Risk Factors

5. RISK FACTORS 5. RISK FACTORS Before investing in our Shares, you should pay particular attention to the fact that we and to a large extent, our business and operations are subject to the legal, regulatory and business environments in the regions in which we operate. Our operations are also subject to a number of factors, many of which are outside our control. Before making an investment decision, you should carefully consider, along with the other matters in this Prospectus, the risks and investment considerations set out below. The risks and investment considerations set out below are not an exhaustive list of the challenges that we currently face or that may develop in the future. Additional risks, whether known or unknown, may in the future have a material and adverse effect on us or our Shares. 5.1 RISKS RELATING TO OUR BUSINESS AND OPERATIONS 5.1.1 We are reliant on contractual agreements for our business including O&M services and EPCC works and any interruptions in terms of procurement, renewal and/or termination of contracts and/or securing work orders from contracts could adversely affect our business operations and financial performance. Our business operations are dependent on our performance of our contractual obligations under our respective contracts. Any material breach of our obligations under these contracts and failure to remedy the contractual breach may lead to the customers having the right to early termination of these contracts and damages as well as a loss of customers or material contracts which may materially and adversely affect our Group’s revenue, profitability and growth. In some of our contracts, our customers may have the right to terminate or suspend our contracts, without cause with notice, and any compensation for the loss of these contacts may not be sufficient to fully compensate us for the loss of these contracts. The inability to perform the contractual obligations of either our client or our own contractual obligations may have an adverse effect on our financial position, business results of operations and cash flow. Our Group’s revenue is derived primarily from O&M services in Malaysia and outside of Malaysia. For the FYE 2015 and FPE 2016 our revenue from O&M services accounted for 90.87% and 89.46%, respectively, of our total revenue. The revenue derived from our EPee works amounted to 8.91 % and 10.30%, respectively, for the FYE 2015 and FPE 2016. Our O&M services and EPee works were based on contractual agreements and work orders which together provide us with business continuity and growth. The revenue from the contracts under the O&M services is dependent on work orders from contracts. Revenue from these contracts are not generated at the time the contracts are awarded unless the work orders are requested for by the customer and carried out in accordance with the terms of the contracts. Our Group’s results of operations and financial conditions may be materially and adversely affected if there is a decrease in the work orders issued. In Malaysia, our domestic O&M revenue accounted for 35.72%, 33.91 %, 26.85% and 26.91% of our total revenue for the FYE 2013, FYE 2014, FYE 2015 and FPE 2016, respectively, which were mainly derived from the PETRONAS group of companies and the pse companies operating in Malaysia. Whilst we strive to increase our total business with PETRONAS, we also seek to expand our Group’s business with other customers at the same time. However, our Group’s results of operations and financial conditions may be materially and adversely affected if the volume of contracts awarded and the work orders issued by PETRONAS and the pse companies operating in Malaysia decreases and we are unable to increase our business from other customers to offset such decrease in business. 5. RISK FACTORS (Cont’d) Outside of Malaysia, our O&M revenue accounted for 42.25%, 45.44%, 64.02% and 62.56% of our total revenue for the FYE 2013, FYE 2014, FYE 2015 and FPE 2016, respectively, which were derived from various customers arising from our operations mainly in the Middle East, Indonesia and Turkmenistan. Accordingly, our business is also dependant on the performance of the economy in these respective jurisdictions for which we operate our business and the overall levels of the business activities of these jurisdictions. There is a risk that our revenue and financial performance would be adversely affected in the event we lose a significant number of our customers outside of Malaysia or any of these customers’ contracts are delayed, terminated, cancelled or postponed and we are unable to secure sufficient contracts to replenish the loss of our revenue from these contracts. Our revenue may also be adversely affected if we are unable to secure work orders from our customers’ contracts as all our contracts are not exclusive. Accordingly, we may not achieve our expected revenue. Any non-renewal or termination of these contracts or decreased work order being requested for by the customer could adversely affect our business, financial condition and results of operations. 5.1.2 We may not be able to execute some of our business strategies and/or future plans successfully which may adversely affect our business prospects and growth. Our business strategy and future plans are to build on our existing strength in O&M and EPCC business operations as well as to expand on the development, operation and ownership of assets in the O&G and power generation industries. We recognise that as part of our expansion plans, we are moving into an asset ownership business model which is relatively new as compared to our track records in O&M and EPCC business segments. However, the strategy for the types of asset we seek to own will be within the energy industry focusing on O&G and power generation industries which we have an operating history. This strategy will capitalise on our existing core expertise and capabilities. Nonetheless, this expansion may expose us to various specific business risks related to the expansion of our asset ownership business model as follows: (i) We may not have sufficient expertise, experience and human resources to develop and operate all our assets. We have experience in O&M services in the MRO of rotating equipment and IRM of static equipment and structures as well as EPCC works. However, there is a risk that we may not have sufficient expertise, experience and human resources to develop and operate our new assets. This may have a negative impact on the prospects of our venture into being an asset owner. We are aware that we may not have the full complement of expertise and experience to develop and operate a potentially wide range of assets. Under such situations, we will complement our existing pool of talents by engaging and/or employing the relevant experienced personnel or external parties. 5. RISK FACTORS (Cont’d) (ii) We may not have sufficient financial resources to embark on ownership of assets and may incur higher borrowings to fund the development and operation of these assets. An asset-based business model would require significantly more financial resources as compared to a service-based business. As such, there is a risk that our asset ownership business model would most likely increase our financial resources requirement. Therefore, embarking on this business expansion may result in an increase in our borrowings if we are unable to fund the asset ownership business using our internally generated funds. In this respect, we would be subject to financial risk if we are unable to service these loans. To minimise the risks, we will first use internally generated funds and where required, source external funds including equity financing and borrowings for the operations. As at 30 June 2016, the gearing ratio of Serba Dinamik Group is 0.82 times, as set out in Section 12.2.9 of this Prospectus. For FYE 2013, FYE 2014, FYE 2015, FPE 2016 and up to the LPD, we have not defaulted on payments of principal sums and/or interest in respect of any of our borrowings. (iii) Obsolescence and ageing assets. We are subject to the risk of obsolescence and ageing assets in our operations and this includes the following: (a) over time, our assets may become obsolete, be made redundant or be superseded by newer technologies or assets;
(b) life span of assets where we may not be able to generate sufficient profits over the expected life span of our assets; and
(c) increase in maintenance cost in ageing assets may adversely affect the financial performance of our assets.

