Industry Overview

6. INDUSTRY OVERVIEW 6. INDUSTRY OVERVIEW

Vital Factor Consulting Sdn Bhd (Company No.: 266797-T) 75C & 77C Jalan 5522/19 Damansara Jaya 47400 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel: (603) 7728-0248 Fax: (603) 7728-7248 Email: enquiries@vitalfactor.com Website: \WJW.vilalfaclor.com 19 April 2013 The Board of Directors Matrix Concepts Holdings Berhad 54B, Damai Complex Jalan Lumut 50400 Kuala Lumpur Dear Sirs Independent Assessment of Property Development Industry in Malaysia The following is an Independent Assessment of the Property Development Industry in Malaysia prepared by Vital Factor Consulting Sdn Bhd for inclusion in the Prospectus of Matrix Concepts Holdings Berhad (herein together with all or anyone or more of its subsidiaries will be referred to as “Matrix Concepts Group” or the “Group”) in relation to its listing on the Main Market of Bursa Malaysia Securities Berhad. 1. BACKGROUND AND INTRODUCTION • The principal business of Matrix Concepts Group is in the sales of land and property development. The focus of this report is on the property development industry.
• As most of Matrix Concepts Group’s developments are located in the state of Negeri Sembilan and Johor, this report will provide some focus on the Property Development Industry in these two states.
• Matrix Concepts Group’s main focus of its property development is on residential properties. However, over the last four financial years they were also involved in commercial properties and industrial plots. As such, this assessment will focus on the residential sector, and will also include some discussion on the commercial and industrial sectors of the overall Property Development Industry.

6. INDUSTRY OVERVIEW (Cont’li) O VITAL FACTOR CONSULTING ®Creating Wnning Business Solutions 2.1 Key Macroeconomic Indicators for Malaysia • Businesses, including Matrix Concepts Group, whose main market Is Malaysia, are affected by the economic well-being of the nation. This is commonly reflected in the country’s gross domestic product performance. Comparative Economic Indicators AAGR 2008 2009 2010 2011 2012 2008-12 Malaysia ……………. 4.8 (1.5) 7.2 5.1 5.6 4.0 US…………………….. (0.3) (3.1) 2.4 1.8 2.2 0.8 Euro zone…………… 0.3 (4.4) 2.0 1.5 (0.4) (0.4) China…………………. 9.6 9.2 10.4 9.2 7.8 9.2 India ………………….. 6.9 5.9 10.1 6.8 4.9 6.9 Indonesia …………… 6.0 4.6 6.2 6.5 6.0 5.8 Thailand …………….. 2.6 (2.3) 7.8 0.1 5.6 2.7 Vietnam ……………… 6.3 5.3 6.8 5.9 5.1 5.8
Note: All units in percentages; AAGR ~ Average Annual Growth Rate (Sources: Bank Negara Malaysia, International MonetaI}’ Fund (lMF)) • Overall, Malaysia’s key economic indicators showed a developing country governed by strong economic fundamentals with GOP growing at an average annual rate of 4.0% between 2008 and 2012. In 2012, the Malaysian economy registered a real GOP growth of 5.6% driven by resilient domestic demand despite the weak external environment. The strong performance in domestic demand stemmed from sound macroeconomic fundamentals, more diversified and balanced economic structure, stronger and developed financial system, and greater macroeconomic policy flexibility implemented in the country.
• In comparison to more advance economies like the US and Euro zone, Malaysia’s GOP performed better between 2008 and 2012. However, Malaysia’s GOP performance lags behind those of some Asian countries like China and Indonesia.

6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating VVinning Business Solution:s @ 3.1 Property Development Industry • The Property Development Industry may be broadly segmented into the following sectors: Structure ofthe Property Development Industry
CJ Matrix ConcrJpfs Group operates within lhasa sectors • Residential Properties are segmented into the following according to the type and cost of construction: Terraced House Single storey low-cost Single storey standard Double storey low-cost Double storey medium-cost/economy Double storey standard 2 to 3-storey Semi-Detached Low-cost Medium-cost Single storey Double storey 2 to 3-storey
Detached Single storey within housing estate Double storey within housing estate Individually-designed Flat/Apartment/Condominium Low-cost flat 1 -2 bedrooms 3 bedrooms or more
Land for residential development A subdivided lot for one house Single plot Small site
6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Winning Business Solutions ,,) • Commercial Properties are segmented into the following types: Office Purpose-built office block Office space in shop office Shop and Shopping Complex Prewar shop Postwar shop Retail lot in shopping complex Lock-up shop Vacant piot • Industrial Properties are segmented into the following types: Factory Warehouse Industrial complex Flatted factory Industrial sitelplot

• Agricultural/Rural Properties comprised the following: Estate land Forestry Kampong land Rubber Oil Palm Paddy Coconut Cocoa Pineapple Orchard/HorticultureNegetable.

• Development Land is segmented into the following: Residential Commercial Industrial Mixed

 

(Including land that is not converled or approved for higher use or converled but still not subdivided) • Leisure Properties include: Hotel Motel Resort Recreational park Golf course Marina
6. INDUSTRY OVERVIEW (Con/’ct)

 

3.2 Supporting Operations of Property Development • In general, the property development is mainly supported by two major operations: Supporting Operations of Property Development Building and
Supporting Construction Services
Building and Construction • Although the building and construction sector is an industry in its own right, it is a key part of the Property Development Industry, whereby building and construction is part of the process of developing the property.
• The BUilding and Construction Industry, through the use of labour, converts raw materials in the form of building materials, to various forms of buildings and infrastructures.
• There are three distinct types of building and construction activities as depicted in the diagram below:
Structure of the Building and Construction Sector
• Real estate constructions are focused on constructing physical buildings for habitation or commercial and industrial use.

 

6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Winning Business Solutions @ • Infrastructure constructions are focused on the bUilding of structures and facilities to enable an economy to operate effectively and efficiently, and to facilitate community living, development and advancement. Some of these structures include the foilowing:
roads and highways; utilities such as water supply system, sewerage system, telecommunications, power grid, and pipelines; major public structures like dams, bridges, airports, seaports, railways and mass transit systems.

• Construction of amenities is focused on the bUiiding of structures and faciiities for the comfort, convenience and leisure of the community. Some of these structures include the following:
community centres and clubs; parks; swimming pools; libraries; museums; theatres.

• Based on the above, the role of the Buiiding and Construction Industry is significant to the overall development of the nation.

Supporting Services • Supporting services that are focused on the buiiding and construction sector
include the following: Civil and structural engineering; Mechanical and electrical engineering; Mineral, mining, soil and geotechnicai; Quantity surveying; Land surveying; Landscaping.

• Some supporting services are also directly relevant to the Property

Development Industry. Some of these services include: Town planning; Environmental impact consultant; Architectural; Interior designing; Legal; Estate valuation; Project management; Market research; Advertising and promotions; Real estate sales.
6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING @ Creating Winning Business Solutions 4. SUPPLY CONDITIONS • Matrix Concepts Group is a developer of residential properties and commercial properties focusing on shop units in Negeri Sembilan and Johor, which will form the focus of this section of the assessment.
• Matrix Concepts Group is also involved in the selling of industrial plots and development and agricultural land.

