Business Overview

4. INFORMATION ON OUR GROUP 4. INFORMATION ON OUR GROUP
4.1 GROUP OVERVIEW 4.1.1 Incorporation and Share Capital Our Company was incorporated in Malaysia under the Companies Act on 14 October 2009 as a public limited company. Our history can be traced back to 1996 with the incorporation of Southern Industrial Gas by our founder, Peh Lam Hoh, who has been involved in the industrial gas industry since 1976. Our first plant was located at Senai, Johor and began operating in 1997. When it was first opened, the Senai plant undertook production of Acetylene and carbon dioxide and also refilling of various gases using liquid gas produced by third parties as feedstock. In late 1997, we expanded our operation by establishing a gas refilling plant in Balakong, Selangor to serve customers in the Klang Valley. In 1999, we further expanded our business by establishing a distribution depot in Kuantan to serve customers in the East Coast of Peninsular Malaysia. We then extend our reach to the north of Peninsular Malaysia in 2000 with the setting-up of a distribution depot in Juru, Penang. In 2001, we set up a production and refilling plant in Puchong, Selangor. The Puchong plant is equipped to produce Gas Mixtures and to carry out refilling activities for oxygen, nitrogen, Argon and carbon dioxide. The Balakong plant was transferred to the Puchong plant to consolidate our operations in the Klang Valley. We also upgraded our Juru depot by setting up an oxygen refilling plant and carbon dioxide refilling plant to better address opportunities in the Northern part of Peninsular Malaysia. In 2003, we constructed our ASU in Senai, Johor and began production of our own liquid oxygen and liquid nitrogen. In the same year, we set up a new oxygen refilling plant in Krubong, Malacca. The Krubong plant was upgraded with the addition of a carbon dioxide gas refilling plant in 2004. In line with our commitment to product and service quality, Southern Industrial Gas was awarded the ISO 9001 :2000 quality management system certification in 2004 which was updated to ISO 9001 :2008 in 2009. In 2005, we upgraded our existing Kuantan depot to incorporate an oxygen refilling plant to better address opportunities in the East Coast of Peninsular Malaysia. In 2008, we further expanded our business in the north with the establishment of a new oxygen, nitrogen and carbon dioxide refilling plant in Bukit Minyak, Penang. The Juru plant was also transferred to the Bukit Minyak plant to consolidate our operations for the northern part of Peninsular Malaysia. In February 2009, we began construction work on our newest manufacturing plant located at Nilai, Negeri Sembilan. The construction of the Nilai plant was completed in September 2009 and is our second industrial gas manufacturing facility, which manufactures Acetylene and Fuming Gas. Our Nilai plant has started operations in December 2009 and begun manufacturing Acetylene and Fuming Gas, as well as refilling carbon dioxide, which will also equip with oxygen, nitrogen and Argon refilling facilities. Our Company’s authorised share capital is RM200,000,000 comprising 400,000,000 ordinary shares of RMO.50 each, of which RM50,400,000 comprising of 100,800,000 Shares have been issued and fully paid-up.

 

4. INFORMATION ON OUR GROUP (Cont’d) The changes in our Company’s issued and fully paid-up share capital since incorporation were as follows:­Date of Allotment  No. of Ordinary Shares Allotted  Par Value (RM)  Consideration  Cumulative Issued and Fully Paid-Up Ordinary Share Capital (RM)  14.10.2009 12.05.2010  20 100,799,980  0.50 0.50  Subscribers’ shares Acquisition  10 50,400,000
Upon completion of the Public Issue, our issued and fully paid-up share capital will increase to RM75,000,OOO comprising 150,000,000 Shares. We do not have any warrant, option or convertible securities in issue or any uncalled capital. 4.1.2 Corporate Structure Our Group’s corporate structure is depicted below:­
100%  100%  100%  Southern  Southern  Southern Carbon  Industrial Gas  Oxygen  Dioxide
The details of our subsidiaries are as follows:-4. INFORMATION ON OUR GROUP (Cont’dj Datel Place of Company Incorporation Southem 20.03.1996/ Industrial Gas Malaysia Issued and Paid-up Share Capital (RM) 23,000,000 Effective Equity Interest Principal Activities (‘Yo) 100.00 Manufacturing, refilling and distribution of all kinds of industrial gases. —.—-.—..-.-.—-.-­–..—..-.-.——f—-.,….,.-,—,-,-I·–,..,.–·—–·-··——···———–Southem 17.09.2007/ 2 100.00 Dormant. Oxygen Malaysia The intended principal activities are investing in onsite plant and supply liquid oxygen, liquid nitrogen and liquid Argon. Southem Carbon Dioxide 26.09.2007/ Malaysia 2 ·-·-1-00:00 -D-orma-nt-.–..-.-.——.—–.—–.­The intended principal activities are investing in carbon dioxide recovery plant and supply liquid carbon dioxide.
4.1.3 Our Subsidiaries (i) Southern Industrial Gas (a) Background and History Southern Industrial Gas was incorporated in Malaysia on 20 March 1996 as a private limited company under its present name. Southern Industrial Gas commenced operations on 1 March 1997. For further details on the background and history of Southern Industrial Gas, please refer to Section 4.1.1 of this Prospectus. (b) Principal Activities and Products I Services The principal activities of Southern Industrial Gas are manufacturing, refilling and distribution of all kinds of industrial gases. For further details on the products and services of Southern Industrial Gas, please refer to Section 4.5 of this Prospectus. (c) Share Capital As at the LPD, Southern Industrial Gas’s authorised share capital is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each, of which 23,000,000 ordinary shares of RM1.00 each have been issued and fully paid-up. The changes in Southern Industrial Gas’s issued and fully paid­up share capital for the past 3 years up to the LPD were as follows:­No. of Ordinary  Cumulative Issued and  Date of  Shares of RM1.00  Fully Paid-Up Ordinary  Allotment  Each Allotted  Consideration  Share Capital  (RM\  15.04.2007  110,000  Cash  21,000,000  05.06.2008  2,000,000  Cash  23.000,000
Southern Industrial Gas does not have any warrant, option or convertible securities in issue or any uncalled capital. (d) Subsidiary or Associated Company After the completion of the Acquisition, on 31 May 2010, Southern Industrial Gas has transferred the 2 existing ordinary shares of RM1.00 each in Southern Oxygen and Southern Carbon Dioxide respectively, for a nominal value of RM1.00 per share each to SIG Gases. Thereafter, Southern Oxygen and Southern Carbon Dioxide became the direct wholly-owned subsidiaries of SIG Gases. As at the LPD, Southern Industrial Gas does not have any associated company. 4. INFORMATION ON OUR GROUP (Conf’dj (ii) Southern Oxygen (a) Background and History
Southern Oxygen was incorporated in Malaysia on 17 September 2007 under the Companies Act as a private limited company under its present name. As at the LPD, Southern Oxygen has not commenced operations.
(b) Principal Activities and Products I Services
As at the LPD, Southern Oxygen is a dormant company. The intended principal activities are investing in onsite plant and supply liquid oxygen, liquid nitrogen and liquid Argon.
(c) Share Capital

As at the LPD, Southern Oxygen’s authorised share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each, of which 2 ordinary shares of RM1.00 each have been issued and fully paid-up. There were no changes in Southern Oxygen’s issued and fully paid-up share capital for the past 3 years up to the LPD. Southern Oxygen does not have any warrant, option or convertible securities in issue or any uncalled capital. (d) Subsidiary or Associated Company As at the LPD, Southern Oxygen does not have any subsidiary or associated company. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’dj (iii) Southern Carbon Dioxide (a) Background and History
Southern Carbon Dioxide was incorporated in Malaysia on 26 September 2007 under the Companies Act as a private limited company under its present name. As at the LPD, Southern Carbon Dioxide has not commenced operations.
(b) Principal Activities and Products I Services
As at the LPD, Southern Carbon Dioxide is a dormant company. The intended principal activities are investing in carbon dioxide recovery plant and supply liquid carbon dioxide.
(c) Share Capital

As at the LPD, Southern Carbon Dioxide’s authorised share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each, of which 2 ordinary shares of RM1.00 each have been issued and fully paid-up. There were no changes in Southern Carbon Dioxide’s issued and fully paid-up share capital for the past 3 years up to the LPD. Southern Carbon Dioxide does not have any warrant, option or convertible securities in issue or any uncalled capital. (d) Subsidiary or Associated Company As at the LPD, Southern Carbon Dioxide does not have any subsidiary or associated company. 4.2 LISTING SCHEME In conjunction with, and as an integral part of our Listing, we undertook the Listing Scheme, which involves the following:­(i) Dividend Payment Prior to the Acquisition, Southern Industrial Gas had declared and paid the following dividends to its shareholders:­(a) First interim dividend amounted to RM1.15 million from its PAT generated between 1 January 2009 to 31 Al.lgust 2009 which was declared on 7 July 2009 and paid on 31 July 2009; and
(b) Second interim dividend amounted to RM1.15 million from its PAT generated between 1 September 2009 and 31 December 2009 which was declared on 3 November 2009 and paid on 30 November 2009. Southern Industrial Gas achieved the PAT of approximately RM2.38 million for the 4-month period between 1 September 2009 and 31 December 2009 which was apportioned based on the audited PAT recorded by Southern Industrial Gas of approximately RM7.15 million for the FYE 31 December 2009.

