Business Overview

5. GENERAL INFORMATION ON OUR GROUP 5. GENERAL INFORMATION ON OUR GROUP
5.1 INCORPORATION AND HISTORY Our Group’s history can be traced back to 1983 with the founding of our subsidiary, SCHSB by Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. SCHSB began its operations as a distributor and supplier of general industrial products for various industries located in a rented premise at Jalan Loke Yew, Kuala Lumpur. During that period, the majority of trading companies offer only certain range of quarry industrial products. To better compete and differentiate ourselves from other trading companies, SCHSB under the stewardship of Lau Mong Ling decided to focus on solely supplying quarry industrial products that are used in the quarry industry instead. The repositioning of SCHSB as a quarry industrial products supplier was timely, as it was in line with the Fourth (4th) Malaysian Plan by the Government’s five (S) year plan, where the Government emphasised on the development of various infrastructure facilities around Malaysia, which led to the construction boom in Malaysia during the mid-1980s. It was therefore an opportune time for SCHSB to capitalise the growing demand for quarry industrial products by the quarry industry to produce various construction materials for the construction and building industry in Malaysia. In 1985, our Group’s first distribution centre outside of Klang Valley was established in Butterworth, Penang through the establishment of SCH (Butterworth), as means to cater to the quarry industry’s growing needs and demand in the northern region of Malaysia. The establishment of the said distribution centre helped to minimise transportation costs and improve the delivery time to our customers in the northern region. FollOWing the success of our distribution centre in Butterworth, our Group then focused on expanding the types of products supplied to the quarry Industry. This was done in order to capture higher market share and improve our market position while at the same time, distinguishing ourselves from the rest of our competitors. During this period, our Group also manage to expand our customer base, and supply products directly to end-users such as quarry operators. In 1988, we moved out from our rented premise in Jalan Loke Yew, Kuala Lumpur to a bigger premise located at Taman Shamelin Perkasa, Kuala Lumpur to better facilitate our growth and business expansion in the Klang Valley. ”’~ __90’s saw our Group embarking on an expansion plan that would increase our distribution network around Malaysia. In 1991, we expanded our business and geographic coverage in East Malaysia, with the incorporation of SCH (Sabah) located in Kota Klnabalu, Sabah. This is part of our Group’s strategy to tap into Sabah’s growing primary industries which included quarry and mining industries. In 1992, our Group further expanded our distribution coverage to include the southern region of Malaysia, with the opening our third (3″) distribution centre in Johor Bahru through the incorporation of SCH (Johore). In 1994, our Group opened our fourth (4th) distribution centre in Kuantan, Pahang through SCH (Kuantan). Our Group then further expanded our penetration into the quarry market in East Malaysia by opening our fifth (Sth) distribution centre in Kuching, Sarawak in 1997 through SCH (Sarawak). Through our distribution centres located in strategic locations nationwide, our Group managed to prOVide timely services to our end-user based customers in the quarry industry in an efficient manner while saving time, costs and resources. In 1999, our Group acqUired a wire-mesh factory which resulted in the establishment of SCHWM. The acquisition and establishment of the wire-mesh factory and company was part of our Group’s plan to offer a more comprehensive range of products to the quarry industry in Malaysia. In 2000, our Group expanded into Singapore with the establishment of Italiaworld, 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) which is principally involved in the distribution of all kinds quarry industrial products for the quarry industry in the South East Asia region mainly Singapore and Indonesia. In 2005, SCHSB’s business operations were relocated to our current premise located in Balakong, Selangor. In 2006, our Group ventured into the offering of quarry machinery and quarry equipment for use in the quarry industry through the establishment of SCHME. The penetration into the quarry machinery and quarry equipment business was part of our Group’s overall strategy of prOViding comprehensive quarry product-based offerings to our customers in the quarry industry while maintaining our competitiveness as a comprehensive quarry industrial products supplier in Malaysia. Our experience in the quarry industry has also played a part in the decision to expand into the provision of quarry machinery and quarry equipment, as our Group saw the demand for more affordable quarry machinery and quarry equipment made from Asian countries, as opposed to higher priced European machinery. In 2008, our Group commenced distribution of Nakayama and Junjin CSM’s range of quarry machinery and quarry equipment to the quarry industry. Our Group sold our first Nakayama vertical-shaft impact crusher to YTL group of companies, one of Malaysia’s leading conglomerates. In 2010, our Group ventured into the reconditioned quarry machinery business segment. OWing to the dynamism and experience of our Promoters, our business grew rapidly over the years and has now transformed into a major player in the quarry machinery and equipment market with a wide distribution network covering the major economic regions in Malaysia and haVing with a market share of 17.2% of the quarry equipment and machinery market in Malaysia in 2012. This increase in geographical spread has given our Group a strong competitive advantage over our competitors in providing fast turnaround service to our customers’ requirements and also has enabled our Group to penetrate a wider market and gaining a larger market share In the quarry industry. [ The rest of this page is intentionally left blank 1 S. GENERAL INFORMATION ON OUR GROUP (Cont’dj Our Group structure as at the LPD and prior to our IPO is diagrammatically summarised below:­
Note:­The substantial shareholders ofSCH (lahore) are SCH Corporation and SCHSB, holding 150,000 shares or 50% equityinterest each in SCH (lahore). [The rest of this page is intentionally left blank] 5. GENERAL INFORMATION ON OUR GROUP (Cant’d) 5.2 SHARE CAPITAL Our authorised share capital is RM50,000,000 comprising 500,000,000 ordinary shares of RMO.lO each, of which RM32,154,202 comprising 321,542,000 Shares have been issued and fully paid-up as at the LPD. The movements in our issued and paid-up share capital since the date of our incorporation are set out below:­Date of Allotment  No. of  Par Value  Consideration!  Resultant  SCH Shares  Types of Issue  Issued and  Allotted  Paid-up Share  Capital RM  RM
22 December 2011  2  1.00  RM2/Subscribers’ shares  2  31 January 2012′  20  0.10  RM2/Share split  2  11 November 2013  321,542,000  0.10  RM32 154 200/ACQuisitions  32154202
Note:­A On 31 January 201~ our Company haa undertaken a share split whereby two (2) ordinary shares of RM1.00 each was sub-divided into 20 ordinary shares of RMO.10 each, which is held by Zaharah binti Md RadziandRawanibintiAhmadof10 ordinarysharesofRMO.l0each. Aspartofour 1m Zaharah binti Md Radzi and Rawani binti Ahmad, whom are employees of BoardroOm.com Sdn Bhd, our secretarial firm, were appointed as nominees ofour Company to facilitate the establishmentofour Company. Both Zaharah binti Md Radzi and Rawani binti Ahmad have resigned as directors of our Company on 31 March 2012 and thesubscribers’sharesheldbythem hasbeentransfered to Lau Mang Ling on 11 November 2013. As at the LPD, we do not have any outstanding warrants, options, convertible securities and uncalled capital. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. Upon completion of our IPO, our enlarged issued and paid-up share capital will be increased to RM41,223,402 comprising 412,234,020 Shares.
5.3 ACQUISITIONS In preparation for our Listing, we have undertaken the Acquisitions. Under the Acquisitions, our Company had entered into four (4) sale and purchase agreements to acquire the entire equity interest in SCH Corporation, SCHWM, SCHME and ltaliaworld. The Acquisitions were completed on 11 November 2013. The new Shares issued pursuant to the Acquisitions shall rank pari passu in all respects with our existing issued Shares including the voting rights and will be entitled to all rights and dividends and other distributions, the entitlement date of which are subsequent thereof. 5.3.1 Acquisition of SCH Corporation Pursuant to the sale and purchase agreement dated 3 January 2013 entered into between our Company and the vendors of SCH Corporation, being Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin, our Company acquired SCH Corporation’s entire issued and paid-up share capital of RM7,880,002 comprising 7,880,002 ordinary shares of RM1.00 each for a total purchase consideration of RM23,556,900, which was wholly satisfied by the issuance of 235,569,000 new Shares at an issue price of RMO.10 per Share on 11 November 2013. Immediately thereafter, SCH Corporation became a wholly-owned subsidiary of SCH. The purchase consideration of SCH Corporation of RM23,556,900 was arrived at a willing­buyer willing-seller basis, after taking into consideration the audited consolidated NA position of SCH Corporation as at 31 August 2012 of RM23,556,869. 5. GENERAL INFORMATION ON OUR GROUP (Cont’d)
5.3.2 Acquisition of SCHWM Pursuant to the sale and purchase agreement dated 3 January 2013 entered into between our Company and the vendors of SCHWM, being Lau Mong Ling, Wong Sin Chin, Yeen Yoon Hin, Au Yong 5au Kuen and Wong Sang @ Wong Hock Lim, our Company acquired SCHWM’s entire issued and paid-up share capital of RMSOO,OOO comprising 500,000 ordinary shares of RMl.OO each for a total purchase consideration of RM2,070,200, which was whoily satisfied by the issuance of 20,702,000 new Shares at an issue price of RMO.lO per Share on 11 November 2013. Immediately thereafter, SCHWM became a whoily-owned subsidiary of SCH. The purchase consideration of SCHWM of RM2,070,200 was arrived at a wiiling-buyer wiiiing­seiler basis, after taking into consideration the audited NA position of SCHWM as at 31 August 2012 of RM2,070, 194.
5.3.3 Acquisition of SCHME Pursuant to the sale and purchase agreement dated 3 January 2013 entered into between our Company and the vendors of SCHME, being Lau Mong Ling, Wong Sin Chin, Yeen Yoon Hin and Lim Lee Pooi, our Company acquired SCHME’s entire issued and paid-up share capital of RM400,000 comprising 400,000 ordinary shares of RMl.OO each for a purchase consideration of RMS,631,SOO, which was whoily satisfied by the issuance of 56,315,000 new Shares at an issue price of RMO.lO per Share on 11 November 2013. Immediately thereafter, SCHME became a whoily-owned subsidiary of SCH. The purchase consideration of SCHME of RMS,631,SOO was arrived at a wiiling-buyer willing­seiler basis, after taking into consideration the audited NA position of SCHME as at 31 August 2012 of RMS,631,4S8.
5.3.4 Acquisition of Italiaworld Pursuant to the sale and purchase agreement dated 3 January 2013 entered into between our Company and the vendors of Italiaworld, being Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin, our Company has acquired Italiaworld’s entire issued and paid-up share capital of SGD100,000 comprising 100,000 ordinary shares for a total purchase consideration of RM89S,600, which was wholly satisfied by the issuance of 8,956,000 new Shares at an issue price of RMO.I0 per Share on 11 November 2013. Immediateiy thereafter, Italiaworld become a wholly-owned subsidiary of SCH. The purchase consideration of Italiaworld of RM895,600 was arrived at a willing-buyer willing­seiler basis, after taking into consideration the audited NA position of Italiaworld as at 31 August 2012 of SGD3S9,S28 (equivaient to RM89S,SI2, based on the exchange rate of SGDl.OO:RM2.4908 as at 31 August 2012). [ The rest of this page is intentionally left blank] 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) 5.4 LISTING SCHEME In conjunction with, and as an integral part of our Listing, the details of our Listing Scheme are as follows:­

 

 

(I) Public Issue Pursuant to our Public Issue, we shall issue 90,692,000 new Shares at our IPO Price to be allocated in the following manner:­(a) 13,000,000 Issue Shares will be made available for application by the Malaysian Public, to be allocated via balloting, to the following:­
(I) 6,500,000 Shares made available to pUblic investors; and
(ii) 6,500,000 Shares allocated to Bumiputera public investors.

 

(b) 13,000,000 Issue Shares made available to our eligible Directors, employees and business associates/persons who have contributed to the success of our Group; and
(c) 64,692,000 Issue Shares by way of private placement to selected investors to the following:­
(i) 45,030,000 Shares by way of private placement to identified Bumiputera investors approved by the Ministry of International Trade and Industry; and
(ii) 19,662,000 Shares by way of private placement to identified investors.

 

The Issue Shares shall rank pari passu in all respects with our existing issued Shares inclUding the voting rights and will be entitled to all rights and dividends and other distributions, the entitlement date of which are subsequent thereof. Upon completion of our Public Issue, our issued and paid-up share capital will increase from RM32,lS4,202 comprising 321,542,020 Shares to RM41,223,402 comprising 412,234,020 Shares. (II) Offer for Sale Concurrent with our Listing, our Company will undertake an offer for sale of 32,980,000 Shares at our IPO Price. Our Offerors are offering for sale 32,980,000 Offer Shares, representing approximately 8.0% of our enlarged issued and paid-up share capital to selected investors. The Offer Shares are payable in full on application upon such terms and conditions as set out in this Prospectus. (III) Listing Upon completion of our IPO, our Company’s entire enlarged issued and paid-up share capital of RM41,223,402 comprising 412,234,020 Shares shall be listed on the ACE Market of Bursa Securities. [ The rest of this page is intentionally left blank l SO 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) 5.5 SUBSIDIARIES All of our subsidiaries are wholly-owned by our Company. As at the date of this Prospectus, we do not have any associated companies. Details of our subsidiaries are summarised as follows:­Company Date! Date of Place of commencement incorporation of business Subsidiaries held by our Company SCH 13 January 3 June 1996 Corporation 1993/ Maiaysia SCHWM 5 March 1999/ 5 March 1999 Maiaysia SCHME 17 August 2006/ 17 August 2006 Maiaysia Itaiiaworld 29 April 2000/ 29 April 2000 Singapore Subsidiaries held by SCH Corporation SCHSB 9 September 9 september 1983/ 1983 Malaysia Authorised share capital RM (unless otherwise stated) Issued and paid-up share capital RM (unless otherwise stated) 25,000,000 7,880,002 500,000 SOO,OOO 500,000 400,000 SGD100,000 SGD100,000 10,000,000 6,000,000 Effective Principal activities equity interest 0/0 100.00 Investment hoiding 100.00 Manufacturing and distribution of quarry grill 100.00 Supplying and distributing quarry machinery, quarry equipment  and  reconditioned  quarry  machinery  as  well  as
spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery to the quarry industry 100.00 Supplying and distributing all kinds of quarry industrial products to the quarry industry in the South East Asia region mainiy Singapore and Indonesia 100.00 Supplying and distributing all kinds of quarry industrial products and quarry machinery in the central region of peninsular Maiaysia 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) Company  Datej Date of Place of commencement incorporation of business  Authorised share capital RM (unless otherwise stated)  Issued and paid-up share capital RM (unless otherwise stated)  Effective equity interest DID  Principal activities  5CH (Butterworth)  27 July 1983/ Malaysia  27 July 1983  500,000  500,000  100.00 Distributing all kinds of quarry industrial products to the quarry industry In the northern region of peninsular Malaysia  5CH (Kuantan)  23 November 1993/ Malaysia  16 June 1994  500,000  100,000  100.00 Distributing all kinds of quarry industrial products to the quarry industry in the eastern region of peninsular Malaysia  5CH (Johore)’  18 November 1992/ Malaysia  22 February 1993  500,000  300,000  ‘50.00 Distributing all kinds of quarry industrial products to the quarry industry in the southern region of peninsular Malaysia  Subsidiaries held by SCHSB  5CH (5abah)  15 November 1991/ Malaysia  15 November 1991  500,000  300,005  100.00 Distributing all kinds of quarry industrial products to the quarry industry in the north east of east Malaysia  5CH (5arawak)  12 May 1997/ Malaysia  2 July 1997  500,000  300,000  100.00 Distributing all kinds of quarry industrial products to the quarry industry in the north west of east Malaysia
Note:­A The substantial shareholders ofSCH (lahore) is SCH Corporation and SCHSB-holding 1SO,OOO shares or SO% equity interest each in SCH (lahore).
5.5.1 SCH Corporation (a) History and business 5CH Corporation was incorporated in Malay-sia under the Act on 13 January 1993 as a private limited company under the name of Iwin Venture 5dn Bhd. It subsequently changed its company name to Iwin Corporation (Malaysia) 5dn Bhd on 17 September 1994 and assumed Its present name since 25 January 1999. 5CH Corporation is principally an investment holding company. 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) There have been no material changes in the manner in which SCH Corporation conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH Corporation’s present authorised share capital is RM2S,000,000 comprlsmg 25,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH Corporation as at the LPD is RM7,880,002 comprising 7,880,002 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCH Corporation since its incorporation are as follows:­Date of allotment  No. of shares allotted  Par value RM  Consideration! Types of issue  Resultant issued and paid-up share capital RM  13 January 1993 1 August 1996  2 7,880,000  1.00 1.00  RM2/Subscribers’ shares RM7,880,0001 ‘AcQuisition of subsidiaries  2 7,880,002
Note:­Issued pursuant to the share swap for the acquisition ofSCHS~ SCH (lohore), sa; (Butterworth)* andSCH (Kuantan) by sa; Corporation on 1 August 1996. As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH Corporation. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment, which was SUbsequently disposed. (c) Substantial shareholders and Directors SCH Corporation is a wholly-owned subsidiary of our Company and the Directors are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. (d) Subsidiaries and associated companies Save for SCHSB, SCH (Butterworth), SCH (Johore) and SCH (Kuantan) being the subsidiaries of SCH Corporation, SCH Corporation does not have any other subsidiary or associated companies. 5.5.2 SCHWM (a) History and business SCHWM was incorporated in Malaysia under the Act on 5 March 1999 as a private limited company under the name of Initial Freeway Sdn Bhd. It SUbsequently assumed its present name on 13 May 1999. The principal activities of SCHWM are in the manufacturing and distribution of quarry grill. There have been no material changes in the manner in which SCHWM conducts its business or activities since the last three (3) years prior to the LPD. 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) (b) Share capital SCHWM’s present authorised share capital is RMSOO,OOO comprising SOO,OOO ordinary shares of RM1.00 each. The issued and paid-up share capital of SCHWM as at the LPD is RM500,000 comprising SOO,OOO ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCHWM since its incorporation are as follows:­Date of No. of Par Considerationl Resultant allotment shares value Types of issue issued and allotted paid-up share capital RM RM 5 March 1999 2 1.00 RM2fSubscribers’ shares 2 16 Auqust 2000 499,998 1.00 RM499,998fCash 500,000 As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCHWM. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. (c) Substantial shareholders and Directors SCHWM is a wholly-owned subsidiary of our Company and the Directors of SCHWM are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The alternate Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent th~ Directors at the Board meeting in the absence of the Director of SCHWM. However, they are not employees of SCHWM (save for Wong Kin Seng, who is our Business Development Manager) and are not involved in the day-to-day operations of SCHWM. (d) Subsidiary and associated companies As at the LPD, SCHWM does not have any subsidiary or associated company. 5.5.3 SCHME (a) History and business SCHME was incorporated in Malaysia under the Act on 17 August 2006 as a private limited company under its present name. The principai activities of SCHME are in the supplying and distributing quarry machinery, quarry equipment and reconditioned quarry machinery as well as spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery to the quarry industry. There have been no material changes in the manner in which SCHME conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCHME’s present authorised share capital is RMSOO,OOO comprising 500,000 ordinary shares of RM 1.00 each. The issued and paid-up share capital of SCHME as at the LPD is RM400,000 comprising 400,000 ordinary shares of RM1.00 each. The movements