4.1 Supply -Residential Properties 4.1.1 Malaysia Current Supply of Residential Properties in Malaysia AAGR  2008-12  Existing Stock..  2008 4,220.5  2009 4,338.6  2010 4,446.1  2011 4,548.0  2012 4,620.2  % 2.3  Growth rate (%) Completed Units……  3.9 136.9  2.8 103.3  2.5 99.9  2.3 65.9  1.6 72.2  (14.8)  Growth rate (%). ……  (24.4)  (24.5)  (3.4)  (34.0)  9.6
Note: All values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministl)’ of Finance)
Future Supply of Residential Properties in Malaysia AAGR I 2008·12  2008  2009  2010  2011  2012  %  Incoming Supply…….  557.5  538.9  533.6  553.8  620.0  2.7  _Growth rate (%) ……..  (2.8)  (3.3)  (1.Q1  3″‘.-o8__1.,.1-“‘.9’-!  _  Housing Starts……….  298.1  86.7  84.5  115.6  138.3  (17.5)  Growth rate (%)……..  122.6  (70.9)  (2.6)  __3_._6.,..8  …1-09…7+__  Planned Supply……..  665.5  667.9  676.5  596.1  599.7  (2.6)  Growth rate (%) ……..  (0.2)  0.4  1.3  (11.9)  0.6
Note: All values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministl)’ ofFinance)
• Between 2008 and 2012, the number of completed residential properties in Malaysia registered a declining AAGR of 14.8%. In addition, the number of housing starts for residential properties also declined at an AAGR of 17.5% between 2008 and 2012. 6. INDUSTRY OVERVIEW (Cont’ct) A VITAL FACTOR CONSULTING Creating VVinning Business Solutions ® 4.1.2 Negeri Sembilan Current Supply of Residential Properties in Negeri Sembilan I AAGR 2008-12  2008  2009  2010  2011  2012  %  Existing Stock ………..  227.3  230.7  232.6  233.9  236.1  0.9  Growth rate (%) ……..  59.6  1.5  0.8  0.5  0.9  Completed Units …….  2.6  3.4  2.0  1.4  2.2  (4.7)  Growth rate (%) ……..  (32.2)  30.8  (42.2)  (29.5)  54.5
Note: All values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance)
Future Supply of Residential Properties in Negeri Sembilan AAGR  2008·12  2008  2009  2010  2011  2012  %  Incoming Suppiy …….  61.1  61.1  63.8  60.2  63.6  1.0  Growth rate (%)=  0.5  0.1  4.4  (5.6)  5.6  Housing Starts ……….  184.6  3.3  4.5  4.2  5.5  (58.4)  Growth rate (%) ……..  4,083.1  (98.2  33.8  5.3)  31.5  Planned Supply ……..  108.4  107.0  104.8  93.0  91.9  (4.0)  Growth rate (%) ……..  (0.3)  (1.3)  (2.0)  (11.3)  (1.1)
Note: All values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance)
• In Negeri Sembiian, the number of completed residential properties has been declining at an AAGR of 4.7% from 2008 to 2012. However, the number of incoming supply has registered AAGR of 1.0% between 2008 and 2012. Matrix Concepts Holdings Berhad Page 8 of 52 Industry Assessment 167 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ~_\ Creating VVinning Business Solutions <;fl, 4.1.3 Johor Current Supply of Residential Properties in Johor 2008 2009 2010 2011 2012 Existing Stock……….. 648.9 662.9 674.5 682.6 692.9 Growth rate (%)…….. 107.6 2.1 1.8 1.2 1.5 Completed Units……. 16.6 13.7 12.5 8.1 10.3 Growth rate (%)…….. (23.4) (17.1) (9.0) (35.4) 27.1 Note: Aft values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministry ofFinance) Future Supply of Residential Properties in Johor 2008 2009 2010 2011 2012 Incoming Supply…….
Growth rate (%)……..
Housing Starts……….
Growth rate (%) Pianned Supply……..
Growth rate (%)……..
63.4 67.3 74.5 89.7 100.3 (1.7) 6.2 10.8 20.3 11.9 13.7 12.3 15.7 19.4 20.9 2.4 (10.0) 27.3 23.7 8.0 149.3 151.2 146.7 149.1 152.6 2.5 1.3 (3.0) 1.6 2.3 AAGR 2008-12 %) (11.3) AAGR 2008-12 % 12.2 11.3 0.5 Note: Aft values in ‘000 units, except percentages. (Source: Valuation and Property Services Department, Ministry ofFinance)
• In the state of Johor, the number of completed residential properties has been declining at an AAGR of 11.3% from 2008 to 2012. However, the numbers of incoming supply, housing starts and pianned supply have registered positive AAGR growth in the same period. 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULT1NG @ Creating ‘Mnning Business Solutions 4.2 Supply -Commercial Properties 4.2.1 Malaysia Current Supply of Shop Units in Malaysia 2008 2009 2010 2011 2012 Existing Stock……….. 344.5 357.0 367.3 371.7 379.0 Growth rate % …….. 3.4 3.6 2.9 1.2 2.0 Completed Units ……. 20.5 9.0 8.1 6.4 7.3 Growth rate (%)…….. 93.2 (56.0) (9.7) (21.2) 14.1  AAGR 2008-12 % 2.4 (22.7)
Note: All values in ‘000 units, except percentages. (Source: Valualion and Property SeMces Department, Ministry of Finance)
Future Supply of Shop Units in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 Incoming Supply……. 49.3 47.9 47.6 51.1 59.0 Growth rate (%) …….. 9.3 (2.9) (0.5) 7.3 15.4 Shop Unit Starts ……. 12.1 5.6 8.2 12.1 15.2 Growth rate (%) …….. 9.4 (53.7) 46.5 48.1 25.1
%)  4.6  5.9
Planned Supply …….. 56.1 58.3 60.5 53.6 55.9 (0.1) Growth rate (%) …….. 1.1 3.9 3.9 (11.5) 4.4
Note: All values in ‘000 units, except percentages. (Source: Valuation and Property SeMces Department, Ministry ofFinance)
• Between 2008 and 2012, the number of incoming supply and shop unit starts has registered positive AAGR. • However, the number of completed shop units in Malaysia has been declining at an AAGR of 22.7% during the same period. Nevertheless in 2012, the number of completed shop units in Malaysia grew by 14.1 %. Matrix Concepts Holdings Berhad Page 10 of 52 Industry Assessment 169 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ,j) Creating ‘Mnning Business Solullo”s 4.2.2 Negeri Sembilan Current Supply of Shop Units in Negeri Sembilan 2008 2009 2010 2011 2012 Existing Stock 17,955 18,105 18,139 16,814 17,148 Growth rate (%)…….. 1.8 0.8 0.2 (7.3) 2.0 Completed Units 323 150 34 107 334 Growth rate (%)…….. 97.0 (53.6) (77.3) 214.7 212.1 Note: All values in units, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance) Future Supply of Shop Units in Negeri Sembilan . 2008 2009 2010 2011 2012 Incoming Supply……. 3,338 3,238 3,310 3,205 3,917 Growth rate (%) …….. –.16.8) (3.0) 2.2 (3.2) 22.2 Shop Unit Starts ……. 28 50 98 300 1,046 Growth rate (%) …….. (71.1) 78.6 96.0 206.1 248.7 Planned Supply …….. 7,669 7,861 8,455 8,179 8,552 Growth rate (%) …….. 3.0 2.5 7.6 (3.3) 4.6 Note: All values in units, except percentages. (Source: Valuation andPropertyServicesDepartment, Ministry ofFinance) AAGR 2008·12 (%) (1.1 ) AAGR 2008·12 %  4.1  147.2
• Between 2008 and 2012, the number of completed shop units in Negeri Sembilan grew by an AAGR of 0.8%. In addition, the number of shop unit starts has registered a strong AAGR of 147.2% during the same period. In 2012, the number of shop unit starts grew by 248.7% to 1,046 units. Matrix Concepts Holdings Berhad Page 11 of 52 Industry Assessment 170 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING @ Creating \Mnning Business Solutions 4.2.3 Johor Current Supply of Shop Units in Johor AAGR 2008-12 2008 2009 2010 2011 2012 % Existing Stock……….. 64,310 65,956 67,229 67,704 68,574
1.6 Growth rate (%)…….. 2.7 2.6 1.9 0.7 1.3
Completed Units……. 1,680 460 1,248 475 870
(15.2) Growth rate (%)…….. 9.0 (72.6) 171.3 (61.9) 83.2 Note: All values in units, except percentages. (Source: Vaiualion and Property Services Department, Ministry of Finance) Future Supply of Shop Units in Johor AAGR 2008-12 2008 2009 2010 2011 2012 Incoming Supply ……. 7,995 8,059 8,429 10,332 12,313
Growth rate (%) …….. 4.4 0.8 4.6 22.6 19.2
Shop Unit Starts ……. 1,930 1,202 1,482 2,606 2,851
Growth rate % …….. (14.3 37.7) 23.3 75.8 9.4
_.-­%  11.4  10.2
Planned Supply …….. 14,772 14,102 14,169 14,881 14,136 (1.1 )
Growth rate (%) …….. (2.1) (4.5) 0.5 5.0 (5.0) Note: All values in units, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance) • Between 2008 and 2012, growth in the number Df cDmpleted units fluctuated widely with 2009 experiencing a large fall in line with the fall in Malaysia’s GDP in the same year. In 2010, there was a surge in cDmpleted units tD cDmpensate fDr the slDwdDwn in 2009. HDwever, the number Df cDmpleted units recDrded a decline Df 61.9% in 2011. • IncDming supply and shDp unit starts shDwed significant increase in 2011, and grew further in 2012.
6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING
5. SUPPLY DEPENDENCIES 5.1 Input Materials • Building materials are the inputs for the building and construction sector that supports the property development industry. As such, the supply and cost of bUilding materials have a direct impact on the property development industry.
• The main input building materials are as follows: Cement (including Portland Cement and Asbestos Cement); Concrete Products (including ready-mixed concrete, bricks, blocks, roofing tiles, piles, poleslposts, beams, and culverts); Clay and Refractory Construction Materials (inciuding refractory bricks, clay roofing tiles, ceramic wall and floor tiles, clay pipes, and ceramic sanitary ware); Iron and Steel Products (including long products, flat rolled products, iron and steel bars and rods, and tubes and pipes, iron and steel angles, shapes and sections, hot rolled and cold rolled coil); Non-Ferrous Metals (including aluminium extrusions for windows and doors. curtain walls, aiuminium panels, and aluminium roofing); Wood and Wood Products (inclUding plywood, hardwood, veneer, particle board, block board, mouldings and builders’ carpentry and joinery, and reconstituted wood based panel).