4. INFORMATION ON OUR GROUP (Cont’d) (ii) Acquisition Pursuant to the share sale agreement dated 8 December 2009 entered into by us and the vendors of Southern Industrial Gas, we acquired the entire issued and paid-up share capital of Southern Industrial Gas comprising 23,000,000 ordinary shares of RM1.00 each for a total purchase consideration of RM50,399,990 which was wholly satisfied by the issuance of 100,799,980 new Shares each credited as fully paid-Up. The vendors and their respective equity interests acquired by SIG Gases together with the number of new Shares issued as consideration are set out as follows:­Name  Shareholding in Southern Industrial Gas  No. of New SIG Gases Shares Issued as Consideration  No. of Ordinary Shares of RM1.00 Held  % Held  Peh Lam Hoh Datin Hanifah Hajar Taib Sing Swee Bee Enterprise Pte Ltd Lau Cheng Ming Loh Pei Yon Kong Khim Tuck Khong Kar Yow Voon Chee Keen Ng Cheng Guan Lim Hung Cheng Peh Hock Soon Tan Chin Peng Li Xiao Qing Manis Toh Ah Katt Chng Hian Beng Lim Ban Seng Yue Thye Chun Xiao Fei Lim Han Chiong Foo Peng Boon Chong Joon Kiong Koh Beng San Wong KokWee Boo Chin Eng Ku Chai Lin  7,302,669 6,147,571 3,163,746 1,506,102 1,347,500 1,056,036 553,250 530,000 494,000 143,356 140,337 100,000 90,750 79,514 66,300 53,010 48,400 39,363 35,750 32,346 15,000 15,000 15,000 10,000 10,000 5,000  31.75 26.73 13.76 6.55 5.86 4.59 2.41 2.30 2.15 0.62 0.61 0.43 0.39 0.35 0.29 0.23 0.21 0.17 0.16 0.14 0.07 0.07 0.07 0.04 0.04 0.01  32,004,734 26,942,393 13,865,458 6,600,654 5,905,564 4,628,192 2,424,678 2,322,782 2,165,008 628,273 615,042 438,261 397,722 348,479 290,567 232,322 212,118 172,513 156,678 141,760 65,739 65,739 65,739 43,826 43,826 21,913  Total  23,000,000  100.00  100,799,980
The purchase consideration of RM50,399,990 for the Acquisition was arrived at on a willing buyer-willing seller basis after taking into consideration the audited NTA of Southern Industrial Gas as at 31 August 2009 of RM50,397,644. The 100,799,980 new Shares issued pursuant to the Acquisition rank pari passu in all respects with the existing Shares of SIG Gases and carryall rights to receive in full all dividends and other distributions declared and paid subsequent to the allotment thereof. The Acquisition was completed on 12 May 2010. 42 4. INFORMATION ON OUR GROUP (Cont’d) After the completion of the Acquisition, on 31 May 2010, Southern Industrial Gas has transferred the 2 existing ordinary shares of RM1.00 each in Southern Oxygen and Southern Carbon Dioxide respectively, for a nominal value of RM1.00 per share each to SIG Gases. Southern Oxygen and Southern Carbon Dioxide are currently direct wholly owned subsidiaries of SIG Gases. (iii) IPO (a) Public Issue We are undertaking the ·Public Issue, details of which are set out in Section 2.2.1 of this Prospectus. (b) Offer for Sale We are undertaking the Offer for Sale, details of which are set out in Section 2.2.2 of this Prospectus. (iv) Listing We will make an application to Bursa Securities for the admission of our Shares into the Official List and for the listing of and quotation for our entire enlarged issued and paid-up share capital on the Main Market of Bursa Securities. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’d)
4.3  OVERVIEW OF OUR BUSINESS ACTIVITIES  4.3.1  Business Model  Our Group’s business model is depicted in the figure below:­

{ {

rr———-, L. l J Supporting Activity :
Our business is in the manufacturing, refilling and distribution of industrial gases. The gases that we are involved in are oxygen, nitrogen, Argon, carbon dioxide, Acetylene, Gas Mixtures, Specialty Gases, Fuming Gas and Refrigerants.
4.3.3 Revenue Streams Our core revenue streams are derived from the manufacturing, refilling and distribution of industrial gases. Our other business activities are the provision of cylinders and delivery services, and the supply of other products and services. Please refer to Section 4.5.6 of this Prospectus for further details of our Group supply of the other products and services. Our cylinders and delivery services are supporting activities to our core business activities, while the supply of other products and services are complementary to our Group’s business to provide a wider range of products and services for the convenience of our customers.
Ship Building Industry
Machinery and Equipment Industry
In-house Air Separation Unit
Network of Gas Refilling Facilities
4.3.2 Business Focus Metal Fabrication  Building and  Industry  Construction Industry  Industrial Gas Industry  Healthcare Industry
In-house Acetylene Production  Product Quality  Wide User Industries
In-house Fuming Gas Production
Reputation and Track Record
4. INFORMATION ON OUR GROUP (Cont’d) We currently produce the following:­Gases Oxygen; Nitrogen; Acetylene; Gas Mixtures; and Fuming Gas. Bulk liquid Oxygen; and Nitrogen. We produce oxygen and nitrogen in liquid form or gas form. In general, large users are supplied with oxygen or nitrogen in bulk liquid form while smaller users are supplied with oxygen or nitrogen that is compressed in gas cylinders. Most buyers of bulk liquid oxygen or nitrogen convert the liquid oxygen or liquid nitrogen into the gaseous form for use. In addition, we currently purchase liquid Argon and liquid carbon dioxide from third-party producers and vapourises and compresses them into cylinders for our customers. Our suppliers for liquid Argon and liquid carbon dioxide are MOX-Linde Gases Sdn Bhd, SSB Cryogenic Equipment Pte Ltd and Cyromaster Sdn Bhd. The manufacturing of liquid Argon and liquid carbon dioxide requires a significant capital outlay in terms of investment in plant and machineries as well as technical expertise. The purchase from the third party will be a prudent and a cost effective approach to enable our Group to gauge the demand as well as establishing our pools of customers for the said products before evaluating further on the viability of manufacturing the liquid Argon and liquid carbon dioxide in-house. We are also engaged in distributing Refrigerants and Specialty Gases such as ethylene, propylene, Purified Helium and Hydrogen. Our suppliers for Refrigerant and Specialty Gases are SSB Cryogenic Equipment Pte Ltd, Sing Swee Bee Enterprise Pte Ltd, Sing Swee Bee Sdn Bhd and Chemgas Pte Ltd. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