As our core competency is in maintenance of plants and assets, we would endeavour to maintain our assets to prolong the life span of our assets. (iv) Specific risks related to our asset ownership business model. Some of the specific risks that are related to our asset ownership business model are as follows: (a) Development of CNG Plant in Muaro Jambi, Sumatra, Indonesia. We are the owner of a CNG plant in Muaro Jambi, Sumatra, Indonesia through our subsidiary, PT Kubic Gasco. On 16 March 2016, PT Kubic Gasco entered into an operational cooperation agreement with Perusahaan Daerah Muaro Jambi (“PO Muaro Jambi”) to collaborate in the commercial operations of the CNG plant in Muaro Jambi. PD Muaro Jambi, a district owned company, has a gas supply agreement with PT Pertamina EP for the supply of natural gas and is the holder of the provisional CNG trading permit. We are subject to the following risks related to our CNG plant in Indonesia: (1) We are dependent on PD Muaro Jambi as the holder of the CNG trading permit and gas supply agreement with PT Pertamina EP. In the event that this arrangement is terminated due to unforeseen circumstances, there is a risk that our CNG plant’s operation would be affected, 5. RISK FACTORS (Cont’d) (b)
(c)

As PO Muaro Jambi is a district owned company, it is in their interest to fulfil their role in the said agreement as a liaison between the government body of Muaro Jambi regency, as well as to ensure compliance with the applicable regulations in Muaro Jambi. Our partners in this joint venture may have economic, business interest or goals that are inconsistent with ours and they may be unable or unwilling to fulfil their obligations under the applicable agreement or arrangement or support our venture. A disagreement, depending on its severity with them could adversely affect our ability to operate the CNG plant. For further details, please refer to Section 5.2.4 of this Prospectus for the risk of changes in political, economic and regulatory conditions in the countries in which we operate. (2) We may face risk of decline of CNG prices. In the event that there is a decline in CNG prices while our gas supply price is fixed, this would negatively affect the financial performance of our CNG plant. For further details, please refer to Section 5.2.1 of this Prospectus for the risk of fluctuations in O&G prices.
(3) We may face a low take-up of our CNG which would increase our costs of operations which would affect the financial performance of our CNG plant.