Local Production of Cement and Concrete Materials AAGR 2008-12 2008 2009 2010 2011 2012 % Cement (‘000 tonnes) …….. 19,629 19,457 19,762 21,198 21,726 2.6 Growth rate (%) …………….. (10.4) (0.9) 1.6 7.3 2.5 Ready-mix concrete (‘000 cu metre) ……………… 9,910 7,465 7,932 10,934 13,082 7.2 Growth rate (%) …………….. (4.7) (24.7) 6.2 37.8 19.6 (Source: Department of Statistics) • Between 2008 and 2012, local production of cement increased at an AAGR of 2.6% while local production of ready-mix concrete increased at an AAGR of 7.2%. Matrix Concepts Holdings Berhad Page 13 of 52 Industry Assessment 172 I 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating VVinning Business Solutions ® Local Production of Clay and Refractory Construction Materials AAGR  2008-12  2008  2009  2010  2011  2012  %  Earthen bricks (million units)……….  952  203  410  621  706  (7.2)  ____G”rowth’-ra=te’j(L”%”L)”‘  “‘  ,..,  “‘  “‘  “‘.. __4,-o. ~,-,78,,-.7’L)__1..0C”c2..-2__ 51.4 _—-“13″‘.8  ,  Ceramic tiles (‘000 sq metre)  85,778  79,730  85,644  82,086  90,699  1.4  Growth rate (%)…………………………  (1.8)  (1.1)  7.4  (4.2)  10.5
(Source: Department of Statistics) • Between 2008 and 2012, local production of earthen bricks registered a negative AAGR of 7.2%. On the other hand, local production of ceramic tiles increased at an AAGR of 1.4% during the same period. Local Production of Basic Iron and Steel Products AAGR  2008·12  2008  2009  2010  2011  2012  %  Basic Iron and Steel Products  (RM Million)  ..  28,431  16,408  19,638  22,094  23,272  (4.9)  Growth rate (%)  .  22.9  (42.3)  19.7  12.5  5.3
(Source: Department of Statistics) • Between 2008 and 2012, sales value for the manufacturing of basic iron and steel products declined at an AAGR of 4.9%. Local Production of Non-Ferrous Metals AAGR 2008-12 2008 2009 2010 2011 2012 % Other basic precious and non­ferrous metals (RM Million)………. 7,611 4,243 5,941 6,886 6,166 (5.1) Growth rate (%) 13.3 (44.2) 40.0 15.9 (10.5) (Source: Department of Statistics) • Between 2008 and 2012, sales value for the manufacturing of other basic precious and non-ferrous metals declined at an AAGR of 5.1 %. I 6. INDUSTRY OVERVIEW (Cont’d)
Local Production of Wood and Wood Products AAGR 2008-12 2008 2009 2010 2011 % Plywood (‘000 cu metres) 4,558 3,655 4,095 3,797 (5.3) (7.8) (7.3)Growth rate (%) :”.~..~(19.8) 12.0’=–‘-‘=”‘-__=’-‘–1-­..~._==—‘==__Veneer sheets (‘000 cu metres) . 948 754 1,017 912
(2.1) Growth rate (%) ~~..~~..~.._=’-“(19.4~0.5) 34.9 (10.3) Laminated board, particleboard and other panels and board (RM million) . 1,831 1,561 1,669 1,901 1,845 0.2 Growth rate (%) . (6.4) (14.7) 6.9 13.9 (2.9) (Source: Department of Statistics) • Between 2008 and 2012, locai production of wood and wood products have been in a downward trend with the exception of laminated board, particleboard and other panels and boards, which registered a slight increase in AAGR at 0.2%. 5.2 Property Development Industry • One of the Property Development Industry’s most critical supply dependencies is the availability of financial resources to carry out property development activities, including the purchase of land and the financing of building and construction activities, As such, access to loans is one the main supply dependencies required to sustain business activities in the Property Development Industry. Loans to Construction Industry AAGR 2008·12 2008 2009 2010 2011 2012 % Total (RM Million) 34,592 36,554 38,476 39,928 44,153 6.3 Growth rate (%) 7.6 5.7 5.3 3.8 10.6 Residential Property (RM Million) 7,520 9,076 8,383 7,979 9,397 5.7 ._Growthmte (%)………. (4.5) 20.7 ~6) (4.8) 17″”.8+-__ Commercial Complexes (RMMillion) 3,410 3,160 3,105 3,077 4,034 4.3 Growth rate (%)………. (3.1) (7.3) (1.7) (0.9) 31.1 (Source: Vaiuation and Property Services Department, Ministry of Finance) 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Wnning Business Solutions @ • In Malaysia, the loans to the construction industry grew at an AAGR of 6.3% between 2008 and 2012. In 2012, the loans to the construction of residential property and commercial complexes represented 21.3% and 9.1 % of the total loans to construction sector respectively. 6. DEMAND 6.1 Residential Property Sector Residential Property Sector in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 % Value of transactions (RM Million) ……………. 41,304 41,848 50,654 61,832 67,762 13.2 Growth rate (%) ………. 13.2 1.3 21.0 22.1 9.6 No of transactions …… 216,702 211,653 226,874 269,789 272,669 5.9 Growth rate (%) ………. 8.6 (2.3) 7.2 18.9 1.1 (Source: Valuation and Property Services Department, Ministry of Finance) • Between 2008 and 2012, the value and number of residential property transactions have registered AAGR of 13.2% and 5.9% respectively. The growing demand for residential property will augur well for property developers in Malaysia.
• In 2012, the total value of residential property transactions accounted for 47.4% of all property transactions by value during the year. ThUS, residential property transactions were the largest in terms of value.
• In 2012, the total volume of residential property transactions accounted for 63.8% of all property transactions by volume during the year.

Matrix Concepts Holdings Berhad Page 16 of 52 Industry Assessment 175 I I6.  INDUSTRY OVERVIEW (Cont’d)  OVITAL FACTOR CONSULTING ‘R’ Creating WInning Business Solutions .Y  Residential Property Sector in Negeri Sembilan 2008 2009 2010 2011 2012 Value of transactions (RM Million)…………….. 1,227 946 1,198 1,877 2,536 Growth rate (%)……….. (9.8) (22.9) 26.6 56.7 35.1  AAGR 2008·12 % 19.9
No. of transactions …… 9,717 7,903 10,252 13,183 14,935 Growth rate (%)……….. (8.4) (18.7) 29.7 28.6 13.3 (Source: Valuation and Property Services Department, Ministry ofFinance) • Between 2008 and 2012, the value and number of residential property transactions in Negeri Sembilan have registered AAGR of 19.9% and 11.3% respectively.
• In 2012, the total value of residential property transactions in Negeri Sembilan accounted for 48.3% of all property transactions by value during the year. Thus, residential property transactions were the largest in terms of value.
• In 2012, the total volume of residential property transactions in Negeri Sembilan accounted for 64.4% of all property transactions by volume during the year.

Residential Property Sector in Johor AAGR 2008-12 2008 2009 2010 2011 2012 % Value of transactions (RM Million) 3,209 3,837 4,481 5,084 5,688 15.4 Growth rate (%)………. (2.4) 19.6 16.8 13.5 11.9+­__ No of transactions 23,589 25,828 26,863 31,084 28,849 5.2 Growth rate (%) (1.6) 9.5 4.0 15.7 –,-“7″”.2oLl_ (Source: Valuation and Property Services Department, Ministry ofFinance)  •  Between 2008 and 2012, the value and number of residential property transactions in Johor have registered AAGR of 15.4% and 5.2% respectively.  •  In 2012, the total value of residential property transactions in Johor accounted for 33.9% of all property transactions by value during the year. Thus, residential property transactions were the largest in terms of value.
Matrix Concepts Holdings Berhad Page 17 of 52 Industry Assessment 176 6. INDUSTRY OVERVIEW (Cont’d) O VITAL FACTOR CONSULTING Creating Winning Business Solutions @ • In 2012, the total volume of residential property transactions in Johor accounted for 58.5% of all property transactions by volume during the year.
• The high value and volume of transactions for residential properties in Malaysia will stimulate the growth of property developers who focus on the development of residential properties.

6.2 Commercial Property Sector Commercial Property Sector in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 % Value of transactions (RM Million) ……………. 16,616 16,389 23,840 27,636 27,792 13.7 Growth rate (%) ………. 1.6 (1.4) 45.5 15.9 0.6 No of transactions …… 31,749 33,338 39,798 43,674 41,082 Growth rate (%) ………. 13.8 5.0 19.4 9.7 5.9 (Source: Valuation and Property Services Department, Ministry of Finance) • Between 2008 and 2012, the value and number of commercial property transactions in Malaysia have registered AAGR of 13.7% and 6.7% respectively.
• The commercial property segment was the second largest contributor to the total value of property transactions in Malaysia. In 2012, the value of commercial property transactions amounted to RM27.8 billion, accounting for 19.5% of all property transactions during the period.

I 6. INDUSTRY OVERVIEW (Cont’d)
Commercial Property Sector in Negeri Sembilan  AAGR  2008-12  2008  2009  2010  2011  2012  %  Value of transactions  (RM Million) …………….  475  477  787  1,016  966  19.4
Growth rate (%) ………. (1.9) 0.4 65.0 29.1 4.9 No oltransaetions …… 1,601 1,520 1,941 2,311 2,410 Growth !ate (%) ………. 5.2 (5.1) 27.7 19.1 4.3
(Source: Valuation and Property SeNices Department, Ministry ofFinance) • Between 2008 and 2012, the value and number of commercial property transactions in Negeri Sembilan have registered AAGR of 19.4% and 10.8% respectively.
• In 2012, the value of commercial property transactions in Negeri SembiIan accounted for 18.4% of ali property transactions during the period.