4. INFORMATION ON OUR GROUP (Conf’dj 4.3.4 User Industries The industrial gases manufactured and supplied by us have a very wide range of applications, and are used in a large number of industries. Some of the applications of industrial gases manufactured and supplied by us include the following:­Types of Industrial Gases  Major User Industry  Principal Applications  Oxygen  Iron and steel  Injected into molten iron to:­-remove sulfur impurities and excess carbon; and -to increase the temperature in the furnace.  Chemical  Used to oxidise raw chemicals to produce chemicals such as nitric acid, ethylene oxide, propylene oxide, vinyl chloride and other chemical compounds.  Oil and gas  Sometimes used to improve and enhance the viscosity of oil and gas flow. In oil cracking plants, oxygen is used to boost production capacity, increase efficiency of high-octane component processing and to remove sulphur impurities  Healthcare  Used in surgery, inhalation therapy, assistance in respiratory problems and other uses  Nitrogen  Oil and gas, chemical, pharmaceutical, electronics and food  Used to create an inert atmosphere to protect solids and liquids from coming into contact with oxygen and moisture  Chemical  Used as a feedstock to produce ammonia and other chemical compounds  Food, healthcare and various other industries  Liquid nitrogen is used as a freezing agent for biological substances and food
4. INFORMATION ON OUR GROUP (Cont’d) 4. INFORMATION ON OUR GROUP (Cont’d) Types of Industrial Gases  Major User Industry  Principal Applications  Argon  Chemical, pharmaceutical and food Metal fabrication, shipbuilding, manufacturing and various other industries Various industries Food Various industries Food Various industries Chemical Oil and gas  Used to create an inert atmosphere to protect solids and liquids from coming into contact with oxygen and moisture Used as a shielding gas in inert gas metal welding Sometimes mixed with nitrogen for use in fire extinguishing systems Solid carbon dioxide is used as a cooling agent to store food Solid carbon’ dioxide is used as a blast cleaning medium Used to manufacture carbonated soft drinks, beer and other beverages. Used to remove caffeine from coffee beans Sometimes used in fire extinguishing systems Used to produce chemicals such as urea, carbonate, bicarbonate and sodium salicyclate Sometimes used to enhance oil recovery where carbon dioxide is injected into oil-bearing stratum to push the oil out under high pressure  Carbon dioxide  Acetylene  Chemical Metal fabrication, machinery and equipment, building and construction, and many other industries  It is a raw material for conversion into acrylic acid derivatives, which are used in the manufacture of acrylic plastics, coatings, adhesives and other products When use in combustion with oxygen, produces a very hot flame that is used to cut and weld metal
Types of Industrial Gases  Major User Industry  Principal Applications  Fuming Gas  Healthcare  Used to sterilise products such as surgical instruments, bandages, sutures and other medical products that would be normally damaged by heat
The diverse usage and applications across a large number of user industries for industrial gases provide us with significant opportunities for growth. 4.3.5 Business Activities Our business activities are depicted in the figure below:­
4. INFORMATION ON OUR GROUP (Conf’dj Our principal business activities are in the manufacturing, refilling and distribution of industrial gases. The gases that we are involved in are oxygen, nitrogen, Argon, carbon dioxide, Gas Mixtures, Specialty Gases and Refrigerants. We provide supporting services, which include provIsion of cylinder sales, rental and maintenance, as well as delivery services. We also supply other products and services that complement our business and provide greater convenience to our customers.
4.4 KEY ACHIEVEMENTS, AWARDS AND RECOGNITION 4.4.1 Key Achievement The table below sets out our key development and achievement milestones over the past years:­Year  Major Milestones  1996  Commencement of business with the incorporation of Southern Industrial Gas.  1997 2003  Construction of the factory in Senai, Johor and the commencement of the production of Acetylene and carbon dioxide, and refilling of various industrial gases. Commencement of the production of liquid oxygen and liquid nitrogen with the commissioning of an ASU at the Senai plant. Our Group, through Southern Industrial Gas obtained ISO 9001 :2000 quality management system certification. Southern Oxygen and Southern Carbon Dioxide were incorporated to undertake their respective intended business activities as set out in Sections 1.1 and 4.1.2 of this Prospectus. Commencement of construction of factory for the manufacturing of Acetylene and Fuming Gas, and refilling of carbon dioxide in Nilai, Negeri Sembilan.  2004  2007  2009

4.4.2 Award, Accreditation and Recognition Our Group, through our subsidiary, Southern Industrial Gas, has received ISO 9001 :2008 quality management system certification for the scope of “Production of liquid nitrogen and oxygen” and “Trading of liquid nitrogen, oxygen and Argon for applications in steel, electronics, medical, construction, shipbuilding and food processing” from SIRIM QAS International Sdn Bhd. Southern Industrial Gas first received the certification on 16 January 2004. Southern Industrial Gas’s current certification is valid from 15 December 2009 to 15 January 2013. 4. INFORMATION ON OUR GROUP (Cont’d)

4.5 OUR PRODUCTS, SERVICES AND OPERATIONS 4.5.1 Revenue Segmentation by Business Activities and Products and Services Our revenue segmentation by business activities and products and services for the FYE 31 December 2009 and the 4-month FPE 30 April 2010 is as follows:­
Note:­Production of Fuming Gas began in December 2009.

4. INFORMATION ON OUR GROUP (Cont’d) 4.5.2 Manufacturing of Industrial Gases We currently produce the following types of industrial gases at our production facility located at Senai, Johor:­(i) Oxygen Oxygen is a gas under normal atmospheric temperature and pressure with the chemical formula Oz. Oxygen is a reactive gas that supports combustion and reacts readily with many substances. It is also essential in sustaining life. We produce oxygen by extracting oxygen from the atmosphere with our ASU. We normally produce liquid oxygen that is 99.6% pure. We can produce liquid oxygen that is up to 99.9% pure to meet more stringent customer specifications if required. Currently, we sell oxygen to our customers in bulk liquid form or gas form. We deliver bulk liquid oxygen to our customers in specialised cryogenic liquid storage tanks. Customers who normally purchase oxygen in bulk liquid form include third-party industrial gas refiIIers, operators in the iron and steel industry, and other large-scale industrial users. Oxygen that is sold to customers in gas form is delivered to customers in gas cylinders. We transport bulk liquid oxygen to our refilling facilities, where the liquid oxygen is vapourised and compressed into gas cylinders. Some of the oxygen currently sold by us is used with Acetylene in oxy-Acetylene cutting and welding. We also supply oxygen to operators in the iron and steel industry, where the oxygen is injected into molten iron and steel to remove impurities and to increase the combustion temperature in furnaces. Oxygen is also used in the chemical, oil and gas, pharmaceutical and healthcare industries. Please refer to Section 4.5.9.1 (ii) of this Prospectus for further details on oxygen. (ii) Nitrogen We currently produce nitrogen. Under normal atmospheric temperature and pressure, nitrogen is a gas with the chemical formula Nz. We produce nitrogen by extracting nitrogen from the atmosphere with our ASU. We normally produce liquid nitrogen that is 99.999% pure with moisture content of less than 3 parts per million. We sell nitrogen to customers in bulk liquid form or gas form. Nitrogen that is sold to customers in bulk liquid form is delivered in specialised cryogenic liquid storage tanks. Customers who normally purchase nitrogen in bulk liquid form include third­party industrial gas refillers and large-scale industrial users. Nitrogen sold to customers in gas form is delivered to customers in gas cylinders. We transport bulk liquid nitrogen to our refilling facilities, where the liquid nitrogen is vapourised and compressed into gas cylinders. 4. INFORMATION ON OUR GROUP (Cont’dj Nitrogen is an Inert Substance that does not support combustion or oxidation and does not react readily with most substances. Many of the industrial applications that involve nitrogen make use of its inert nature. Nitrogen is widely used to create an inert atmosphere to protect solids and liquids from coming into contact with oxygen and moisture in the oil and gas, chemical, pharmaceutical, electronics and food industries. Liquid nitrogen is a cryogenic liquid with a boiling point of -195.8°C at normal atmospheric pressure. Liquid nitrogen is used as a Refrigerant and cooling agent to freeze items such as biological substances and food. Please refer to Section 4.5.9.1 (iii) of this Prospectus for further details on nitrogen. (iii) Acetylene Acetylene is a chemical compound with the chemical formula CzHz and is a gas at normal atmospheric temperature and pressure. We produce Acetylene by reacting calcium carbide with water. The resulting Acetylene is cooled, purified, dried, compressed and injected into gas cylinders. We currently sell Acetylene to our customers in gas form. The Acetylene is injected under pressure into a gas cylinder that contains a specified amount of acetone. Acetylene cannot be safely pressurised for efficient storage and transportation, and as such, the Acetylene is dissolved in acetone in cylinders for storage and transportation. Most of the Acetylene sold by us is used by our customers to combust together with oxygen to produce a hot oxy-Acetylene flame for cutting and welding metals. Oxy­Acetylene metal cutting and welding is widely used in the shipbuilding, metal fabrication, machinery and equipment, building and construction and other industries. While most of the Acetylene currently sold by us is produced in-house, in 2008 and 2009, a small proportion was purchased from third-party producers to supplement our production to meet customers’ demand. Moving forward, we expect to be self­sufficient as production has recently begun at our Acetylene plant in Nilai, Negeri Seremban. Please refer to Section 4.5.9.1 (Vi) of this Prospectus for further details on Acetylene. (iv) Gas Mixtures We currently produce a range of Gas Mixtures. Gas Mixtures are blends of two or more gases that are mixed in accordance with customer’s individual specifications. We have the expertise to produce a wide range of Gas Mixtures. Examples of Gas Mixtures produced by us include:­Argon and carbon dioxide; Argon and hydrogen; Argon and helium; Argon and nitrogen; Argon, carbon dioxide and oxygen; Argon, carbon dioxide and hydrogen; Argon, carbon dioxide and helium; and Argon, carbon dioxide and nitrogen.
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4. INFORMATION ON OUR GROUP (Conf’d) Gas Mixtures produced by us can be used in a wide range of applications, including:­Medical and pharmaceutical applications; Calibrating Gas Mixtures for analytical purposes, for example in petrochemical engineering; As an environmental compliance mixture; For use in lasers; Used in electronics manufacturing; Used to detect leaks; and Standard mixtures for the chemical and fertiliser industries. (v) Fuming Gas Fuming Gas is a type of industrial gas that is used to kill harmful organisms such as bacteria, mold and fungus. We produce a Fuming Gas compnslng a mixture of ethylene oxide and carbon dioxide. This Fuming Gas is used by manufacturers of medical equipment to sterilise their products. We have begun to manufacture Fuming Gas at our new production facility in f\lilai, Negeri Sembilan. 4.5.3 Refilling of Industrial Gases Our industrial gas refilling business activities are focused on refilling Argon and carbon dioxide. We purchase liquid Argon and liquid carbon dioxide from third-party producers. We then utilise our in-house gas vaporisation facilities to convert most of the liquid Argon and liquid carbon dioxide into their corresponding gases, which are then refilled into gas cylinders. A small percentage of the liquid Argon and liquid carbon dioxide is supplied to customers in liquid form. (i) Argon We currently supply Argon to our customers. Under normal atmospheric temperature and pressure, Argon is a gas with the chemical formula Ar. Argon is characterised by its inert nature and does not react readily with most substances. Argon has the highest concentration in the atmosphere of all the noble gases and as a result it is the most readily available and frequently used. Like nitrogen, many of the industrial applications that involve Argon make use of its inert nature. Argon is used to create an inert atmosphere to protect solids and liquids from coming into contact with oxygen and moisture in the chemical, pharmaceutical and food industries. Argon is used as a shielding gas in inert gas metal welding, where a continuous stream of Argon gas at the welding area displaces atmospheric gases that can cause weld defects. In addition, as it does not support combustion, Argon gas is sometimes used in fire extinguishing systems. Please refer to Section 4.5.9.1 (iv) of this Prospectus for further details on Argon.