 

5. GENERAL INFORMATION ON OUR GROUP (Cont’d) in the issued and paid-up share capital of SCHME since its incorporation are as foiiows:­Date of  No. of  Par  Consideration!  Resultant  allotment  shares  value  Types of issue  issued and  allotted  paid-up share  capital  RM  RM  17 August 2006  3  1.00  RM3/Subscribers’ shares  3  28 May 2007  S9,997  1.00  RMS9,997/Cash  60,000  14 August 2007  40,000  1.00  RM40,000/Cash  100,000  16 Aprii 2009  300,000  1.00  RM300,000/Cash  400,000
As at the LPD, there are no outstanding warrants, options, convertible securities or uncaiied capitai in SCHME. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the aiiotment. (c) Substantial shareholders and Directors SCHME is a wholiy-owned subsidiary of our Company and the Directors of SCHME are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The aiternate Directors are Lau Kok Foo (alternate to Lau Mong Ling), Wong Kim Yong (aiternate to Wong Sin Chin) and Yeen Teck Yin (alternate to Yeen Yoon Hin). The aiternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCHME. However, they are not empioyees of SCHME and are not involved in the day-to-day operations of SCHME. (d) Subsidiary and associated companies As at the LPD, SCHME does not have any subsidiary or associated company. 5.5.4 Italiaworld (a) History and business Italiaworid was incorporated in Singapore under the Singapore Companies Act, Chapter SO on 29 April 2000 as a private limited company under its present name. Italiaworid is principaliy engaged in the suppiy and distribution of aii kinds of quarry industrial products to the quarry industry in the South East Asia region mainiy Singapore and Indonesia. There have been no material changes in the manner in which Italiaworid conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital Itaiiaworld’s present authorised share capitaiis SGD100,000 comprising 100,000 ordinary shares. The movements in issued and paid-up share capital of Itaiiaworid since its incorporation are as foiiows:­5. GENERAL INFORMATION ON OUR GROUP (Cont’d) Date of  No. of  COnsideration!  Resultant  allotment  shares  Types of issue  issued and  allotted  paid-up share  capital  SGD
29 April 2000 4 4/5ubscribers’ shares 4 18 May 2005 99,996 99,996/Bonus issue 100,000 As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in Italiaworld. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. (c) Substantial shareholders and Directors Italiaworld is a wholly-owned subsidiary of our Company and the Directors of Italiaworld are Lau Mong Ling, Wong Sin Chin, Yeen Yoon Hin and Liew Yew Chern. (d) Subsidiary and associated companies As at the LPD, Italiaworld does not have any subsidiary or associated company.
5.5.5 SCHSB (a) History and business 5CH5B was incorporated in Malaysia under the Act on 9 September 1983 as a private limited company under its present name. The principal activities of 5CH5B are in the supply and distribution of all kinds of quarry industrial products and quarry machinery in the central region of peninsular Malaysia. There have been no material changes in the manner in which 5CH5B conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital 5CH5B’s present authorised share capital is RM10,000,000 comprising 10,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of 5CHSB as at the LPD is RM6,000,000 comprising 6,000,000 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of 5CH5B since its incorporation are as follows:­Date of allotment  No. of  Par  COnsideration!  Resultant  shares  value  Types of issue  issued and  allotted  paid-up  share capital  RM  RM  9 September 1983  2  1.00  RM2/5ubscribers’ shares  2  31 October 1983  124,998  1.00  RM124,998/Cash  125,000  17 September 1983  100,000  1.00  RM100,000/Cash  225,000  3 September 1991  125,000  1.00  RM125,000/Cash  350,000  1 October 1992  150,000  1.00  RM150,000/Cash  500,000  28 June 1996  5500,000  1.00  RM5,500,000/Bonus issue  6,000,000
5. GENERAL INFORMATION ON OUR GROUP (Cont’d) As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCHSB. In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. (c) SUbstantial shareholders and Directors SCHSB is a wholly-owned subsidiary of SCH Corporation and the Directors of SCHSB are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The alternate Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCHSB. However, they are not employees of SCHSB (save for Wong Kin Seng, who Is our Business Development Manager) and are not involved in the day-to-day operations of SCHSB. (d) Subsidiaries and associated companies As at the LPD, SCHSB’s subsidiaries are SCH (Sabah) and SCH (sarawak). SCHSB does not have any associated company. 5.5.6 SCH (Sabah) (a) History and business SCH (Sabah) was incorporated in Malaysia under the Act on 15 November 1991 as a private limited company under its present name. SCH (sabah) is principally involved in the distribution of all kinds of quarry industrial products to the quarry industry in the north east of East Malaysia. There have been no material changes in the manner in which SCH (Sabah) conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH (Sabah)’s present authorised share capital is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH (Sabah) as at the LPD is RM300,00S comprising 300,005 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCH (Sabah) since its incorporation are as follows:­Date of allotment  No. of shares allotted  Par value RM  Consideration/ Types of issue  Resultant issued and paid-up share capital RM  15 November 1991 11 Januarv 1992  5 300,000  1.00 1.00  RM5/Subscribers’ shares RM300 ODD/Cash  5 300,005
As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH (Sabah). In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. 57

 

5. GENERAL INFORMATION ON OUR GROUP (Cont’d) (c) Substantial shareholders and Directors SCH (Sabah) is a wholly-owned subsidiary of SCHSB and the Directors of SCH (Sabah) are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The alternate Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCH (Sabah). However, they are not employees of SCH (Sabah) (save for Wong Kin Seng, who is our Business Development Manager) and are not involved in the day-to-day operations of SCH (Sabah). (d) Subsidiary and associated companies As at the LPD, SCH (Sabah) does not have any subsidiary or associated company. 5.5.7 SCH (Sarawak) (a) History and business SCH (Sarawak) was incorporated in Malaysia under the Act on 12 May 1997 as a private limited company under its present name. SCH (Sarawak) is principally involved in the distribution of all kinds of quarry industrial products to the quarry industry in the north west of East Malaysia. There have been no material changes in the manner in which SCH (Sarawak) conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH (Sarawak)’s present authorised share capital is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH (Sarawak) as at the LPD is RM300,000 comprising 300,000 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCH (Sarawak) since its incorporation are as follows:­Date of  No. of  Par  Consideration!  Resultant  allotment  shares  value  Types of issue  issued and  allotted  paid-up share  capital  RM  RM
12 May 1997 2 1.00 RM2/Subscribers’ shares 2 20 AUQust 1997 299998 1.00 RM299 998/cash 300000 As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH (Sarawak). In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. (c) Substantial shareholders and Directors SCH (Sarawak) is a wholly-owned subsidiary of SCHSB and the Directors of SCH (Sarawak) are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The alternate

5. GENERAL INFORMATION ON OUR GROUP (Cont’d) Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCH (Sarawak). However, they are not employees of SCH (Sarawak) (save for Wong Kin Seng, who is our Business Development Manager) and are not involved in the day-to-day operations of SCH (Sarawak). (d) Subsidiary and associated companies As at the LPD, SCH (Sarawak) does not have any subsidiary or associated company. 5.5.8 SCH (Butterworth) (a) History and business SCH (Butterworth) was incorporated in Malaysia under the Act on 27 July 1983 as a private limited company under the name of Engineering & Quarry Equipment Sdn Bhd. It then changed its name to Sin Chee Heng (Kedah) Sdn Bhd on 2 October 1989. It subsequently assumed its present name since 7 December 1993. SCH (Butterworth) is principally involved in the distribution of all kinds of quarry industrial products to the quarry industry in the northern region of peninsular Malaysia. There have been no material changes in the manner in which SCH (Butterworth) conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH (Butterworth)’s present authorised share capital is RMSOO,OOO comprising 500,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH (Butterworth) as at the LPD is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCH (Butterworth) since its incorporation are as follows:­(c) Date of  No. of  Par  Consideration!  Resultant  allotment  shares  value  Types of issue  issued and  allotted  paid-up share  capital  RM  RM  27 July 1983  3  1.00  RM3/ Subscribers’ shares  3  28 October 1993  49,997  1.00  RM49,997/cash  50,000  28 June 1996  200,000  1.00  RM200,000/Bonus Issue  2S0,000  1 January 200S  2S0 000  1.00  RM2S0 OOO/cash  500000
As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH (Butterworth). In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. Substantial shareholders and Directors SCH (Butterworth) is a wholly-owned subsidiary of SCH Corporation and the Directors of SCH (Butterworth) are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The 59

5. GENERAL INFORMATION ON OUR GROUP (Cont’d) alternate Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCH (Butterworth). However, they are not employees of SCH (Butterworth) (save for Wong Kin Seng, who is our Business Development Manager) and are not involved in the day-to-day operations of SCH (Butterworth). (d) Subsidiary and associated companies As at the LPD, SCH (Butterworth) does not have any subsidiary or associated company. 5.5.9 SCH (Kuantan) (a) History and business SCH (Kuantan) was incorporated in Malaysia under the Act on 23 November 1993 as a private limited company under its present name. SCH (Kuantan) is principally involved in the distribution of all kinds of quarry industrial products to the quarry industry in the eastern region of peninsular Malaysia. There have been no material changes in the manner in which SCH (Kuantan) conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH (Kuantan)’s present authorised share capital is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH (Kuantan) as at the LPD is RM100,000 comprising 100,000 ordinary shares of RM1.00 each. The movements in the issued and paid-up share capital of SCH (Kuantan) since its incorporation are as follows:­Date of allotment  No. of shares allotted  Par value RM  Considerationj Types of issue  Resultant issued and paid-up share capital RM  23 November 1993 28 June 1996  4 99996  1.00 RM4/ Subscribers’ shares 1.00 RM99 996/cash  4 100000
As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH (Kuantan). In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. (c) Substantial shareholders and Directors SCH (Kuantan) is a wholly-owned subsidiary of SCH Corporation and the Directors of SCH (Kuantan) are Lau Mong Ling, Wong Sin Chin and Yeen Yoon Hin. The alternate Directors are Lau Li Li (alternate to Lau Mong Ling), Wong Kin Seng (alternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). 60 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCH (Kuantan). However, they are not employees of SCH (Kuantan) (save for Wong Kin Seng, who is our Business Development Manager) and are not involved in the day-to-day operations of SCH (Kuantan). (d) Subsidiary and associated companies As at the LPD, SCH (Kuantan) does not have any subsidiary or associated company.
5.5.10 SCH (Johore) (a) History and business SCH (Johore) was incorporated in Malaysia under the Act on 18 November 1992 as a private limited company under its present name. SCH (Johore) is principally involved in the distribution of all kinds of quarry industrial products to the quarry industry in the southern region of peninsular Malaysia There have been no material changes in the manner in which SCH (Johore) conducts its business or activities since the last three (3) years prior to the LPD. (b) Share capital SCH (Johore)’s present authorised share capital is RMSOO,OOO comprising SOO,OOO ordinary shares of RM1.00 each. The issued and paid-up share capital of SCH (Johore) as at the LPD is RM300,000 comprising 300,000 ordinary shares of RM 1.00 each. The movements in issued and paid-up share capital of SCH (Johore) since its incorporation are as follows:­Date of allotment  No. of  Par  Consideration!  Resultant  shares  value  Types of issue  issued and  allotted  paid-up share  capital  RM  RM  18 November 1992  S  1.00  RMS/ Subscribers’ shares  S  6 December 1993  99,995  1.00  RM99,995/Cash  100,000  28 June 1996  50,000  1.00  RMSO,OOO/Bonus issue  lS0,000  2S september 2003  lS0,000  1.00  RM150,000/cash  300,000
As at the LPD, there are no outstanding warrants, options, convertible securities or uncalled capital in SCH (Johore). In addition, there are no discounts, special terms or instalment payment terms applicable to the payment of the consideration for the allotment. [ The rest of this page is intentionally left blank l

 

5. GENERAL INFORMATION ON OUR GROUP (Cont’d) (c) Substantial shareholders and Directors The details of the substantial shareholders of SCH (Johore) as at the LPD are as follows:­Name  Place of  <—-Direct—->  <—-Indirect—->  Incorporation  No. of  010  No. of  010  shares  shares
SCH Corporation Malaysia 150,000 SO.OO SCHSB Malaysia 150,000 SO.OO
The Directors of SCH (Johore) are Lau Mong Ling, Wong Sin Chin, Yeen Yoon Hin and Lim Lee Pooi. The alternate Directors are Lau Li Li (aiternate to Lau Mong Ling), Wong Kin Seng (aiternate to Wong Sin Chin) and Yeen Wei Yin (alternate to Yeen Yoon Hin). The alternate Directors are the child of the respective Directors and represent the Directors at the Board meeting in the absence of the Director of SCH (Johore). However, they are not empioyees of SCH (Johore) (save for Wong Kin Seng, who is our Business Development Manager) and are not invoived in the day-to-day operations of SCH (Johore). (d) Subsidiary and associated companies As at the LPD, SCH (Johore) does not have any subsidiary or associated company. 5.6 MAJOR APPROVALS AND LICENSES 5.6.1 Major approvals, licenses and permits Save for the generai business licenses possessed by our Group as disclosed below, as at the LPD there are no other major approvals, major iicenses and permits issued to our Group in order for us to carry out our operations other than those pertaining to the general business requirements. Our Group is not required to obtain any manufacturing business licenses under the Industrial Coordination Act, 1975 or under any local state laws for our manufacturing and distribution of quarry griils business segment as it does not meet the minimum requirements required under these iaws and acts to appiy for a manufacturing license. [ The rest of this page is intentionally left blank 1 ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) As at the LPD, our general business is as follows:­No. 1. 2. 3. 4. S. 6. 7.  Issuing Authority/Company/ Registration No. Majlis Perbandaran Kajangj SCHSB License No:-L-18209 Majlis Perbandaran Johor TengahjSCH (Johore) License No:-L-2301145 Bahru Majlis Perbandaran Kuantanj SCH (Kuantan) License No:-L-4014600041998 Majlis Perbandaran Seberang PeraijSCH (Butterworth) License No:-5101264631 Majlis Perbandaran Kota KinabalujSCH (Sabah) License No:-DBKK 264319 Kerajaan Negeri Sarawak/ SCH (Sarawak) License No:-604050 Majlis Perbandaran Kajangj SCHWM License No:-L-6633  Date of Issue 31 December 2012 31 December 2012 31 December 2012 4 January 2013 31 December 2012 3 October 2013 31 December 2012  Date of Expiry 31 December 2013 31 December 2013 31 December 2013 9 January 2014 31 December 2013 17 September 2014 31 December 2013  Nature of Approval/ Licenses Business license Business license Business license Storage and business license Business license Business license Business License  Equity and/or Major Conditions Imposed Compliance status To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise To be exhibited in the Complied licensed premise
63 ICompany No.: 972700-P I