Commercial Property Sector in Johor AAGR  2008·12  2008  2009  2010  2011  2012  %  Value of transactions  (RM Million)  1,507  1,673  2,231  2,842  2,989  18.7  Growth rate (%)……….  (22.6)  11.0  33.4  27.4  5.2__.  _  No oftransaetions ……  3,692  4,309  5,161  5,427  4,630  5.8  Growth rate (%)……….  (4.9)  16.7  19.8  5.2  14.7
(Source: Valuation and Property SeTYices Department. Ministry ofFinance)  •  Between 2008 and 2012, the value and number of commercial property transactions in Johor have registered AAGR of 18.7% and 5.8% respectively.  •  In 2012, the value of commercial property transactions in Johor accounted for 17.8% of ali property transactions during the period.
I 6. INDUSTRY OVERVIEW (Cont’d)
6.3 Development and Industrial Properties Industrial Transactions in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 (%) Value of transactions (RM Million) ……………. 7,897 6,833 9,830 11,542 12,006 11.0 _ GrowtlJ~ate (~) ………. 11.5 (13.5) 43.9 17.4 4.0 No of transactions …… 8,126 8,059 9,838 10,479 9,984 5.3 Growth rate (%) ………. 2.6 (0.8) 22.1 6.5 (4.7 (Source: Valuation and Property Services Department, Ministry of Finance) Development Transactions in Malaysia I AAGR 2008·12 2008 2009 2010 2011 2012 (%) Value of transactions \ (RMMillion)……………. 14,009 7,589 11,611 17,978 20,955liO.6 . Growth rate (%)………. 36.0 (45.8) 53.0 54.8 16.6 _ Nooftransactions 14,702 15,664 18,922 21,713 23,029 11.9 Growth rate (%) 5.2 6.5 20.8 14.8 6.1 (Source: Valuation and Property Services Department, Ministry ofFinance) • The value and number of transactions for industrial and development properties in Malaysia have registered strong growth rates in the last five years. 6. INDUSTRY OVERVIEW (Cont’d) 0 ..~r~:~;V:~~~~~e:?o~:~L TING “, Industrial Transactions in Negeri Sembilan AAGR 2008-12 2008 2009 2010 2011 2012 (%) Value of transactions (RM Million) ……………. 176 238 398 383 586 35.1 Growth rate (%) ………. (14.1) 35.2 67.2 (3.7) 52.9 No of transactions …… 389 426 498 536 619 12.3 Growth rate (%) ………. (6.0) 9.5 16.9 7.6 15.5 (Source: Valuation and Property SeNices Department, Ministry ofFinance) Development Transactions in Negeri Sembilan AAGR 2008-12 2008 2009 2010 2011 2012 (%) Value of transactions (RM Million) 243 189 318 436 437 15.8 Growth rate (%)………. 50.9 (22.2) 68.3 37.1 0.2 No ottransactions …… 453 455 681 770 814 15.8 Growth rate (%)……… (0.4) 0.4 49.7 13.1 5.7 (Source: Valuation and Property Services Department, Ministry ofFinance) • The value of transactions for industrial property in Negeri Sembilan has registered stronger AAGR growth as compared to the development property between 2008 and 2012. Industrial Transactions in Johor AAGR 2008·12 2008 2009 2010 2011 2012 (%) Value of transactions (RM Million) ……………. 849 939 1,670 1,463 2,199 26.9 _Growth rate (%) ………. (9.8) 10.6 77.8 12.4 50.2 No ot transactions …… 905 1,099 1,518 1,342 1,302 9.5 Growth rate (%) ……….. (14.9) 21.4 38.1 .-~. (3.0) , (Source: Valuation and Property Services Department, Ministry ofFinance)
6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING
Development Transactions in Johor AAGR  2008·12  2008  2009  2010  2011  2012  (%)  Value of transactions  (RM Million)  4,733  931  1,210  3,449  2,372  (15.9)  Growth rate (%)……….  427.1  (80.3)  30.0  185.1~1.2)  No oflransactions  1,816  1,558  1,996  2,850  2,859  12.0  Growth rate (%)  6.0  (14.2)  28.1  42.8  0.3
(Source: Valuation and Properly Services Deparlment, Ministry of Finance) • Between 2008 and 2012, the value of industrial property transactions in Johor grew by 26.9% while the number of industrial property transactions grew at an AAGR of 9.5%. During the same period, the value of development property transactions in Johor registered a negative AAGR of 15.9% despite a positive AAGR of 12.0% in the number of development property transactions. 7. DEMAND DEPENDENCIES • Demand for property development in general is dependent on population growth particularly for residential properties as well as availability of loans to facilitate property investment and transactions. 7.1 Population PopUlation Size AAGR 2010-12 2010 2011 2012 % Malaysia 28.59 28.96 29.34 1.3 -Negeri Sembi/an………….. 1.03 1.04 1.06 1.3 A-Johor…………………………. 3.36 3.40 3.44 1.1 All units in million persons. except percentages. (Source: Deparlment of Statistics) • The continuing growth in the Malaysian population will drive demand for properties, particUlarly residential properties. Matrix Concepts Holdings Berhad Page 22 0(52 Industry Assessment 181 6. INDUSTRY OVERVIEW (Cont’d)
7.2 Loans • One of the most critical demand dependencies, especially for the residential property sector, is the amount of loans given to buyers. Availability of loans are predicated by many factors including the following from the lenders’ perspective: Liquidity in the market; Financial institutions’ internal leading policies; Government policies; Bank Negara Malaysia policies and gUidelines.
Loans to Relevant Sectors in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 % Property Sector 318,817 352,603 405,870 469,913 541,885 14.2 ~rowth rate (%)………. 13.1 10.6 15.1 15.8 15.3 Purchases of residential property ….. 191,141 209,701 237,458 268,845 303,369 12.2 Growth rate (%)………. 10.4 9.7 13.2 13.2 12.8 Purchases of non­residential property….. 66,541 73,954 90,738 109,964 131,375 18.5 Growth rate (%)………. 21.1 11.1 22.7 21.2 19.5 Note: All units are in RM miliion, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance)
Loans for the Purchase of Residential Property in Malaysia AAGR 2008-12 2008 2009 2010 2011 2012 Low medium-cost ………. 10,377 10,045 9,565 8,996 8,758 Growth rate (%) …………. (4.1) (3.2) (4.8) (5.9) (2.6) Medium-cost……………… 21,704 20,979 20,490 19,828 19,197 Growth rate (%_=,,__~2.3) (3.3) (2.3) (3.2) (3.2) Higher medium-cost …… 28,593 30,085 30,812 31,080 30,935 ~rowth rate (%) …………. 2.2 5.2 2.4 0.9 (0.5) %  (4.2)  (3.0) –~. 2.0
._~-­High-cost ………………….. 129,277 147,540 175,022 206,674 241,034 16.9 Growth rate (%) …………. 16.7 14.1 18.6 18.1 16.6
Note: All units are in RM million, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance)
• Between 2008 and 2012, loans for the purchases of low medium and medium-cost residential properties have declined. However, the loans for the purchases of higher medium and high-cost residential properties have increased. 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ,_, Creating Wnning Busjness Solutions “” Loans for the Purchase of Non-Residential Property in Malaysia AAGR  2008-12  2008  2009  2010  2011  2012  %  Land ……………………..  13,520  14,164  18,271  23,936  28,172  20.1  Growth rate (%) ……….  32.6  4.8  29.0 .  31.0  17.7  Shops…………………….  28,602  32,464  38,574  44,655  51,915  16.1  Growth rate (%) ……….  15.9  13.5  18.8  15.8  16.3
Note: All units in RM million, except percentages. (Source: Valuation and Property Services Department, Ministry of Finance)
• Between 2008 and 2012, the loans to purchase land and shops in Malaysia have registered strong AAGR of 20.1% and 16.1% respectively.
• The continuing growth in the loans for the purchase of residential and commercial properties will continue to support demand for such properties, and sustaining property developers who are developing these types of properties.

B. COMPETITIVE ANALYSIS 8.1 Nature of Competition in the Industry • The competitive nature of the Property Development Industry within the
residential sector can be segmented into two categories: Government Mandated Low-Cost Housing; Non-Government Mandated Housing.
• Government mandated low-cost housing is not subjected to competitive forces, but is regarded as Universal Service Obligations required of property developers.
• Development of non-government mandated housing is subjected to normal competitive conditions.
6. INDUSTRY OVERVIEW (Cont’d)
• Development of non-residential properties is also subjected to normal competitive conditions.
• The competition in the Property Development Industry is predicated by the number of players in the industry:

 

As at 28 February 2013, the Real Estate and Housing Developers’ Association of Malaysia had approximately 1,000 members, most of which were property developers. In 2010, there were 22,140 establishments in the construction industry of which: 3,989 were in Residential Construction; 4,970 were in Non-residential Construction. (Source: Department of Statistics) 8.2 Factors of Competition • As with most free enterprise environments, competition among non-government mandated housing ;s based on a number of factors, including, among others: Location; Quality of development; Track record and reputation of developer; Branding. Location • Location is a key factor of competition. Properties located in growth areas, close to amenities and are highly sought after would be in greater demand and would normally command higher pricing. Quality of Development • The quality of development is an important factor of competition. Quality also affects the reputation of developers, which may have an Impact on the take­up rates of their future developments. In addition, buyers also seek properties where their quality commensurate with pricing. As such, quality of development is important for developers to command higher prices to enhance profits. Track Record and Reputation of Developer • A developer with a proven track record and established reputation provides confidence to buyers on the quality of its developments as well as the confidence that its developments will be compieted in a timely manner. In addition, track record and reputation are also beneficial for property developers in bUilding up reference sites. Matrix Concepts Holdings Berhad Page 25 of 52 Industry Assessment 184 6. INDUSTRY OVERVIEW (Cont’d)
Branding • With a large number of property developers in Malaysia, branding is important for property developers to differentiate themselves from competitors and to create awareness among buyers. In addition, a strong brand name creates a direct positive impact on the properties. 8.3 Operators in the Industry • As at 28 February 2013, there were approximately 50 and 110 property developers in Negeri Sembilan and Johor respectively that are registered with the Real Estate and Housing Developers’ Association of Malaysia. However, there are many other property developers in Negeri Sembilan and Johor that are not registered with the Association, and these are mainiy smalier operators or opportunistic operators that may develop smali-scale properties on an ad-hoc basis.
• Competition within the Property Development Industry in Malaysia occurs in various forms. Among others, these include different sectors of property development such as residential, commercial, industrial, agricultural, deveiopment land and leisure. Within the residential and commercial sectors, there are various areas of competition in terms of size, price range and types of properties, such as condominiums, terraced houses and bungalows for residential properties. As for commercial properties, there are shop offices, multipurpose offices and shopping complexes.
• For residential property development, there are many players competing in this sector. In addition, some of them may also undertake other related and non-related activities. Some of these activities related to property development may include, among others, in-house engineering and architectural design, building and construction, interior design as weli as property management.
• As at 28 February 2013, some of the players involved in residential property development in Negeri Sembilan include the foliowing (listed in alphabeticaliy order):

Bagan Pinang Development Sdn Bhd; Dataran Segar Sdn Bhd; GO Development Sdn Bhd; GUH Properties Sdn Bhd (subsidiary of GUH Holdings Bhd); IJM Land Berhad; KGG Development (M) Sdn Bhd; Labuhills Properties Sdn Bhd; Matrix Concepts Group; Mega 3 Housing Sdn Bhd; Nilai Resources Group Sdn Bhd; Seri Pajam Development Sdn Bhd; Seriemas Development Sdn Berhad (holding company is PNB Deveiopment Sdn Bhd, which is a SUbsidiary of Permodaian Nasional Berhad);
Matrix Concepts Holdings Berhad Page 26 of 52 Industry Assessment 185 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ,_, Creating Wnning Business Solutions “” Sime Darby Group; Sunrise MCl land Sdn Bhd; TH Properties Sdn Bhd (subsidiary of Lembaga Tabung Haji).
Note: This is not an exhaustive list. (Source: Vital Factor Consulting Sdn Bhd)
• As at 28 February 2013, some of the players involved in residential property development in Johor include the following (listed in alphabetically order): BCB Bhd; Bandar Raya Developments Bhd; Berinda Properties Group; Binaik Equity Bhd; Country View Bhd; Crescendo Corporation Bhd; Daiman Development Bhd; Danga Bay Sdn Bhd; Uniphoenix Jaya Sdn Bhd (subsidiary of Fiamma Holdings Bhd); Focal Aims Holdings Bhd; Glomac Bhd; Horizon Hills Development Sdn Bhd; Hua Yang Bhd; IJM land Bhd; 101 Properties Bhd; Johor land Bhd; KCC Development (M) Sdn Bhd; KSl Holdings Bhd; Mah Sing Group Bhd; Mahabuilders Bhd; Malaysia land Properties Sdn Bhd; Matrix Concepts Group; Melati Ehsan Holdings Bhd; Muipha International Bhd; Plenitude Bhd; S P Setia Bhd; Scientex Bhd; Scudai Development Sdn Bhd; Southern Gateway (M) Sdn Bhd; Tanah Sutera Development Sdn Bhd; UEM land Holdings Bhd; United Malayan land Bhd. Note: This is not an exhaustive list. (Source: Vital Factor Consulting Sdn Bhd)
6. INDUSTRY OVERVIEW (Cont’d)
9. GOVERNMENT REGULATIONS 9.1 Different Levels of Government • The Property Development Industry is regulated at 3 levels of authority: Federal Government; State Government; Local Government.
• The Federal Government regulates on matters such as: control and licensing of developers; protection of environment; formulation of national housing policy; control of foreign investment.

