we use in our processing activities include the following: • Plasma cutting;
• Laser cutting;
• WateIjet cutting;
• Oxy-gas cutting;
• Bandsaw cutting;
• Expanded metal process;
• Shearing; and
• CNC machines.

(i) Plasma Cutting Plasma cutting process is used to cut steel and other electrically conductive metals. Plasma is created through the ionisation of the gas when substantial heat is added to the gas by internal electrode. The gas is then compressed and forced through a narrow area ofthe nozzle, creating a concentrated plasma arc. 6. BUSINESS OVERVIEW (Cont’d) Bycontrollingthearc length,torch speed and angle ofcutting, desiredcuttingqualitycan be achieved. Furthennore, by increasing the air pressure and amperage, the plasma cutters will be able to cut through thicker metals due to the higher arc temperature generated. The picture below iUustrates the plasma cutting process: Plasma Cutting
In order to improve the cut quality of plasma cutters, several improvements on the cutters have been developed. For instance, by swirling the plasma gas that is being forced through the constricted nozzle, it provides a cool bamer for the copper nozzle, thus increasing the lifespan of the nozzle. In addition, the bevel cuts on both sides ofthe metals using conventional plasma cutters can be avoided. Through this development, the arc is evenly distributed along one side of the work piece, creating a square cut. The square side can be switched by reversing the swirl direction. There are numerous advantages ofplasma cutters compared to ether methods ofcutting: • Its ability to cut, gouge and pierce any electrically conductive metal, including stainless steel, aluminium and brass;
• Its ability to produce precise cutting at high speed;
• It does not require highly-flammable gas, thus increasing safety at the work place;
• Less time consuming as it does 110t require a pre-heat cycle; and
• Its ability to cut with small or no heat affected zone, which helps to avoid warping and paint damages around the cut area.

(ii) Laser Cutting Laser cutting is a technology that uses laser to cut materials. With the assistance of lenses, the laser beam is focused to become an intense beam on the smface ofthe material to be cut. The laser energy will then melt, bum and vaporise the material and the high-pressure assisted gas will blow away the molten material from the work piece, leaving behind a high quality surface finish. The method commonly used for cutting metals is melt and blow. The metal is heated to its melting point and then high-pressure gas will be blasted to blow the melted metal out ofthe cut area. 6. BUSINESS OVERVIEW (Conl’d) Below are the three (3) main lasing materials used in laser devices with different applications: Carbon Dioxide (“C02”) • Mainly used for cutting, engraving, welding and boring of metals, ceramics, polymers, wood and rubber;
• This laser method uses one (I) of two (2) methods to excite the gas, which are direct current (“DC”) or radio frequency (“RF’);
• The DC design works on an internal electrode inside the cavity, where problems such as electrode erosion and plating ofelectrode materials on the work piece might occur; and
• On the other hand, the external electrode ofRF design is not prone to these problems.

Neodymium Laser (Nd) • Mainly used for welding and boring ofmaterials that require low repetition and high energy_ Neodymium Yttrium-alumiuium-garnet (Nd-YAG) • Mainly used for high-power boriug, eugraviug and welding. OUf laser cutting machine uses CO2 as the lasing material, and the RF-excited system. There are three (3) machine configurations used in the laser cutting system as following: • Moving Material Laser which involves a stationary laser cutting head and a moving material table. This method is mostly used for precision cutting of thick flat sheet material;
• Flying Optics Laser which involves a stationary work piece and a moving laser cutting head. This technique has the fastest speed compared to the rest; and
• Hybrid Lasers where both the laser cutter and the work piece are moving. The beam delivery path length is more constant compared to a flying optic machine and its beam delivery system may be simpler.

Our laser cutting machine is based on the flying optics laser system. (iii) Waterjet Cutting WateIjet cutting is a cold cutting process which uses an extremely high-pressure water stream to cut through materials including metal, plastic, glass, wood and stone. It is usually done undetwater to reduce noise and splash. During the wateIjet cutting process, a large volume of water is being forced through a tiny opening or orifice of a nozzle which Causes the water to rapidly accelerate and cut the work piece by eroding the small cracks on the work piece surface generated by the water stream impact. Abrasive waterjet cutting has also been widely used nowadays with the difference being the addition of abrasive materials into the high-pressure water stream compared to normal pure waterjet cutting. The abrasive materials intensity the cutting process by increasing the speed ofthe erosion for the crack on the work piece. The pille wateIjet cutting is usually used to cut softer materials compared to abrasive waterjet cutting. These waterjet cutting methods are more environmental-friendly as they produce no hazardous particles or dust, and the water and garnet used can be recycled. 6. BUSINESS OVERVIEW (Conl’d) However, the disadvantage of using the waterjet cutting method is that a stream lag will result in geometry errors. This is because the exit part of the watetjet cuts slower than the entry part. Furtherrnore, a V-shaped taper is created as the cutting force decreases. This is especially apparent when the wateIjet cuts through the work piece at high speed. Precautionary measures such as decreasing cutting speed and increasing cutting power can be taken to overcome these shortfalls. We use both the pure and abrasive watetjet systems. (iv) Oxy-Gas Cutting The oxy-gas cutting process involves the combustion ofmetal using oxygen and fuel gas. This cutting process can be done manually with portable devices or by using a floor-mounted machine for larger­scale operations. Before cutting the work piece, the metal has to be preheated using a mixture of oxygen and fuel gas. A bright red heated zone indicates that the ignition temperature is reached and a pure oxygen stream will be blown towards the area in order for the molten metal to flow out, fonning the cut on the work piece. The pictme below illustrates the oxy-gas cutting process: Oxy-gas Cutting Process
The mixture of fuel gas and oxygen on both sides of the pure oxygen stream provide a balanced preheated area to produce good quality cutting. In addition, the direction of the cut can be changed without changing the angle or the position ofthe nozzle. Some ofthe fuel gases that can be used in this cutting process are as follows: Acetylene; Propylene; Propane; Methyl-acetylene-propadience (MAPP);
• Natural Gas; and Hydrogen. However, the oxy-gas cutting method is only limited to materials with ignition temperature lower than its melting point or else cutting would be impossible as the material would melt and flow away. 6. BUSINESS OVERVIEW (Conl’d) In addition, the cutting edge quality and cutting speed can be improved with increase in purity of the oxygen supplied. Furthennore, the flow rate of the oxygen affects the surface of the cut. Supplying too little oxygen or too much oxygen can have varying results, with the former resulting in slow ragged cuts while the latter would provide a wide concave cut. During the process of cutting with oxy-gas, flashback issues require the most attention from the operators. Flashback is the burning of the gas or the mixture of the gases inside the blowtorch which will lead to an explosion. Therefore, safety measures need to be undertaken. (v) Bandsaw Cntting A bandsaw machine has a continuous band with cutting teeth that runs in a loop acting as a blade for cutting purposes. There are 2 or 3 wheels working in this continuous loop, namely the idler wheel and the drive wheel. The idler wheel is used to control the tension of the blade while the drive wheel is cOlUlected to the power source and is used to clasp the blade onto the saw. Bandsaw machines can either be a vertical or a horizontal bandsaw machine. For horizontal bandsaw, the horizontal blade cuts downward into the work piece and is mostly used for cutting the work piece to a desired length at the required angle. The horizontal bandsaw usually switches off automatically when the cut is completed. For the vertical bandsaw, the work piece is being pushed against the vertical blade, cutting into the side of the work piece. The blade for bandsaw machines are made of various types and sizes of materials for different usage. For instance, different cutting requires different blade width whereby straight cuts require wider blades compared to curved cuts. In addition, the tension of the blade has to be adjusted correctly to avoid damage to the blade. Our Group undertakes bandsaw cutting using horizontal bandsaw machines. (vi) Expanded Metal Process The process of producing expanded metal results in diamond-shaped holes on the metal sheet. There is no metal waste generated during the expanding process. The expanding process produces a light and strong steel mesh without any welding. The expanded metal is then passed through a cold-rolling mill to flatten the mesh in order to produce a smooth and flat surface. (vii) Shearing Shearing is used to cut straight lines on flat metal materials. The characteristics of the shearing process .include: • Its ability to make straight-line cuts on flat metal materials;
• Metal is placed between upper and lower shear blades; and
• Its ability to cut relatively small lengths of materials at any time since the shearing blades can be mounted at an angle to reduce the necessary shearing force required.