Development of small gas power plant in Ambon Island, Indonesia. In July 2016, through our subsidiary Serba Oinamik Indonesia, we entered into a 10-year agreement to lease out a 0.8 MW gas power plant for Ambon City Centre shopping mall. We expect to complete the installation at the end of 2016 and commence operations by the first quarter of 2017. In this respect, we expect to start generating revenue for FYE 2017 from leasing of the small gas power plant facilities. We may face the risk of early termination of our contract which would affect the revenue generated from the small gas power plant. As this plant is for a captive user namely Ambon City Centre shopping mall, any termination before the contract ends may render our asset idle. Developments of small gas power plants in East Kalimantan, Indonesia. On 20 November 2015, through our subsidiary Serba Oinamik Indonesia, we entered into an MOU with PT Kutai Timur Investama, a local government district development body to form a partnership arrangement with the intention of developing small gas power plants in the regency of East Kutai in East Kalimantan, Indonesia. The MOU period is valid for five years till 2020. We intend to own, operate and maintain these said small gas power plants. The proposed partnership arrangement is expected to be finalised by 2017 and subsequently initial developments will commence during the same year. We are subjected to the following risks related to the development of the said small gas power plant in East Kalimantan, Indonesia: 5. RISK FACTORS (Cant’d) (d) (a) We may not be able to comply with all the relevant laws and regulations pertaining to the development and operation of small gas power plants and this includes, among others, obtaining relevant licences, permits and approvals to commence commercial operations of the gas power plant and/or obtaining a gas supply agreement and/or obtaining the rights to sell power. In the event that we are unable to comply with these said relevant laws and regulations, we may not be able to commence the operations and/or may face the risk of not being able to recover our investments. For further details, please refer to Section 5.2.4 of this Prospectus for the risk of changes in political, economic and regulatory conditions in the countries we operate in.
As we will be working in partnership with PT Kutai Timur Investama, a local government body, part of the terms and agreement of the MOU is for PT Kutai Timur Investama to assist in obtaining the relevant regulatory compliances to enable the small gas power plant to commence operations.
(b) We may not be able to obtain sufficient gas supply to run the power plant. If we are unable to obtain a constant source of gas supply, this would impact on our ability to provide constant supply of power.
(c) We may not be able to factor in the increase in the price of natural gas to run the power plant. In the event that there is an increase in the price of natural gas as fuel for our power plant, it may increase our cost of operations and affect the financial performance of our small gas power plant.
(d) We face the risk that the development of the small gas power plant may not materialise as this is based on an MOU. In the event that this agreement does not materialise, any excess funds not utilised for this purpose will be utilised to meet the working capital requirements of our Group.

Developments of a small gas power plant in Muaro Jambi, Indonesia. On 17 May 2016, through our subsidiary PT Kubic Gasco, we entered into a MOU with PT PLN (Persero) Region South Sumatra, Jambi and Bengkulu for the sales of power. We plan to develop a small gas power plant with a 4 IVIW capacity next to our CNG plant in Muaro Jambi, Sumatra, Indonesia. We are in the midst of preparing the application of relevant licences and permits for the small gas power plant prior to the commissioning of construction. We are supjected to the following risks related to the development of the said small gas power plant in Indonesia: 5. RISK FACTORS (Cont’d) (a) We may not be able to comply with the relevant laws and regulations pertaining to the development and operation of small gas power plants and this including, among others, obtaining relevant licences, permits and approvals to commence commercial operations of the gas power plant and/or obtaining a gas supply agreement and/or power purchase agreement. In the event that we are unable to comply with these said relevant laws and regulations, we may not be able to commence the operations and/or may face the risk of not being able to recover our investments. For further details, please refer to Section 5.2.4 of this Prospectus for the risk of changes in political, economic and regulatory conditions in the countries we operate in.
(b) We may not be able to obtain sufficient gas supply to run the power plant. If we are unable to obtain a constant source of gas supply as fuel for our power plant, this would impact on our ability to meet our commitments in providing constant supply of power.
(c) We may not be able to factor in the increase in the price of natural gas to run the power plant. In the event that there is an increase in the price of natural gas as fuel for our power plant, it may increase our cost of operations and affect the financial performance of our gas power plant.
(d) We may face the risk of that the MOU with PT PLN does not materialise into a power purchase agreement. In the event that this agreement does not materialise, any excess funds not utilised for this purpose will be utilised to meet the working capital requirements of our Group.

(The rest of this page has been intentionally left blank) 5. RISK FACTORS (Cont’d) (e) Developments of industrial park in Sarawak Part of our strategy is to develop and own an industrial park in Sarawak incorporating a CUF providing electricity, steam, chilled water, demineralised water, wastewater treatment, industrial gases and compressed air. The development of the industrial park utilises our core competencies in EPCC for the development and construction of the industrial park and O&M for the maintenance of the CUF. With our experience in undertaking maintenance of CUF in Kuantan, Pahang as well as Kerteh, Terengganu, we intend to carry out the O&M of the CUF in the industrial park. Upon the completion of the industrial park, we plan to operate and maintain the CUF while the management of the industrial properties within the park would be subcontracted to an external party. We expect to generate revenue in the form of sales of CUF products and services, and the provision of services to tenants of the industrial park. As at the LPD, we are in the midst of negotiating with the authorities for a suitable site. We may be SUbject to the risk of delays in executing this business expansion due to various factors including, among others, delays and/or the inability to secure the proposed land, risks in financial commitment, risks relating to insufficient expertise, experience and resources in developing an industrial park, risks relating to relevant regUlatory compliances and low demand for O&M services in the surrounding areas. All these risks would affect the financial performance of the proposed industrial park. In addition, part of our future plans and strategies is to grow our business through investment and acquisition in companies that can add value to our existing business operations or provide an incremental revenue stream to our business while enhancing our competitive advantages. Our strategies include acquiring companies that can complement or expand our existing product and service offerings, provide us with access into new segments and/or geographical markets, and/or enable us to enhance our track record of accomplishments. In light of the above strategies, we are exploring investment opportunities in the following areas: (i) Companies with technologies and skills set that are complementary or add value to our O&M services. For example, companies with the technologies and skills to provide maintenance services for gas turbines with output power of more than 160 MW. In addition, target companies could also manufacture critical rotating equipment parts and components. For example, turbine blades and fuel nozzles.
We may be subject to the risk of delays in executing this business expansion due to the uncertainties relating to the process of selection, negotiations and finalisation with potential target companies for investment or acquisition. After the acquisition, we may face risks and uncertainties of operating in a different country and/or markets. In addition, we may not be able to run the business profitably and this may affect our financial performance.
(ii) Small hydropower generation companies in East Coast region and Northern region of Peninsular Malaysia. We expect to have a minority equity interest in small hydropower plants as our participation in these investments are likely through invitation with specific equity participation in the form of minority partner.