• The State Government has sole jurisdiction over land matters covering issuance of titles; conversion; amalgamation and subdivision; imposition of conditions for foreign ownership of property.
• The Local Government administers all aspects of: bUilding plans approval; building inspection; and provides maintenance service of infrastructure such as roads and street lighting, refuse disposal, etc.
• The principal submitting person (PSP) of a building plan, a professional architect, engineer or bUilding draftsman of the project, is responsible for the issuance of the certificate of completion and compliance (CCG). However, the Local Government may inspect the building site at any time and has the authority to issue written notice to PSP to rectify any non-compliance or withhold the issuance of CCC until such non-compliance is rectified.
• Before starting any project, the developer is required to obtain the following

license and permit from the Ministry of Housing and Local Government: Housing Developer Licence; Advertisement and Sales Permit. 9.2 Low Cost Housing Policy • Since 1982, the Malaysian government has imposed a 30% quota for low cost housing as a social obligation by developers to complement the efforts of the government to provide affordable housing for all. However, the policy varies across states and is governed by the relevant state government and local authorities. 6. INDUSTRY OVERVIEW (Cont’d)
9.2.1 Negeri Sembilan • In Negeri Sembilan, housing developers are required to provide low cost housing as follows: For projects on private land with development area of more than five acres, at least 30% of the total number of units developed has to be low-cost; For projects on private land with development area of less than five acres, at least 10% of the total number of units developed has to be low-cost single storey house with a minimum area of 20′ x 60′ for each unit. • However, application for reduction or exemption from the low cost housing policy will only be approved on a case-by-case basis. If the application is approved, the payment for the relevant reduction or exemption are as follows: For projects approved before 21 June 2006, developers have to pay RM5,000 for each unit that are exempted; For projects approved after 21 June 2006, developers have to pay RM500 per unit multiplied by the number of units of the development. (Source: Negeri Sembi/an State Secretariat Office) 9.2.2 Johor • In Johor, housing developers are required to provide low cost housing as follows: For projects with development area of more than five acres, 40% of the number of units have to be low-cost; For projects with development area between three and five acres, 20% of the number of units have to be low-cost; For projects with development area of less than three acres, they are exempted from the low-cost housing policy. 6. INDUSTRY OVERVIEW (Cont’d)
• In addition, the housing composition and price controls are different between Johor Bahru City Council (MBJB) and other Local Authorities (PBT), which are as follows:
(1) Applies to development in Johor Bahru city only; (2) Applies to development in Johor, but outside Johor Bahru city. (Source: Johor State Government)
• The prices of low cost housing are also controlled, which are as follows:

Cateaorv  Price Control (RMI  ComDosition  MBJB (1) (%1  Other PBT (‘) (%)  House ­Low Cost  According to the set orice  50  30  House -Medium Low Cost  < RM50,000  20  30  House -Medium Low Cost  < RM80,000  20  30  Shop ­Medium Low Cost  < RM150,000  10  10
Cateaorv  Floor Area (sa ttl  Sales Price (RMI  Within Johor Bahru District  680  35,000  Within Muar, Batu Pahal, Kluang, Segamat, Pontian, Kola Tinaai and Mersina District  680  30,000  Small cities/towns within Muar, Batu Pahat, Kluang, Segamat, Pontian, Kota Tinaai and Mersina District  680  28,000  All Districts where developers are approved with Planning Permission (SBKS) for 500 units and above, the Low Cost Housina is reauired to be 10% of the development  680  25,000
Notes: SBKS = Surrender and Re-alienation (Source: Ministry of Housing and Loca/ Government and Johor state Government)
9.3 Housing Developer Licence • According to the Housing Development (Control and Licensing) Act 1966, any housing development undertaken by a housing developer must possess a licence issued by the Ministry of Housing and Local Development.
9.4 Advertisement and Sale Permit • According to the Housing Development (Control and Licensing) Regulations 1989, any advertisement or sale made by a licensed housing developer requires an advertisement and sale permit issued by the Ministry of Housing and Local Development. 6. INDUSTRY OVERVIEW (Cont’d)
9.5 Registration of Contractors· elOB • Under the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994, it is mandatory for all builders, contractors and sub-contractors, whether local or foreign, to register with the Construction Industry Development Board (CIDB), before undertaking or executing any construction work in Malaysia.
• The Certification of Registration issued by the CIDB is vaiid for a minimum period of 1 year and a maximum term not exceeding 3 years, unless cancelled, suspended or revoked earlier by CIDB.
• There are three categories of registration as follows: Building Construction; Civil Engineering Construction; Mechanical and Electrical.

• The scope of registration is further classified into seven grades and is differentiated by their respective tender capacities:

Grade’  Tender Capacity (RM) .  G1  Not exceeding 200,000 Not exceeding 500,000 Not exceeding 1 million Not exceeding 3 million Not exceeding 5 million Not exceeding 10 million No limit  G2  G3  G4  G5  G6  G7
(Source: Construction Industty Development Board) 9.6 Participation in Government Projects • It is compulsory for any company intending to participate in Government projects as a contractor of works to be registered with the Contractor Services Centre (PKK), which falls under the purview of the Ministry of Works, and CIDB. Registration for contractor of works, construction and electrical contractors are registered separately. (Source: Ministry ofFinance) 9.7 Government Incentives • There are no specific incentives relating to the Property Development Industry.
6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING
9.8 Environmental Regulations • Under the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987, housing development covering an area of 50 hectares or more is required by the Department of Environment to carry out an Environmental Impact Assessment (EIA) study, which has to be submitted to the Department of Environment for approval.
• This ensures that efforts are made to adequately address environmental concerns. It also ensures that environmental factors are given due consideration by integrating environmental aspects into local plans.

10. BARRIERS TO ENTRY 10.1 Government Policies • With the exception of various Government approvals, permits and licences for all acquisitions, development and sale of land and properties, there are no material barriers or impediments to any individual or organisation to develop properties.
• In addition, operators who are involved in the building and construction as part of Property Development activities also have to register with the CIDB.

10.2 Capital Cost • Generally, the capital set-up cost can be segmented into two categories. Category 1 • At its basic, this group of property developers undertake joint-ventures with land owners, who in return will normally be entitled to some of the developed properties or share in the proceeds of the sales.
• The property deveiopers in this category would normally sell properties ‘off the plan’ to obtain working capital for construction.
• Construction can be outsourced to third parties on a full turnkey basis. Therefore initial outlay to develop any property can be low.
• As such, the barrier to entry in terms of capital cost is low for this category of property developers.

Category 2 • This category of property developers is normally larger and more established organisations. They would normally purchase the land prior to selling off the plan or construction. As such, the capital requirements are significantly higher depending on the value of the land.
6. INDUSTRY OVERVIEW (Cont’ct)
• In addition, it is common for this group of property deveiopers to purchase land bank for future developments when timing is deemed to be appropriate to maximise profits. This further increases the requirements for capital.
• Thus, the barrier to entry in terms of capital cost is high for this category of property developers.

 

10.3 Track Record • Track record and reputation also form one of the barriers to entry for new entrants. A proven track record is required to demonstrate that the property developer has the ability to develop quality properties.
• Track record also provides confidence to potential buyers that the developer is able to complete projects on time. This aspect of buyer confidence is important as there are cases of developers abandoning projects where buyers have very little recourse to recover their initial payments.
• In addition, the reputation of the property developer is important in ensuring fast sales.

10.4 Land • Most land may be purchased at the right price based on a ‘willing buyer willing seller’ basis. Since there is no scarcity of land, any individual can purchase land to develop property.
• Thus, land may be purchased easily for property development, which forms a relatively low barrier to entry. However, barriers to entry start to escalate for larger andlor more expensive land, especially for land located in major built­up areas or in prime locations.

11. THREAT OF SUBSTITUTES • There are no practical substitutes for residential and commercial properties: Residential: While there are no practical substitutes for residential housing, there are choices of different types of properties such as low­cost houses or flats, medium-cost terrace houses and higher-end properties like condominiums, semi-detached or bungalow houses. Commercial: While there are no practical substitutes for commercial properties, there are choices of different types of commercial properties such as purpose-built offices, shop houses or shop offices and higher­end shops or shopping complexes. In addition, in a very small number of cases, residential homes are converted into small offices, workshops or showrooms. 6. INDUSTRY OVERVIEW (Cont’d)
12. RELIANCE ON AND VULNERABILITY TO IMPORTS • As building materials are key inputs for construction of buildings, structures and infrastructures, their supply will affect property developers.
• Generally, major raw materials used in property development such as piles, tiles, iron and steel materials, and cement and concrete materials are widely available locally and overseas.
• Most of the bUlky and basic raw materials like iron and steel materials, earth, sand, bricks, roofing tiles and cement are locally available. As such, developers are normally not vulnerable to imports as most common materials are available locally, and if not, there are many alternative sources of supply overseas.