The shearing process perfonns only fundamental straight-line cutting but shearing can usually produce any geometrical shape with a straight-line cut. It is usually used in cutting a sheet, strip and plates. (viii) CNC Machines CNC refers specifically to a computer controller that reads computer programme instructions to control a machine tool. Machine tools that are controlled by CNC are commonly referred to as CNC machine tools or systems. 6. BUSINESS OVERVIEW (Cont’d) The process of CNC starts with the execution of the command from the machine control unit (MCU) by the drive motor. The number of rotations is sent to the drive motor and the command is carried out. A feedback device then confinns that the command has been executed correctly. Within the steel industry, CNe machines are used in conjunction with plasma cutler, laser cutler, waterjet cutter and many more other machines to improve safety issues and reduce the exposure of workers to debris, noise and chemical substances used in the production process. 6.7 PRODUCTION FACILITIES AND OPERATING CAPACITIES Our main activities under processing of steel products are cutting, levelling, shearing, profiling, bending and finishing of steel products as well as production of expanded metal. In general, our Group undertakes processing activities based on secured purchase orders and these orders usually consist of varied steel products including flat and long products of various types of materials including carbon steel, stainless steel and alloy steel, various sizes and thickness, which require different processing time. The capacity, output and utilisation rate of our processing machinery for the FYE 31 December 2012 is as follows: Production Output for  Capacity  Types of Machines  FYE 31 December 2012  Annual Capacity(l)  Utilisation  (%)
Cutting machines (2) (3) 20,807 tonnes 25,172 tonnes Notes: (1) Annual capacity is calculated based on instaUed machinery capacity and resources running 24-hour shifts on weekdays, twelve (J2) hour shifts on Saturday and five and a half days a week excluding public holidays, machinery set-up time and downtime. We are currently operating 24-hour shifts to enable our customers demands are met.
(2) Based on fifteen (15) unitsofmachineriesofvarious capabilities andfunctions ofwhich one (1) unit ofnewly acquired CNC plasma cutting machine begin operations in October 2012 while Moo (2) units ofnewly acquired machines, namely CNC plasma cutting machine and CNC laser cutting machine began operations in December 2012.
(3) The types ofcutting machines refer to CNC oxy gas and plasma cutting machines, oxy-gas cutting machine with optical tracer, CNC oxy-gas cutting machines, CNC plasma cutting machines, CNC laser cutting machines and CNC waterjel cutting machine.

We also process coils to convert them into sheets as stock items for sale. The process includes levelling and shearing. Our capacity, output and utilisation rate of our coil levelling machines (including shearing) for the FYE 31 December 2012 are as follows: Production Output for  Capacity  Types of Machines  FYE 31 December 2012  Annual Capacity{l)  tJtilisation  (%)  Coil levelling machines (2)  58,050 tonnes  157,665 tonncs  36.82
Notes: (1) Annual capacity is calculated based on installed machinery capacity and resources running 16 hour shifts, and SIX days a week excluding public holidays, machinery set-up time and downtime. We are currently operating 16 hours shifts as we are able to cope with customers demands hased on the shift duration.
(2) Based on three (3) units ofcoil leveUing machines.