53 5. RISK FACTORS (Cont’d) As a minority shareholder, we do not have management control over these companies. In the event that these companies are not properly managed and/or are not running profitably, we may face the risk of not being able to recover our investments. In addition, the companies may not be able to comply with all the relevant laws and regulations pertaining to the development and operation of hydropower generation plants and this includes, among others, obtaining relevant licences, permits and approvals to commence commercial operations of the gas power plant and/or obtaining the rights to sell power. In the event that the management is unable to comply with the relevant laws and regulations, the hydropower plants may not be able to commence operations and we may face the risk of not being able to recover our investment. For further details, please refer to Section 5.2.4 of this Prospectus for the risk of changes in political, economic and regulatory conditions in the countries we operate in. We face the risk that these investments may not materialise and therefore any excess funds not utilised for this purpose will be utilised to meet the working capital requirements of our Group. For further details, please refer to Section 4.8.1.5 and 7.21.1.5 of this Prospectus. In addition, we were offered to purchase a 30-acre land in Kidurong, Bintulu on 25 August 2016. SUbsequently on 3 October 2016, we have paid 20.00% non-refundable deposit amounting to RM2.45 million for the said land. In the event that we do not proceed with the balance of the purchase consideration for the 30-acre land in Kidurong, we will lose our 20.00% deposit. We face the risk that the land purchase may not materialise and we would therefore have to seek land elsewhere which may not be in the location of our choice. If the purchase of the land materialises, we may face compliance risk pertaining to the development of the land and this includes, among others, obtaining relevant licences, permits and approvals, which could result in delays and/or suspension of the development of the land. In the event that we are unable to proceed with the development of the land, we would not be able to realise the expected benefits from the new MRO and IRM centre. Part of our future plans is to develop the said land and establish our new IVIRO and IRM centre in Sarawak, Malaysia. The estimated total land and development cost is RIVl247.23 million. In the event that we are unable to fully utilise the developed new MRO and IRM centre as planned, we would not be able to realise the expected benefits. Please refer to Section 7.21.1.3 of this Prospectus for our future plans and strategies in relation to our new IVIRO and IRM centre in Sarawak, lVIalaysia. In addition, we may not be able to generate sufficient earnings to offset the investment costs including financing cost for the said centre. Please refer to Section 7.3 and Section 7.21 of this Prospectus for further details on our business strategies and future plans, strategies and prospects, respectively. 5.1.3 We are subjected to compliance with laws and regulations applicable to the O&G and power generation industries, including HSE laws and regulations. The O&G and power generation industries are sUbject to various laws and regulations, including HSE laws and regulations, administered by local, national and overseas governmental authorities. These laws and regulations address, among others, occupational safety and health of employees and other aspects of the operation of our business. Failure to comply with any relevant laws and regulations, as well as injuries or other harm caused by such failure, may result in financial penalties, administrative or legal proceedings against us, including the termination or suspension of our business. In addition, we must obtain various licences, permits and approvals to operate our businesses. Even though we have obtained the required licences, permits and approvals, we are subject to continuous review under the applicable laws and regulations, the implementation of which is sUbject to change from time to time. 5. RISK FACTORS (Cont’d) Please refer to Annexure A of this Prospectus for details of our major licences, permits and approvals for our operations. Further, we have incurred and expect to continue to incur operating costs to comply with government regulations, and we have incurred, and expected to continue to incur operating costs on an on-going basis to comply with HSE laws and regulations. There can be no assurance that we will be able to remain in compliance with applicable HSE laws and regulations, neither that we will be able to obtain, maintain or renew the required licences, permits and approvals nor that we will not be involved in future litigations or proceedings (or be held responsible in any future litigation or proceedings) relating to HSE matters or other regulatory matters of which the cost could be material. In addition, there can be no assurance that the adoption of new HSE laws and regulations, new interpretations of existing laws and regulations or other similar developments will not result in our operations being subjected to suspension or the imposition of fines and penalties. Our failure to comply with any or all applicable government regulations, or a change in any or all such regulations, may disrupt our operations and could have material adverse effect on our business, financial condition, results of operations and cash flows. 5.1.4 We depend on our Executive Directors, key management and on the expertise of skilled and qualified personnel for the continuing success of our business and the loss of their services could, in the short term, have an adverse effect on our business operations and financial performance. The continued success of our business is, to a significant extent, dependent on the ability, commitment and efforts of our Executive Directors, key management and our ability to retain skilled and qualified personnel. The loss of such skilled or qualified personnel may lead to operating challenges and increased cost in our operations. In addition, we are likely to continue to rely significantly on the collective contribution of our management team and there can be no assurance that we will be able to retain any of our Executive Directors or key management. Further, the failure to develop a succession plan effectively or to hire suitable replacement and adequately train the replacement employees in a timely manner may adversely affect our ability to manage and operate our business. Although we have employment contracts and incentives-based remuneration in place to retain their services, there can be no assurance that the unexpected departure or loss of the service of any of the Executive Directors, member of our key management or significant number of skilled and qualified personnel without any suitable and prompt replacement would not have an adverse effect on our business and financial performance. 