13. INDUSTRY PROSPECTS AND OUTLOOK IN MALAYSIA • The outlook of the Property Development Industry in Malaysia is generally dependent on the performance of the following: Malaysian economy and the construction sector; Performance of the property sector; Malaysian Government’s initiatives; Policies for housing loans; Population growth.
13.1 Malaysian Economy and the Construction Sector • A growing economy provides the impetus for private and public spending, Which will have a positive flow-on effect to the Property Development 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 GOP growth of 5.6%. In 2013, the Malaysian economy is expected to grow between 5.0% and 6.0%. (Source: Bank Negara Malaysia) 6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING OCreating VIflnning Business Solutions @ • The performance of the construction industry in the recent years are as follows: Performance of the Construction Industry AAGR  2008·12  2008  2009  2010  2011  2012  %  Nominal GDP of  Construction Industry”  21,156  23,187  25,893  28,306  34,862  13.3  Real GDP Growth of  Construction Industry (%)…….  4.4  6.2  6.0  4.6  18.5  8.7
“Units in RM million. (Source: Bank Negara Malaysia) • The construction industry in Malaysia showed robust growth with the nominal GDP of the construction industry growing at an AAGR of 13.3% between 2008 and 2012.
• In 2013, the real GDP of the construction industry in Malaysia is expected to grow by 15.9%.

(Source: Bank Negara Malaysia) • The continuing growth in the Malaysian economy and in the construction sector in particular will augur well for operators within the Property Development Industry in Malaysia. 13.2 Performance of the Property Sector • The performances of the property sector in Malaysia in recent years provide some indications on the Property Development Industry, which are as follows: AAGR of Property Transactions Sales Value and Volume between 2008 and 2012 Sales Value Volume (~,) (‘,’,) Malaysia 12.8 5.9 (Source: Valuation and Property Services Department, Ministry ofFinance) Matrix Concepts Holdings Berhad Page 35 of 52 Industry Assessment 194 6. INDUSTRY OVERVIEW (Cont’ct)
Malaysia -Growth Rate in 2012 2012 Planned Incoming Supply Supply (‘/.) (110) Residential Units 0.6 11.9 Shop Units…………………………….. 4.4 15.4 Industrial Units……………………….. 6.5 10.2 Space in Shopping Complexes… (10.8) (19.8) Space in Purpose-BuiitOffices… (15.7) (14.0) (Source: Valuation and Property Services Department, Ministry of Finance) In 2012, the number of new sales and advertising permits for properties in Malaysia grew by 11.9% to reach 1,387 permits. The increase in the number of new sales and advertising permits indicates increased building activities; In 2012, there were 235,249 housing approvals in Malaysia representing a growth of 47.4% compared to 2011. The increase in the number of housing approvals indicates increased bUilding activities. (Source: Bank Negara Malaysia) 13.3 Government Initiatives • The various initiatives undertaken by the Malaysian Government would also benefit operators in the Property Development Industry. These initiatives are listed as follows: On-going development of the five regional economic corridors signais a potential growth in the economy and the property market in these regions: Iskandar Malaysia, Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor. The Government had launched the My First Home Scheme programme under the 2012 BUdget to help young adults with earnings below RM3,000 per month to purchase their first home. Subsequently in the 2013 Budget, the Government announced that the income limit would be raised to RM5,000 per month for individual loans and RM10,000 per month for joint loans of husband and wife. Home buyers under this programme are allowed to obtain 100% financing loan from financial institutions and they do not have to pay a 10% down payment. In the 2012 Budget, the maximum property value allowed under the scheme had been increased from RM220,000 to RM400,000 effective from 1 January 2012. Matrix Concepts Holdings Berhad Page 36 0’52 industry Assessment 195 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ,,’ Creating Winning Business Solutions @) In 2013, a total of 80,000 houses will be built in major locations in Malaysia, including Seremban, Johor Bahru, Kuala Lumpur, Shah Alam and Kuantan, via the 1Malaysia People’s Housing Programme (PR1 MA). In addition, a Housing Facilitation Fund amounting to RM500 million will be provided by Perumahan Rakyat 1Malaysia (PR1MA) Berhad to build houses in collaboration with private housing developers. (Sources: Performance Management and Delivery Unit (PEMANDU), 2012 Budget and 2013 Budget) 13.4 Policies for Housing Loans • In November 2010, Bank Negara Malaysia announced the implementation of the maximum loan-to-value (LTV) ratio of 70% on the third housing loan onwards for individuals. However, financing facilities for first and second house are not affected by this new policy. This new policy is implemented to prevent speculative activity and to moderate excessive investment in residential property.
• In addition, from 1 January 2012 onwards, financial institutions are required to assess borrower’s net income and debt obligations before approval.

(Source: Bank Negara Malaysia) • These loan policies with tighter borrowing guidelines may have an impact on the Property Development Industry. 13.5 Population Growth • Population growth will drive the demand for new property development projects, particularly residential projects.
• Between 2010 and 2012, the population of Malaysia increased at an AAGR of 1.3% to reach 29.3 million people based on estimated figures.

(Source: Deparlment of Statistics) 14. INDUSTRY PROSPECTS AND OUTLOOK IN NEGERI SEMBILAN • The outlook of the Property Development Industry in Negeri Sembilan is generally dependent on the performance of the following: Negeri Sembilan’s economy and the construction sector; Performance of the property sector; Malaysian Government’s initiatives; Population growth; Synergistic growth led by surrounding developments. 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Winning Business Solutions ® 14.1 Economy and the Construction Sector of Negeri Sembilan • A state that experiences economic expansion will provide the impetus for private and pUblic spending, which will have a positive flow-on effect to the Property Development Industry in Negeri Sembilan. Between 2006 and 2010, real GDP of Negeri Sembilan grew at an AAGR of 4.1 %; In 2012, the economy in Negeri Sembilan is expected to grow by 7.4%. (Sources: Economic Planning Unit, Prime Minister’s Department) • The performance of the Construction Industry in Negeri Sembilan in recent years were as follows: Performance of the Construction Industry in Negeri Sembilan AAGR  2006·10  2006  2007  2008  2009  2010  %  Real GDP Growth of  Construction Industry (%)…….  (1.9)  7.6  13.1  9.1  7.1  9.2
(Sources: Economic Planning Unif, Prime Minister’s Department) • The construction industry in Negeri Sembilan showed robust growth with real GDP of the construction industry growing at an AAGR of 9.2% between 2006 and 2010.
• Between 2011 and 2015, the real GDP of the construction industry in Negeri Sembilan is forecasted to grow at an AAGR of 4.0%.

(Sources: Economic Planning Unit, Prime Minister’s Department) • The continuing growth in the economy and construction sector of Negeri Sembiian will augur well for operators within the Property Development Industry in Negeri Sembilan. 6. INDUSTRY OVERVIEW (Cont’d/
14.2 Performance of the Properly Sector • The performances of the property sector in Negeri Sembilan in recent years provide some indications on the Property Development Industry, which are as follows: AAGR of Properly Transactions Sales Value and Volume between 2008 and 2012 Sales Value Volume (‘Yo) (‘Yo) Negeri Sembilan… 18.7 9.8 (Source: Valuation and Properly SeNices Deparlment, Ministry ofFinance) Negeri Sembilan -Growth Rate in 2012 2012 Planned Incoming Supply Supply (‘Yo) (‘Yo) Residential Units (1.1) 5.6 Shop Units…………………………….. 4.6 22.2 Industrial Units……………………….. (0.3) 0.8 Space in Shopping Complexes (28.3) 55.2 Space in Purpose-Built Offices (6.8) 135.9 (Source: Valuation and Properly SeNices Deparlment, Ministry ofFinance) 14.3 Government Initiatives • Various initiatives undertaken by the Malaysian Government in Negeri Sembilan would also benefit operators in the Property Development Industry. These initiatives are as follows: Under the Second Rolling Plan (RP2), the Gemas-Johor Bahru double tracking rail project will be developed. A developed infrastructure network will enhance the socio-economic status of the respective vicinity. The Educity@KLEC (Kuala Lumpur Education City) will be developed in Negeri Sembilan and Klang Valley to establish Malaysia as a regional hub for higher education. Some of the initiatives located in KLEC include the setting up of Epsom College, Asia International Skills Academy and Cambridge Judge Business School. (Source: PEMANDUj
6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTING
14.4 Population Growth • Between 2010 and 2012, the population of Negeri Sembilan increased at an AAGR of 1.3%.
• In 2012, Negeri Sembilan had a population of 1.06 million, which was the 12′” largest population out of 16 states and territories’ in Malaysia.