 

5. GENERAL INFORMATION ON OUR GROUP (Cant’d) 5.7 PROPERTIES OF OUR GROUP 5.7.1 Properties occupied and owned by our Group The summary details of the information on the material land and buildings owned by our Group as at the LPD are set out below:­No. 1. (a)  Registered owner/ Title Details/ Postal address Description of property/ Existing Use/ Tenure/Expiry of Lease Express Condition/ Restriction in interest Category of Land Use/ Land Area/ Built-up area sqm 5CH (Johorel 3-storey shophouse 99 years lease expiring on 13 April 2094 Individual title held under HSD 227114, Lot PTD 62687, Mukim Pulai, Daerah Johor Bahru, Negeri Johor No. 18, 18-1 and 18-2, Jalan Sri Perkasa 1/6, Taman Tampoi Utama, 81200 Johor Bahru, Johor Darul Takzim@ Rented individual to To be used for three (3)-storey shoplot for business and residence an built according to the plan approved by the local authority. All wastes and pollution from activities must be disposed to the places approved by the local authority. To adhere to all terms and conditions enforced by the local authority. cannot be sold or transferred to foreigner without state authority consent. Building (Land use) 204 (Land) 318 (Built-up area)  Audited NBVasat 31 August 2013 RM Date of Issuance of Certificate of Fitness for Occupation Encumbrances 434,871 1 November 1997 Charged to CIMB Bank Berhad
64
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cant’d) No.  Registered owner/  Description  Express Condition/  Category of  Audited  Date of  Encumbrances  Title Details/  of property/  Restriction in interest  Land Use/  NBVasat  Issuance  Postal address  Existing Use/  Land Area/  31 August  of Certificate  Tenure/Expiry  of  Built-up  2013  of Fitness for  Lease  area  Occupation  sam  RM  2.  SCHSB  (a)  Individual  title  held  under  1V2  storey  terrace  To be used for light industry two  Industrial  237,600  8 January 1994  None  Geran  152419,  Lot  32063,  factory  (2)-storey  terrace  factory  built  (Land use)  Mukim  Pulai,  Daerah  Johor  according to the plan approved by  Bahru, Negeri Johor  Warehouse  the local authority. All wastes and  223  pollution  from  activities  must  be  (Land Area)  No. 32, Jalan Perdagangan 4,  Freehold  disposed  to  the  places approved  Taman  Universiti,  81300  by the local authority. To adhere  222  5kudai,  Johor  Bahru,  Johor  to  all  terms  and  conditions  (Built-up  Darul Takzim  enforced by the local authority.  area)  Cannot be transferred  unless the  factory  stated  in  express  conditions has been build.
(b)  Individual  title  held  under  1V2  storey terraced  To be used for light industry two  Industrial  340,000  8 January 1994  Charged to CIMB Bank  Geran  152414,  Lot  32061,  factory  (2)-storey  terrace  factory  built  (Land use)  Berhad  Mukim  Pulai,  Daerah  Johor  according to the plan approved by  Bahru, Negeri Johor  Regional  office  of  the local authority. All wastes and  223  5CH  (Johore)  and  pollution  from  activities  must  be  (Land Area)  No. 36, Jalan Perdagangan 4,  warehouse.  disposed  to  the  places approved  Taman  Universiti,  81300  by the local authority. To adhere  318  5kudai,  Johor  Bahru,  Johor  Freehold  to  all  terms  and  conditions  (Built-up  Darul Takzim  enforced by the local authority.  area)
65
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cant’d) No.  Registeredownerl  Description  Express ConditionI  Category of  Audited  Date of  Encumbrances  Title Detailsl  of propertyI  Restriction in interest  Land Usel  NBVasat  Issuance  Postal address  Existing Usel  Land Areal  31 August  of Certificate  TenurelExpiry  of  Built-up  2013  of Fitness for  Lease  area  Occupation  sqm  RM  cannot be transferred  unless the  factory is completed in accordance  with the local authority plan.  (c)  Strata title  held  under Geran  Apartment  None  Commercial  56,234  23 September  None  S9390jM1j2j4, Bangunan  No.  (Land use)  2000  M1, Tingkat No.2, Petak No.  Rented to individual  4,  Lot  52468,  Bandar  #NjA  Selayang,  Daerah  Gombak,  Freehold  (Land Area)  Negeri Selangor  59  No.  18-1B,  Jalan  SBC  3,  (Built-up  Taman Sri Batu Caves, 68100,  area)  Selangor Darul Ehsan  (d)  Individual  title  held  under  1’12  storey  semi- For industry use only  Industrial  2,520,750  23 March 1998  Charged to Public Bank  Geran  118306,  Lot  37285,  detached factory  (Land use)  Berhad  Pekan  Kajang,  Daerah  Ulu  No restriction in interest  Langat, Negeri Selangor  Head-office of  1,599  SCHSB and  (Land Area)  No.3, Jalan Teras 3, Kawasan  warehouse  Industri  Teras  Balakong,  952  Taman  Industri  Selesa  Jaya,  Freehold  (Built-up  43300  Balakong,  Selangor  area)  Darul Ehsan(l)
66
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR G=.R:..::O=.U=.P’–‘-(C::..:o:..::n:.::.t..=’d)<–_ No. (e)  Registered owner! Title Details! Postal address 2 individual titles held under Geran 118304, Lot 37283 & Geran 118305, Lot 37284, respectively Pekan Kajang, Daerah Ulu Langat, Negeri Selangor No. 5 and No.7, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri Selesa Jaya, 43300 Balakong, 5elangor Darul Ehsan(l)  Description of property! Existing Use! Tenure!Expiry of Lease Open sided single storey detached factory Warehouse and manufacturing factory Freehold  Express Condition! Restriction in· interest For industry use only No restriction in interest  Category of Land Use! Land Area! Built-up area sam Industrial (Land use) *1,115 (Land Area) *990 (Built-up area)  Audited NBVasat 31 August 2013 RM 900,000  Date of Issuance of Certificate of Fitness for Occupation 10 October 2001  Encumbrances Charged to Public Bank Berhad  (f)  Lot 35, Jalan 0 1/1, Kawasan Perusahaan Cheras Jaya, 43200 Cheras, Selangor Darul Ehsan Individual title held under H.5.(M) 13156, PT 23677, Mukim Ceras, Tempat Cheras Jaya, Daerah Hulu Langat, Negeri Selangor  lease 30 industrialVacant land Currently vacant. To build a new operation facility in the future 99 years expiring on December 2098  For industry use only Cannot be transferred or charged without the state authority consent  ‘N/A (Built-up area) Industrial (Land use) 8,510 (Land Area)  4,216,532  N/A  Charged to United Overseas Bank (Malaysia) Berhad
67
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) No. 3. (a) (b)  Registered owner! Title Details! Postal address Description of property! Existing Use! Tenure!Expiry of Lease Express Condition! Restriction in interest SCH Kuantan Individual title held under PN 4661, Lot 44677, Mukim Kuala Kuantan, Daerah Kuantan, Negeri Pahang No.3, Jalan Industri Tanah Putih Baru 5, Batu 3, Kawasan Perindustrian Perdana Jaya, Tanah Putih, Jalan Gambang, 25150 Kuantan, Pahang Darul Makmur Individual title held under PN 4662, Lot 44676, Mukim Kuala Kuantan, Daerah Kuantan Negeri Pahang Darul Makmur No.1, Jalan Industri Tanah Putih Baru 5, Batu 3, Kawasan Perindustrian Perdana Jaya, Tanah Putih, Jalan Gambang, 25150 Kuantan, Pahang Darul Makmur 1V2 storey terrace For industrial building only factory cannot be transferred, leased or Regional office for charged without written consent 5CH (Kuantan) and from state authority warehouse 99 years lease expiring on 3 October 2075 1V2 storey terrace For industrial bUilding only factory cannot be transferred, leased or Regional office for charged without written consent 5CH (Kuantan) and from state authority warehouse 99 years lease expiring on 3 October 2075  Category of Land Use! Land Area! Built-up area sam Business bUildings (Land use) 149 (Land Area) 188 (Built-up area) Business bUildings (Land use) 177 (Land Area) 244 (Built-up area)  Audited NBVasat 31 August 2013 RM Date of Issuance of Certificate of Fitness for Occupation Encumbrances 161,256 9 October 1997 173,352 9 October 1997 Charged to CIMB Bank Berhad Charged to CIMB Bank Berhad
68
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) No. 4. S.  Registered owner! Title Details! Postal address Description of property! Existing Use! Tenure!Expiry of Lease Express Condition! Restriction in interest 5CH 5abah Master title held under Parent Title Lot No. 33 (MPKK No.6) Title Country Lease No. 015022769, District of Kota Kinabalu, Sabah Double storey terrace light industrial warehouse cum office cannot be transferred or charged without Government permission Lot 6, Lorong Makat 3, Estate Regional office for Perindustrian, Makat SCH (Sabah) and Kolombong, 88450 warehouse Kolombong, Sabah 999 years lease expiring on 17 August 2923 5CHButterworth Individual title held under held Double storey semi-For industrial use only HSD 15745, PT S78, Mukim detached light 06, Daerah Seberang Perai industrial factory No restriction in interest Tengah, Negeri Pulau Pinang Regional office for No.1, Lorang Nagasari 23, SCH (Butterworth) Taman Nagasari, Seberang and warehouse Perai 13600 Pulau Pinang Freehold  Category of Land Use! Land Area! Built-up area som Industrial (Land use) 439 (Land Area) 418 (Built-up area) Industrial (Land use) 374 (Land Area) 129 (Built-up area)  Audited NBVasat 31 August 2013 RM Date of Issuance of Certificate of Fitness for Occupation 348,766 18 August 2000 374,352 26 November 1996  Encumbrances Assigned to Malayan Banking Berhad Charged to Malayan Banking Berhad
69
ICompany No.: 972700-P I 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) Notes:­(1) These properties has extensions erected thereon consisting of awnings and extended roofing at the side, front and back portions (‘Extensions”). These Extensions were made to accommodate additional storage spaces for storing our Groups inventories. The application for the temporary Certificate of Atness for these Extensions has been approved by Majlis Perbandaran Kajang on 23 OCtober 2013. @ Our Group intends to maintain this property to generate rental yield income for our Group.* The properties located on No. S & 7, la/an Teras 3, Kawasan Industri Teras Balakong, Taman Inciustri Selesa laya, 43300 Balakong, Selangor Darul Ehsan is a combined factory unit bUilt across both lands. As such, the total built~up area of the factory is 990 sq m across both lands. /\, N/A as no building has been erected/build on this land. However, we have plans to build our new operation facility upon our successful Listing. Further details ofour future plans are further elaborated in Section 6.15 of this Prospectus. # N/A as there is no measurement of the total land area occupied. These properties include shop houses and apartment units.
There are no non-compliance with current statutory requirements, relevant land laws and building regulations in respect of the above properties owned by our Group. In addition, none of the properties disclosed above are in breach of any land use conditions or permissible land use. [ The rest of this page is intentionally left blank 1 70 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) 5.7.2 Properties occupied which are rented by our Group The details of material properties rented by us as at the LPD are set out below:­
1.  Lot 7782-S, Batu 121fz Serdang Lama, 43300 Seri Kembangan, Selangor Darul Ehsan  Low Han Leong Brothers Sdn Bhd/SCHSB  Open sided single storey detached fa ctory/Storage facility  l,S61  1 August 2013 to 31 July 201S/ RM187,200  *Not available  2.  Lot 236S, Block 233, Batu Kitang Light Industrial Park, 71/2 Miles, Jalan Batu Kitang, 932S0 Kuching, Sarawak  Kong Shian Lee and Ho Yune Lin/ SCH (Sarawak)  1’12 Storey reinforced concrete semi-detached light industrial workshop/ Industrial workshop  63S  1 March 2009 to 28 February 2014/ RM21,OOO  26 November 2002  3.  280, Woodlands Industrial Park ES @ Woodlands, #08-34 Singapore 7S7322  Wong & Lee Trading Enterprise/ Italiaworld  Office loti Regional office ltaliaworld  of  177  1 April 2013 to 31 March 2016/ /\SGD3,103 per month  7 March 2013
Notes:­Not available as the Certificate of Fitness has not been issued for this property as at the LPD. As such, SCHSB has provided an undertaking to relocate from the above mentioned property to our new operation fadlityIocated at H.5.(M) 13156, PT 23677; Mukim Ceras; Tempat Cheraslaya, Daerah Hulu Langat; Negeri Selangor bean’ng the postal address of Lot 35, lalan 0 1/1, Kawasan Perusahaan Cheras laya, 43200 Cheras; Selangor Darul Ehsan. We shall relocate from the above mentioned property to our new operation fadlity within six (6) months from the completion of construction of the said fadlity, which its overall construction is estimated to be completed within thirty-siX (36) months from the date ofour Listing. * Equivalent to RMB,007.60 (based on the exchange rate ofSG01.00:RM2.sB06) inclusive of7% Govemment service tax(GST) ofSingapore. Our Group has also rented several other accommodations/residential properties for our foreign workers for a total rental amount of approXimately RM l,SOO per month. We do not deem these rented properties to be material to our Group as we do not foresee any difficulties in securing alternative accommodation for our foreign workers should the said rental arrangements be terminated. Save as disclosed above, there is no non-compliance with current statutory requirements, land rules or building regulations in respect of the landed properties owned/leased by our Group. In addition, none of the above land has breached any land use condition or permissible land use. 5. GENERAL INFORMATION ON bUR GROUP (Cont’d)
5.7.3 Business Location Our Group’s head office is located at No.3, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri Selesa Jaya, 43300 Balakong, Selangor Darul Ehsan. Details of the locations of business where our Group operates from are set out below:­Company· Address Purpose  SCHWM No. S & 7, Jalan Teras 3, Kawasan Manufacturing and distribution of Industri Teras Balakong, Taman Industri quarry grill Selesa Jaya, 43300 Balakong, 5elangor Darul Ehsan  SCHME No.3, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri 5elesa Jaya, 43300 Balakong, Selangor Darul Ehsan Supplying and distributing quarry machinery, quarry equipment and reconditioned quarry machinery as well as spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery to the quarry industry  Italiaworld 280, Woodlands Industrial Park E5 @ Woodlands, #08-34 Singapore 757322 Supplying and distributing all kinds of quarry industrial products to the quarry industry in the South East Asia region mainly Singapore and Indonesia  SCHSB No.3, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri Selesa Jaya, 43300 Balakong, Selangor Darul Ehsan Headquarters office, supplying and distributing all kinds of quarry industrial products and quarry machinery in the central region of peninsular Malaysia  SCH (Sabah) Lot 6, Lorong Makat 3, Estate Perindustrian, Makat Kolombong, 88450 Kolombong, Sabah Distributing all kinds of quarry industrial products to the quarry industry in the north east of east Malaysia  SCH (Sarawak) Lot 236S, Block 233, Batu Kitang Light Industrial Park, 7V2 Miles, Jalan Batu Kitang, 93250 Kuching, Sarawak Distributing all kinds of quarry industrial products to the quarry industry in the north west of east Malaysia  SCH (Butterworth) No.1, Lorong Nagasari 23, Taman Nagawari, 13600 Seberang Prai, Pulau Pinang Distributing all kinds of quarry industrial products to the quarry industry in the northern region of peninsular Malaysia  SCH (Johore) No. 36, Jalan Perdagangan 4, Taman Universiti, 81300 Skudai, Johor Bharu, Johor Darul Takzim Distributing all kinds of quarry industrial products to the quarry industry in the southern region of peninsular Malaysia  SCH (Kuantan) No. 1 & 3, Jalan Industri, Tanah Putih Baru S, Batu 3, Jalan Gambang, 25150 Kuantan, Pahang Darul Makmur Distributing all kinds of quarry industrial products to the quarry industry in the eastern region of oeninsular Malavsia
5. GENERAL INFORMATION ON OUR GROUP (Cont’d) 5.7.4  Acquisitions of Properties during the two (2) years preceding the date of this Prospectus  Our Group has not acquired any properties during the past two (2) years preceding the date of this Prospectus.  5.7.5  Material Plant and Equipment  As at 31 August 2013, details of the material plant and equipment used by our Group for the manufacturing of quarry grill are set out below:­
Material Plant and Equipment  Number of units  NBV as at 31 August 2013 RM’OOO  Crimping machine ·Weaving loom machine Forklift Volta belt joint machine Total  8 6 10 3 27  223 18 1 129 371
5.7.6  Regulatory Requirements and Environmental Issues  There are no regulatory requirements and/or major environmental issues which may affect our Company’s operations arising from the utilisation of our assets.  5.7.7  Material Capital Expenditures and Divestitures  Save as disclosed below, there were no other material capital expenditures (including interests in other corporations) made by us for the past four (4) financial years:-
DesCription  FYE 2010  FYE2011  FYE2012  FYE 2013  RM’OOO  RM’OOO  RM’OOO  RM’OOO  Leasehold land  *4,392  Plant and Machinery  (1)854  (2)888  Motor Vehicles(3)  1531  652  910  1,265  Total  5,923  1,506  1,798  1,265
Notes:­This is in relation to the purchase of the leasehold vacant industrial land by SCHSB on 31 March 2010. * Further details of this leasehold vacant industrial land are further described in Section 5.7.1(g) above. This amount includes the capitalisation of the capital expenditures incurred for the purchase of U7is leasehold vacant industrial land, involving professional fees and stamp duty of RM57,999.50 and RM12D,414r respectively. (1) Purchase bySCHMEofone (1) unitofJunjin CSMhydrauliccrawler drillfora purchasecost ofRM0.76million and crimping machine at a purchase consideration of RM94,OOO. The Junjii7 CSM hydraulic crawler drill was purchasedwiththeintentionofrentingitouttoourcustomers, consistingofsmallquanyoperatorswhodo not have U7e financial capability of purchasing and maintaining the hydraulic crawler drill. We charged a monU7/yrentalofapproximatelyRM2O,OOOamonth, foraperiodofthree (3) years. The crimping machine is used to manufacture our quany grills and is purchased to improve the efficiency of our quany grills manufacturing production line. Our Groups policy on renting ofour quarry machinery and quarry equipment is to recognise this arrangement as an operating lease in our accounts, -as all of U7e risk and reward of the quany machinery and quany equipment are retained by our Group U7roughout the rental period and is capitalised as our property, plant and equipment; and depreciated on a straight line basis. The rental income generated is recognised in our income statement on a time proportioned basis over U7e relevant rental. (2) Purchase by SCHME ofone (1) unitofDytecojawcrusherfor thepurposeofrentingittoourcustomerfora period offour (4) years anda monthlyrental ofapproXimatelyRM31,000 a month. 73
5. GENERAL INFORMATION ON OUR GROUP (Cont’d) After the rental period for the renting ofJUf1j1n CSM hydraulic crawler dnll and Dyteco jaw crusher has ended, our Group can either:­(a) Renew the rental agreement with our existing customers to extend the rental pen”ocl ofthese quarry machinery;
(b) Seek for new customers to rent these quarry machinery;