5.1.5 We are SUbjected to foreign regUlatory and operational risks faced by our operations outside Malaysia. We have overseas operations and expect to continue expanding our business activities outside of Malaysia. We are required to comply with foreign laws and regulations in the countries in which we operate including, but not limited to, trade laws, investment sanction laws, environmental laws, tax laws, industry laws and capital control regulations. Prior to extending our operations outside of Malaysia, we conduct internal management assessment on legal and regulatory operating environment and the political, economic and competitive conditions of a particular country, both when commencing work in that country and on an ongoing basis. We cannot ensure, however, that the local legal, regulatory, political, economic or competitive developments in the countries in which we operate will not have a material adverse effect on our business, financial condition or results of operations. 55 5. RISK FACTORS (Cont’d) We have expanded our business through investments outside of Malaysia and we may continue to make similar investments in the future including seeking opportunities in O&G and power generation industries, such as Southeast Asia, Central and South Asia, Middle East and the United Kingdom. These transactions subject us to different risks than those we face in growing our operations in Malaysia, including foreign legal and regulatory risks associated with cross-border transactions and operational risks related to managing transactions outside of Malaysia, such as those arising from dealing with entrenched domestic competitors in overseas markets. These risks may complicate our efforts to complete these transactions and impede our efforts to integrate the overseas businesses into our global operations. Any failure by us to address these issues could delay or prevent us from completing any future overseas expansions or could make such transactions substantially more expensive to complete than we had anticipated, any of which could have a material adverse effect on our business, financial condition or results of operations. 5.1.6 We are exposed to risks arising from foreign exchange fluctuations which may adversely affect our financial performance. Part of our income and expenses, particularly those relating to our overseas investments and operations, are denominated in foreign currencies, in particular USD. One of our subsidiaries, Serba Dinamik International, uses USD as their functional currency, while our reporting currency is RM. Changes in the exchange rate between RM and USD may not have a material impact on our foreign currency denominated cash flows, but may have an adverse impact on our reported income and expenses as they are required to be stated in RM in our consolidated financial statements. For further information on the foreign exchange gain/loss recognised by our Group for the FYE 2013, FYE 2014, FYE 2015 and FPE 2016, please refer to Note 20 of the Accountants’ Report included in Section 13 of this Prospectus. 5.1.7 Our insurance coverage may not be adequate to cover all losses or liabilities that may arise in connection with our operations. We are subject to operational and environmental risks such as fire, flood, accidents and other risks that may affect our business operations. We maintain insurance at levels that we believe are customary in the industries in which we operate to protect against various losses and liabilities. We maintain insurance to cover, among others, damage to the equipment, all risks and workers compensation. The operations of our facilities involve many risks and hazards, and if we were to incur a significant loss or liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our insurance coverage is also subject to periodic renewal. If premium levels for the insurance coverage required for these facilities increase significantly, we could incur substantially higher costs for such coverage or may decide to reduce the coverage amount, either of which could have an adverse effect on our business, financial condition, results of operations and cash flows. While we have insurance coverage for various aspects of our business, our insurance coverage may be insufficient to cover all losses that we suffer. If we incur substantial liability and the damages are not covered by insurance or exceed policy limits, or if we are not able to obtain liability insurance for our business, it may have a material adverse impact on our operations and financial condition. 5. RISK FACTORS (Cont’d) 5.1.8 We are exposed to the credit risk of our customers and counterparties with whom we do business. Adverse economic conditions affecting, or financial difficulties of, our customers and counterparties could impair the ability of our customers and counterparties to pay for our services or fulfil their contractual obligations or cause them to delay those payments or obligations. We depend on our customers and counterparties to remit payments on a timely basis. Any delay or default in payment could have a material adverse effect on our financial condition, result of operations and cash flows. Please refer to Section 12.2.13.1 of this Prospectus for the trade receivables turnover period and ageing analysis.
5.1.9 We are exposed to interest rate risk from borrowings. As at 30 June 2016, we have RM518.67 million of borrowings. Out of our total borrowings of RM518.67 million, RM501.78 million or 96.74% are floating-rate loans. Therefore, any movement in the base rates of the relevant financial institutions may increase our interest expense and therefore adversely affect our profitability. Our Group is also exposed to interest rate risk on the term deposits placed with financial institutions. We monitor our exposure to changes in interest rates on a regular basis. Borrowings are negotiated with a view to securing the best possible terms including rates of interest to the Group. However, there can be no assurance that such measures are sufficient to mitigate the interest rate risk exposure, and interest rate risk exposure may as a consequence materially and adversely affect our Group’s business, financial condition, results of operations and cash flow. (The rest of this page has been intentionally left blank) 5. RISK FACTORS (Cont’d)