4. INFORMATION ON OUR GROUP (Cont’d) (ii) Carbon Dioxide We currently supply carbon dioxide to our customers. Under normal atmospheric temperature and pressure, carbon dioxide is a gas with the chemical formula CO2• Carbon dioxide is denser than air, mildly reactive and is normally non-flammable. Carbon dioxide does not form a liquid under normal atmospheric pressure. Under normal atmospheric pressure, carbon dioxide sublimates directly from a solid phase to gaseous phase at -78.5°C. This property makes solid carbon dioxide, which is commonly known as “dry ice”, useful as a blast cleaning medium and as a cooling agent for laboratories and retail stores. In the food industry, carbon dioxide is used to produce carbonated beverages and in processing foods such as d~caffeinated coffee. As carbon dioxide does not support combustion, it is sometimes used in fire extinguishing systems. Please refer to Section 4.5.9.1 (v) of this Prospectus for further details on the carbon dioxide. 4.5.4 Distribution of Industrial Gases In addition to manufacturing industrial gases and industrial gas refilling, we are also engaged in distributing a range of industrial gases. Our Group centralised distribution centre for industrial gases is located in Senai. We currently distribute two (2) main categories of industrial gas namely, Refrigerants and Specialty Gas. The Refrigerants distributed by us are suitable for use in commercial, residential and automotive air conditioners, and refrigeration systems. The Specialty Gas distributed by us include:­Ammonia; Argonite; Ethane; Ethylene; Helium (purified helium and helium balloon gas); Methane;
Noble gases (such as neon and xenon); Compressed air; and Sulphur hexafluoride. 4. INFORMATION ON OUR GROUP (Cont’d) 4.5.5 Cylinder and Delivery Services We provide cylinder and delivery services to support our core business activities of manufacturing, refilling and distribution of industrial gases. We rent gas cylinders to some of our customers. Customers who rent gas cylinders are charged a monthly fee for each gas cylinder rented. An additional fee is charged for each time that the gas cylinder is refilled with gas. Other cylinder services provided by us include repair and maintenance services. If required, we provide delivery services for our customers, either in bulk liquid form transported by specialised cryogenic storage tankers or in gas form stored in gas cylinders. 4.5.6 Other Products and Services We are also engaged in supplying other complementary products and services primarily to provide convenience to customers as part of our strategy to enhance customer loyalty. They include supply of welding products such as welding sets and electrodes, and provision of gas flushing services. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Conf’dj
4.5.7 Business Process (i) Process Flow for the Production of Liquid Oxygen and Liquid Nitrogen The table below depicts the process flow for the production of liquid oxygen and liquid nitrogen:­
Note: I.H:) ProceSSJZs thai. are carried …,., outin theASU.
4. INFORMATION ON OUR GROUP (Cont’dj Air is treated to remove substances that may freeze and clog up the ASU’s cryogenic piping. The air is first filtered at the air intake to remove impurities such as dust and hydrocarbon particles. The air is compressed in a multi-stage air compressor. The compressed air is then passed through a chiller to condense the water vapour that is present in the air. The condensed water is removed in a water separator and passed through a dryer to remove any remaining water. The air then passes through a molecular sieve, which is packed with absorbents that trap the carbon dioxide, heavier hydrocarbons and any remaining traces of water vapour. The stream of air is split, with a small portion diverted to a compressor, where its pressure is boosted. It is then cooled and allowed to expand rapidly, which results in cooling of the air. The cooled air is used to provide the required cold temperature for the operation of the ASU. The main stream of air passes through a heat exchanger, where it is cooled by the very cold purified liquid oxygen and liquid nitrogen that has been produced by the ASU. The cooled air is liquefied. At the pressure of 1 Atmosphere (the atmospheric pressure at sea level) gaseous oxygen becomes liquid oxygen at -183°C while gaseous nitrogen becomes liquid nitrogen at -196°C. The liquid air enters the base of the first high pressure fractionating column. As the liquefied air works its way up the column, it loses additional heat. The oxygen (which is the fraction with the highest boiling point at -183°C) continues to liquefy, forming an oxygen-rich mixture at the bottom of the column, while most of the nitrogen and Argon (which have lower boiling points) remain in gas form and continue to flow to the top of the fractionating column. The liquid oxygen mixture (known as crude liquid oxygen) is drawn out of the bottom of the fractionating column and cooled further. The crude liquid oxygen is fed into the top of a low-pressure fractionating column. As the crude liquid oxygen flows down the low-pressure fractionating column, most of the remaining nitrogen and other gases leave the crude liquid oxygen in gas form, leaving purified liquid oxygen at the bottom of the column. The liquid oxygen can be further processed in additional fractionating columns if higher purity is required. The nitrogen and other gases from the top of the high-pressure fractionating column are drawn off and cooled further using the gas liquefier, nitrogen recycle compressor and gas expander. The mixture is fed into the top of another low-pressure fractionating column. Argon, which has a higher boiling point than the nitrogen at ­186°C, flows to the bottom of the column as a liquid, while the nitrogen turns into gas. The nitrogen flows to the top of the column as very pure gaseous nitrogen. The nitrogen can be further processed in additional fractionating columns if higher purity is required. The purified liquid oxygen and liquid nitrogen are stored in separate cryogenic storage vessels. The liquid oxygen and liquid nitrogen may be distributed to customers in bulk liquid form or converted into gas in a vapouriser to refill gas cylinders. Our ASU is not equipped with the specific fractionating column reqUired to purify liquid Argon. The liquid Argon that is not recovered in our ASU is returned to the atmosphere. 4. INFORMATION ON OUR GROUP (Conf’dj (ii) Process Flow for the Production of Acetylene The table below depicts the process flow for the production of Acetylene:­Water Calcium Carbide :: II Ir Ir II
Calcium carbide and water are reacted together in an Acetylene generator. The resulting Acetylene is cooled, filtered and dried by a series of condensers. scrubbers, purifiers and dryers to remove water and impurities. The Acetylene is then compressed and passed through an oil separator. It is then dried in a high pressure dryer and passed through a final filter. The filtered Acetylene can then be used to refill gas cylinders. As Acetylene is compressed, some lubricating oil from the compressor becomes mixed with the Acetylene. This lubricating oil must to be removed before the Acetylene is filled into gas cylinders. An oil separator is used to remove the lubricating oil. 4. INFORMATION ON OUR GROUP (Cont’d) Empty gas cylinders that are returned by customers are inspected for damage and worn-out components. Any damaged or worn-out components are repaired and replaced. The gas cylinder is then weighed and topped-up with acetone if required. The gas cylinder is then ready to be refilled with Acetylene. 4.5.8 Quality Management Our Group, through our subsidiary, Southern Industrial Gas, has received ISO 9001 :2000 quality management system certification for the scope of “Production of liquid nitrogen and oxygen” and “Trading of liquid nitrogen, oxygen and Argon for applications in steel, electronics, medical, construction, shipbuilding and food processing” from SIRIM QAS International Sdn Bhd. The company first received the certification on 16 January 2004 which was updated to ISO 9001 :2008 in 2009. The company’s current certification is valid from 15 December 2009 to 15 January 2013. We have an in-house quality assurance testing facility located in our production facility at Senai, Johor, which is equipped with Gas Chromatograph, oxygen analyser and moisture analyser. With the Gas Chromatograph, we can perform accurate chemical analysis to ascertain the composition of samples of liqUid and gas that are collected in-process and at the end of the production process. As at the LPD, we had one (1) Quality Assurance Officer. The Quality Assurance Officer is trained to perform chemical analysis using the Gas Chromatograph machine. 4.5.9 R&D and Technology 4.5.9.1 Relevant Technology The main technology that is relevant to our business is Cryogenic Distillation as this is the method that we use to produce liquid oxygen and liqUid nitrogen. A description of the following industrial gases is also provided, as they are the major contributors to our revenue:­Oxygen; Nitrogen; Argon; Carbon dioxide; and Acetylene. (i) Cryogenic Distillation Distillation is a method of physically separating a liquid mixture into its component parts (or fractions) based on the different volatilities of the individual fractions at a given pressure. Fractional distillation is a special type of distillation whereby the liquid mixture is heated to a temperature at which several fractions of the liqUid mixture will evaporate. Fractional distillation is generally used when the boiling points of the fractions are close together. As the boiling points are close together, several separation stages are usually required to achieve a high degree of separation. Cryogenic distillation refers to distillation or Fractional Distillation that is carried out at a very low temperature. 4. INFORMATION ON OUR GROUP (Conf’dj We use the Cryogenic Distillation method to produce liquid nitrogen and liquid oxygen in our ASU. Our ASU was manufactured by American Air Plant from US and our Group acquired the used ASU from PT Aneka Gas Industri from Indonesia. The total cost of the ASU inclusive of installation and other ancillary costs is approximately RM13.50 million. Within the overall industrial gas industry, Cryogenic Distillation is currently the principal method of producing liquid nitrogen, liquid oxygen and liquid Argon. The process generally involves liquefying air by cooling it to a very low temperature and then carefully heating the liquid so that the various component gases leave the mixture one at a time. Cryogenic Distillation in Industrial Gas Production Before processing, the air is treated and filtered to remove impurities that can clog the ASU. Water and carbon dioxide are removed, as they will solidify at the low temperature during operation of the ASU.
Our Group’s ASU Air compressors and heat exchangers are used to cool and liquefy the air. The liquefied air is fed through the base of a high-pressure fractionating column. As the liquefied air works its way up the column, it loses additional heat. The oxygen (which is the fraction with the highest boiling point) continues to liquefy, forming an oxygen­rich mixture at the bottom of the column, while most of the nitrogen and Argon (which have lower boiling points) remain in gas form and continue to flow to the top of the fractionating column. 4. INFORMATION ON OUR GROUP (Cont’d) The liquid oxygen mixture (known as crude liquid oxygen) is drawn out of the bottom of the fractionating column and cooled further. The crude liquid oxygen is fed into the top of a low-pressure fractionating column. As the crude liquid oxygen flows down the low-pressure fractionating column, most of the remaining nitrogen and other gases leave the crude liquid oxygen in gas form, leaving purified liquid oxygen at the bottom of the column. The liquid oxygen can be further processed in additional fractionating columns if higher purity is required. The nitrogen and other gases from the top of the high-pressure fractionating column are drawn off and cooled further. The mixture is fed into the top of another low­pressure fractionating column. Argon, which has a higher boiling point than nitrogen, flows to the bottom of the column as a liquid, while the nitrogen turns into gas. The nitrogen flows to the top of the column as very pure gaseous nitrogen. The nitrogen can be further processed in additional fractionating columns if higher purity is required. The liquid Argon can be removed from the low-pressure fractionating column and processed with a third fractionating column to produce high purity Argon. (ii) Oxygen Oxygen is the second most abundant gas in the atmosphere, with approximately 21 % of the atmosphere by volume consisting of oxygen. Please refer to Section 4.5.2 (i) of this Prospectus for further details on oxygen. High purity oxygen is commonly produced on an industrial scale by the Cryogenic Distillation method. Oxygen can also be produced by chemical synthesis or by the electrolysis of water, although these methods are only normally used to produce relatively small amounts of the gas. (iii) Nitrogen Nitrogen is the most abundant gas in the atmosphere, with approximately 78% of the atm.osphere by volume consisting of nitrogen. Please refer to Section 4.5.2 (ii) of this Prospectus for further details on nitrogen. High purity nitrogen is commonly produced on an industrial scale by the Cryogenic Distillation method. (iv) Argon Argon is the most common noble gas present in the atmosphere, making up approximately 0.9% of the atmosphere by volume. Please refer to Section 4.5.3 (i) of this Prospectus for further details on Argon. High purity Argon is commonly produced on an industrial scale by the Cryogenic Distillation method. (v) Carbon Dioxide Carbon dioxide is normally produced by the combustion of substances containing carbon such as wood, petroleum or natural gas. It is also a by-product of fermentation or hydrogen production or may be formed by chemical synthesis. Please refer to Section 4.5.3 (ii) of this Prospectus for further details on carbon dioxide. 61 4. INFORMATION ON OUR GROUP (Cont’d) (vi) Acetylene Acetylene is classified as a hydrocarbon, as it is a compound that consists entirely of carbon and hydrogen. Please refer to Section 4.5.2 (iii) of this Prospectus for further details on the Oxygen. Acetylene may be produced on an industrial scale using a number of methods as follows:­As the by-product of a chemical reaction between calcium carbide and water; By partial combustion of methane; and Through thermal cracking of hydrocarbons where the temperature of hydrocarbons is raised to the point where the atomic bonds break or crack and the atoms are rebond to form different materials. Through this process, Acetylene is generated as a co-product to make ethylene. We produce Acetylene by reacting calcium carbide with water. The chemical equation for the reaction is as follows:­
Note: GaG2 represents calcium carbide, H20 represents water, Ga(OHh represents calcium hydroxide and G2H2 represents Acetylene. A high degree of care must be taken in’handling, storing and transporting Acetylene, as it is a highly flammable and unstable compound. Pure or highly concentrated Acetylene can explosively decompose. Acetylene can explode violently if the pressure of the gas exceeds approximately 2 atmospheres, or if it is in liquid or solid form. Acetylene also forms an explosive mixture with air that is readily ignited by sparks and flames.
Cut-away Diagram of a Typical Acetylene Gas Cylinder 4. INFORMATION ON OUR GROUP (Cont’d) Acetylene is commonly stored and transported in gas cylinders. The gas cylinder contains a porous filling that is partially filled with acetone, which is a solvent for Acetylene. Acetylene is injected under pressure into the cylinder, where it dissolves in the acetone. The Acetylene will remain dissolved in the acetone as long as the cylinder is sealed. 4.5.9.2 Policies of R&D Our R&D policies are focused on internal process improvement and quality assurance as a means of strengthening our competitiveness. Continuing process improvement and quality assurance are important in enabling our Group to achieve the following:­(i) Maximise the efficiency and productivity of the ASU and Acetylene production plant to maximise yield and minimise production costs;
(ii) Minimise ASU and Acetylene production plant down-time to maximise capacity utilisation; and