(c) Recondition the quarry machinery (forJunjin CSM hydraulic crawler drill only); or (d) Dispose these quarry machinery as second hand quarry machinety. (3) Involves the purdJase ofvarious motor vehicles by our subsidiaries. The above material capital expenditures were primarily financed by a combination of bank borrowings and internally generated funds. Save as disclosed below, there were no other material capital divestitures (Including interest In other corporations) made by our Group for the past four (4) financial years:­Description  FYE2010  FYE 2011  FYE 2012  FYE 2013  RM’OOO  RM’OOO  RM’OOO  RM’OOO  Land and bUilding(l)  310  70  120  Plant and machinery  (2)123  227  433  70  227  120
Notes:­(1) nJis is in relation to the disposal of various apartment units and houses located in Peraly Sabah and Selangor. (2) DisposalbySCHSBofone(I)unitofNakayama conecrusher. Save for our planned capital expenditures relating to our expansion plans as set out in Section 6.15 of this Prospectus, we do not have any material capital expenditures and divestitures currently in progress, within or outside Malaysia. 5.7.8 Material Plans to Construct, Expand or Improve Facilities As at the LPD, our Group has no immediate plans to construct, expand and improve our facilities, save for the following:­(a) We intend to construct our new operation facility to cater for our business growth as well as to expand and further develop our core competencies in the quarry machinery, quarry equipment and quarry grill. Our new facility shall house our new corporate office, warehouse, showroom for the quarry machinery and quarry equipment, and space for fabrication works for reconditioned quarry machinery under SCHME. The new operation facility will be a four (4)-storey building with a total built-up area of 8,176 sq m, to be built on a leasehold vacant industrial land belonging to us with a land size of 8,510 sq m located at Lot 35, Jalan 0 1/1, Kawasan Perusahaan Cheras Jaya, 43200 Cheras, Selangor Darul Ehsan. The estimated cost of construction of our new head-office and facilities is expected to amount to RM14.0 million. The construction cost will be funded via the proceeds from our IPO of RM10.00 million and bank borrowings of RM4.00 million. Upon completion of the construction of our new operation facility, we shall have an an office space of approximately 8,176 sq m, which will house our corporate office, and housing our showroom for the quarry machinery and quarry equipment for display. In addition, we shall have a warehouse space with a size of approXimately 4,959 sq m located at our new operation facility, which will house additional 5. GENERAL INFORMATION ON OUR GROUP (Cont’d) warehouse space and fabrication area to conduct reconditioning works on the used quarry machineries. Currently, the bUilding plans for our new operation facility are pending the relevant authorities’ approval. However, we expect that the building of our new operation facility will begin immediately upon our Listing and the overall construction is estimated to complete within thirty six (36) months from the date of our Listing. [The rest of this page is intentionally left blank]

 

 

6. BUSINESS OVERVIEW
6.1 PRINCIPAL ACTIVITIES AND PRODUCTS This section outlines our principal activities as well as the range of prodUcts which are supplied, distributed and manufactured by us. 6.1.1 Principal business activities Our Group offers a wide range of quany-based prodUcts ranging from quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery and its related spare parts as well as quarry grill that are widely used by quarry operators and quarry plants in the quarry industry. We are principally involved in the business of distribution and supplying of quarry industrial prodUcts, quarry machinery, quarry equipment and reconditioned quarry machinery as well as supply of spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery to the quarry industry in Malaysia and South East Asia. Our Group is also involved in the manufacturing and distribution of quarry grill. Our products are categorised under four (4) main business segments, as illustrated in the diagram below:­
We are currently distributing and supplying our products to more than 500 domestic customers in the quarrying activities in Malaysia. We have also distributed our products to our customers located in Singapore, Indonesia, Thailand, Myanmar and cambodia. The suppliers for our quarry industrial products include Seishin Corporation, Tiantai Yongli Import & Export, 2 Rivers Enterprise, Mitsubishi, Sumitomo Corporation and North Malaya Engineers Trading Co Sdn Bhd. We have secured the non-exclusive distributorship rights from Junjin CSM, Nakayama, Alpha Plus and Ryoko Sangyo Corporation. Ryoko Sangyo Corporation is the trading arm of Mitsubishi, to distribute its quarry industrial prodUcts such as Mitsubishi rock tools and drilling equipment. Further details of our non-exclusive distributorship rights are further described in Section 6.1.3 of this Prospectus. Our quarry industrial products are further described in Section 6.1.2 of this Prospectus. The brand new quarry machinery and quarry equipment that we distribute and supply are from reputable quarry machinery and quarry equipment manufacturers namely Nakayama (distributed by Seishin Corporation of Japan), Alpha Plus (manufactured by C & Oh Corporation of Korea) and Junjin CSM of Korea. These quarry machinery and quarry equipment include Nakayama’s range of crushing equipment, such as cone crushers, jaw crushers and gyropactor, as well as Junjin CSM and Alpha Plus range of machinery, which includes hydraulic crawler drill and hydraulic breakers. Our brand new quarry machinery and quarry equipment are further described in Section 6.1.3 of this Prospectus. 76

 

6. BUSINESS OVERVIEW ( Cont’d) To widen our range of quarry machinery and quarry equipment, we also supply reconditioned hydraulic crawler drilling machinery branded under Junjin CSM. The used hydraulic crawler drilling machinery is of an older model from Junjin CSM, the JD-700. These used hydraulic crawler drilling machinery are imported and reconditioned by our technical team to ensure that they are able to perform under the required conditions before they are sold. Further description of our reconditioned quarry machinery is set out in section 6.1.3 of this Prospectus. We also carry an extensive range of spare parts to complement our supply of quarry machinery, quarry equipment and reconditioned quarry machinery. These spare parts (both repairable and consumable parts) are parts of the quarry machinery and quarry equipment that are replaced after certain hours of usage in order to keep the quarry machinery and quarry equipment running. The repairable and consumable parts that we distribute are sourced from both local and overseas authorised suppliers that are approved by the quarry machinery and quarry equipment brand manufacturers. Our spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery are further described in Section 6.1.4 ofthis Prospectus. We are also involved in the manufacturing and distribution of quarry grill. Our quarry grill products are marketed to quarry operators and are mostly produced according to their orders. Further description of quarry grill products are set out in Section 6.1.6 of this Prospectus. We have also successfully penetrated into the mining industry since 2011 and we are currently supplying our quarry industrial products and quarry machinery to iron ore and gold mines. We pride ourselves as a quarry specialist supplier of quarry industrial products, quarry machinery and quarry equipment for quarrying activities where the products we distribute are used in various stages of a quarrying process which include but not limited to the drilling and blasting stage to the various crushing stages to screening activities of a quarrying process. We have been distributing and supplying our products to the quarry industry for the last 25 years and to the mining industry since 2011. For better understanding of the usage of our products in a typical quarrying process from the initial stage of drilling and blasting rocks to final screening of rock material, we set out below a diagrammatic illustration and commentary of a general quarry operation:­[ The rest of this page is intentionally left blank 1 ICompany No.: 972700-P I 6. BUSINESS OVERVIEW (Cont’dj (iv) (iii) Primary crushing Drilling and Blasting
78
6. BUSINESS OVERVIEW (Cont’d) One of the earliest steps in the process is the rock extraction process where a study is carried out to collect site information which range from the amount of shot holes required to location of shot holes to depth of shot holes, amongst others. Once these have been performed, drilling machines such as Junjln CSM’s hydraulic crawler drill machinery are used to drill shot holes. Then, explosives and detonator cord are inserted into the shot holes before setting off the explosives, breaking the rock into smaller pieces. Once blasted, the rocks are often still in large unmanageable sizes. Operators then used rock breakers to further break down the sizes of these rocks. Excavators are then used to move the blasted rocks to the quarry’s processing areal plant. Here, they are subjected to a series of crushing and screening processes, depending on the type of end product of the particular quarry. There are a number of crushing processes and they can be sectioned into primary, secondary and tertiary crushing and screening activities. Blasted rocks are first fed into a chute to a vibrating feeder. The feeder screens out dusts and fine materials, leaving only rocks. The rocks are then fed to a crusher. A jaw crusher is usually used in this stage as it is designed to handle and crush large rocks with odd shapes into manageable sizes. Crushed rocks are then conveyed using conveyor belt system onto primary stockpile where the secondary crusher is fed. The secondary crushing process is carried out to further break down the rocks into smaller sizes. The type of crushing equipment used in this stage can either be a cone crusher, jaw crusher or impact crusher. In the case of cone crusher, it breaks down the size of stones by squeezing it between the cones. It is designed with a concave (a vertical conical chamber) and a mantle (a vertical conical crushing head). It crushes stones fed to it by rotating the mantle, crushing the stones between mantle and concave. By using a cone crusher, the size of the stones can be controlled by increasing or decreasing the gap between concave and mantle. Impact crusher on the other hand, utilises impact to crush rocks. Rocks that are fed to it are crushed and impacted by the built in rotor. Sizes of rocks are also adjustable by changing the gap between the impact plates and the rotor. The materials from the secondary crushers are then screened to separate the small size crushed stone and dust from larger stones. Outputs from secondary crushing process are then subjected to a tertiary crushing process. This third crushing process normally utilises an impact crusher or a cone crusher, due to the eqUipment’s abilities to adjust the size of the subject. The stones from tertiary crushing process are then conveyed by conveyor belts to another screening process in order to sort them according to their sizes. [ The rest of this page is intentionally left blank l
6. BUSINESS OVERVIEW ( Cont’d) The table below summarises the types of products we carry and supply to quarry operators at each stage of the quarrying process:-StaQe (i) (ii) (iii) (iv) (v) (Vi) (Vii) (Viii) (ix)  Process Our Products Drilling and blasting • Hydraulic crawler drill, power hydraulic drifter and hydraulic breaker • Mitsubishi rock tools • Ammonium nitrate Transportation Primary Crushing • Various quarry industrial products that are attached to tractors and excavators such as bucket teeth, adaptor, repointer, duaplate and rock tyres. • Jaw crusher Conveying primary output of • crushing Conveyor system which includes quarry industrial products such as conveyor belt, impact spring, conveyor roller, belt fastener, shaft mounted reducer, cone-bac epoxy backing system and packing compound. Secondary Crushing • Cone crusher Secondary • Quarry grill screening Conveying secondary output of • crushing Conveyor system which includes quarry industrial products such as conveyor belt, impact spring, conveyor roller, belt fastener, shaft mounted reducer, cone-bac epoxy backing system and packing compound. Tertiary crushing Final screening • Cone crusher, jaw crusher and gyropactor. • Conveyor system which includes quarry industrial products such as conveyor belt, impact spring, conveyor roller, belt fastener, shaft mounted reducer, cone-bac epoxy backing system and packing compound. • Quarry grill
Our Group is equipped with more than 25 years of experience in the quarry industry and reputation as an established distributor and supplier of quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery as well as its related spare parts and quarry grill and to be a one-stop quarry specialist supplier by venturing into the provision of quarry engineering services (by collaborating with engineering companies). The type of quarry engineering services that we intend to prOVide include provision of designing, fabrication, installation and commissioning of quarry plants. Further description of our intended quarry engineering services is set out in Section 6.15 of this Prospectus. [ The rest of this page is intentionally left blank 1

 

6. BUSINESS OVERVIEW (Cont’d) 6.1.2 Quarry industrial products Our quarry industrial products are sourced both locally and overseas such as Korea, Japan, China, USA and Australia. The supply of quarry industrial prodUcts is our Group’s largest business segment and our Group’s largest revenue contributor. Demand for our quarry industrial products is relatively constant and repetitive in nature, as these consumable quarry industrial prodUcts generally have a relatively short product life of approximately three (3) to six (6) months; depending on the hours of usage (approximately 10 hours per day, 6 days per week) due to the extensive wear and tear caused by the continuous usage during a quarrying process. Thus, we are reqUired to continuously provide and supply these quarry industrial products for use in a quarrying process for replacement as and when these quarry industrial prodUcts reached its maximum life span, or torn and worn out during the quarrying process, Our Group focuses on the delivery time to help our customers’ mitigate the risk of delay and ensure the smooth conduct of the tatters’ projects. By offering a wide range of quarry industrial products, we are able to provide our customers with a higher degree of convenience as we are able to provide quarry industrial products from approved manufacturers and minimise the downtime in their quarrying operations and processes. The table below lists the types of quarry industrial products that our Group carries:­
Conveyor Belt • Conveyor belt is used to convey rock materials in a quarry plant
to its intended destination. Conveyor belts are used in various sections of a quarry plant, depending on the size of the quarry plant. • Our Group offers conveyor belts in various sizes, thickness and material, catering to the different needs of customers.
• Used as part of a conveyor belt

Impact Spring system, impact spring allows the conveyor belt system to convey materials of different weights.
6. BUSINESS OVERVIEW (Cont’d)
Conveyor Roller • Used in a conveyor belt to support and facilitate the movement of the belt. • Available in various sizes that correspond to conveyor belt sizes.
• Used to fasten conveyor belt, in order to maintain conveyor belt’s productivity.
• Available in various sizes for use with conveyor belts of different types and sizes.
• Used with jaw crushers, jaw plates are attached to break down various rock materials into smaller pieces.
• It is highly wear-resistant and comes in various sizes and grades for various quarry operating conditions.
• Used for rock drilling activities and attached to crawler drill machines, rock tools are made up of button bits, shank and adaptors.
• These rock tools come in various shapes (button bits of conical, semi-ballistic, retrac button shapes) and sizes (different sizes and length for shanks and adaptors) which are used for various drilling activities and rock materials.

 

6. BUSINESS OVERVIEW ( Cont'(/)
Duaplate
Shaft Mounted Reducers
• A type of chromium carbide composite cladding material that is used to prolong the life of clad plates.
• Available in a range of different grades to suit a variety of quarry operating conditions.
• A type of industrial product that is attached to the bucket of an excavator, bucket teeth/ adaptor/ repointer is used as a type of ground engaging tool for excavators to shift large rock materials.
• Our Group supplies bucket teeth/ adaptor/repointer from various brands with different surfaces and grades to suit various quarry operating conditions.
• Used in material handling equipment such as conveyor belts, shaft mounted reducers are connected to belt pulleys and has the ability to provide speed and torque conversions to other device through a rotating power source.