5.2 RISKS RELATING TO OUR INDUSTRY 5.2.1 We operate in an industry that is subject to the risk of fluctuation in O&G prices. Since June 2014, the average monthly price of Brent crude oil had declined from a high of USD112.00 per barrel in June 2014 before falling to a low of USD30.00 per barrel in January 2016. In early June 2016, the average daily price of Brent crude oil rebounded to approximately USD50.00 per barrel for the first time since July 2015. However, in July 2016, the monthly price of Brent crude oil declined and averaged at USD45.00 per barrel. By October 2016, the monthly price of Brent crude oil had increased to an average of USD50 per barrel. Similarly, the trend in natural gas prices, particularly in Asia, moves in tandem with the fluctuations in Brent crude oil prices. (Source: IMR Report). O&G prices are subjected to variables including, but not limited to, demand and supply of oil, gas and petroleum products, level of production, ability of OPEC to maintain oil production levels and pricing, worldwide economic and financial market conditions and prospects, geopolitical factors, competition from alternative sources of energy, technological advancements in exploration, development and production, government regulations and policies, natural disasters, escalation of armed hostilities or outbreak of war. Prolonged depressed O&G prices will generally lead to a curtailment in O&G activities and spending in the O&G industry. However certain sectors such as maintenance of assets, particularly in the production of crude oil and natural gas and downstream refineries, processing and petrochemical plants, are to a certain extent less affected as operations would still have to continue. Although the provision of maintenance services is regarded as critical in extending the life of both onshore and offshore rotating and static equipment as well as structures, there is no certainty that our financial performance or prospects of our business would not be materially affected by prolonged depressed O&G prices. 5.2.2 We operate in an industry that is competitive and our inability to compete effectively could adversely affect the results of our operations and our financial conditions. As an independent service provider that provides maintenance services on various brands of rotating equipment, we generally face competition from OEM and/or their respective authorised service providers as well as other independent service providers. We also collaborate with some of the OEM to bid for O&M projects particularly in countries where the OEM does not have any physical operational facilities or in Malaysia where only operators that are licensed or registered by PETRONAS are allowed to bid directly for work awarded by PETRONAS, PSC and Risk Service Contract operators and contractors in the O&G industry. It is a common business practice for OEM of rotating equipment and static equipment or their authorised service providers to carry out maintenance at least once during the warranty period, therefore there is a risk that we may not be able to compete with them effectively until such a time the warranty expires. Service providers undertaking asset maintenance for the O&G and power generation industries, including our Group, compete on service differentiations, and other factors of competition. Some of these factors of competition or service differentiation include quality of products and services offered, track record and market reputation, cost competitiveness and operational facilities inclUding service centres. (Source: IMR Report). 5. RISK FACTORS (Cant’d) Our contracts are awarded on a competitive bid basis and our ability to compete in Malaysia and overseas will be dependent on, among other factors, our pricing, service quality and responsiveness, ability to provide total solutions, safety record, technical capabilities and track record. Although we work in collaboration with some OEM for our O&M services where required, there is no assurance that we would be able to compete effectively with our peers, which may adversely affect our business performance and financial conditions. Further, for the O&M segment, we participate in tender bids for maintenance contracts to provide MRO and IRM services to potential customers within the O&G and power generation industries. These contracts may be for either, scheduled or unscheduled engineering and maintenance work. Where we are successful in securing a tender bid, the contracts secured are typically for a period of two to five years. For the EPee segment, we participate in tender bids for EPee contracts in relation to mechanical and piping, instrumentation, electrical engineering as well as electrical and instrumentation design. These may be related to plants, facilities, road infrastructure and bUildings, as well as other related systems and solutions including design and installation of process control and instrumentation, auxiliary power generation and firefighting systems for the O&G and power generation industries. The EPee contracts that we secure may typically be for a period of one to three years depending on the scale and specifications of the contract. In this respect, owing to the short to medium-term nature of the contracts, there is no assurance that we are able to compete effectively with our peers to sufficiently replenish our contracts upon their expiry or termination. Accordingly, this may also adversely affect our business performance and financial conditions. 5.2.3 We may not be able to source or retain our skilled and experienced personnel which could adversely affect our business operations and financial conditions. We are dependent on skilled and experienced personnel such as engineers, technicians and service personnel to carry out our business operations in maintenance of rotating and static equipment, plants, structures as well as EPee works. As at the LPD, we employ a total of 611 technical and supervisory skilled personnel namely engineers, technicians, quality control/HSE personnel and other technical and supervisory personnel, which accounted for approximately 72.91 % of our total employees. Of these, approximately 43.08% were contracted staffs mainly sourced from India, Philippines and Indonesia which are usually deployed to various locations of services or works undertaken by us in Malaysia and overseas. Prior to the downturn in O&G prices, we face competition for the engagement of skilled and experienced personnel in the O&G industry which has placed upward pressure on wages. In the event of a rebound in O&G prices or exploration, development and production activities, we may face difficulties in sourcing or retaining skilled and experienced personnel for our business operations. As a result, any loss of our skilled and experienced personnel may adversely affect our business operations and financial conditions. 5.2.4 Our business operations are subjected to prevailing economic, political and regulatory conditions which may adversely affect our business operations in Malaysia as well as abroad. Any changes and/or developments in political, economic and regulatory conditions in Malaysia and the countries in which we operate could adversely affect our business and financial performance. These uncertainties include, but are not limited to, changes in political leadership, investment policies, taxation, interest rates, O&G policies, regulatory structure, risks of war, civil disobedience, expropriation and nationalisation. Similarly, any prolonged and/or widespread economic slowdown would affect business confidence and subsequently affect the tendency to spend, either from the public or private sectors. Any economic slowdown regionally and globally may cause our customers to defer or reduce their purchases of our services, or cut our prices. As such, this may impact our business. There can be no assurance that any adverse political, regulatory or economic developments, which is beyond our control, will not materially affect our financial performance or the industry as a whole. 5. RISK FACTORS (Cont’d)
5.3 RISKS RELATING TO THE INVESTMENT IN OUR SHARES 5.3.1 The offering of our Shares may not result in a liquid market for our Shares. Our Shares constitute a new issue of securities for which there is no existing market. There can be no assurance as to the development of any market, or the liquidity of any market that may develop, for our Shares, the ability of holders to sell our Shares or the prices at which holders would be able to sell our Shares. None of us, the Promoters, the Selling Shareholders or the Joint Bookrunners have an obligation to make a market for our Shares. Bursa Securities has granted its approval for our Listing. It is expected that there will be an approximate 10-Market Day gap between the closing of the Institutional Offering and trading of our Shares. We cannot assure you that there will be no event or occurrence that will have an adverse impact on the securities markets, our industry or us during this period that would adversely affect the market price of our Shares when they begin trading.
5.3.2 Our Share price may be volatile. The market price of our Shares could be affected by numerous factors, including the following: (i) general market, political and economic conditions;
(ii) trading liquidity of our Shares;