(iii) Maintain a very high level of safety, particularly at the Acetylene production plant, to prevent accidents. 4.5.9.3 R&D Expenditure We did not recognise any expenditure that is specific to R&D activities during the past three (3) FYE 31 December 2007 to FYE 31 December 2009 and the 4-month FPE 30 April 2010 as our R&D activities are mainly related to process improvement. 4.6 OTHER BUSINESS ASPECTS 4.6.1 Production Facilities, Capacity and Utilisation Our operations are currently focused only on Southern Industrial Gas. Our operational facilities are as follows:­Main Types of Activities Carried out at the Facility Manufacturing of liquid oxygen, liquid nitrogen, Acetylene and mixed gases, and refilling of industrial gases such as oxygen, nitrogen, Argon, carbon dioxide, Gas Mixtures and Acetylene  Approximate Land Area (square meters)  Location of Facility  14,516  PLO 137, Kawasan Perindustrian Senai III, 81400 Senai, Johor No. 17, Jalan BP 4/1, Bandar Bukit Puchong, 47120 Puchong, Selangor  Manufacturing of mixed gases, and refilling of industrial gases such as oxygen, nitrogen, Argon, carbon dioxide and ethylene  4,679
4. INFORMATION ON OUR GROUP (Cont’d) Main Types of Activities Carried out at the Facility Refilling of industrial gases such oxygen and carbon dioxide  as  Refilling of industrial gases such  as
oxygen Manufacturing of Acetylene and Fuming Gases, and refilling of carbon dioxide Refilling of industrial gases such as oxygen, nitrogen and carbon dioxide Approximate Land Area (square meters)  1,904  1,799  12,536  5,192
Location of Facility Lot 6215 & Lot 6216, Krubong Industrial Park, 75250 Krubong, Malacca No.1, Jalan 1M 14/8, Bandar Indera Mahkota, 25200 Kuantan, Pahang Lot 10688, Jalan Permata 1/4, Kawasan Perindustrian Arab Malaysia, Mukim Sentul Nilai, Negeri Sembilan Plot 235, Jalan Perindustrian Bukit Minyak 7, Kawasan Perindustrian Bukit Minyak 13, Seberang Perai, Penang Southern Industrial Gas’s capacity and production capacity for its ASU for the production of liqUid oxygen and liquid nitrogen for the FYE 31 December 2009 is as follows:­Production Capacity for  Annual Capacity (1)  FYE 31.12.2009  Product  (Tonnes)  (Tonnes)  Liquid oxygen  Variable  8,766  Liquid nitrogen  Variable  3,334  Total  20,160  12,100
Notes:­(1) Annual capacity is based on production being carried out 24 hours per day throughout the year.
(2) The production capacity for Gas Mixtures is not available as it is dependent on the production capacities of the other products (i.e. the types of gases being mixed to produce the specific Gas Mixtures).