Rock Tyre • Tyres used on machinery at quarry plants. Produce less heat while at the same time giving excellent anti-wear performance.
• Available in various sizes to suit various types of machinery. 6. BUSINESS OVERVIEW ( Cont’d) industrial Packing Compounds Cone-Bac Epoxy Backing System Ammonium Nitrate  • • •  A chemical compound that is used as adhesive material to hold conveyor belts. Used to strengthen and join jaw plate to jaw crusher. Chemical compound used as an explosive to blast rocks
6.1.3 Quarry machinery and quarry equipment We currently distribute a range of brand new quarry machinery and quarry equipment from three (3) foreign manufacturers, namely Nakayama, Junjin CSM and Alpha Plus~ which are currently distributed to our customel s in the quarrying industry located in Malaysia, Singapore and Indonesia. We also supply reconditioned hydraulic crawling machinery by Junjin CSM which are supplied and distributed to smaller quarry operators located in east Malaysia. The quarry machinery and quarry equipment that we distribute has an estimated product lifespan of between three (3) years to six (6) years, with regular interval maintenance. This business segment began in 2006 as part of our Group’s plan to venture and expand our product range offerings into the distribution and supply of quarry machinery and quarry equipment for the quarry industry. The quarry machinery and quarry equipment that we 6. BUSINESS OVERVIEW (Cont’d’j distribute and supply to quarry operators are used in various rock crushing stages of a quarrying process. We currently have the non-exclusive distributorship rights to distribute and supply Nakayama brand range of crushers and Junjin CSM range of crawler drillers. The salient terms of these non-exclusive distributorship rights are as follows:­Name  Products  Region  Years  Junjin CSM  Junjin CSM hydraulic crawler drill and its related spare parts Mitsubishi materials brand and rock drilling tools Nakayama crushing equipment  Malaysia and Singapore region Malaysia Malaysia  Not stated, but has been distributing since 2008. Not stated, but has been distributing since 2009. Not stated, but has been distributing since 2008.  Ryoko Sangyo Corporation  Nakayama
Our Group is not aware of any other players that have been given with these distribution rights by these brand name owners for the Malaysian region. We wish to highlight that Alpha Plus has not given any distributorship terms and letters of distributorship. However, we have been distributing the Alpha Plus quarry machinery and quarry equipment since 2007. There are no distribution agreements made between our Group and the above brand names for the distribution of the above prodUcts. Other than the above shown allocated region for distributionr there are no other prohibitions and distribution duration imposed on our Group. The table below describes the range of quarry machinery and quarry eqUipment that we currently distribute:-
Nakayama Cone Crusher • For crushing rock materials.
• For primaryr secondary or tertiary crushing. • Centralised control system by a touching type control panel.
• Optional online monitoring system that enhances safety and provides for remote monitoring.
• Available in four (4) different models with different motor power and feed size.

6. BUSINESS OVERVIEW (Cant””
Brand
• For primary or secondary crushing process as it can be fed with large sized rocks.
• Optimum feed opening ratio. • Counter balanced design. SR Series Gyropactor • For secondary or tertiary crushing process, a cone crusher is used to produce artificial sand.
• Designed with opened rotor which minimised blocking of feed material. • Rotor adopts a sectionalised design which is made up of assembled components for easy parts replacement.
• Two (2) types of crushing chamber to choose from ­metal and rock. Metal chamber is designed with anvils that provide positive crushing for sand manufacturing with greater reduction ratio. Rock chamber on the other hand allows for better sand shape.
• Reversible rotation which doubles the anvil replacement.

Junjin CSM Hydraulic Crawler Drill • Available in four (4) models differentiated by amongst others, drilling depths, type of hydraulic drifter, size of machinery as well as the size of bit and rod attached to the machinery
• For drilling and blasting stage of a quarrying process, the hydraulic crawler drill is responsible for drilling into rocks to facilitate the insertion of explosives. 6. BUSINESS OVERVIEW (Cont’dj Brand • Used together with hydraulic crawler drill, Junjin CSM’s power hydraulic drill offers high penetration rated with maximum drilling economy.
• It is the section of a hydraulic crawler drill that is responsible for the drilling process.
• Incorporates a hydraulic damper that protects the drifter and increases durability.
• Available in two (2) models.

 

Alpha Plus Hydraulic Breaker • High impact energy and impact rate.
• High efficiency with optimised control valve.
• Attached to excavators to break large sized rocks into smaller, more manageable

 

sizes for crusher machinery after the drilling and blasting rocess. 6.1.4 Reconditioned quarry machinery In 2010, our Group ventured into the supplying and distributing of reconditioned hydraulic crawler drilling machinery that are imported from Junjin CSM. These used hydraulic crawlers drilling machinery is of an older model sold by Junjin CSM to our Group for reconditioning. These used hydraulic crawler drilling machinery are imported from Korea and are then SUbjected to reconditioning activities by our Group’s technical team upon arrival to ensure that they are well-maintained and are able to perform under the required conditions before they are resold. Junjin CSM is fully aware that our Group reconditions its used hydraulic crawlers drilling machinery which are then resold to the smaller quarry operators in East Malaysia. Junjin CSM sells and trades the used hydraulic crawler drilling machinery to our Group, and it is then reconditioned by our technical team. Our technical team has received on-going technical training by Junjin CSM to provide technical support and maintenance services for the range of such quarry machineries to our customers in the quarry industry. These reconditioned quarry machinery will then be sold and marketed to smaller quarry operators that are mainly located in east Malaysia. The used hydraulic crawler drilling machinery is of an older model from Junjin CSM, the JD-7oo. The reconditioned hydraulic crawler drilling machinery does not compete directly with Junjin CSM’s range of brand new hydraulic crawler drilling machinery. However, despite being an older model, it shares similar replacement spare parts with the current models of quarry machinery and quarry eqUipment which facilitate the maintenance of this machinery. The sales of reconditioned quarry machinery by our Group acts as a brand building tool for Junjin CSM where potential customers, especially smaller quarry operators/quarry plants in East Malaysia will be introduced and exposed to the Junjin CSM brand and range of its products. This would create brand exposure, awareness and marketing opportunities for 6. BUSINESS OVERVIEW ( Cont’d) Junjin CSM should these quarry operators/quarry plants decide to eventually upgrade its usage of reconditioned quarry machinery to the newer Junjin CSM’s range of quarry machinery and quarry equipment, when its quarry operational size and activities grows. Our Group would also be able to penetrate to the smaller quarry operators/quarry plants located in East Malaysia. The reconditioned quarry machinery are targeted to be supplied and distributed to smaller quarry operators and quarry plants located in east Malaysia that does not require the use of new hydraulic crawler drilling machinery. The addition of this reconditioned hydraulic crawler drilling machinery into our range of quarry machinery and quarry equipment has enabled our Group to increase the range of products that we carry, facilitating our penetration into the market of smaller sized quarry operators and quarry plants iocated in Malaysia. The offering of reconditioned hydraulic crawler drilling machinery provides smaller quarry operators and quarry plants an alternative to the choice of cheaper reconditioned quarry machinery for their quarrying operations, as compared to the usage of brand new machinery which is more expensive. Such offering enables smailer sized quarry operators and quarry piants in lowering their operating costs in quarry machinery and quarry equipment. This also provides the opportunity for these smaller quarry operators to engage our Group for our other range of products and services that can be prOVided to their quarrying operations, whilst exposing them to the Junjin CSM’s brand name and range of quarry machinery and quarry equipment. In order to provide our customers with value added after sales service, these reconditioned hydrauiic crawlers drilling machinery also comes with a one (1) month warranty by us, which covers the major parts of the machinery which include but not limited to the engine, transmission, drifter, drive train and hydraulic systems. As at the LPD, we have not encountered any warranty claims by our customers for the reconditioned hydraulic crawler drilling machinery that we supply and distribute. Further, we have not made any provisions for any warranty claims on the reconditioned hydraulic crawier drilling machine as based on past trends, there have not been any warranty claims made within the one (1) month warranty period given to our customers. In any event, our management does not expect that thiS product liabilities risk to be material. In addition, our Group aiso distributes Junjin CSM’s range of brand new quarry machinery and quarry equipment, and as such will be aware of any potential original quarry machinery and quarry equipment defects, thus further mitigating this risk. In the near future, our Group aims to increase the number of models of reconditioned crawler drilling machinery from Junjin CSM and penetrate into the South East Asia markets. The reconditioning activities are handled by our technical team which consists of a chief mechanic, supported by technicians and apprentices (which are interns undergoing practical training at our Group). The follOWing details the various steps undertaken by our technical team during a reconditioning process of used hydraulic drilling machinery:­(a) Quarry machinery that arrived in Malaysia is thoroughly cleaned, both externally as well as internally.
(b) Following the cleaning process, our technicians will proceed with a series of tests that aims to determine the working condition of the machinery. Among the areas checked are the starting conditions as well as the working condition of the battery, starting conditions of the engine, fuel pump and fuel injection system of the engine, as well as running the engine at specific rate of revolution. Once the conditions have been determined, our technicians will proceed with servicing the engine of the machinery, where engine oil, oil filter and air filter will be replaced. If the tests detect any defects on these machinery, our technical team would then send these

6. BUSINESS OVERVIEW ( Cont’d) machinery back to Junjin CSM for product liability claims and would not proceed with any reconditioning works for the said defective quarry machinery. (b) Our technicians wili then test the conditions of the hydraulic system. The main hydraulic task will be cleaned, followed by a series of tests to determine the hydraulic system’s working conditions under certain pressures. Then, the inner filters of the hydraulic system wili be replaced with new parts.
(c) Another area that is checked is the quarry machinery’s power divider. During this stage, the technicians wili inspect the conditions of the bearings, oil seal as well as checking for any oil leakages from the gearbox. If any leakages are detected, our technicians will perform the necessary repairs which include replacing old seals and parts with new spare parts.
(d) The air compressor of the machine is then checked for any leakages as well as for worn parts. Its maximum air output is then checked to determine the condition of the air compressor, followed by an oil and filter change.
(e) Other areas that are checked by our technicians include the wiring and lighting system, control panels and its switches, under carriage, rollers, sprockets, idlers, hoses, dust collector suction and its fiiters. Damaged and! or worn parts are then changed.
(f) FollOWing all these checks, our technicians wili then inspects the body of the machinery for dents, and if necessary, repairs wili be carried out. Once the repairs are conducted, the machinery will then be sprayed with a new coat of paint.

6.1.5 Supply of spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery Our Group also carry a wide range of popular spare parts associated specifically for the use and act as replacement parts only for the quarry machinery, quarry equipment and reconditioned quarry machinery that we distribute and suppiy. Among the consumable spare parts that we carry includes roller chains, machinery’s engine parts such as pistons, engine cylinders, belts, tubes, valves, gears and various others. It is of imperative importance that we continuously carry adequate stock for these consumable spare parts as it enables us to respond to our customers’ request and queries and orders at a shorter time frame, thus allowing our customers to have minimum downtime and minimise disruptions in their quarrying operations. The spare parts for quarry machinery, quarry equipment and reconditioned quarry machinery that we supply and distribute has an estimated product lifespan of between three (3) months to six (6) months, depending on the hours of usage of the quarry machinery, quarry equipment and reconditioned quarry machinery. However, during a routine service, only regular consumable parts are normally replaced (depending on the hours of usage of the quarry machinery and quarry equipment), for example, the cone crusher’s consumable spare parts that are normally repiaced are the concave and mantle parts, as these are the consumable spare parts that crushes the rocks that are fed to the machine. The various spare parts supplied for the quarry machinery, quarry equipment and reconditioned quarry machinery that we carry are sourced from local and overseas authorised suppliers that are approved by the quarry machinery and quarry equipment 6. BUSINESS OVERVIEW (Cont’d) brand manufacturers. These consumable spare parts from overseas are mainly imported from various countries such as Korea, Japan/ China, USA and Australia. In addition, we also purchase these consumable spare parts from a local supplier for the engine used in Junjin CSM’s hydraulic crawler drilling machinery. The local supplier, Scott & English (Malaysia) Sdn Bhd, is an agent appointed by Junjin CSM to sell the necessary quarry machinery and quarry equipment consumable spare parts for the engines used in Junjin CSM’s hydraulic crawler drilling machinery. The table below shows an example of some of the major consumable spare parts that our Group carries according to the type of quarry machinery and quarry equipment that we currently distribute and supply:­Quarry machinery and quarry e ui ment

 

Junjin CSM hydraulic crawler drill (with hydraulic drifter)
The Junjin CSM hydraulic crawler drill machine consist of main four (4) segments, namely travelling device, working device (includes gUide shell/ boom, swing post and drifter), power resource and hydraulic control device. These four (4) segments consist of thousands of repairable and consumable spare parts that we distribute and supply. While the consumable spare parts of the hydraulic crawler drill machine are required to be replaced after certain specified hours (ranging from 50 work hours to 2/400 work hours)/ one of the main segments of the hydraulic crawler drill machine is the hydraulic drifter. The hydraulic drifter is a part of the hydraulic crawler drill machine that does the drilling activity while the latter allows for movement in a quarry plant. The follOWing highlights the key areas of a hydraulic drifter that are required to be replaced at shorter regular intervals due to the nature of its purpose: Driving segment A part of the hydraulic drifter that drives the drilling mechanism/ it consist of a number of parts as shown below:

6.  BUSINESS OVERVIEW (Cont’dJ and quarry Gear segment A segment that allows the operator of the hydraulic crawler drill to change the speed of the drill. The diagram below shows the gear housing and its major parts:

Damper segment Designed to absorb shocks resulting from drilling work, the segment also houses the motor of the hydraulic drifter. Alpha Plus hydraulic breakers Hydraulic breakers are attached to excavators and used to break large sized rocks into smaller, more manageable sizes. Below shows an example of some key consumable parts of a hydraulic breaker: Chisel Chisel is the part of a hydraulic breaker that is used to break rocks. Therefore, it is one of the key part of the machinery that is required to be replaced with regular intervals for the machine to work within its optimum level. The diagram below shows an example of the type of chisels available:

The hydraulic breaker is driven by a motor with various replaceable parts. The diagram below shows the replaceable motor parts such as piston, cylinclElr,…hEli:lclS,.i:lccuITlulatori:lnd…Yi:llye: ..
6. BUSINESS OVERVIEW (Cont’dJ
Nakayama cone crushers Nakayama jaw crushers
Cone crushers, much like the hydraulic crawler drill, also consist of repairable and consumables spare parts. The section where spare parts are required to be replaced on regular intervals is the head section, which consist of the cone crusher’s mantle and concave spare parts. This is the section of the machine where it crushes the rocks that are fed  into  it.  Below  are  some  sample  of major  consumable parts:  Concave  Mantle

Bush
The jaw crusher from Nakayama is a type of heavy-duty crusher that is built tough for maximum productivity. It incorporates a simple structure that reduces parts maintenance, and as such; cheap to use and maintain. The main consumable spare parts in a jaw crusher are jaw plates (which are described in Section 6.1.2 of this Prospectus). They make contact with the rocks that are fed into the machine, and have to withstand the force of the swing jaw, and eventually wear out. The diagram below shows a cross sectional area of a jaw crusher, highlighting the major parts of the machine: 6. BUSINESS OVERVIEW ( Cont’t/’j
Nakayama SR series gyropactor
A type of vertical-shaft impact crusher because of its designl a gyropactor machine is used to produce artificial sand. Its main feature lies in its reversible open type rotor which facilitates crushing of rocks fed to it. The main segment of the crushing chamber in the vertical-shaft impact crusher is the sectionalised rotor which allows for easy replacement of parts. The picture below shows the major replacement parts of the rotor:
6. BUSINESS OVERVIEW ( Cont’dJ 6.1.6 Quarry grill SCHWM is our Group’s manufacturing outfit located in Balakong, Selangor Darul Ehsan, which principally manufactures quarry grill in various weaves as well as aperture sizes for different usage.