(iii) differences in our actual financial and operating results and those expected by investors and analysts; (iv) changes in earnings estimates and recommendations by financial analysts;
(v) changes in market valuations of listed shares in general or shares of companies comparable to ours;
(vi) perceived prospects of our business and the industry in which we operate;

(vii) changes in government policy, legislation or regulation in Malaysia or in countries where we operate; and (viii) general operational and business risks. In addition, many of the risks described elsewhere in this Prospectus could materially and adversely affect the market price of our Shares. Accordingly, there can be no assurance that our Shares will not trade at prices lower than the Institutional Price or the Retail Price. Over the past few years, the Malaysian regional and global equity markets have experienced significant price and volume volatility that has affected the share prices of many companies. Share prices of many companies have experienced wide fluctuations that are often unrelated to the operating performance of these companies, including fluctuations as a result of developments in other emerging markets. There can be no assurance that the price and trading of our Shares will not be subject to fluctuations. 5. RISK FACTORS (Cont’d)
5.3.3 There may be a delay in, or termination of, our Listing. The occurrence of certain events, including the following, may cause a delay in, or termination of, our Listing: (i) the Joint Underwriters’ exercise of their rights under the Retail Underwriting Agreement to discharge themselves of their obligations thereunder;
(ii) our inability to meet the minimum public spread requirement as determined by Bursa Securities, that is, having at least 25.00% of our enlarged issued and paid-up share capital in the hands of at least 1,000 public shareholders holding at least 100 Shares each at the point of our Listing; or