6. BUSINESS OVERVIEW (Cont’d) The details of our material machinery and equipment used for our processing operations with their respective NBVas at 31 December 2012 are as follows: Audited NBV as at 31  Machinery and Equipment  No. of  December 2012  Units  RM’OOO
LF Klang  Coil levelling machines  3  6.221  CNC oxy~gas and plasma cutting machine  1  11  Oxy-gas cutting machine with optical tracer  1  *  cNC oxy~gas cutting machines  4  308  cNC plasma cutting machine  3  1,189  cNC laser cutting machine  2  3,299  Shearing machines  7  246  Portable plasma cutting machine  1  *  Portable oxy-gas cutting machines  8  8  Expanded metal machine  2  841  Bandsaw machines  10  231  LF Hardware  Bandsaw machines  5  36  Supreme Steelmakers  CNC laser cutting machines  3  1,240  cNC waterjet cutting machine  1  745  High precision CNC press brake machine  1  788  CNC plasma cutting machine  1  *  Shearing machines  2  328  Surface grinding machine  1  *  Bandsaw machines  4  55  ASA Steel  Bandsaw machines  3  *  Portable oxy-gas cutting machine  2  4  15,550  Note:  * value is negligible
6. BUSINESS OVERVIEW (Conl’d) 6.8 OUR BUSINESS AND OPERAnON PROCESSES (a) Trading The process flow of our trading operations is illustrated as follows:
Provide QUotation
Generate Invoice [ ~~ ~ 1 _o_el_Ne_’Y~Of_p_m_d_o_et
~
Upon receiving a purchase request from a customer, a stock check will be carried out in order to ensure the availability of stock to meet customer’s requirement. If there is insufficient amount of stock, quotes for finished products from our suppliers will be obtained in order to meet the customer’s required amount of stock. Quotes for the prices of the items requested will be submitted to the customer. When an agreed price has been negotiated, a purchase order will be sent by the customer. Products that have been ordered will be arranged for bulk delivery or packed appropriately as a fonn of protection for steel sheet products during delivery. Invoice is generated and sent to customer along with the ordered product. After the delivery of products, payments for the products will be tracked in order to ensure that the agreed payment tenns are abided. 6. BUSINESS OVERVIEW (Cont’d) (b) Processing (i) Shearing of Flat Steel Products The process flow for our processing activities is illustrated as follows: [ V’sual Inspeelion Erticle Verification ]~~~====::::;;~r-:;:=====–~~ ‘~—–‘ Customer Inquiry & Confirm Order
Visual inspection is carried out on all incoming stock to check for defects. Any defective items will be rejected. The input steel coils will then be placed into the uncoiler unit and unwound. The unwound steel coil will then be inspected for surface defects and defects are recorded. As the coil is being unwound, it is fed into a levelling machine to flatten and level the coil. The leveller eliminates any edge waves or centre buckling on the steel coils. After the coil passes through the levelling machine, it feeds directly to a shearing machine that cuts the coil into specific length to become a steel sheet. The first item produced are checked for quality and requirements compliance before commercial production for work order are carried out. In-process quality control measures are taken throughout the levelling and shearing process. Any defects and variations are reported to the Quality Control Officer for advice and further action. The steel sheets are then packed and stored at the warehouse. For some of our products such as stainless steel sheets with bright surface, the sheared sheets are laminated with polyvinyl chloride (PYC) or polyethylene (PE) film, and/or packaged with paper interleave as additional packaging protection prior to storage in the warehouse. 6. BUSINESS OVERVIEW (Cont’d) When a customer inquiry is received, stock check is carried out before confirming customer’s orders. Available stock with required measurements is then delivered to the customer. (ii) Cutting of Long Steel Products Stock Received
[ Visual Inspection Ctlstomer Inquiry & Confinned Order Cutting line Set-up Perform Cutting Storage Delivery of Goods Visual inspection is carried out on the stock received to check for any surface defects. Any defective items will be rejected. After replying customers’ inquiries and confinning their orders, cutting line is set up and mechanical adjustments for the bandsaw machines are made. After securing the steel bars or rods on the bandsaw machines using fasteners and holders, cutting operations are then performed. The first item produced are checked for quality and requirements compliance before commercial production for work order are carried out. All finished products will be sent to the quality control department to ensure that the product requirements and specifications are met. Products that passed the inspection test will then be packed and stored at the warehouse before they are due for delivery. (iii) Tracking ofleftovers of steel materials We endeavour to utilise any leftovers ofsteel materials whenever possible. Whenever an order is received, we will conduct checks to ascertain if there are any remaining steel materials that can be used for such new order received. If there are sufficient steel materials that can be used to meet the demand from the new order received, then our Group will not need to use new raw materials. Tn the event there is a shortfall, our Group will supplement the leftover materials with new raw materials. While there may be leftovers of steel materials in the course of our business, the cost of these leftover steel materials have already been imputed into our pricing when we provide quotations to our customers. Hence, our loss from leftovers would be minimal. ICompany No. 756407-0 I 6. BUSINESS OVERVIEW (Conl’d) (c) Inventory Management OUf Group has in place the following inventory management procedures to ensure smooth flow of inventory to meet sales orders as well as ensuring that stock levels are replenished at all times: Inventory Inwards
Purchasing department issues  Once goods are received.  the  The  warehouse  personnel  The  inventoty  department  purchase  order upon  receive  warehouse  personnel  will  will  update  stock  cards  w:1I update the digital slock  111StlUCtlOns  from  e:·:ecut:l.ve  perfolm inspection  to  ensure  which  are  kept  In  the  record database accordingly  directors or sales personnel  the  goods  are  m  good  warehouse prior  to  passmg  condition,  and  according  to  thern  to  the  mventory  the  quanbty  ordered  and  department  specifications  Inventory Outwards

I)  The sales personnel w:1I  The  sales  personnel  The dehvery department  The warehouse personnel  The mventory department  check d,e availability of  will issue a s ales order  vvill Issue delivery order  w:ll  update  stock  card  wIll  update  the  digital  stock  upon  recelvmg  for  arrangement  of  accordmgly  immediately  stock  record  database  enquUles  from  dehvery  upon  depar1ure  of  the  accordmgly  customers  inventory.  2)  If ,tock is not available.  the sales personnel  wil1  execute a request to  the  purchasing  dep artment  (refir lnwnlory /fTWard  char/abow).
Further to the above procedures being adopted by our Group, we also ensure that our inventory department performs regular periodic comparison on stock cards in the warehouse as compared to its digital records. This is to ensure that firstly, all records are consistent and up to date and secondly as an audit to ensure that there has not been any pilferages In addition, our Group perfonns 100% physical stock take at least twice a year and update stock cards and the digital stock record database accordingly. Any material discrepancies will be investigated. 72 6. BUSINESS OVERVIEW (Conl’d) 6.9 QUALITY ASSURANCE We place emphasis on our product quality and adhere to quality management system standards. This is reflected by the ract that our subsidiary companies, namely LF Klang, Supreme Steelmakers and ASA Steel are ISO certified companies, which provide assurance to customers ofour quality processes. We essentially adopt the following approaches to ensure that quality standards are maintained internally: Incoming steel materials including flat and long products have to go through inspection and checking of defects and types of materials prior to processing; In process checking and inspection to ensure that specifications are met; and Final quality checks in the fann of inspections are also carried out for the processed products before delivery to customers. As at LPD, we have ten (I 0) quality assurance personnel focused on ensuring the product quality meets with the needs and specifications of customers. 6.10 MARKETING AND DISTRIBUTION (aJ Marketing Strategies Our marketing strategies are as follows: We position ourselves as a supplier of steel products with the capability to trade and process flat and long products of various steel materials including carbon steel, stainless steel and alloy steel. This is further supported by our product diversity in tenns of size, thickness and grades to provide convenience to our customers; We have in-house facilities to support our processing operations. Our processing facilities include the following machines: coil levelling, shearing, oxy-gas cutting with optical tracer, CNC oxy-gas cutting, CNC plasma cutting, CNC oxy-gas and plasma cutting, CNC laser cutting, portable plasma cutting, CNC waterjet cutting, high precision CNC press brake, portable oxy-gas cutting, expanded metal, surface grinding and bandsaw; We continually provide quality products and services to establish our reliability as a steel product supplier to create customer loyalty and dependency; and We keep abreast of new processes and technological development to stay ahead of the competition as well as to better meet the needs and requirements ofcustomers. To implement our marketing strategies, as at LPD, we have thirty four (34) personnel involved in sales and marketing functions in our offices in Shah Alam, Selangor and Sungai Besi, Kuala Lumpur. 6. BUSINESS OVERVIEW (Cont’d) (b) Distribution Network We adopt a combination of direct and indirect distribution channel strategy:

MJnufacturersof ‘-” Met,,1 ProducL”~ and Cwnponents ——-_. c:Fdbntalnrsnt MachirreIY.
–“”,… l—–EqUlprrll:mt “,nd Metdl ~~tnJttures -Di,..Clf-‘ .. .J “. CtXnfJanhl$ v’JilJlin the “~~,,-~~ BIJi!tJing. Ctmstnlt;!ioll ~~nd Infrastructure Industries { Others
Hardvv3lre WholesnJers and Ret3l1er<;;
(i) Direct Distribution OUf direct distribution channel approach is perfonned through our own sales and marketing division, which is focused on selling our products directly to end-user customers. Our end-user customers are mainly manufacturers and fabricators of metal products, and companies involved in the building, construction and infrastructure industries. Our sales and marketing offices are located in Shah Alam, Selangor and Sungai Besi, Kuala Lumpur. Our direct distribution approach enables us to work closely with our customers to evaluate and attain a better understanding of customers’ requirements, which serves as a feedback mechanism for improvement of our products and services. (ii) Indirect Distribution We also adopt an indirect distribution strategy to enable us to utilise the existing network of our intermediaries including hardware wholesalers and retailers to expand our market coverage without the need for significant investment in sales and marketing infrastructure. These hardware wholesalers and retajlers are also our customers. 6.11 RESEARCH AND DEVELOPMENT We are primarily engaged in trading and processing ofsteel products. As such, research and development is not relevant to our business and we do not carry any specific research and development activities. As such, we have not incurred any expenditure for research and development activity for the past four (4) FYE 31 December 2009 to 2012. I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Conl’d) 6. I2 MAJOR CUSTOMERS No customer has contributed 10% or more ofour total sales for the past four (4) FYE 31 December 2009 to 2012. We have approximately 3,900, 4,000, 3,900 and 3,700 active customers for FYE 31 December 2009 to 2012 respectively. Our top 500 active customers who have purchased from us have contributed to approximately 89.24% of our revenue for FYE 31 December 2012. Of the top 500 customers, 464 are repeat customers who have purchased from us for at least two (2) of the three (3) FYE 31 December 2010 to 2012. The breakdown of revenue contribution from our top 500 active customers for FYE 31 December 2012 is as follows: Customer Base Manufacturers of metal products and components  l\umbcr of Customers 75  Repeat Customers(l) 66  Contribution to Revenue for FYE 31 December 2012 < ———-Trading —-~—-> < ——–Processing ——–> < -OthenP> -> Flat Long Flat Long (%) (%) (%) (%) (%) 2.62 1.06 9.02 0.56 #  Aggregate Contribution to Revenue (%) 13.26  Fabricators of machinery, equipment and metal structures  181  172  10.15  2.35  22.54  2.18  0.06  37.28  Companies within the building, construction and infrastructure industries  17  14  1.49  0.08  3.31  0.15  – 5.02A  Hardware wholesalers and retailers  218  205  8.06  7.36  14.75  1.72  0.01  31.90  Others  9  7  0.39  0.11  1.26  0.04  – 1.79A  Total  500  464  22.70′  10.95′  50.87A  4.65  0.Q7  89.24A
Notes: # Insignificant proportion.
, Total does not add-up due to rounding. (1) Repeat customers are customers who have purchasedfrom our Group for at Least two (2) ofthe three (3) FYE 31 December 2010 fa 2012.
(2) Include trading ofspecialised steel materials including tool steel and non-ferrous metal products including bronze, brass, aluminium and copper products.

75 6. BUSINESS OVERVIEW (Conl’d) 6.13 MAJOR SUPPLIERS Our major suppliers (i.e. those who contributed 10% or more of our total purchases of materials and services for the past four (4) FYE 31 December 2009 to 2012) are as follows: Approximate  Principal  Length of  Products  < —-FVE 31 December -~–­>  Relationship  Supplied  2009  2010  2011  2012  (years)  Total Group purchases (RM’OOO)  307,893  397,469  450,202  376,931  Suppliers  Percentage of Our Group’s Total  Purchases of MateriaJs and Services (%)  MegasteeJ Sdn Bhd OJ  28.98  40.08  31.54  22.84  14  Flat carbon steel  Bright Steel Sdn Bhd (1)  3.32  4.70  4.42  10.99  16  Flat carbon steel  Posim Marketing Sdn Bhd (I)  12.25  6.01  2  Flat carbon steel  JK Ji Seng Sdn Bhd (2)  9.58  13.57  1.62  3  Flat carbon steel  JK Ji Sena Marketing  16.67  4.69  7  Flat carbon steel  Sdn Bhd ‘)  Tatal purcha<;es from  48.97  59.05  61.78  41.46  our major suppliers
Notes: (I) Megasteel Sdn Bhd and Bright Steel Sdn Bhd are indirect subsidiaries of Lion Corporation Berhad whilst Posim Marketing Sdn Bhd is an indirect subsidiary of Lion Industries Corporation Berhad which is an associate ofLion Corporation Berhad. On 7December 2012, Lion Corporation Berhad had announced t”t and its wholly owned subsidiary, PMB Jaya Sdn Bhd, had entered into an agreement to dispose ofapproximately 25.34% equity interest in Lion Industries Corporation Berhad to Tan Sri Cheng Heng Jem and Dynamic Horizon Holdings Limited, whilst Bright Steel Sdn Bhd, had entered into an agreement to dispose of approximately 1.04% equity interest in Lion Industries Corporation Berhad to Tan Sri Cheng Heng Jem. On 25 April 2013, Lion Corporation Berhad has announced that the disposal has been completed on 24 April 2013.
(2) Based on CCM search dated 17 April 2013, JK Ji Seng Sdn Bhd and JK Ji Seng lvfarke{jng Sdn Bhd are two separate companies with a common director.

We are dependent on our major suppliers which collectively contributed 48.97%. 59.05%, 61.78 and 41 .46% of our total purchases for the FYE 31 December 2009 to 2012. For the FYE 31 December 2012, we have two (2) suppliers which contributed above 10% of our purchases, namely Megasteel Sdn Bhd and Bright Steel Sdn Bhd. Notwithstanding that they are our two (2) single largest suppliers, we have managed to maintained a stable business relationship with Megasteel Sdn Bhd and Bright Steel Sdn Bhd for whom we have been dealing with for approximately fourteen (14) and sixteen (16) years respectively. 6. BUSINESS OVERVIEW (Cont’d) We also source from several other suppliers for our steel materials including, among others, Ann Joo Metal Sdn Bhd, Hiap Teck Hardware Sdn Bhd, CMC S.E. Asia Pte Ltd, Hyosung Corporation, Aperam Stainless Europe, S.A., Sumikin Bussan Corporation, Shijiazhuang Iron & Steel Co., Ltd and Stemcor (S.E.A.) Pte Ltd for the FYE 31 December 2012. This suggests that we have ready access to other suppliers, should there be a need to purchase from alternative suppliers. Steel products are commodity items and may be sourced locally and imported. The following statistics demonstratetheavailability ofthese materialsfromtheperspective oflocal productionandimports: • In 2011, the local production afhot-rolled steel products amounted to 5.1 million tonnes;
• In 2012, the import value ofiron and steel products increased by 5.3% to RM22.7 billion.