 

 

Aperture refers to the opening between adjacent parallel wires and quarry grill with different aperture levels are used in different stages of a quarry plant. Our quarry grill is also available in plain hooks or reinforced hooks, depending on our customers’ applications and specifications. The normal quarry grill has a product lifespan of between one (1) to three (3) months, while our newly developed diamond shaped quarry grill is expected to have longer prodUct lifespan of between three (3) to six (6) months, depending on the hours of usage. The range of “Flat Top’ quarry grills manufactured by SCHWM is of higher quality, which generally has 1112 times longer useful life as compared to the “Double Weave” quarry grills. In addition, our Group has submitted an application to patent our “Diamond Shape” quarry grill to the Intellectual Property COrporation of Malaysia (“MyIPO”) on 3 August 2012. Currently, we are awaiting MyIPO’s instruction and directive for our Group to file a substantive examination of this patent. The types of quarry grill produced by us ranges from aperture sizes of 2 millimetres to 2 inches, with wire diameter of 2.S millimetres to 12 millimetres. The manufacturing process of our quarry grill is set out in Section 6.1.7 of this Prospectus. 6. BUSINESS OVERVIEW (Cont’d) 6.1.7 Operations Flowchart Quarry grill manufacturing process
Sourcing of materials High-carbon steel wire rods are the main material used to produce quarry grill which are sourced locally. These quarry grill are used in screening machines in quarry plants and available in sizes ranging from 2.5 millimetres to 12 millimetres. High carbon steel is selected due to its high resistance property, enabling it to be used for longer periods before being replaced. Crimping Crimping is a process in which the wire rods are formed into the required shapes and sizes with specific diameter. During this process, the wire is first crimped in precision machines that specifically define the spacing of the wires and ensure that the wires will be firmly locked together at the intersections. Extra crimps between the intersections are sometimes performed to provide a more stringent weaving. Crimping process often takes place before the weaving process as it allows the wire rods to have a stable and more rigid structure. Difference sizes, shapes and crimped styles functioned to screen the crushed rock into various size categories in order to cater the diverse demand for construction works such as building and road foundation. Weaving Weaving process will be carried out after the wire rods have been crimped. The large diameter metal wire will be rolled into the required curve shape before weaving. 95 6. BUSINESS OVERVIEW (Cont’d) We have the ability to produce different types of weave including flat top, double crimp weave, intermediate crimp weave as well as slot weave. Each wire screen panel is designed and manufactured to perform a specific function in effective aggregate screening and separation. Hooking Screening for sizing and sieving are supported by clamping rails that apply tension across the screening surface. The tension is applied through edge treatments on the woven wire screen panel commonly referred to as hooks. The proper edge prepared to fit the screening desk is crucial for effective screening and longer service life. There are two (2) types of hooks offered by our Group, plain hooks and reinforced hooks. The diagram below shows an example of a hooked section of a quarry grill and the types of hooks available:­
The standard hook length of a quarry grill produced is 1.25 inches and the standard angle is 60 degrees. However, the hooking process will only be carried out when requested by our customers. Finished quarry grill Finished quarry grill are then transferred to our quality control department where it is inspected by our Group’s quality control personnel to ensure the quality of the quarry grill conformed to the requirement and specifications. Once approved, the qualified quarry grill is then transported to packing section where they are rolled and packed. The packed wire­mesh is then transported to the storage warehouse and is ready to be delivered to the customers. [ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW ( Cont’dj 6.2 PRINCIPAL MARKETS Our domestic and overseas customers are suppliers and distributors of quarry products, contractors and quarry/mining operators. It has been one of our sales strategies to focus on supplying directly to the end users in the quarry industry, complementing it with our strong after-sales services. Approximately 94.7% of our Group’s revenue (based on the origin of purchase orders) for the FYE 2013 was generated from the local quarry market as depicted below:­
We are currently distributing and supplying our products to more than 500 domestic and 30 overseas customers involved in quarrying activities. Malaysia remained our largest market for FYE 2013, accounting 94.7% of our Group’s total revenue. Our local revenue is segmented by states, as follows:-Statesl  FYE 2010  FYE 2011  FYE 2012  FYE 2013  Countries  Revenue (RM’OOO)  0/0  Revenue (RM’OOO)  0/0  Revenue (RM’OOO)  °/0  Revenue (RM’OOO)  0/0  Zone 1:  Klang Valley, Selangor, Negri  19,075  47.6  19,496  44.0  26,899  49.6  32,818  53.6  Sembilan and Melaka  Zone 2:  Penang, Kedah,  3,939  9.8  5,513  12.5  6,051  11.2  6,004  9.8  PerIis and Perak  Zone 3:  Pahang, Terengganu and Kelantan  4,885  12.2  6,206  14.0  7,699  14.2  8,375  13.7  Zone 4: Johor  2,968  7.4  2,987  6.7  3,976  7.3  4,416  7.2  Zone 5: Sabah  4,426  11.1  4,024  9.1  4,437  8.2  3,875  6.3  Zone 6: Sarawak  1,475  3.7  1,571  3.5  2,682  4.9  2,532  4.1  Singapore  1,845  4.6  2,901  6.6  1,604  3.0  1,763  2.9  Indonesia  419  1.0  1,221  2.8  793  1.5  1,283  2.1  Myanmar  69  0.2  1  *  5  *  – – cambodia  943  2.4  347  0.8  80  0.1  185  0.3  Thailand  – – – – 14  0.0  – – Total  40,044  100.0  44,267  100.0  54,240  100.0  61,251  100.0
Note:­* Less than 0.05% 6. BUSINESS OVERVIEW ( Cont’d) 6.3 MARKET SHARE For the FYE 2012, the SCH Group generated revenue of RM54.2 million, of which RM51.8 million was generated from the Malaysian market equivalent to an estimated of 17.2% share of the quarry equipment and machinery market during 2012, as illustrated in the figure below. This is based on our Group’s revenue of RM51.8 million against the forecast market size of RM301.6 million in 2012.
Note: Based on the forecasted market size for 2012 and our Group’s historical financial results for the same year. The forecasted market sizing consists of revenues generated from the supply of quarry machinery, pen’pheral equipment and spare parts and the provision ofengineen’ng services. (Source: IMR Report) 6.4 SALES AND MARKETING STRATEGIES AND DISTRIBUTION NETWORK sales and marketing strategies The major thrust of our Group’s marketing strategy is to position ourselves as the quarry specialist supplier by offering a wide range of prodUcts that are used in the quarry industry. Our Group has been serving the quarry industry for over 25 years. The sales and marketing strategies employed by our Group include the following: • Positioning our Group as a quarry specialist supplier with extensive array of products that can be used in various stages of a quarrying process. This is achieved through our continuous marketing efforts of a wide variety of quarry related products;
• Highlighting our extensive distribution network that covers the northern, central, southern and eastern region in peninsular Malaysia, both Sabah and Sarawak in east Malaysia as well as our presence in Singapore covering the regional markets; and
• Availability of an online presence through our corporate website, www.schsb.com.my that catalogues our prodUcts that we are able to supply to the quarry industry.

Our Group also undertakes a string of promotional and marketing activities that aims to inform and educate our customers with regards to our suppliers’ new products and technologies. These include conducting frequent sales visits to potential customers, in some cases, proViding demonstrations of new quarry machinery and quarry equipment to customers. 6. BUSINESS OVERVIEW ( Cont’d) In addition, we also provide our customers with value added after-sales service such as periodical maintenance services during the quarry machinery and quarry equipment’s warranty period (12 months for brand new quarry machinery and quarry equipment), managed by our technical team which are strategically stationed in various states in Malaysia to cover each region in Malaysia, which ensures issues with the quarry machinery and quarry equipment supplied are solved promptly and on timely-manner. Distribution network Our distribution network strategy is based on direct distribution method where we focus on marketing and selling our products directly to customers. Each of our branches consists of a sales person, supported by its team of administrative and support staffs, which supports the respective branch manager in carrying out the sales and marketing activities at their designated regions. This strategy is made possible with the availability of our subsidiaries that are strategically located in various states in Malaysia and Singapore, with each subsidiary being responsible for its designated regions. This strategy has allowed our Group to work closely with our customers where we are able to evaluate and attain a better understanding of the local industry and customers’ requirements, which also serves as a feedback mechanism for continuous improvement. 6.4.1 After-sales services and support Currently, our Group’s technical team is headed by Leong Mun Wah, SCHME’s Business Development Manager. He is supported by a chief mechanic, technicians and apprentices (Which are interns undergoing practical training at our Group). Our technical team’s role is to proVide value added after-sales services to our customers, through our two-level support system. In essence, our Group’s two-level technical support is described as follows:­(i) First level The first level support offers remote assistance where our technicians will proVide the necessary response over the telephone, or electronic mail. They will require the customer to describe the issue that is currently occurring, and from there, our technicians will offer a set of solutions. The first level support is only applicable for minor quarry machinery and quarry equipment issues. The first level support allows our technician to have an understanding of the issue faced by the customer, and should the customer fail to rectify the problem, our technicians will have the necessary information required to perform a level two support. (i1) second level Should a customer’s internal team fail to rectify the quarry machinery and equipment problem, our Group’s technical team will be despatched to our customer’s site. Because information regarding the issue has been communicated to our technicians during the first level support, they will also transport the required as well as related parts necessary to the site. Currently, once a request by a customer has been made, our technical team will travel to site immediately within the same day if the customer’s site is in Klang Valley. However, if the customer’s site is located outside Klang Valley, our technical team will take approXimately 24 hours to reach the site. 6.  BUSINESS OVERVIEW (Cont’c/J  6.5  KEY ACHIEVEMENTS AND MILESTONES
.  . .  .  .
1983 • Incorporated SCHSB 1986 • First foray out of Klang Valley to penetrate the northern region of peninsular Malaysia with the acquisition of Engineering & Quarry Equipment Sdn Bhd, which subsequently changed its name to Sin Chee Heng (Kedah) Sdn Bhd and later, SCH (Butterworth). 1991 • Incorporated SCH (Sabah) to penetrate into Sabah. 1992 • Incorporated SCH (Johore) to penetrate the southern region of peninsula Malaysia. 1993 • Incorporated SCH Corporation as an investment holding company to hold its subsidiaries in different states within Malaysia. • Incorporated SCH (Kuantan) to penetrate the eastern region of peninsula Malaysia. 1997 • Incorporated SCH (sarawak) to penetrate into Sarawak. 1999 • Incorporated SCHWM to venture into the manufacturing and distribution of quarry grill. 2000 • Incorporated ltaliaworld in Singapore to tap into the South East Asia regional markets. 200S • SCHSB moved to our current premise located in Balakong, 5elangor, with a built-up area of approximately 9S2 sq m. 2006 • Incorporated SCHME to expand our range of products by incorporating the business of importing and distributing of quarry machinery and quarry equipment and its related spare parts. 2008 • Commenced distribution of Nakayama brand of quarry machinery. • Commenced distribution of Junjin CSM range of quarry equipment. 2009 • Commenced the distribution of Mitsubishi brand of quarry industrial products. 2010 • Received an appreciation award from Junjin CSM, our machinery supplier, for our outstanding contribution to the sales of Junjin CSM branded machinery in Malaysia. • SCHME ventured into the supply and distribution of reconditioned quarry machinery branded under Junjin CSM. 2012 • Submitted the patent application for our “Diamond Shape” quarry grill. 2013 • Completed the Acquisitions 6. BUSINESS OVERVIEW (Cont’c/J 6.6 MACHINERY, EQUIPMENT AND WAREHOUSE SPACE Our subsidiary, SCHWM is involved in the manufacturing of quarry grill products for use in the quarry industry. Our manufacturing activities are conducted at our premise located at No. 5 & 7, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri Selesa Jaya, 43300 Balakong, Selangor Darul Ehsan. The table below lists the machinery and equipment that we currently possess for our quarry grill manufacturing activities:­ffl~~t\lnit$ Wii31: Crimping machinery Used to crimp quarry 8 RM223,OOO grill’s rai Is Weaving loom machinery Used to weave quarry 8 RM18,OOO grill Hooking machinery Bending the edges of 1 RMl quarry grill
Our quarry grill manufacturing operations run ten (10) hours per day and six (6) days a week. The production output, capacity and utilisation of our manufacturing facilities are as follows:­
Quarry grill A900,OOO 826,920 91.88 Note:­A Based on the quarry manufacturing operations of 3,000 kg per da}’; for a total operation of 300 days per annum. We currently opt to operate only one shift per day as our quarry grill are generally produced when orders are received and thus, our maximum annual and monthly production capacity would stand at 1,800/000 kg and 150/000 kg/ respectively, should we implemented a two (2) shifts operation. Our manufacturing machinery capacity for the quarry grill is as follows:­Machinery  Production  Utilisation rate (°/0)  capacity (kg)#  FYE 2010  FYE 2011  FYE 2012  FYE 2013  Crimping machine  900,000  “102.01  93.75  92.39  91.88  Weaving  loom  900/000  “102.01  93.75  92.39  91.88  machine  Actual manufacturing output (‘000 kg)  918  844  832  827
Notes:­# A  The total production capacity of900,000 kg is based on one shift of ten (10) hours per day. This is based on the quarry manufacturing operations of3, 000 kg per day, for a total operation of300 daysper annum. The utilisation rate in FYE 2010 isover 100% due to some overtime work being performed in FYE 2010. During FYE 2010-the overtime performed was approximately five (5) hours per month.  101
6. BUSINESS OVERVIEW (Cont’d) Our warehouse storage space for the storage of our industrial quarry products, quarry machinery, quarry equipment and its related spare parts for the financial years under review is as follows:­No. 1.  Company 5CH (Johore)  Warehouse No. 32, Jalan Perdagangan 4, Taman Universiti, B1300 5kudai, Johor Bahru, Johor Darul Takzim  *Size (50 m) 222  2.  SCH (Johore)  No. 36, Jalan Perdagangan 4, Taman Universiti, B1300 5kudai, Johor Bahru, Johor Darul Takzim  200  3.  5CH5B  No.3, Jalan Teras 3, Kawasan Industri Teras Balakong, Taman Industri 5elesa Jaya, 43300 Balakong, 5elangor Darul Ehsan  476  4.  5CH5B  No. 5 and No.7, Jalan Teras 3, Balakong, Taman Industri 5elesa 5elangor Darul Ehsan  Kawasan Industri Teras Jaya, 43300 Balakong,  297  5.  5CH (Kuantan)  No.3, Jalan Industri Tanah Putih Baru 5, Batu 3, Kawasan Perindustrian Perdana Jaya, Tanah Putih, Jalan Gambang, 25150 Kuantan, Pahang Darul Makmur  134  6.  5CH (5abah)  Lot 6, Lorong Makat 3, Estate Kolombong, B8450 Kolombong, 5abah  Perindustrian,  Makat  376  7.  5CH (Butterworth)  No.1, Lorong Nagasari 23, Taman Nagasari, 5eberang Perai 13600 Pulau Pinang  116  B.  5CHSB  Lot 7782-5, Batu 12’12 5erdang Lama, 43300 5eri Kembangan, 5elangor Darul Ehsan  1,561  9.  5CH (5arawak)  Lot 2365, Block 233, Batu Kitang Light Industrial Park, 7V2 Miles, Jalan Batu Kitana, 93250 Kuchina, 5arawak Total storaae SDace available  572 3.954
Note: Based on the nature of our business, the current estimated storage rate for all our warehouses will be between 50% to 95% capacity. Thisisbecausemovementofourinventoriesfollowajust-In-timeinventory system whereby we are continuously buying and moving out stock to customers. * 6.7 QUALITY ASSURANCE POLICY One of the key areas in our line of business involves the ability of our distributors to deliver quality quarry industrial products, quarry machinery and quarry equipment to our customers to meet their specified specifications and requirements for their quarrying process. In order for us to achieve this, we have implemented a stringent internal quality policy that aims to undertake quality control testing with regards to the incoming stocks. Our quality control approaches include the following:­• Checking of incoming quarry industrial products, quarry machinery and quarry equipment, to ensure that they meet our orders and specifications. These mainly 6. BUSINESS OVERVIEW (Cont’d) consist of visual checks where our staff verify the models received with the orders via model numbers; • Random testing of each incoming batch of products and parts to identify defects. Products and parts with manufacturing defects or defects arising from delivery (such as scratches, dents and breakage), which will be returned to our supplier, or in some cases, we will notify our suppliers who will send replacement item; and
• In terms of quarry machinery and quarry equipment, our stock keeper and technicians will conduct visual checks (to detect for scratches, matching of part numbers with orders, correct placement of safety stickers on machine) and perform basic functionality test (such as movement and rotation checks) before storing them.