Note: ‘The population of Se/angor includes Wi/ayah Persekutuan Putrajaya. (Source: Department of Statistics) 14.5 Synergistic Growth led by Surrounding Developments • Large-scale projects within close prOXimity to a property development site will provide flow-on benefits and enable synergistic growth to the properties developed. Some of the major developments in Negeri Sembilan are prOVided below. Bandar Sri Sendayan is a new integrated township located on a 5,233-acre plot of land in Seremban, Negeri Sembilan. As an integrated township, Bandar Sri Sendayan comprises a mixed development of residential, commercial, industrial, leisure and institutional properties as well as government and agriculture properties and Undeveloped land. In addition, within Bandar Sri Sendayan township, there will be schools and kindergarten, police station and beat houses for police taskforee patrol services, fire department, petrol station, mosque and surau, supermarket and shopping centres, medical centre and health clinic, multi-purpose hall, a 26-acre green park as well as clubhouse with various sporting and recreation facilities as well as pedestrian-friendly walkways and pavements, landscaping, fibre-optic backbone to cater for high speed broadband as well as access roads linked to highways and surrounding areas. Bandar Enstek is an integrated development with residential areas, industrial hub, commercial hub and institutional zones. Among others, it incorporates the MedicalCity@enstek to establish a biotechnology development centre inclUding university hospital, medical health research centre, medical complex, commercial centre, convention centre and student hostels. In addition, techpark@enstek is expected to become a world-class industrial hub, focusing on the specialised fields of Biotechnology, Advanced Manufacturing Technology and Information and Communication Technology industries. To complement techpark@enstek, a complete logistic facility namely logispark@enstek is being established to provide integrated logistics solutions. 6. INDUSTRY OVERVIEW (Cont’d)
Oakland Commercial Centre and Industrial Park comprise commercial and industrial areas. Various businesses as well as international companies from United States and Japan set-up their tobacco processing facility and cultured drink manufacturing facility in these areas. Public amenities such as a hospital and hypermarket as well as highways are located close to the Oakland Commercial Centre and Industrial Park. Bandar Ainsdale is an affordable housing area for the 1Malaysia Housing Programme. The township will incorporate residential and commercial developments as well as a proposed train station to serve as its public transportation terminal. Seremban 2 is a township comprising residential communities, several schools, a 15-acre city iake park, a sports complex, a modern shopping centre and commercial business parks. It is also home to the state government and local authorities. S2 Heights is an extension of Seremban 2 which comprises mainly residential properties as well as a 6.6 acre linear park for social, community and recreationai activities. Some of the nearby industrial areas include Tuanku Jaafar Industrial Park, Senawang Industrial Park and Nilai Industrial Estate. These industrial areas are home to various international companies and conglomerates from South Korea, United Kingdom, United States, Switzerland, Netherlands, India and Japan. These companies are mainly involved in the manufacturing of electronic and electrical products and components, manufacturing of machinery, processing of food products, manufacturing of polyester products as well as manufacturing of adhesive, abrasive, laminates, dental, medicai and car care products. • All these existing, on-going and new developments and townships will provide flow-on benefits to each other, and at the same time create critical mass to spur local economic growth to encourage business and industrial investments, as well as residential living in Negeri Sembilan. 15. INDUSTRY PROSPECTS AND OUTLOOK IN JOHOR • The outlook of the Property Development Industry in Johor is generally dependent on the performance of the fOllowing: Johor’s economy and the construction sector; Performance of the property sector; Malaysian Government’s initiatives; PopUlation growth; Synergistic growth led by surrounding developments. 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Wnoing Business Solutions @ 15.1 Economy and the Construction Sector of Johor • A growing state economy provides the impetus for private and public spending, which will have a positive flow-on effect to the Property Development Industry in Johor. Between 2006 and 2010, real GOP of Johor grew at an AAGR of 3.4%; In 2012, the economy in Johor is expected to grow by 6.4%. (Sources: Economic Planning Unit, Prime Minister’s Department) • The performance of the Construction Industry in Johor in recent years are as foliows: Performance of the Construction Industry in Johor AAGR 2006·10 2006 2007 2008 2009 2010 % Real GOP Growth of Construction Industry (%) ……. (5.7) (0.1) 0.9 13.5 7.7 (Sources: Economic Planning Unit, Prime Minister’s Department) • The construction industry in Johor showed robust growth with the real GOP of the construction industry growing at an AAGR of 5.4% between 2006 and 2010.
• Between 2011 and 2015, the real GOP of the construction industry in Johor is forecasted to grow at an AAGR of 4.1 %.

(Sources: Economic Planning Unit, Prime Minister’s Department) • The continuing growth in the economy and construction sector of Johor will augur well for operators within the Property Development Industry in Johor. 15.2 Performance of the Property Sector • The performances of the property sector in Johor in recent years provide some indications on the Property Development Industry, which are as follows: AAGR of Property Transactions Sales Value and Volume between 2008 and 2012 Sales Value Volume {‘!oj (%) Johor………………… 8.9 4.1 (Source: Valuation and Property Services Department, Ministry ofFinance) 6. INDUSTRY OVERVIEW (Cont’ct) O VITAL FACTOR CONSULTING @ Creating ‘Mnning Business Solutions Johor -Growth Rate in 2012 2012 Planned Incoming Supply Supply (%) (%) Residential Units 2.3 11.9 Shop Units (5.0) 19.2 Industrial Units……………………….. 2.8 25.2 Space in Shopping Complexes… 0.0 (51.8) Space in Purpose-Built Offices … (0.8) (Source: Valuation and Property Services Department, Ministry of Finance) 15.3 Government Initiatives • Some of the government initiatives include developments in Johor: Construction of Johor Bahru-Nusa Jaya coastal highway; Flood Mitigation Plan (RTB) will be implemented. The project costing RM1 billion will improve the infrastructure for flood prevention in several states, inclUding Johor. In Johor, RTB projects will be implemented in the town and Sungai Segamat; Development of the electrified double-track railway project from Johor Bahru to Padang Besar in Perlis. (Sources: 2012 Budget and Tenth Malaysia Plan) • The improved infrastructure under these government initiatives will benefit operators in the Property Development Industry in Johor. 15.4 PopUlation Growth • Between 2010 and 2012, the population of Johor increased at an AAGR of 1.1%.
• In 2012, Johor had a population of 3.44 million, which was the second largest population out of 16 states and territories’ in Malaysia.

Note: *The population of Selangor includes Wi/ayah Persekutuan Putrajaya. (Source: Department of Statistics) • The growing popUlation will provide growth opportunities to the Property Development Industry in Johor. 6. INDUSTRY OVERVIEW (Cont’ct) OVITAL FACTOR CONSULTING _Creating Wnning Business Solutions ® 15.5 Synergistic Growth led by Surrounding Developments • Five flagship zones have been identified as the key development areas in Iskandar Malaysia. The economic growth in the following zones are targeted to be strengthened and diversified: Flagship Zone Area Selected Key Developments A Johor Bahru City Centre New financial district Danga Bay Integrated Watelfront City Upgrading of CBD Austin Hill Development B Nusajaya and Medini Johor New State’s Admin Centre EduCity Afiat Healthpark International Destination Resort Southern Industrial Logistic Clusters C Western Gate Port ofTanjung Pelepas Development RAMSAR World Heritage Park Second Link Access Tanjung Piai D Eastern Gate Development Tanjung Langsatlndustrial Park Pasir Gudang Port Tanjung Langsat Port E Senai-Skudai Senai Intemational Aiport Senai Cargo Hub Kulai MSC Cyberport Universiti Teknologi Malaysia Senai Hi-Tech Park (Source: Iskandar Regional Development Authority) • Under the Comprehensive Development Plan 2006 -2025 for South Johor Economic Region (now known as Iskandar Malaysia), a few industries were identified as the main economic pillars where local and foreign direct investment are targeted to increase in order to achieve stable long term economic growth: Electrical and electronics; Petrochemicals and oleo chemicals; Food and agro processing; Logistics and related services; Tourism; Health services; Educational services; Financial services; Creative and ICT industries.
Matrix Concepts Holdings Berhad Page 440’52 Industry Assessment 203
• For the education sector, EduCity in Iskandar Malaysia is developed to position Malaysia as a world-class education destination. Some of the universities in EduCity Iskandar include Newcastie University Medical Malaysia, Netherlands Maritime Institute of Technology and Raffles University Iskandar.
• The development of these industries will increase the population and commercial activities in Johor and thus increasing the demand for properties in Johor.

(Source: Iskandar Regional Development Authority and Comprehensive Development Plan 2006 -2025 for South Johor Economic Region, Khazanah Nasional Berhad) 16. DRIVERS OF GROWTH • Some of the drivers of growth for the Property Development Industry are: Socio-economic growth such as Gross Domestic Product growth and population growth will Increasingly boost the requirements for housing and ultimately increase the demand for property development. In addition, it will also drive commercial activities to increase demand for commercial properties. Increasing affluence of consumers as reflected in the increase in Gross National Product per capita and disposal income, which will increase affordability and stimulate the demand for the purchase of properties. Government spending on the residential housing sector as reflected in the Tenth Malaysia Plan will continue to provide opportunities for operators in the Property Development Industry. Low interest rate for property buyers will enable more people to be abie to buy residential properties. Government spending on development of infrastructures such as new highways and transportation links will attract development of residential and commercial properties in the nearby areas. For instance, the construction of Gemas-Johor Bahru double tracking raii project wili provide opportunities for property developers with land bank located in the surrounding areas. Matrix Concepts Holdings Berhad Page 45 of 52 Industry Assessment 204 6. INDUSTRY OVERVIEW (Cont’d) VITAL FACTOR CONSULTINGO® Creating Wnning Business Solullo”s 17. THREATS ANO RISKS ANALYSIS 17.1 Fluctuations in Prices of Iron and Steel Materials • In 2010, the use Df irDn and steel materials including steel bars and rods, steel sheets, cast irDn pipes and tubes, hardware materials and Dthers represented 26.2% of the total CDSt Df bUilding materials used fDr the residential and non-residential cDnstructions (Source: Department of Statistics).
• As iron and steel raw materials are commDdities, the prices of these raw materials are subject to fluctuations in global market prices. In some situations, an increase in the price of these raw materials may not be easily passed onto customers. This could have an impact on profit margins. Alternatively, if an increase in cost is passed ontD customers, the price competitiveness of the operator may be eroded.

Mitigating Factors • Operators with strong financial strength may be able tD purchase and maintain stocks of key raw materials to create a cushion against price fluctuations.
• As these raw materials are commodities and therefore subjected to world prices, all operators that use these materials are equally affected.

17.2 Global Economic Slowdown • Any prolonged and/or widespread economic slowdown may affect consumer and business confidence and spending. Any increased in uncertainties in the global and IDcal economies will further reduce the level of investments. This will in tum reduce demand on consumer spending, including investment in properties. Mitigating Factors • As evidenced in the past, the Malaysian Government’s continued prompt policy flexibility in implementing pro-growth measures to sustain the country’s growth momentum, by raising domestic demand to compensate for slower external growth, has helped Malaysian companies to counter some of the effects of the SIDWdown in the global economy.
• This is suppDrted by the relatively high real GOP growth Df 5.6% for Malaysian economy in 2012 as CDmpared to the real GOP growth of 1.3% for advanced economies(1)
• In 2013, real GOP of the Malaysian economy is forecasted to grow between 5.0% to 6.0%, while advanced economies(1) are projected to experience a growth of 1.4%. The Malaysian econDmy is expected to be better off compared to many of the more advanced economies.