Our ASU has the capacity to produce a total of 20,160 tonnes of liquid oxygen and liquid nitrogen per year. The mix of liquid oxygen and liquid nitrogen produced can be varied based on demand for these gases. The mix (by weight) of liquid oxygen and liquid nitrogen that can be produced at anyone time ranges between the following:­A maximum of 78.6% liquid oxygen and 21.4% liquid nitrogen; A maximum of 78.6% liquid nitrogen and 21.4% liquid oxygen; and A mixture of liquid oxygen and liquid nitrogen that falls within the two ranges.
Southern Industrial Gas’s average utilisation rate for the production of liquid oxygen and liquid nitrogen during the FYE 31 December 2009 was approximately 60.02%. 4. INFORMATION ON OUR GROUP (Cont’d) Southern Industrial Gas’s capacity, production and utilisation rate for the production of Acetylene for the FYE 31 December 2009 was as follows:­Product  Annual Capacity (m3 ) *  Production for FYE 31.12.2009 (m3 )  Utilisation Rate for FYE 31.12.2009 (%)  Acetylene  864,000  795,804  92.11
Note:­* Annual capacity is based on production being carried out 24 hours per day throughout the year. Southern Industrial Gas’s utilisation rate for the production of Acetylene during the FYE 31 December 2009 was approximately 92%. This relatively high utilisation rate indicates that our Acetylene production plant is being used efficiently. Our new Nilai plant has the capacity to produce 1,296,000 m3 of Acetylene per year, based on one 12-hour shift per day at the plant. THE REST OFTHIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’d) 4.6.2 Types, Sources and Availability of Raw Materials The purchases made by us for the FYE 31 December 2009 are as follows:­
Percentage of Purchases (0/0)
Calcium Carbide  6.933  25.67  97.19  2.81  Electricity  4,530  16.77  100.00  Liquid Argon  3,873  14.34  43.82  56.18  Liquid Carbon Dioxide  2,694  9.97  87.67  12.33  Acetone  431  1.60  100.00  0.00  Total  18,461  68.35  85.36  14.64
Purchases of Finished Products  Refrigerants  3,848  14.25  63.58  36.42  Specialty Gas  1,189  4.40  37.06  62.94  Acetylene  1.523  5.64  100.00  – Welding Products  989  3.66  98.79  1.21  Liquid Oxygen  500  1.85  70.70  29.30  Other Products  463  1.71  21.86  78.14  Toteil  8,512  * 31.52  68.63  31.37  Sub-contracted Services  Piping Works  35  0.13  100.00  – Total  35  0.13  100.00  – TOTAL PURCHASES  27,008  100.00  80.11  19.89
Note:­* Does not add up due to rounding. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’dj The purchases made by us for the 4-month FPE 30 April 2010 are as follows:­
Calcium Carbide Electricity Liquid Argon Liquid Carbon Dioxide Acetone Total Purchases of Finished Products  Refrigerants  1,799  20.23  61.06  38.94  Acetylene  22  0.25  100.00  0
Specialty Gas Welding Products Liquid Oxygen liquid Nitrogen Other Products Total TOTAL PURCHASES 1,680 1,154 1,191 989 145 5,159 463 565 370 203 310 3,732
8,891
Percentage 18.90 12.98 13.40 11.12 1.63 58.03 5.21 6.35 4.16 2.28 3.49 41.97
100.00
100.00 100.00 44.95 99.78 100.00 87.25 36.70 100.00 61.75 36.57 8.18 58.53
75.20
0 0 55.05 0.22 0 12.75 63.30 38.25 63.43 91.82 41.47
24.80
Note:­* Does not add up due to rounding. The main raw material for the production of oxygen and nitrogen is air, which is available free of charge. Calcium carbide is the main raw material used in producing Acetylene. Between the FYE 31 December 2005 to FYE 31 December 2009, the average price of the calcium carbide that we purchased increased by approximately 46%. During the FPE 30 April 2010, the average price of the calcium carbide that we purchased decreased by approximately 10% compared to the average purchase price during FYE 31 December 2009. The other main component of is electricity. The average price of the electricity fluctuate not more than 10% from year to year between the FYE 31 December 2005 to FYE 31 December 2008. However, during the FYE 31 December 2009, the average price of the electricity increased by approximately 22% compared to the average purchase price during FYE 31 December 2008. 4. INFORMATION ON OUR GROUP (Cont’d) Southern Industrial Gas purchased the following from its suppliers in Singapore:­(a)  Refrigerant products from Sing Swee Bee Enterprise Pte Ltd;  (b)  Liquid oxygen, liquid Argon, liquid carbon dioxide and Specialty Gases from SSB  Cryogenic Equipment Pte Ltd; and  (c)  Specialty Gases from Chem-Gas Pte Ltd.
The rationale for purchasing the abovementioned products from the suppliers who are based in Singapore are mainly due to:­(i) support our Group’s operations in Senai, Johor particularly in logistics sense, Le. after taking into consideration of delivery efficiency in terms of distance and timing which could translates into savings in transportation cost by approximately 36% as compared to purchases being made from other alternative local suppliers in Klang Valley. Southern Industrial Gas does purchase from other local suppliers in Klang Valley to support our Group’s operations in Klang Valley, Malacca and Penang;
(ii) other suppliers may not be able to meet our Group’s requirements in terms of quantity and demand due to their limited capacities; and