Our manufacturing division has also put in place an internal quality control process that aims to control the quality of our quarry grill. Our quality assurance policy for our manufacturing activities can be broken down into three (3) stages as follows:­Incoming quality assurance Raw materials such as high carbon steel are subjected to inspections when they are delivered to our premise. This is to ensure that incoming raw materials meet our specifications and requirements. Raw materials that fail to meet our specifications will be returned to the suppliers for replacement. In-process quality assurance Our in process quality assurance measures are implemented in various stages of the manufacturing process. Random checks and inspection are carried out to ensure that the key areas of our quarry grill such as aperture size, weave finishing, hooking areas meet the specification and requirement. In addition, the checks and inspection will ensure that products that do not meet the specifications do not proceed to the next production stage. Out-going quality assurance Our manufacturing personnel also perform quality checks on all finished products in respect of various key product properties such as finishing, aperture size, weave finishing and hooking finishing. Finished products that meet our spedfications are then stored before being delivered to our customers. 6.8 PRODUCT DEVELOPMENT AND ENHANCEMENT Our Group, through our subsidiary SCHWM, is involved in the product development of quarry grill. Our product development activities involve the development of new quarry grill and also the enhancement of performance of our existing quarry grill products. The development of new quarry grill is a result of gathering feedbacks from our customers, where they will inform us on the performance of our products, and ways in which we can enhance them. Our production team is led by Wong Sang @ Wong Hock Lim and has been instrumental in developing new quarry grill products for our customers. He is supported by four (4) team members and our Managing Director, Lau Mong Ling whom is the advisor of our product development team. Our product development activities range from research to design to test production and real-world use before we offer our product to our customers. 6. BUSINESS OVERVIEW (Cont’d) The table below describes our product development activities in relation to the development of new quarry grill:-Staae Research Design Prototype Testing  DescriDtion We gather information from our customers regarding areas to enhance and work closely with our customers in the design to provide them with the products that meet their needs. At this stage, we aim to gather information regarding the current performance of our quarry grill such as its screening efficiency and durability. Final designs will contain a set of specification which include the type of material to be used, shapes and aperture sizes and will have to be approved by our management before moving to the next stage. Once designs are approved, our team will proceed with creating a prototype from the specification sheet. The prototype will then be tested at our customers’ site to determine its efficiency as well as durability. The feedbacks gathered are then used to modify and/or improve the design before producing an improved prototype. Prototypes that are approved are then put into production.
We have also successfully developed a new type of quarry grill known as “Diamond Shape’, which has double the life span of the “Double Weave” quarry grill. We have submitted the application for this quarry grill patent to the MyIPO on 3 August 2012 and the same is being processed by the Registrar of Patents. 6.9 INTERRUPTIONS IN BUSINESS We have not experienced any interruption to our business, which has had significant effects on our operations for the past twelve (12) months preceding the LPD. [ The rest of this page is intentionally left blank 1 ICompany No.: 972700-P I 6. BUSINESS OVERVIEW (Cont’dj 6.10 MAJOR CUSTOMERS Our Group’s top ten (10) customers for each business segment for the past four (4) FYEs 2010 to 2013 are as follows:­Rank Customer Quarry industrial products 1. Honest Sam Development Sdn Bhd
2. Aras Kuasa Sdn Bhd
3. Hap Seng Building Material Sdn Bhd
4. Goltra 5dn Bhd
5. Weng Lee Granite Quarry Sdn Bhd
6. Toong Yoon Engineering Works 5dn Bhd
7. LCS Enterprise Sdn Bhd
8. STM Maju (M) Sdn Bhd
9. YY Engineering Sdn Bhd
10. Batu Tiga Quarry Sdn Bhd

Country of Origin Malaysia  FYE 2010 Revenue contribution RM’OOO 794  0/0 1.98  FYE 2011 Revenue contribution RM’OOO 1,664  0/0 3.76  FYE 2012 Revenue contribution RM’OOO 1,741  0/0 3.21  FYE 2013 Revenue contribution RM’OOO 1,990  0/0 3.25  Length of relationship Years 17  Malaysia Malaysia  485 595  1.21 1.49  718 719  1.62 1.62  1,079 813  1.99 1.50  1,520 671  2.48 1.10  6 12  Malaysia Malaysia  427 166  1.07 0.41  392 182  0.89 0.41  247 357  0.46 0.66  242 134  0.40 0.22  15 10  Malaysia  215  0.54  228  0.52  196  0.36  195  0.32  16  Malaysia Malaysia Malaysia Malaysia Total  604 52 7 288 3,633  1.51 0.13 0.02 0.72 9.07  145 219 479 3 4,749  0.33 0.49 1.08 0.01 10.73  -357 152 63 5,005  -0.66 0.28 0.12 9.24  71 309 498 38 5,668  0.12 0.50 0.81 0.06 9.26  4 5 7 7
[ The rest of this page is intentionally left blank l 105 ICompany No.: 972700-P I 6. BUSINESS OVERVIEW ( Cant'(/) Rank  Customer  Country  FYE 2010  FYE 2011  FYE 2012  FYE 2013  Length of  of origin  Revenue  Revenue  Revenue  Revenue  relationship  contribution  contribution  contribution  contribution  Quarry  machinery  and  quarry  equipment  RM’OOO  DID  RM’OOO  DID  RM’OOO  DID  RM’OOO  DID  Years  and its related spare parts  1.  Ronseng Enterprise  Malaysia  1,483  3.70  950  2.15  229  0.42  58  0.09  3  2.  Advancecon Machinery 5dn Bhd  Malaysia  – – – – 3,069  5.66  31  0.05  4  3.  Gasing  Rock  Blasting  Sdn  Malaysia  – – 1,540  3.48  36  0.07  10  0.02  4  Bhd  4.  Jeram Land Sdn Bhd  Malaysia  – – 1,026  2.32  128  0.24  30  0.05  4  5.  Zhan Chang Granite Quarry  Singapore  – – 1,098  2.48  – – 195  0.32  3  Pte Ltd  6.  Lufoong  Construction  Sdn  Malaysia  10  0.02  1,021  2.31  2,033  3.75  215  0.35  4  Bhd  7.  LY Chhuong Construction &  Cambodia  943  2.35  – – – – 185  0.30  3  Import Export Co. Ltd.  8.  LC5 Enterprise Sdn Bhd  Malaysia  868  2.17  – – – – 27  0.04  2  9.  ACME  Engineering  &  Malaysia  799  2.00  57  0.13  – – 129  0.21  2  Construction Sdn Bhd  10.  Harapan Ramai Sdn Bhd  Malaysia  780  1.95  46  0.1  – – 2  ~  2  Total  4,883  12.19  5,738  12.96  5,495  10.14  882  1.43
[ The rest of this page is intentionally left blank] 106 ICompany No.: 972700-P I 6. BUSINESS OVERVIEW (Cont’dj Rank Customer Quarry grill 1. Weng Lee Granite Quarry
2. Kuad 5dn Bhd
3. Dayalam Venture Sdn Bhd
4. FYS Marketing 5dn Bhd
5. Priscojaya 5dn Bhd
6. PT Mitra Investindo TBK SGD
7. PT Harap Panjang
8. Linnhoff Technologies Pte Ltd
9. PT Kawasan Dinamilka Harmonitama
10. Aras Kuasa 5dn Bhd

Country of origin Malaysia Malaysia Malaysia Malaysia Malaysia Indonesia  FYE 2010 Revenue contribution RM’OOO 120 328 288 106 99 8  0/0 0.30 0.82 0.72 0.26 0.25 0.02  FYE 2011 Revenue contribution RM’OOO 125 112 173 76 109 249  0/0 0.28 0.25 0.39 0.17 0.25 0.56  FYE 2012 Revenue contribution RM’OOO 99 122 127 85 7 144  0/0 0.18 0.22 0.23 0.16 0.01 0.27  FYE 2013 Revenue contribution RM’OOO –102 –98  0/0 –0.17 –0.16  Length of relationship Years 10 14 9 11 7 5  Indonesia Singapore  -16  -0.04  127 121  0.29 0.27  39 45  0.07 0.08  64 75  0.10 0.12  6 6  Indonesia  – – 119  0.27  190  0.35  252  0.41  5  Malaysia Total  62 1,027  0.15 2.56  78 1,289  0.18 2.91  145 1,003  0.27 1.84  132 723  0.22 1.18  5
Our Group is not dependent on any single customer as none of our customers contribute more than 10% of our total revenue for the period under review. Many of our customers, which include suppliers and distributors of quarry products, contractors and quarry/mining operators, are repeat customers who have been with our Group for a number of years. However, the fluctuation in revenue contribution from our customers varies from year to year depending on various factors, such as the number/nature of the projects undertaken (for customers who are contractors) and the level of quarrying activity and quarrying operations in the quarry and mining industry in Malaysia (for customers who are quarry/mining operators). It should be noted that the demand for our quarry industrial products is relatively constant and repetitive in nature by our customers, as these consumable quarry industrial products generally have a relatively short product life of approXimately three (3) to six (6) months; depending on the hours of usage (approXimately 10 hours per day, 6 days per week) due to the extensive wear and tear caused by the continuous usage during a quarrying process. Thus, our customers are reqUired to replace these quarry industrial products for use in their quarrying operations on a timely manner upon the exhaustion and torn of the industrial products used to have minimum downtime and minimise disruptions in their quarrying operations. 107 6. BUSINESS OVERVIEW ( Cont’d) Based on the table above, most of our top ten (10) customers generally show a recurring or increasing purchasing trend for quarry industrial products for the period under review. The demand and supply of our quarry machinery and quarry equipment depends on the requirement of our customers in their usage at different levels of the quarrying operations. Once purchased, our customers are not required to frequently replace its quarry machinery and quarry equipment as the quarry machinery and quarry equipment that we distribute has an estimated product lifespan of between three (3) years to six (6) years, with regular interval maintenance. However, our customers would purchase additional units of quarry machinery and quarry equipment if their quarrying operations required additional support at different stages of the quarrying process, such as additional usage of jaw crushers in the primary crushing stage, hydraulic crawler drill for use in the drilling, blasting and crushing stages. The regular interval maintenance requires the purchase of the spare parts used in the quarry machinery, quarry equipment and reconditioned quarry machinery, which has an estimated product lifespan of between three (3) months to six (6) months. The demand for our quarry grills are mostly produced according to the orders of the quarry operators, thus the volume of production depends on the order quantity made by our customers. Our quarry based-products are essentially items which are designed or built specifically to be used in various stages of a quarrying process and operations. Malaysia has been our largest market for FYE 2012 and FYE 2013, accounting 95.6% and 94.7% of our Group’s total revenue, respectively. Whilst Malaysia has been our Group’s largest source of revenue contribution, our Group has been expanding and growing our presence in both domestic and overseas markets particularly Indonesia, Thailand, Myanmar and Cambodia. We have also successfully penetrated our products into the mining industry since 2011. We are currently supplying our quarry industrial products and quarry machinery to an iron ore mining company, Honest Sam Development Sdn Bhd which is located in Kuantan, Pahang. Nevertheless, we have maintained good business relationship with our customers in the quarrying industry, some of which have more than fifteen (15) years relationship with our Group. In addition, our Group has a wide customer base which amounts to more than 500 domestic and 30 overseas customers involved in quarrying activities. [ The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW ( Cont’dJ 6.11 MAJOR SUPPLIERS The value of the quarry machinery, quarry equipment and reconditioned quarry machinery purchased by our Group is typically higher, as shown in the table below:­Activities  Supply of quarry industrial products  Supply of quarry machinery, quarry equipment, and reconditioned quarry machinery  Supply of spare parts for quarry machinery and quarry equipment  Raw materials associated with manufacturing of quarry grill
SuppliElrs Country of FYE origin 2013 RM’OOO 2 Rivers Enterprises Development China 2,968 Co., Ltd Tiantai Yongli Import & Export China 2,484 Co., Ltd Contitech (Tianjin) Conveyor Belt China 1,181 Ltd Junjin CSM Korea 13,237 Seishin Corporation* Japan 1,685 Dyteco Co., Ltd Korea 1,330 Seishin Corporation* Japan 5,998 Junjin CSM Korea 735 C & Oh Corporation Korea 157 North Malaya Engineers Trading Malaysia 1,673 Company Sdn Bhd RCI Wire Sdn Bhd Malaysia 174 Light Metals Industries Sdn Bhd Malaysia 633 Notes:­* Seishin Corporation is a Japanese trading company based in Kobef Japan which distributes the quarry machinery and quarry equipment manufadured by Nakayama and Mitsubishi Materials Corporation to SCHME As such, a/I bIllings are bIlled to Seishin Corporation for the quarry machinery and quarry equipment supplied to our Group. It should be noted that the Nakayama brand ofavshers and Mitsubishi rock tools are all sourced and supplied to our Group via Seishin Corporation as they are able to provide longer and flexible credit tenns of up to 180 days for the financing terms of our purchase of these quarry machinery and quarry equipment @ Nakayama Crushing pte Ltd is a company based in Singapore that distributes 07ina-made quarry machinery and quarry equipment spare parts used in Nakayama quarry machinery and quarry equipment [ The rest of this page is intentionally left blank l ICompany No.: 972700-P I 6. BUSINESS OVERVIEW (Cant’d) Our Group’s top ten (10) suppliers for each of the past four (4) FYEs 2010 to 2013 are as follows:­Rank Supplier 1. Junjin CSM
2. Seishin Corporation

 