(Source: IMR Report) THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Coni ‘d) 6.14 MAJOR LICENCES, PERMITS AND REGISTRATIONS The major licences issued to our Group as at LPD are summarised as below:
Issuing Issue Date / Status of Company Authority Type of Licences Validity Period Salient Conditions ComDliance LF Hardware  MITI  Manufacturing licence No. A018765 Serial No. 031746  24.07.2012A / (with effect from 06.04.2012, unless revoked)  a) b)  Site shall be at Lot 401-405, Jalan Tiga, Off Jalan Chan Sow Lin, 55200 Kuala Lumpur Any sale of shares in the company must be notified to MITl and MIOA  Complied  c)  The company must train Malaysians so that the transfer of technology and skills are carried out throughout all levels ofthe workforce  d)  The company shall carry out its project as may be approved and in compliance with laws and regulations applicable in Malaysia
LF Klang  MIT!  Manufacturing Licence  20.03.2012A /  a)  Site shall be at Wisma Leon Fuat,  Complied  No. A018570  (with effect from  No.6, Lorong Keluli lB,  Serial No. 031461  19.03.2012,  Kawasan  Perindustrian  Bukit  Raja  unless revoked)  Selatan,  40000 Shah Alam,  Selangor Darnl Ehsan  b)  Any sale of shares in the company  must be notified to MITI and MIOA  c)  The company must train Malaysians  so that the transfer of technology and  skills  are  carried  out  throughout  all  levels ofthe workforce
78 ICompany No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d) Company LF Klang Supreme Steel makers  Issuing Authority MITI MITI  Type of Licences Manufacturing Licence No, AOl8579 Serial No. 031470 Manufacturing Licence No. A018734 Serial No. 031698  Issue Date I Validity Period 26.03.2012’/ (with effect from 17.01.2012, unless revoked) 27.06.2012’/ (with effect from 12.04.2012, unless revoked)  Salient Conditions d) The company shall carry out its project as may be approved and in compliance with laws and regulations applicable in Malaysia a) Site shall be at No. II, Lorong Keluli IB, Kawasan Perindustrian Bukit Raja Selatan, 40000 Shah Alam, Selangor Darul Ehsan b) Any sale of shares in the company must be notified to MITI and MIDA c) The company must train Malaysians so that the transfer of technology and skills are carried out throughout all levels ofthe workforce d) The company shall carry out its project as may be approved and in compliance with laws and regulations applicable in Malaysia a) Site shall be at Lot 6A & 8, Jalan Tiga, Off Jalan Sungai Besi, 55200 Kuala Lumpur b) Any sale of shares in the company must be notified to MITI and MIDA  Status of Compliance Complied Complied
79 ICompany No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d) Issuing  Issue Date I  Status of  Company  Authority  TVDe of Licences  Validity Period  Salient Conditions  Comoliance
c) The company must train Malaysians so that the transfer of technology and skills are carried out throughout all levels ofthe workforce  d) The company shall carry out its project as may be approved and in compliance with laws and regulations applicable in Malaysia  ASA Steel  MITI  Manufacturing Licence No. A018727 Serial No. 031687  20.06.20IYI (with effect from 23.03.2012, unless revoked)  b) Any sale of shares in the company must be notified to MITI and MIDA a) Site shall be at No.8, Jalan Tiga, Off Jalan Sungai Besi, 55200 Kuala Lumpur  Complied  c) The company must train Malaysians so that the transfer of technology and skills are carried out throughout all levels ofthe workforce  d) The company shall carry out its project as may be approved and in compliance with laws and regulations applicable in Malaysia
Note: lhe manufacturing licences for our subsidiary companies were only obtained in 2012 as our subsidiary companies were principaLly involved in the trading of steel and steel related materials prior to 1983. In 1983, our subsidiary companies purchased machineries to cut steel products to smaller sizes. There were no modifications to the steel material. As such, we were not aware that we require manufacturing licences. Upon embarking on the Listing exercise, we were advised by our listing advisers and MIT! that our activities would be considered as man~facturing following which we applied to MIT! for our subsidiary companies’ manufacturing licenses on 21 December 2011. 80 I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d) Notwithstanding the above, our Board confirms that as at LPD, we have not been imposed with any legal penalties for our delay in the application for the said manufacturing licenses_ As stated in Section 3 ofthe Industrial Coordination Act 1975 (“leA”), the maximum penalty for the non-compliance ofthe Section 3 ofthe leA would carry a penalty oftwo thousand ringgit fine or 6 months imprisonment and to a further fine not exceeding one thousand ringgit for every day during which such default continues_ As we have already obtained manufacturing licences for all our subsidiary companies, the abovementioned penalties are not applicable to us and we are able to carry on with our business activities_ As such, our Board is ofthe opinion that the delay in the application for the said manufacturing licenses would not have any impact on the operations andfinancials ofour Group_ 6.15 INTELLECTUAL PROPERTY RIGHTS Save as disclosed below, our Group docs not have any registered trade mark or other registered intellectual property rights as at the date of this Prospectus:­Registered owner Supreme Steelmakers Supreme Stcc1makers  Artistic representation of industrial designs  Country/ Territory of registration Malaysia Malaysia Industrial Design registration number MY 12-00981­0101 MY 12-00982­0101  Date of registration! (Date of expiry) 2607.2012/ (26.07.2017) 26.07.2012/ (26072017)  Authority Intellectual Property Corporation of Malaysia Intellectual Property Corporation of Malaysia  Registration class 6: Furnishings (Sub-class) 06-04: Storage furniture 06-04: Storegae furniture
81 I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d)
Malaysia
Industrial Country! Design Registration class Artistic representation of Territory of registration Date of registrationi 6: Furnishings Registered owner industrial designs registration number (Date of expiry) Authority (Sub-class) Supreme Steelmakers Malaysia MY 12-00983­26.07.2012/ 06-04: Storage Intellectual Property 0101 (26072017) furnitureCorporation of Malaysia Supreme Steelmakers MY 12-00984­26.07.2012/ 06-04: Storage Intellectual Property 0101 (26072017) furnitureCorporation of Malaysia The above industrial designs arc of Supreme Stcelmakcrs’s own unique designs of storage pallets used to stack up its products at its premises and within the Leon Fuat Group. 6.16 DEPENDENCY ON PATENTS, INTELLECTUAL PROPERTY RIGHTS, LICENCES, INDUSTRIAL, COMMERCIAL OR FINANCIAL CONTRACTS 6.16.1 Dependency on Intellectual Property Rights, Major Licences or Industrial, Commercial and Financial Contractor Our Group is not dependent on any patents or other intellectual property rights, or major licences for our business operations, Our Group is also not dependent on material contracts or agreements including industrial, commercial and financial contracts, which are material to our business or profitability. 82
I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d) 6.17  PROPERTY, PLANT AND EQUIPMENT  6.17.1  Own Properties  Our Group owns the following properties:
Registered/ Beneficial Owner LF Klang LF Klang  Title/Address 11 Lorang Keluli 1B, Kawasan Perindustrian Bukit Raja Seiatan, Scksyen 7, 40000 Shah Alam, Selangor Daml Ehsan held under GRN 290613, Lot 26102, (formerly H.S. (D) 30968, Lot No. PT 17395), Mukim Kapar, Daerah Klang, Negeri Selangor DaTul Ehsan 6, Lorang Kcluli lB. Km,vasan Perindustrian Bukit Raja Selatan, Seks)’cn 7, 40000 Shah Alam, Sclangor DaTul Ehsan held under GRN 290612, Lot 26104, (formerly H.S. (D) 30970, Lot No. PT 17397), Mukim Kapar, Daerah Klang, Negeri Se1angor Daml Ehsan  Description/ Existine: lise A unit of single storey detached factory cum warehouse building with an annexed 4 storey office and a unit ofsingle storey factory cum warehouse building with annexed single storey office and 2 storey store/ Used as a steel processing plant, warehouse and office A unit of 4~ office with an annexed 2 units ofsingle storey warehouse cum factory/Used as a steel processing plant, warehouse and office  Tenure Freehold Freehold  Encumbrances First Party PI, 2nd and 3rd Legal Charges in favour ofHong Leong Bank Berhad First Party pt Legal Charge in favour of EON flank Berhad  Land / Built­up Areas (SQ. ft.**) 179,736 /19,754 (office built-up area) & 102,882 (factory built~ up area) 116,928/ 29,600 (office built-up area) & 51,200 (factory built­up area)  Audited NBV as at 31 December 2012 iRM’OOO) Office and factoryNBV: 20,998.60 & landNBY, 6,890.00 Office and factory NBV: 3,603.43 & landNBY, 2,536.28  Issuance Date ofCertificate of Fitness/ Certificate of Completion and ComDlianee 03.03.2008″ , 17.02.2010(2) and 01.01.2012(3) 09.12.1997 and 01.01.2012(3)
83 I Company No. 756407-0 I 6. BUSINESS OVERVIEW (Coltl’d) Registered/ Beneficial Owner LF Klang LX Hardware Supreme Steelmakers  Title/Address No. 16, Lorang Keluli IB, Kawasan Perindustrian Bukit Raja Selatan. Seksyen 7, 40000 Shah Alam, Selangor Darul Ehsan held under 1l.S. (D) 30972, Lot No. PT 17399), Mukim Kapar, Daerah Klang, Negeri Selangor Darul Ehsan Descriotionl Existin~ Use A unit ofdetached building with annexed office building / Currently vacant and in dilapidated condition Tenure Freehold No. 6A, Jalan Tiga, Off Jalan A unit of single storey Leasehold Sungai Besi, Kawasan Perusahaan detached factory! expiring on Sungai Besi, 55200 Kuala Whole unit is rented to 09.07.2050 Lumpur held under PN 37429, Lot Supreme Steelmakers and it is No. 443 (formerly H.S. (D) used as a steel processing plant 66962, Lot No. P.T. 413). Seksyen 92, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur No.8, Jalan Tiga, Ofr Jalan A unit of single storey Leasehold Sungai Besi, Kawasan Perusahaan detached factory cum expiring on Sungai Besi, 55200 Kuala warehouse with an annexed 4­21.04.2062 Lumpur held under PN 35203, storey office building! Used as Lot No. 507, (formerly H.S. (D) a steel processing plant, office 101568, LotNo.l’.T. 480), and warehouse (part of which Seksyen 92, Bandar Kuala amounting to 5,460 sq. ft. is Lumpur, Daerah Kuala Lumpur, rented out to ASA Steel and it Wilayah Pcrsekutwm Kuala is used as a steel processing LumpurI’. plant)  Encumbrances First Party Legal Charge in favour of AmBank(M) Berhad Land I Built­up Areas (sa. ft.*”‘”l 130,680/# First Party 1st 30,591/ Legal Charge in 14,000 (factory favour of United built-up area) Overseas Bank (Malaysia) Berhad First Party I”‘ 40,106/10,920 yd, 3’d and 4th (office bui1t~up Legal Charges in area) &: favour of 15,600 (factory Ambank (M) built-up area) Bhd  Audited NBV as at 31 December 2012 (RM’OOO) Building and land NBV: RM I9,624 Office and factory NBV: 1,234.18 and LandNBV: 3,227.85 (audited carrying value at company level). However, NBV at pro forma Group is 1,004.31 OfJiceand factory NBV: 3,339.02 & landNBV: 1,718.38  Issuance Date of Certificate of Fitness/ Certificate of Completion and Compliance # 09.10.1998(4) and 28.03.2013(5) 26.08.2008 and 28.03.2013(5)
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ICompany No. 756407-0 I 6. BUSINESS OVERVIEW (Cont’d) Notes: part ofproperty is leased to Tenaga Nasional 8hd (200866-W) for purposes ofsiting an electric sub-station. ** conversion oforiginal measurements for properties in square meters (sq m) to square feet (sq fl) at 1 m] = 10.7639If. # This property was acquired through public auction on 2 July 2012 and is currently unoccupied and in dilapidated condition. As disclosed in Section 6.18.1(0) of this Prospectus, we plan to build a new processing plant with warehousing facililies and renovate and refurbish the office building. We will obtain the certificate ofcompletion and compliance ofconstruction prior to occupying the said property. (I) for a unit ofsingle storeyfactory cum warehouse building with 4 storey office and guardhouse.
(2) for a unit ofsingle storeyfactory cum warehouse building with a single storey office and 2 storey store.
(3) for single storey structure, lean-ta-extensions and extended shed.
(4) There were certain additional extensions to these buildings (i.e extended shed) which were not itl accordance to the approved building plan. As at LPD, we have dismantled the said unapproved extensions,
(5) We have currently installed a new additional roofing in between the walk-way of the premise bearing the address No.6A and No.8, Jalan riga, Off Jalan Sungai Besi, Kawasan Perusahaan Sungai Besi, Kuala Lumpur. This additional roofing is constructed based on the approved building plan by Dewan Bandaraya Kuala Lumpur. As at LPD, we have obtained the certificate ofcompletion and compliance for the said roofing.