(iii) certain types of Specialty Gases such as helium, purified helium, helium balloon gas and ethylene oxide are not produced locally. In addition, some local petrol chemical manufacturers produced certain types of Specialty Gases such as propane and ethylene for their own internal use only. As such, the abovementioned Specialty Gases were imported from Singapore in order to meet the demand of our Group’s customers. Further details on Sing Swee Bee Enterprise Pte Ltd and SSB Cryogenic Equipment Pte Ltd are set out in Section 7.1.1 of the Prospectus. 4.6.3 Sales and Marketing 4.6.3.1 Marketing Strategies Our marketing strategy is to position our Group as a supplier of high quality industrial gases. We operate our own ASU and produce high purity liquid oxygen and liquid nitrogen. We also complement our own manufactured gases with those produced by third-parties. This enables us to maximise from our customer base and distribution network to sell a wide range of industrial gases to increase our revenue stream. We also position ourselves as a one-stop supplier for oxy-Acetylene welding needs, as we supply welding equipment and consumables in addition to oxygen and Acetylene to our customers. To support our marketing strategy, as at LPD, we have 21 Sales and Marketing personnel focused on new business development and servicing existing customers. 4. INFORMATION ON OUR GROUP (Cont’d) 4.6.3.2 Distribution Channel Strategy Our distribution channel strategy comprises both direct and indirect distribution as follows:­End-Users
Our distribution strategy enables us to maximise our profit margin by selling directly to large end-users and maximise market coverage by using intermediaries. We sell our industrial gases directly to customers in the following industries:­(i)  Shipbuilding;  (ii)  Metal fabrication;  (iii)  Manufacture of machinery and equipment;  (iv)  Iron and steel industry;  (v)  Chemical;  (vi)  Healthcare; and  (vii)  Others.
We also sell our industrial gases to intermediaries as follows:­(i) Dealers, who sell to end-users without further processing;
(ii) Refillers, who buy gases in bulk liquid or gaseous form and refill them into cylinders for resale to dealers and end-users; and

(iii) Other operators including manufacturers for use in manufacturing Gas Mixtures. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cant’d) The number of dealers, refillers and other operators of our Group via our indirect distribution channel and their respective locations are as set out below:­FPE 30 April 2010  Indirect Distribution Channel  No. of Dealers  No. of Refillers  No. of Other Operators  Total  Central Region Southem Region Northem Region  26 27 13  -2 — 3 5 1 – 29 34 14  Total  66  2  9  77
Our Group’s revenue contribution segmented by end user industries via our direct and indirect distribution channels for the 4-month FPE 30 April 2010 is as follows:­Revenue for the FPE 30 April 2010 Direct Distribution Channel Indirect Distribution Channel Constructio Total for nand Total for Direct Indirect “10 of Fabrication Engineering Distribution Other Distribution Total Shipbuilding Refrigerant Works Channel Dealers Operators Channel Total Revenue Region Work Others* Refillers (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) (RM’OOO) IIRM’OOORM’OOO Central Region 3,572972 740 479 2,710 4,93~ 48.1533 -_~ 4,008f— 8,943—-~ -Southern Region ___§l~ __ 782 ____2,240 _~845 __ 36.851,608 351 949 4,605 1,778 462 Northern Region 327 134 305 169 529 1,464 1,056 31 13.73___.-h~~ 2,551 Sabah —._—-­’–­—_~_———-f—­1—-..: ——­Singapore —-15 15–102 102 117 0.63-..————­-Indonesia 119 119 0.64- -119 Total 1,968 2,021 1,827 999 4,203 11,018 6,406 493 657 7,556 18,575 100.00 % of Total Revenue 10.59 10.88 9.84 5.38 22.63 59.32 34.49 2.65 3.54 40.68 100.00
Note:­* Others comprising of metal stamping, electrical and electronics, steel mills / stainless steel, scrap metal, oil and gas, automotive, laboratory, furniture, hit treatment, medical, chemical, foods, ice manufacture and rubber / plantation. We generally sell our products directly to larger end-users who purchase large quantities of industrial gases and to end-users that are located close to our various facilities. We generally utilise the indirect distribution strategy of selling our products through intermediaries to serve end-users who are located far from our various facilities as well as to serve customers who normally purchase smaller quantities of industrial gases. 4.6.4 Intellectual Property We do not own any brand names, patents, trademarks, technical assistance agreements, franchises and other intellectual property rights. 4. INFORMATION ON OUR GROUP (Cont’d) 4.6.5 Principal Markets Our revenue contribution segmented by geographic markets for the FYE 31 December 2009 and the 4-month FPE 30 April 2010 is as follows:­Revenue for the 4­ Revenue for the FYE  month FPE 30 April  31 December 2009 RM’OOO  2010 RM’OOO

32.39Selan or 17,677 6,250 33.65 Johor 19,288 35.35 5,863 31.56 Pahan 4,998 9.16 1,633 8.79 Penan 6.193,380 1,461 7.87 Malacca 2,576 4.72 983 5.29 Ne eri Sembilan 1,423 2.61 408 2.20 1,191 2.18 414 2.23 Perak 871 1.60 1.53 Kuala Lum ur 285 1,335 3.50 Kedah 2.45 651 791 1.45 2.01 Kelantan 373 18 0.10 Sabah Sub-Total 1 18,33953,531 98.10 98.73 Overseas SinQapore 117750 1.37 0.63 Indonesia 119287 0.53 0.64 Sub-Total 1,037 236 1.27 TOTAL 54,568 100.00 18,575 100.00 1.90 The Malaysian market accounted for 98.10% and 98.73% of our total revenue for the FYE 31 December 2009 and 4-month FPE 30 April 2010 respectively. We served customers in 12 states and federal territory in Malaysia. Our largest markets in Malaysia were Selangor and Johor, which accounted for 32.39% and 35.35% respectively of our total revenue for the FYE 31 December 2009. During the 4-month FPE 30 April 2010, Selangor and Johor accounted for 33.65% and 31.56% respectively of our total revenue. Our sole overseas market for the FYE 31 December 2009 was Singapore and Indonesia, which accounted for 1.37% and 0.53% respectively of our total revenue. For the 4-month FPE 30 April 2010, our overseas markets were Singapore and Indonesia, which accounted for 0.63% and 0.64% respectively of our total revenue. 4. INFORMATION ON OUR GROUP (Cont’d) 4.6.6 Seasonal or Cyclical Effect We do not experience any material seasonality in our business as our business operations are relatively stable throughout the year with the exception of a minor slowdown in business activity during the principal festive seasons at the beginning and end of each calendar year. 4.6.7 Major Customers Our Group has more than 1,000 customers, nevertheless, none of our customers individually contributed to 10% or more of our total revenue for any of the past three (3) FYE 31 December 2007 to FYE 31 December 2009 and for the 4-month FPE 30 April 2010. 4.6.8 Major Suppliers The value of purchases from our suppliers that accounted for more than 10% of our total purchases for the past three (3) FYE 31 December 2007 to FYE 31 December 2009 and 4­month FPE 30 April 2010 are as follows:­Supplier Name  Principle Activities  Length of Relationship  Purchases  FYE 31.12.2007  FYE 31.12.2008  FYE 31.12.2009  FPE 30.04.2010  (RM ‘000)  (%)  (RM ‘000)  (%)  (RM ‘000)  (%)  (RM ‘000)  (%)  Magnalium Sdn Bhd  Manufacturing and trading of calcium carbide, and dissolved Acetylene  7  3,308  14.08  3,866  13.62  5,179  18.52  1,277  14.36  Tenaga Nasional Berhad  Supply of electricity  14  4,902  20.87  5,589  19.69  4,530  16.20  1,154  12.98  MOX-Linde Gases Sdn Bhd  Gas manufacturer  7  – – 3,334  11.74  3,417  12.22  1,051  11.82  SSB Cryogenic Equipment Pte Ltd  Importers, exporters and traders of cryogenic tanks, equipment, accessories and cryogenic  13  2,705  11.52  3,215  11.32  3,301  11.80  1,179  13.26  Sing Swee Bee Enterprise Pte Ltd”  Importers, exporters, distributors and wholesalers of industrial, medical, specialty and other types of gases, Refrigerants, gas cylinders, fire fighting equipment, welding and cutting equipment and accessories  13  2,027  8.63  2,782  9.80  2,709  9.69  1,268  14.26  MCB Industries Sdn Bhd  Manufacturing and trading of calcium carbide, and dissolved Acetylene  8  127  0.54  3,092  10.89  2,636  9.43  426  4.79  Total Group Purchases  23,493  28,390  27,968  8,891
4. INFORMATION ON OUR GROUP (Cont’dj Note: Inclusive of other purchases and purchase of plant, property and equipment. Further details on Sing Swee Bee Enterprise Pte Ltd are set out in Section 7.1.1 of this Prospectus. In addition to the above, Cryomaster Sdn Bhd, Teknogas (M) Sdn Bhd, Chem-Gas Pte Ltd and Air Products Malaysia Sdn Bhd are some of our other suppliers for calcium carbide, liquid gases and Specialty Gases. Mitigating factors against dependency on our suppliers Our business may be dependent on the following suppliers by virtue of their contribution towards our purchases for the FYE 31 December 2009:­(i) Magnalium Sdn Bhd, which accounted for 18.52% of our purchases;
(ii) Tenaga Nasional Berhad, which accounted for 16.20% of our purchases;