3 2 Rivers 1 . Enterprise 4. Tiantai Yongli Import & Export
5. C&Oh Corporation

6. Sumitomo Corporation

7. Enfico Enterprise Sdn Bhd
8. Light Metal Industries (M) Sdn Bhd
9. Qingdao Chow Wansheng

10. North Malaya Engineers Trading Co Sdn Bhd

Total
6. BUSINESS OVERVIEW (Cont’d) For the FYEs 2010, 2011, 2012 and 2013, our top two (2) suppliers are 5eishin Corporation and Junjin CSM, which accounted approximately 58.11%, 50.10%, 24.70% and 58.87%, respectively, of our total purchases. Our Group relies on our suppliers and partners who we work closely with to support our business activities, and our Principals, who provide us the non-exclusive distributorship rights to distribute and supply their quarry machinery and quarry equipment. Most of our products are imported from Japan, Korea, China, USA and Australia. Our Group usually make purchases from our approved list of suppliers and prefers to maintain long-term business relationships with our suppliers based upon their trustworthiness and reliability in the supply of quality quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery as well as its related spare parts and raw materials for the manufacturing of quarry grill. We have been dealing with our major suppliers, partners and Principals for at least one (1) year. As an authorised distributor, we are able to distribute and supply the range of quarry industrial products, quarry machinery and quarry equipment of reputable brands such as Nakayama, Junjin CSM and Mitsubishi. However, we do not have any supply agreements with any of our Principals. The fluctuation in purchases from our suppliers was a result of varying quarry project requirements of our customers. Accordingly, we may not procure similar purchases in terms of quantity with the same supplier for subsequent years. Our Directors are of the view that our Group is not dependent on any single major supplier due to the availability of a large pool of overseas suppliers in the market coupled with the abundant supply of quality quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery as well as its related spare parts and raw materials for the manufacturing of quarry grill. In addition, we have a wide network of contacts for suppliers, both foreign and local to meet our customer’s requirements. 6.12 TYPES, SOURCES AND AVAILABILITY OF MATERIALS The majority of our products are sourced from our overseas suppliers and manufacturers (from countries such as Japan, Korea, China, USA and Australia). In general, we have not experienced any significant price fluctuations from our major suppliers over the past four (4) FYEs 2010 to 2013. Our raw materials such as high carbon steels are used for the manufacturing of our quarry grill and are sourced from local our suppliers based in Malaysia. As these raw materials are easily available locally, we have not experienced, nor do we foresee any supply problems that would adversely affect our manufacturing, assembly and testing operations. Over the years, we have built strong working relationships with our suppliers and manufacturers as we have established good track record for our purchases and payment commitments. We are constantly sourcing for more suppliers who are able to proVide us with competitive pricing, timely delivery and quality products. To-date, we have not faced any difficulties in the sourcing of our supplies from our suppliers, located locally or overseas. 6.13 OUTLOOK OF THE QUARRY MACHINERY AND EQUIPMENT MARKET IN MALAYSIA The analysis of the quarry machinery and equipment market in Malaysia including the market dynamism, competitive analysis, barriers to entry and outlook is set out in Section 7 of this Prospectus. 6. BUSINESS OVERVIEW (Cont’d) 6.14 COMPETITIVE STRENGTHS 6.14.1 Wide range of integrated quarry services Our Group offers a comprehensive range of quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery as well as its reiated spare parts, and quarry grill. Our extensive range of quarry products are currently being used in aimost all stages of a quarrying process. We have aiso successfully penetrated our products into the mining industry. We are currently suppiying our quarry industrial products and quarry machinery to an iron ore mining company, Honest Sam Development Sdn Bhd which is iocated in Kuantan, Pahang. In the FYE 2012, we began a project together with an engineering firm whereby we supplied our quarry machinery to its client, which is involved in goid mining activities. Our Group’s success comes from our abiiity to provide our customers with fast turnaround time that is supported by our Group’s experienced sales and technical team. Our Promoters and key management personnel have more than 25 of years of experience in the quarry industry and this has provided us with the knowledge to provide our customers with the initial pre-saies advice associated with the products we carry, user briefings as well as after-sales support, giving customers what they require. Our technical team consist of experienced individuais who work ciosely with customers to ensure customers’ downtime are minimised. By offering such integrated services, our Group is able to put ourselves in a favourabie position to assist customers in terms of time savings, effort and cost. 6.14.2 Established player Our Group is an established player in the quarry equipment and machinery market with more than 25 years of experience, capabiiities and knowiedge of the quarry industry, as we are able to suppiy our products and services to the whole quarrying process chain of a quarry. The range and extent of products that we supply to our customers in the quarry industry complements their quarrying needs and requirements. Our sales team wili conduct continuous site visit to the quarry operation sites to determine the suitabie products to be used, to ensure that our customers get the right performing quarry industrial products, quarry machinery or quarry equipment for their quarrying process. Over these years, we have been maintaining our favourabie reputation as the supplier and distributor of quarry products and have established long working relationships with some of our customers. Our customers have since referred and recommended us to some of their customers that have enabled us to widen our customer base. In addition, the referrai and recommendation by our customers also serve as a testament of our experience and abiiities in the industry. As an authorised distributor we are able to distribute and suppiy the range of quarry industrial products, quarry machinery and quarry equipment of reputabie brands such as Nakayama, Junjin CSM and Mitsubishi. In terms of the hydraulic crawler drill machinery from Junjin CSM, we currentiy suppiy both brand new (four (4) types of models) as well as reconditioned models (one (1) modei) to the market. Both brand new and used machinery are imported from Korea. All the hydrauiic crawler driii machinery are priced according to their specifications and features, and thus, 6. BUSINESS OVERVIEW (Cont’d) we are able to target quarry operators of various sizes with the brand new and reconditioned quarry machinery. To further complement our sales of quarry machinery and quarry equipment, we also sell its related consumable spare parts. In terms of convenience and accessibility, our Group focuses on the delivery time to help the customers’ mitigate the risk of delay and ensure the smooth conduct of the latter’s projects. The positive feedback received from our customers has enabled us to strengthen our customers’ confidence in our business model, thereby increasing our credibility and image as a reputable quarry specialist supplier as well as enhancing our long-term competitiveness in the marketplace. 6.14.3 Qualified and experienced management team Our Group’s past success have been influenced by the presence and leadership qualities of our key management personnel within our organisation. Our unique combination forms the sustainable competitive strengths over our competitors. Our Group is led by Lau Mong Ling, Yeen Yoon Hin and Wong Sin Chin, who has over 2S years of accumulated knOWledge and experiences in the quarry industry. Since our Group’s inception, our Directors have maintained close working relationship with both local and overseas suppliers and customers. Their contributions to our Group have formed our Group to its present status and will also drive our Group’s growth moving forward. Our Group also takes a proactive and continuous effort towards addressing succession planning to ensure continued success of our Group. Various steps have been implemented to address this, such as the grooming of new management staff to gradually assume responsibilities of senior management. In addition, we have also adopted a competitive remuneration package and employee benefits coupled with continuous training in order to attract, retain and develop new and current key management personnel. 6.14.4 Strong customer and supplier relationship Our Group believes in building and maintaining sustainable working relationships with our customers. Our consistency in delivering high quality products and services that meet our customers’ expectations and satisfactions, leading to establishment of strong and long standing relationship with customers has been one of our key strengths. In addition, our Group has the ability to source, import and/or procure the products based on the requirements made by our customers from a pool of suppliers. We have established and maintained close business relationships with our suppliers over the years and believe that continuous supply and availability of products to cater the industry’s needs is one of the key essential factors that have allowed us to excel in the industry. Our efforts and hard work was been recognised by one of our suppliers, Junjin CSM which awarded us the appreciation award for our excellent performance and contribution in the sales of Junjin CSM branded quarry machinery in the Malaysian quarry machinery and equipment market. 6.14.5 Wide geographical coverage Our Group has established a distribution network that covers the major regions in Malaysia and has strategically located subsidiaries in Selangor, Penang, Pahang, Sabah, Johor, Sarawak and Singapore where each subsidiary is responsible for their assigned geographical coverage. Our Group has established subsidiaries located in different parts of Malaysia in 6. BUSINESS OVERVIEW (Cont’dj order to better serve strategically and cover the major regions in Malaysia, where the major quarry operators, end-users, quarry sites and quarry plants are located at. Our branch offices are equipped to maintain, repair and overhaul various types of quarry industrial products, quarry machinery and quarry equipment, quarry grill and spare parts for machinery supplied by us or by third parties. Our wide geographical coverage enables us to market our supplied products efficiently and effectively, with deeper understanding of the local market conditions in each region. In addition, our operations that are strategically located in various regions allow us to provide timely deliveries to our customers in the quarry industry, leading to higher levels of customer satisfaction. Our network of branches and sales office (established under our subsidiaries) allows us to provide maintenance, repair and sales services to a large base of quarry operators located all over Malaysia. As we have experienced technical personnel based in our branch offices, we are better positioned to dispatch our technical personnel to our customer’s site in a timely manner to respond to quarry machinery and quarry equipment breakdown or for maintenance services. Each subsidiary is managed by a branch manager/business development manager and sales team who shall supervise and oversee the overall operations, sales and maintenance services provided to our customers in the respective geographical coverage areas. Each subsidiary is responsible for their assigned geographical coverage, where the subsidiaries are well-equipped to maintain, repair and overhaul various types of quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery, quarry grills and the supply of spare parts used as replacement parts for quarry machinery, quarry equipment and reconditioned quarry machinery supplied by our Group or by third parties. This also allows them to provide maintenance, repair and sales services to a large base of quarry operators located all over of Malaysia. In addition, our subsidiary, ltaliaworld located in Singapore allows us to service and serve our customers in Singapore and Indonesia. ltaliaworld’s customers consist of quarry operators that operate quarry plants in Indonesia and orders are placed from ltaliaworld’s sales offices in Singapore. This has enabled our Group to be able to penetrate into the quarry industry in Singapore and Indonesia, and enabling us to better serve our customers located in Singapore and Indonesia, which consist of quarry operators that operate quarry plants in Indonesia. In view of the above, the key rationale for establishing various subsidiaries with similar activities segregated on a regional basis are as follows:­(a) To facilitate the localisation of our Group’s operations in order to increase the efficiency and effectiveness in responding to the local market conditions; and
(b) Providing a mechanism to measure the performance of each regional operation of our subsidiaries.

6.14.6 Focus on customer service We have an extensive distribution and sales network that spans across Malaysia, with our subsidiaries located in key economic regions around Malaysia, comprising of our sales and technical team at each of our subsidiaries, with nationwide reach, covering major quarry sites and operations in Malaysia. 6. BUSINESS OVERVIEW (Cont’d) Our Group believes that one of the key fundamental elements of our business is to meet our customers’ needs, by providing them with products that are required in a timely manner. Our Group’s focus on raising the awareness of each sales personnel to recognise the value of providing excellent service to the customers has been one of the key strengths. In order to enhance the sense of cooperation between our customers and our saies and marketing department, our Group will provide product trainings to our customers as part of our effort to differentiate ourselves from our competitors. In addition, these product trainings provide the platform for our Group to understand the needs of our customer better. In addition, we have a team of technical personnei that attends to customers’ service requests (brand new machinery soid are provided with a tweive (12) months warranty whiie our reconditioned hydraulic crawler drilling machinery are provided with one (1) month warranty). Leveraging on our technical team, we are abie to increase the value of our service, while at the same time, providing us with a piatform to cross sell our other products. In addition, we provide our customers with a two (2)-ievei value added after-sales support where our technical team is despatched to our customers’ quarrying site within the same day for quarrying sites located within Klang Valley area, and within twenty-four (24) hours for quarrying sites located outside the Klang Valley. 6.15 FUTURE PLANS AND PROSPECTS OF OUR GROUP Increase domestic and regional market share As part of our future pians, our Group aims to grow our presence in both domestic and overseas markets particuiarly Indonesia, Thailand, Vietnam, Myanmar and Cambodia. This can be achieved by ieveraging on our existing customers which have foreign quarry operations and business operations in these geographical regions and leveraging on our reputation as a quarry specialist supplier in Malaysia to work ciosely with the iocal quarry suppliers and distributors in the targeted countries in which we wish to expand our presence. Possible working arrangements include establishing joint venture companies with these companies in the identified countries to supply the various types of quarry industrial products, quarry machinery, quarry equipment and reconditioned quarry machinery as well as quarry grills to the quarrying operators and piants in the countries. For the domestic market, our Group pians to increase our market share by increasing our range of products that we distribute and supply to further strengthen and bolster our products portfolio. This includes increasing the type of models of our quarry machinery, quarry eqUipment and reconditioned quarry machinery. We have identified that there exists a iarge market and demand for reconditioned quarry machinery as there are a large number of smali quarries in east Malaysia and South East Asia, where newer and more powerful machinery are not reqUired for their quarrying process as it is costly and more technological advanced for their quarrying operations. The demand and requirements for our reconditioned quarry machinery has encouraged us to proVide additional range of reconditioned quarry machinery for these smaller quarry operators and quarry plants. We wili ieverage on our subsidiaries’ (SCH Sabah and SCH Sarawak) presence in east Malaysia to penetrate into the reconditioned quarry machinery segment. We aim to implement this future plan within the next twelve (12) months after our Listing. 6. BUSINESS OVERVIEW ( Cont’d) Expanding our range of services provided As part of our Group’s strategy to further increase our penetration and involvement into the quarrying industry domestically and regionally, we intend to venture into the provision of quarry engineering services, aimed directly at serving quarry operators. The range of quarry engineering services that we intend to provide includes the provision of designing, fabrication, installation and commissioning of quarry plants. Our Group plans to engage with our engineering partners (via joint venture agreements with suitable engineering partners) which has the necessary resources and expertise in the engineering services to develop the design, fabrication, installation and commissioning of quarry plants. These engineering companies has more than ten (10) years of expertise and experience in the design, fabrication, manufacturing, installations and commissioning of quarry plants. This would allow our Group to be involved in the designing and fabrication stages of the design, fabrication, installation and oommissioning of quarry plants which uses our Group’s quarry machinery, quarry equipment and reoonditioned quarry machinery. We aim to collaborate with the type of aforementioned oompanies to bid for quarrying projects and to leverage on their expertise and experience to develop the design, fabrication, installation and commissioning of quarry plants. Our Group will not be setting up our own engineering services division internally for such expansion plans. Instead, our Group plans to expand our revenue stream by diversifying into quarry project based revenue, by forming a group of experts, which includes engineering partners, construction partners and other parties whom have the expertise and technical know-how in the quarry industry, to bid and tender for quarry development projects around the region. Our Group shall provide our advice, feedbacks and inputs to the engineering service providers and supply our range of products which is required and suitable for the design, fabrication, installation and commissioning of the quarry plants. While there is no suitabie partners being identified at this stage, our Directors do not expect any substantial cost to be incurred arising from a joint venture arrangement with a suitable engineering company. Under this joint venture arrangement, the management expects to provide our experience and knowledge on quarry machinery to the engineers during the design and fabrication stages and our Group will provide the full range of products for the quarry operation. The entire process from design and fabrication (which includes quarry machinery) will be offered as a single package to operators which intend to set up a new quarry site. Nevertheless, this plan is still in its initial stages of planning and has not been finalised at this juncture. Our Group may also consider acquiring a small suitable company for this purpose. Our Group’s management has envisaged that our plans to venture into the provision of quarry engineering service in two (2) forms:­(a) acquisition of a small engineering player; or
(b) Via collaboration with our engineering partners/third party engineering firm. Under this arrangement, our Group’s management does not expect to incur any substantial investment oost.

6. BUSINESS OVERVIEW (Cont’d) The provision of such engineering services wili aliow us to cater to a larger market. It wili not only increase our product portfolio while providing us with a new marketing avenue, but will also boister our position as a quarry specialist supplier. The provision of quarry engineering services is part of our Group’s aim where it aliows us to be a one-stop quarry solutions provider that provide customers with products and services that ranges from designs to commissioning of quarry plants to supplying and distributing various types of quarry industrial products, quarry machinery and quarry equipment to quarry grili. The expansion of our range of services is expected to commence immediateiy after our Listing. Manpower expansion In order to support our Group’s continuous expansion and to continuously create added vaiue for our customers, we intend to increase our workforce within tweive (12) months after our Listing. This is in line with our increased sales volume in terms of the range of machinery that we carry, which wouid lead to shortage of manpower as weli as longer time needed to respond to the service requests from our customers. We intend to increase the current headcount in our technical team by another 50% (particularly for our technicians and engineers), which wouid aliow us the capacity to cope with the additional service requests, and maintaining our service response time within 24 hours if our customer is located outside of the Klang Valiey. In addition, the positive response of the availability of reconditioned quarry machinery will also lead to increase in imports of used machinery, where our technicians are reqUired to carry out reconditioning works. Establishing quarry machinery and quarry equipment showroom and service centre We have acquired a ieasehold vacant industrial land located in Cheras, Seiangor, with a total land area of approximately 8,510 sq m. Part of our IPO proceeds will be utilised to construct our new operation facility to cater for our business growth in the quarry machinery and quarry equipment segments. Our new operation facility shali house our new corporate office, warehouse, showroom cum service centre for quarry machinery and quarry equipment and reconditioning works space. Our new showroom wili aiso act as a piatform to facilitate any pre-saies enquiries and activities associated with our range of quarry machinery and quarry equipment that we suppiy. We wili be able to provide our potential customers with product demonstrations and highlighting the key features and capabilities of various modeis of quarry-based products. The bUilding of our new operation facility wili begin immediately upon our Listing and overali construction is estimated to be completed within thirty six (36) months from the date of our Listing. Prospect of our Group The negative growth rate recorded for the quarry machinery and equipment market of ­19.2% and -8.8% during 2008 and 2009, respectively, was due to recessionary economic conditions around the world and sluggish performance recorded in the construction industry, which ied to the decrease in setups of new quarries and siower wear and tear in quarry machinery and quarry equipment. This has resulted in siower and deciining capitai expenditure made in the overali quarry machinery and equipment market. The quarry machinery and equipment market is also largely cyciicai in nature, which is dependent on the repiacement cycles of the major quarry machinery and equipment. 117 6. BUSINESS OVERVIEW ( Cont'{/) The quarry machinery and equipment market grew by 9.4% and 9.8% during 2012 and 2013. This was in tandem with the growth in the construction industry performance, which mainly contributed to the higher and stronger growth in the quarry operations market which grew by 14.3% and 13.4% during 2012 and 2013, respectively. The growth was due to higher demand for capital expenditure investment (especiaily for replacement of quarry machinery and equipment by the quarry industry) and government commitment and initiatives towards catalyZing growth for the quarrying Industry through projects outlined by the lOMP and ETP. Our Group has taken a cautionary commercial view to pursue a prudent growth strategy whilst it assesses whether this high growth rate is sustainable. Our management also takes note at that time, there are other external factors and global events, such as the financial crisis faced in Europe, political uprisings in the Middle East and the great earthquake in Japan during 2011, which may potentiaily affect the future growth of the quarry machinery and equipment market. Our management is weil aware that any aggressive growth strategy for our Group to match this market growth may potentiaily expose our Group to debtors’ coilection risk subsequently should the high market growth rate is not sustainable. The IMR has estimated that the forecasted CAGR for the quarry machinery and equipment market is at 9.1% between 2012 and 2017, Our Group’s revenue recorded an increase of 12.9%, from RMS4.24 miliion in FYE 2012 to RM61.2S million in FYE 2013, which is above the said forecasted CAGR. In 2014, the Malaysian economy faced an uncertain period of cautious and uncertain growth outlook. However, domestic demand remained in steady momentum, and private investment broadly increased as a direct result of the Economic Transformation Programme (“ETP”) measures. As forecasted, the economy remained fairly resilient despite the uncertain economic outlook globaily. However, Malaysia has increased its cooperation with rising economies within the Association of South East Asian Nations (“ASEAN”) as weil as China to bolster its external demand due to uncertainties arising from Western advanced economies. Moving into 2013, the projects and initiatives launched by the ETP (initiated 26 October 2010) are expected to continue taking effect. Strong capital infiows encouraged through the ETP, which seeks to propel Malaysia towards becoming a high-income developed nation with a RM1.7 triilion gross nation income (“GNI”) economy by 2020, are expected to materialise and now have more visible and pronounced effects on the local economy and consumer income. Under the ETP, private-sector driven projects with an investment value of RM1.3 triliion are to be undertaken to spearhead Malaysia’s economic growth over the next ten (10) years. (Source: IMR Report) In view of this, for the FYE 2013, our Group has pursued a more aggressive growth strategy to capture these opportunities. For the FYE 2013, our Group has achieved revenue growth of 12.9% or RM7.01 miliion. Our Directors are of the view that the prospects of our Group are favourable. Furthermore, our competitive strengths and advantages are expected to contribute to the profitability of our business. Our competitive strengths and advantages are expected to ensure our business sustainability as weil as providing a sound platform for business growth. Moving forward, we have in place a series of business plans that are focused in expanding our presence and market share both in the domestic and regional markets, expanding our manpower to better service our customers as weil as expanding the range of products and 6. BUSINESS OVERVIEW (Cont’d) services. These future plans will help us to sustain our business, provide growth opportunities and at the same time adopt a prudent approach in expanding our business. Our future pians set out in the above paragraphs are expected to be implemented within three (3) years from the date of our Listing. [The rest of this page is intentionally left blank]

 

 

 

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