6.17.2 Rented Properties In addition, we also rent the following properties for our operations: Tenant liSA Steel  Landlord Supreme Steelmakers  Address Dcscription/ Existing Use No.8, Jalan Tiga, Off Jalan Sungai Sesi, Kawasan Perusahaan Sungai Scsi, 55200 Kuala Lumpur Part of the single storey factory cum warehouse with an annexed 4 storey office building/Used as a steel processing plant  Rental Period 01.01.2013 to 31.12.2015  Annual Rental RM 120,000  Land / Built -up Areas Sq. ft. 40,106/ 5,460*  Issuance Date of Certificate of Fitness/ TCF/ Certificate of Completion and Compliance 26.08.2008  Supreme Stec1makers  LF Hardware  No. 6A, Jalan Tiga, Off Jalan Sungai Sesi, Kawasan Pcrusahaan Sungai Sesi, 55200 Kuala Lumpur A unit of single storey detached factory/Used as a steel processing plant  01.01.2013 to 31.12.2015  120,000  30,591/ 14,000  09.10.1998(1)  LF Hardware  Fresh Look Stone Arts Trading Sdn Bhd  Lot 401-405, Jalan Tiga, Off Jalan Chan Sow Lin, 55200 Kuala Lumpur A unit of single storey factory together with a double storey officeA fUsed as a steel processing plant  01.04.2012 to 31.03.2014  240,000  35,076/ 4,500  17.12.1999(21
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6. BUSINESS OVERVIEW (Cont’d) Notes: * Refers to the occupied area There was a temporary staircase that linked to a store room which encroached into the site boundary ofthe facility. As at LPD, we have dismantled the said extension. (I) Please refer to Section 6.17.1forfurther details on the saidproperty.
(2) The premise was issued wilh a reF by Dewan Bandaraya Kuala Lumpur on 17 December 1999. The reF is subject to annual renewal afwhich the latest renewal has been performed and valid until 16 December 2013.