 

Note: (1) Advance economies include Australia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Gennany, Greece, Hong Kong SAR, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Malta, Netherlands, New Zealand, Norway, Porlugal, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan Province of China, United Kingdom and United States. (Sources: Bank Negara Malaysia and International Monetary Fund) • It is expected that the continuing GOP growth in Malaysia will help to generate domestic business activities and domestic consumption, which will in turn help to counter the slowdown in the local economy. 17.3 Property Overhang • The increase in property overhang is commonly due to over-supply andlor low take-up of new launches by developers. The continuing rise in property overhang will have an impact on property developers within the industry.
• In 2012, the number of completed and unsold residential units reached 15,000 units, amounting to RM4.7 billion in Malaysia (Source: Valuation and Property Services Department, Ministry of Finance)

Mitigating Factors • The Government had launched the My First Home Scheme programme under the 2012 Budget to help young adults with earnings below RM3,000 to purchase their first home. Subsequently in the 2013 Budget, the Government announced that the income limit would be raised to RM5,000 per month for individual loans and RM1 0,000 per month for joint loans of husband and wife. Home buyers under this programme are allowed to obtain 100% financing loan from financial institutions and they do not have to pay a 10% down payment.
• According to the Budget 2012, the maximum property value allowed under the scheme had been increased from RM220,000 to RM400,000 effective form 1 January 2012.
• The above is aimed at stimulating the demand for properties and house ownership in Malaysia. This is expected to have a favourable impact on the Property Development Industry in Malaysia.

17.4 Implementation of Tighter Housing Loan Policies • On 3 November 2010, Bank Negara Malaysia announced with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to financing facility taken out by borrowers on the third home onwards. I 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING ®Creating \Mnning Business Solutions • In addition, from 1 January 2012 onwards, financial institutions are required to assess borrower’s net income and debt obligations before approval.
• These housing loan policies imposed by Bank Negara Malaysia may discourage demand on residential properties from potential home buyers.

Mitigating Factors • Financing facilities for the purchase of the first and second homes by individuals are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies. (Source: Bank Negara Malaysia)
• As such, demand from individuals purchasing their first or second homes using financing facilities will not be affected by the new ruling.
• Furthermore, the new method to assess a borrower’s debt paying ability will curb speculative activities in property transactions that create large number of unoccupied homes. This in turn protects the interest of property deveiopers by preventing property bubble.
• In addition, all operators within the Property Development Industry in Malaysia are equally affected by the new ruling imposed.

18. CRITICAL SUCCESS FACTORS • Quality of Property Development: To ensure business sustainability, property developers must be able to continually meet and deliver quality property development to customers. Those who adopt stringent controis in their construction processes and have attained internationally recognised quality management system certifications are in a better position to compete effectively.
• Established Track Record: The track record and reputation of a property developer determine the levei of confidence in property investors towards the developer. In addition, these aspects are important in securing bank loans for property development projects. As such, other than possessing a prime project location, a reputable track record is significant to attract property buyers.
• Design and Architectural Capabilities: A property developer’S design and architectural capabilities are important to ensure business sustainability and growth. Customers are more likely to be attracted to properties with superior architecture and interior designs that will provide the buyer with a better lifestyle and living environment.

Matrix Concepts Holdings Berhad Page 48 of 52 Industry Assessment 207 6. INDUSTRY OVERVIEW (Cont’cf) O VITAL FACTOR CONSULTING Creating Wnning Business Solutions ® • Financial Stability: Property developers who are in a healthy financial position are more likely to complete and deliver quality property development projects to customers. Potential property investors may emphasize financial stability as a key criterion in the evaluation of property purchases as they would not want any disruption during the construction process. In addition, a financially strong property developer would be in a better position to deliver quality products to compete with other industry players. 19. MARKET SIZE 19.1 Market Size -Malaysia Market Size of Total Property Market in Malaysia • In 2012, the size of the total property market in Malaysia in terms of total value of property transactions (including all types of land and building) was RM142.8 billion.
Market Size of Residential Property in Malaysia
• In 2012, the size of the residential property market in Malaysia in terms of total value of residential property (including residential land and bUildings) transactions was RM67.8 billion.
Market Size of Commercial Property in Malaysia
• In 2012, the size of the commercial property market in Malaysia in terms of total value of commercial property (including commercial plots and buildings) transactions was RM27.8 billion.
Market Size of Industrial Property in Malaysia
• In 2012, the size of the industrial property market in Malaysia in terms of total value of industrial property (including industrial plots and bUildings) transactions was RM12.0 billion.

(Source: Valuation and Property Services Department, Ministry of Finance) 19.2 Market Size -Negeri Sembilan Market Size of Total Property Market in Negeri Sembilan • In 2012, the size of the total property market in Negeri Sembilan in terms of total value of property transactions (including all types of land and building) was RM5.3 billion. 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING Creating Wnning Business Solutions ® Market Size of Residential Property in Negeri Sembilan • In 2012, the size of the residential property market in Negeri Sembilan in terms of total value of residential property (including residential land and buildings) transactions was RM2.5 billion.
Market Size of Commercial Property in Negeri Sembilan
• In 2012, the size of the commercial property market in Negeri Sembilan in terms of total value of commercial property (including commercial plots and buildings) transactions was RM1.0 billion.

Market Size of Industrial Property in Negeri Sembilan • In 2012, the size of the industrial property market in Negeri Sembilan in terms of total value of industrial property (including industrial plots and bUildings) transactions was RMO.6 billion. (Source: Valuation and Property Services Department, Ministry ofFinance) 19.3 Market Size -Johor Market Size of Total Property Market in Johor • In 2012, the size of the total property market in Johor in terms of total value of property transactions (including all types of land and building) was RM16.8 billion.
Market Size of Residential Property in Johor
• In 2012, the size of the residential property market in Johor in terms of total value of residential property (including residential land and bUildings) transactions was RM5.7 billion.
Market Size of Commercial Property in Johor
• In 2012, the size of the commercial property market in Johor in terms of total value of commercial property (including commercial plots and bUildings) transactions was RM3.0 billion.
Market Size of Industrial Property in Johor
• In 2012, the size of the industrial property market in Johor in terms of total value of industrial property (including industrial plots and buildings) transactions was RM2.2 billion.

(Source: Valuation and Property Services Department, Ministry ofFinance) 6. INDUSTRY OVERVIEW (Cont’d)
20. MARKET SHARE 20.1 Market Share -Malaysia Total Property Market • In 2012, Matrix Concepts Group’s market share of the total property market in Malaysia was estimated at less than 1%. This was based on the Group’s revenue of RM456.1 million from its sales of land and property development for the financial year ended 31 December 2012. Residential Property Market • In 2012, Matrix Concepts Group’s market share of the residential property market in Malaysia was estimated at less than 1%. This was based on the Group’s revenue of RM328.1 million from residential properties for the financial year ended 31 December 2012. Commercial Property Market • In 2012, Matrix Concepts Group’s market share of the commercial property market in Malaysia was estimated at less than 1%. This was based on the Group’s revenue of RM15.2 million from commercial properties for the financial year ended 31 December 2012. Industrial Property Market • In 2012, Matrix Concepts Group’s market share of the industrial property market in Malaysia was estimated at less than 1%. This was based on the Group’s revenue of RM79.8 million from industrial properties for the financial year ended 31 December 2012. 20.2 Market Share -Negeri Sembilan Total Property Market • In 2012, Matrix Concepts Group’s market share of the total property market in Negeri SembiIan was estimated at 7%. This was based on the Group’s revenue of RM375.1 million from its sales of land and property development in Negeri Sembilan for the financial year ended 31 December 2012. Residential Property Market • In 2012, Matrix Concepts Group’s market share of the residential property market in Negeri Sembilan was estimated at 10%. This was based on the Group’s revenue of RM247.1 million from residential properties in Negerl SembiIan for the financial year ended 31 December 2012. Commercial Property Market • In 2012, Matrix Concepts Group’s market share of the commercial property market in Negeri Sembilan was estimated at 2%. This was based on the Group’s revenue of RM15.2 million from commercial properties in Negeri Sembilan for the financial year ended 31 December 2012. Matrix Concepts Holdings Berhad Page 51 of 52 Industry Assessment 210 6. INDUSTRY OVERVIEW (Cont’d) OVITAL FACTOR CONSULTING (Ii)Creating Wnning Business Solutions Industrial Property Market • In 2012, Matrix Concepts Group’s market share of the industrial property market in Negeri Sembilan was estimated at 13%. This was based on the Group’s revenue of RM79.8 million from industrial properties for the financial year ended 31 December 2012. 20.3 Market Share -Johor Total Property Market • In 2012, Matrix Concepts Group’s market share of the total property market in Johor was estimated at less than 1%. This was based on the Group’s revenue of RM81.0 million from property development in Johor for the financial year ended 31 December 2012. Residential Property Market • In 2012, Matrix Concepts Group’s market share of the residential property market in Johor was estimated at 1%. This was based on the Group’s revenue of RM81.0 million from residential properties in Johor for the financial year ended 31 December 2012. Note: For the financial year ended 31 December 2012, Matrix Concepts Group did not recognise revenue from commervial and industrial property in Johor. We, Vital Factor Consulting Sdn Bhd, have prepared this report in an independent and objective manner and have taken all reasonabie consideration and care to ensure the accuracy and completeness of the report. It is our opinion that the report represents a true and fair assessment of the industry within the limitations of, among others, secondary statistics and information, and primary market research. Our assessment ;s for the overall industry and may not necessarily reflect the individual performance of any company. We do not take any responsibilities for the decisions or actions of readers of this document. This report should not be taken as a recommendation to buy or not to buy the shares of any company. Yours sincerely
WooiTan Managing Director Matrix Concepts Holdings Berhad Page 52 0’52 Industry Assessment 211

 

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