(iii) the revocation of the approval of Bursa Securities for our Listing for whatever reason. In this respect, we will exercise our best endeavour to comply with the various regulatory requirements applicable to our Company, including, inter alia, the public shareholding spread requirement in paragraph (ii) above for our successful Listing. However, there can be no assurance that the abovementioned factors/events will not cause a delay in or non-implementation of our Listing. In such an event, you will not receive any IPO Shares, and we and the Selling Shareholders will become liable to return in full all monies paid in respect of all applications for the IPO Shares. If such monies are not returned in full within 14 days after we and the Selling Shareholders become liable to repay it, then, in accordance with the provision of Subsection 243(2) of the CMSA, we and the Selling Shareholders (including the officers of our Company) shall be jointly and severally liable to return such monies with interest at the rate of 10.00% per annum or at such other rate as may be prescribed by the SC from the expiration of that period until the full refund is made. In the event our Listing is aborted or terminated, and our Shares have been allotted to the shareholders, a return of monies to all holders of our Shares could only be achieved by way of cancellation of share capital as provided under the Act and its related rules. SUch cancellation requires the sanction of our shareholders by special resolution in a general meeting, consent of our creditors (unless dispensation with such consent has been granted by the High Court of Malaya) and the confirmation of the High Court of Malaya. There can be no assurance that such monies can be recovered within a short period of time or at all in such circumstances. 5.3.4 We cannot assure you that we will declare and distribute any amounts of dividends in the future. As we are a holding company, our Company’s income, and therefore our ability to pay dividends, is dependent upon the dividends and other distributions we receive from our subsidiaries and associates. The payment of dividends by our subsidiaries and associates will depend upon their distributable profits, operating results, financial condition, capex plans, debt servicing and other obligations or business plans and applicable laws or agreements restricting their ability to pay dividends or make other distributions. In addition, changes in applicable accounting standards may also affect the ability of our subsidiaries and associates and consequently, our ability to declare and pay dividends. Although it is the intention of our Board to adopt a dividend payout ratio of at least 30.00% of our PAT attributable to the owners of our Company for each financial year, excluding any unrealised income from adjustments due to accounting policies that are non-cash in nature, dividend payments are not guaranteed, and our Board may decide, in its sole and absolute discretion, at any time and for any reason, not to pay dividends or to pay smaller dividends than we currently propose. 5. RISK FACTORS (Cant’d) If we do not pay dividends, or pay dividends at levels lower than that anticipated by you, the market price of our Shares may be negatively affected and the value of the investment in our Shares may be reduced. In determining the size of any dividend recommendation, we will also take into consideration a number of factors including, but not limited, to the following: (i) our level of cash, gearing and return on equity and retained earnings;
(ii) our expected financial performance;

(iii) our projected levels of capex and other investment plans; (iv) our working capital requirements; and
(v) any contractual restrictions and/or commitments.

Further, our payment of dividends may adversely affect our ability to fund unexpected capex as well as our ability to make interest and principal repayments on any borrowings that we may have outstanding at the time. As a result, we may be required to borrow additional money or raise capital by issuing equity securities, which may not be on favourable terms or available at all. Further, in the event we incur new borrowings subsequent to our Listing, we may be subject to covenants restricting our ability to pay dividends.

5.3.5 The sale, or the possible sale, of a substantial number of our Shares in the public market following our IPO could adversely affect the price of our Shares. Following the IPO, up to 470,100,500 IPO Shares, representing up to approximately 35.21 % of our enlarged issued and paid-up share capital, will be publicly held by investors participating in our IPO, while 859,979,500 Shares, representing approximately 64.42% of our enlarged issued and paid-up share capital, will be held by our Promoters, assuming that the Over-allotment Option is not exercised. Following our Listing, the Shares sold in our IPO will be tradable on the Main Market of Bursa Securities without restriction. Notwithstanding our existing level of cash and cash equivalents, we may issue additional Shares in connection with financing activities or otherwise. In addition, any of the Promoters could dispose of some or all of our Shares that it holds after the moratorium period pursuant to its own investment objectives. If any of the Promoters sells, or is perceived as intending to sell, a substantial amount of our Shares that it holds, the market price for our Shares could be adversely affected.
5.3.6 Forward-looking/Prospective statements in this Prospectus may not be accurate. This Prospectus contains forward-looking statements. All statements, other than statements of historical facts, included in this Prospectus including, but not limited to, those regarding our financial position, business strategies, future plans and objectives for future operations, are forward-looking statements. Such forward-looking statements are made based on assumptions that we believe to be reasonable as at the date of this Prospectus. Forward-looking statements can be identified by the use of forward-looking terminologies, such as the words “may”, “will”, “would”, “could”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “aim”, “plan”, “forecast” or similar expressions and include all statements that are not historical facts. Such forward­looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements, or industry results expressed or implied by such forward-looking statements. 62

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