6.17.3 Regulatory Requirements and Environmental Issue As at LPD, save for the newly acquired land with building bearing the address ofNo.16, Lorang Keluli lB, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, 40000 Shah Alam, our Board believes that we are in compliance in respect of all regulatory requirements (including land rules and building regulations) and environmental issues which may materially affect our Group’s operations and/or utilisation of assets. For the newly acquired land with building, we intend to build a new processing plant together with warehousing facilities on the said property, as disclosed in Section 6.18.1 of this Prospectus and will obtain the certificate of completion and compliance prior to occupying the said property. The Board acknowledges the responsibilities in complying with all relevant laws, regulations, rules and requirements governing the business operations of our Group. Moving forward, we will designate certain employees to liaise with the relevant governing authorities (i.e MIDA, MITI, local authorities/councils) to ensure that we comply with all relevant regulatory requirements which amongst others, includes land rules, building regulations, environmental issues and licensing requirements. These designated employees will be responsible to update the Board from time to time on the latest regulations and requirements pertaining to our business operations. In addition, we will also engage professional advisers such as solicitors, architects and consultants if the need arises. In terms of legal affairs, we will seek legal opinions from our solicitors on legal matters pertaining to our business operations. We will ensure that all legal documents or contracts are vetted by the solicitors prior to tabling to the Board. We also have four (4) Independent Directors comprising two (2) directors who are also independent directors in other listed companies in Malaysia, a lawyer and an accountant, all of whom possess adequate knowledge and experience to provide an independent element in the decision-making process of the Board to protect the interests of the minority shareholders and other stakeholders. Based on the above, the Board is of the opinion that the aforementioned internal controls/precautionary measures put in place gives reasonable assurance that the system of internal control in place is effective to ensure that all relevant laws, regulations, rules and requirements governing our business operations are complied with. 6.17.4 Interruptions to Business and Operations We have not experienced any material interruption in business which had a significant effect on our operations during the past twelve (12) months preceding the LPD. 6. BUSINESS OVERVIEW (Cont’d) 6.18  FUTURE PLANS, STRATEGIES AND PROSPECTS  6.18.1  Future Plaus and Strategies  Our future plans are focused in two (2) key areas as depicted in the figure below:

Construction of Purchase ofNew Processing Plant New Machineryand Warehouse (a) Construction of a New Processing Plant with Warehousing Facilities Part of our future plans is to build a new processing plant together with warehousing facilities to cater for new processing services. We intend to set-up the new processing plant in Kawasan Perindustrian Bukit Raja Selatan, which is close to our head office at Wisma Leon Fuat. Our Group had on 2 July 2012, through a public auction, purchased a piece of freehold industrial land with an existing detached building with annexed office building to house a new processing plant with warehousing facilities. The said land, bearing the address of No.16, Lorang Keluli 1B, Kawasan Perindustrian Bukit Raja Selatan, Seksyen 7, 40000 Shah Alam. Selangor Darul Ehsan, is located directly opposite our head office at Wisma Leon Fuat and has a land area of approximately 130,680 sq. ft. The cost of the acquisition of the land with building and related incidental cost is RMJ 9.00 million and RMO.64 million respectively of which RM2.56 million was funded through internally generatedfimdswhilsttheremainingpurchaseconsideration ofRM17.08millionwasfunded through bank borrowings i.e tenn loan and bank overdraft facility. Upon completion ofthe Listing, we plan to utilise RM13.00 million ofour Public Issue proceeds to partly repay these bank borrowings. The new processing plant will be equipped with two (2) new slitting machines which would take up approximately 10,000 sq. ft. of floor space for the processing of steel products, In addition, the remaining floor space would be utilised to stock our steel materials for trading and processing purposes. We intend to commence the construction ofthe new processing plant with warehousing facilities by 2015. The construction is estimated to be completed by 2016 and we intend to commence operations in the new plant by 2016. The cost of the construction of new processing plant with warehousing facilities is estimated to be RM6.00 million. We plan to utilise RM6.00 million of our Public Issue proceeds for the construction ofthis new processing plant with warehousing facilities. In the event that the construction cost exceeds RM6.00 million, the additional cost will be funded through internally generated funds and/or bank borrowings. The construction ofthe new processing plant with warehousing facilities includes the strengthening of the foundation ofthe ground to house the new machinery as well as renovation and refurbishment of the existing office building. 6. BUSINESS OVERVIEW (Cont’d) (b) Purchase of New Machiuery for Slittiug Process Our Group’s current processing operations include cutting, levelling, shearing, profiling, bending and finishing of products as well as production of expanded metal. Part of our future plans is to expand our facilities to incorporate slitting of steel products as part of our processing operations. Slitting, which is the process of cutting coils into various widths, will complement our existing range ofvalue added services in our processing operations. As part of our plans to undertake slitting activities, our Group intends to utilise RM6.00 million of our Public Issue proceeds to purchase two (2) new slitting machines by 2016. The cost of the slitting machines is estimated at RM3 .00 million per unit. The slitting machines are designed to slit steel coils ofthe following specifications: Machinery Slitting machine Slitting machine  Functions Slitting ofcoils  Quantity  Slitting Capability Thickuess Width (mm) (mm) 0.5 to 3.0 *to 1,524 3.0 to 6.0 *to 1,524
Note: Minimum size is based on customer specification and available machine tools. The following table indicates the timing for implementation ofour future plans: Construction of a new processing plant and warehouse Purchase of new machinery and equipment  Year of Commencement 2015 2016
6.18.2 Prospects The prospects ofour Group are dependent on the following factors: • Business performance;
• Competitive advantages;
• Future plans to provide sustainable growth; and
• Industry prospects and outlook.

(a) Business Performance Between FYE 31 December 2009 and 2012, our financial perfonnance was as follows: • RevenuegrcwatanAAGRof7.15%;
• GP grew at an AAGR of 9.79%;
• PST grew at an AAGR of 11.64%; and
• PAT grew at an AAGR of 12.27%.

6. BUSINESS OVERVIEW (Cont’d) The financial performance over the last four (4) years will provide us with the platfOlTI1 for continuing business success and growth. For FYE 31 December 2012 our revenue fell. This was primarily due to a strategic decision to scale down on the trading of low margin products. Nevertheless, despite the drop in revenue, we experienced growth in some ofour key margins as compared to FYE 31 December 2011 as follows: GP Margin grew from 11.03% to 13.90% PBT Margin grew from 6.23% to 7.64%; and PAT Margin grew from 4.63% to 5.51%. (b) Competitive Advantages OUf competitive advantages will provide a platform for continuing growth and success. This includes the following: A proven track record; Diversity in product range; Economies ofscale; In-house steel processing facilities; and Large customer base.
Please refer to Section 6.1 ofthe Prospectus for further details. (c) Future Plans to Provide Sustainable Growth OUf future plans are as follows: Construction of a new processing plant and warehouse; and Purchase of new machinery and equipment. Our Group’s future plans would provide us with the platform to grow our business. (d) Industry Prospects and Outlook As our trading and processing of steel products mainly consist of rolled steel products, our business prospects are also dependent on the general prospects and outlook of the rolled steel industry in Malaysia. The outlook of the rolled steel industry is dependent on the following factors: Performance of the rolled steel industry; Performance of main user industries; Economic conditions; Global prices of steel products; and Government initiatives.
6. BUSINESS OVERVIEW (Coni ‘d) Performance of the Rolled Steel Industry The performance of the rolled steel industry in recent years was as follows: Local Production of Rolled Steel Prodncts AAGR 2007-11 (%) Local Production of Hot-Rolled Long Steel Products . 0.5 Local Production of Hot-Rolled Flat Steel Products . -10.2 Imports and Exoorts of Rolled Steel Products AAGR 2008-12 (%)  Imports of Bars, Rods, Angles, Shapes and Sections Imports of Flat-Rolled Iron and Steel Products Exports ofBars, Rods, Angles, Shapes and Sections Exports of Flat-Rolled Iron and Steel Products  .. . .. ..  6.9 -3.4 -18.5 -13.2

(Source: IMR Report) Over the years Malaysia had experienced a decline in production of hot-rolled flat steel products, which may have affected exports of related products. Performance of Main User Industries The outlook of the rolled steel industry is dependent on the perfomlance of its main user industries. Growth in the perfomlance of the main user industries will also have a direct and positive flow-on effect to the rolled steel industry. The performance ofthe main user industries in recent years was as follows: AAGR of Main User Industries AAGR 2008-12 (%1 Automotive*  .  4.2  Construction,  .  13.3  Manufacturing  .  1.8  Imports of E&E Products  ..  -2.0  Exports of E&E Products  .  -2.5
Notes: * Based on sales value E& E Electrical and l~lectronic. (Source: IMR Report) 6. BUSINESS OVERVIEW (Con/’d) Economic Conditions A growing economy provides the impetus for private and public spending, which will have a positive flow-on effect on the rolled steel industry. • Between 2008 and 2012, real GDP of the Malaysian economy grew by an AAGR of 4.0%; In 2012, the Malaysian economy registered a real GDP growth of 5.6%; and As for 2013, real GDP for Malaysia is forecasted to grow between 5.0% and 6.0%. (Source: IMR Report) Global Prices of Steel Products The global prices of selected steel products in recent years were as follows: The global price of flat carbon steel products increased from USD 664 per tonne in December 2009 to USD 733 per tonne in December 2012, thereby increasing at an AAGR of3.4%; • The global price of long carbon steel products increased from USD 589 per tonne in December 2009 to USD 702 per tonne in December 2012, thereby increasing at an AAGR of 6.0%; The global price of stainless steel products (Grade 304) declined from USD 3,053 per tonne in December 2009 to USD 2,920 per tonne in December 2012, thereby registering a negative AAGR of 1.5%; and The global price of stainless steel products (Grade 316) declined from USD 4,325 per tonne in December 2009 to USD 4,159 per tonne in December 2012, thereby registering a negative AAGR of 1.3%. Fluctuations in global prices of steel products will affect the demand for rolled steel products whereby an increase in global prices of steel products may lead to a decline in demand for the said products in general including rol1ed steel products. A sustained increase in global steel prices may in tum affect operators who are involved in manufacturing, trading and processing of carbon steel and stainless steel. (Source: IMR Report) Government Initiatives Various initiatives undertaken by the Government would benefit operators within the rolled steel industry either directly or indirectly resulting from growth opportunities provided to the user industries. Some of the initiatives introduced by the Government include the following: On-going development of the five regional economic corridors -Iskandar Malaysia, Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor -signals a potential growth in the economy and property market, which would create demand for construction materials including rolled steel products, in these regions. 6. BUSINESS OVERVIEW (Cont’d) • Under the 10th Malaysia Plan, a number of development projects have been identified to be carried out during 2011 to 2015. Some of the development projects presented under the 10~ Malaysia Plan include the following:
Construction of an integrated transport terminal (lIT) in Gombak, Selangor; Development of live Universiti Teknologi MARA (UiTM) branch campuses; A total of 78,000 units of new affordable public housing units would be constructed by the Government; and Implementation of a mass rapid transit (MRT) system in Kuala Lumpur.

• In the 20 I3 Budget, various initiatives have been identified. Some of these initiatives include the following:
RMI billion is to be added to the Special Fund for the Building, Improvement and Maintenance of Schools project, which is in addition to the RMI billion allocated for this project in the 2012 Budget; Allocation of RMl.9 billion for the construction of 123,000 units of affordable houses; RM I00 million is allocated to the Ministry of Housing and Local Government for the rehabilitation of 30 abandoned housing projects
• Some of the plans that have been earmarked under the Economic Transfonnation Programme (ETP), which is a progressive framework identifying various economic sectors and strategies in transforming Malaysia into a high-income and developed nation by 2020, include the following:

The Greater Kuala LumpurlKlang Valley (KL/KV) development plan which contains various projects that are aimed at, among others, attracting multinational corporations (MNC), revitalising certain locations to enhance attractiveness for residential and commercial purposes and improving public transportation network systems; and Under the electrical and electronics banner, some of the aims include growing automation equipment manufacturing, building electricity transmission and distribution companies, and building an electrical home appliance manufacturing hub. These initiatives would provide growth opportunities for user industries such as the electrical and electronics, manufacturing, construction and infrastructure sectors, which would have a positive flow-on effect to the rolled steel industry. (Source: IMR Report) Based on our historical business performance, competitive advantages and future plans, our Board is of the view that these will serve as a platform to help facilitate growth opportunities and growth prospects of our Group in the long-term. Although the Board is also cognisant of the industry performance that indicated negative growth in local production ofhot-rolled flat steel products between 2007 and 2011, exports of flat-rolled iron and steel products between 2008 and 2012, and exports ofE&E products between 2008 and 2012, one of the main user industries for iron and steel, our past positive performances from FYE 31 December 2009 to 2012 whereby our revenue, GP, PBT and PAT has been growing at an AAGR of 7.15%,9.79%, 11.64% and 12.27% respectively indicates that we are able to achieve growth despite challenging market conditions. However, for FYE 31 December 2012, we experienced a drop in revenue, PBT and PAT due to a strategic decision to scale down on the trading of low margin products.

 

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