(iii) MOX-Linde Gases Sdn Bhd, which accounted for 12.22% of our purchases; (iv) SSB Cryogenic Equipment Pte Ltd of Singapore, which accounted for 11.80% of our purchases;
(v) Sing Swee Bee Enterprise Pte Ltd, which accounted for 9.69% of our purchases; and
(vi) MCB Industries Sdn Bhd, which accounted for 9.43% of our purchases. Some of our mitigating factors against over-dependency on suppliers are as follows:­
(i) Magnalium Sdn Bhd
(a) We are a producer of Acetylene and as a result is not dependent on Magnalium Sdn Bhd for the supply of Acetylene.
(b) We purchased calcium carbide from one other supplier from among our top 20 suppliers during the FYE 31 December 2009, indicating that we have alternative source of supply.
(c) Magnalium Sdn Bhd has been our supplier for 7 years, indicating a long-term and stable business relationship. This will provide the basis for a continuing business relationship.

 

(ii) Tenaga Nasional Berhad

Tenaga Nasional Berhad is the monopoly supplier of electricity to end-users in Malaysia. As a result, we have no practical alternative other than to purchase electricity from Tenaga Nasional Berhad. This dependency applies to most companies in Peninsular Malaysia. (iii) MOX-Linde Gases Sdn Bhd (a) We are a producer of liquid nitrogen and liquid oxygen and as a result is not dependent on MOX-Linde Gases Sdn Bhd for the supply of these liquid gases.
(b) We purchased liquid gases from one other supplier from among our top 20 suppliers during the FYE 31 December 2009, indicating that we have alternative source of supply.
(c) MOX-Linde Gases Sdn Bhd has been our supplier for 7 years, indicating a long-term and stable business relationship. This will provide the basis for a continuing business relationship.

4. INFORMATION ON OUR GROUP (Cont’d) (iv) SSB Cryogenic Equipment Pte Ltd
(a) We purchased speciality gases from 4 other suppliers from among our top 20 suppliers during the FYE 31 December 2009, indicating that we have alternative source of supply.
(b) SSB Cryogenic Equipment Pte Ltd has been our supplier for 13 years, indicating a long-term and stable business relationship. This will provide the basis for a continuing business relationship.

 

(v) Sing Swee Bee Enterprise Pte Ltd
(a) We purchased Refrigerants from two (2) other suppliers from among our top 20 suppliers during the FYE 31 December 2009, indicating that we have alternative source of supply.
(b) We purchased cylinders and valves from Sing Swee Bee Enterprise Pte Ltd. Sing Swee Bee Enterprise Pte Ltd has been our supplier for 13 years, indicating a long-term and stable business relationship. This will provide the basis for a continuing business relationship. Please refer to Section 7.1.1 and Section 7.4 (i) for further details.

 

(vi) MCB Industries Sdn Bhd
(a) We purchased calcium carbide from one other supplier from among our top 20 suppliers during the FYE 31 December 2009, indicating that we have alternative source of supply.
(b) MCB Industries Sdn Bhd has been our supplier for 8 years, indicating a long­term and stable business relationship. This will provide the basis for a continuing business relationship.

 

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4. INFORMATION ON OUR GROUP (Cont’d) 4.6.9 Material Plant, Machinery and Equipment Our material plant, machinery and equipment are as follows:­Plant I Machinery I Equipment Air separation plant unit Dissolved Acetylene and refilling plant Fuming Gas plant Refilling gas plant liqUid storage tanks ISO tanks Cylinders and portable liquid containers I ‘liquid gas containers Gas Chromatograph Long tube Total  Description Produce oxygen and nitrogen liquid liquid Produce and refilling of Acetylene gas Produce Fuming Gas Refilling of oxygen, nitrogen, Argon and carbon dioxide Liquid storage Storage and transport liquid Gas and containers liquid Analyser for gas purity Store and transport compressed hydrogen  No. of units 1 2 1 15 25 3 98,602 1 2  Audited NBV as at 30 April 2010 (RM’OOO) 9,535 3,173 668 1,821 3,684 716 29,976 198 729 50,500
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’d) 4.6.10 Material Capital Expenditures and Divestures Save as disclosed below, we did not incur any other material capital expenditures and divestitures for the past 3 years up to the LPD:­Transaction value (RM’OOO) <—–FYE 31 December —-> 1 January 2010 upto the LPD (1)Description 2007 2008 2009 (;!!2,197Freehold land 44–(J!682Leasehold Land —(;!!5,783tJ!1,555Factory buildings 9 82 (;!!2,462Dissolved Acetylene and refilling plant 20—Fuming Gas plant 661 22-Liquid storage tanks 74 670 214-Refilling gas plant 141 451 40 15 ISO tanks 397 —Cylinders and portable liquid 2,042 5,447 4,013 3,074 . containers/liquid gas containers (4) Long tube –468 308 Gas Chromatograph 235 1–Total 2,874 10,356 14,142 3,735 Notes:­(1) The capital expenditures are financed by a combination of internally generated funds and bank borrowings.
(2) Our freehold land and single storey detached office and factory located at Lot 10688, Ja/an Permata 1/4, Kawasan, Perindustrian Arab Malaysian, Mukim, Setul Daerah Seremban (Please refer to item no. (5) in Section 4.6.12 of this Prospectus for further details). The construction of our Nilai plant was completed in September 2009 and we started operations in December 2009 for the manufacturing ofAcetylene gas.
(3) Leasehold land and building located at Plot 235, Taman Perindustrian Bukit, Minyak, Penang. Please refer to item no. (3) in Section 4.6.12 of this Prospectus for further details.
4. INFORMATION ON OUR GROUP (Cont’d)
(4) The units of cylinders and portable liquid containers purchase for the past 3 years up to LPD are as below:

FYE2007 (Units)  FYE200B (Units)  FYE2009 (Units)  1 January 2010 up to theLPD (Units)  Cylinders Portable liquid containers  2,735 10  10,648 10  7,616 20  5,983 15
4.6.11  Material Plans to Construct, Expand or Improve Facilities  As at the LPD, we have no immediate plans to construct, expand or improve on existing facilities, saved as disclosed in Sections 2.8 and 4.8 of this Prospectus.  4.6.12  Properties  As at the LPD, we own the following properties:­
No.  Location  Descriptionl Existing Use  Approximate Approximate Age of Land Areal Buildingl Built-up Area Tenure  Audited NBVas at 30 April 2010 Encumb (RM’OOO) ranees  1.  PLO 137, Kawasan Double storey detached office and factoryl 14,516 12 yearsl Perindustrian Senai III, 81400 Manufacturing of liquid oxygen, liquid square meterl 60 years Senai, Johor nitrogen and Acetylene gas, and refilling of 4,359 square lease expiring industrial gas such as oxygen, nitrogen, meter on Argon, carbon dioxide and Gas Mixture 13.02.2060  4,817 Charged to RHB Bank Bhd  2.  No. 17, Jalan BP 4/1, Bandar Double storey detached office and refilling Bukit Puchong, 47100 planU Puchong, Selangor Refilling of industrial gases such as oxygen, nitrogen, Argon, carbon dioxide and Gas Mixture  4,679 square 9 yearsl meterl Freehold 1,427 square meter  3,164 Charged to RHB Bank Bhd  3.  Plot 235, Taman Perindustrian Single storey detached office and refilling Bukit Minyak, Penang planU Refilling of industrial gases such as oxygen and carbon dioxide  5,192 square 1.5 yearsl meterl 60 years 943 square lease expiring meter on 08.08.2067  2,235 Charged to OCBC Bank (M) Bhd  4.  Lot 6215 and Lot 6216, Office cabin and refilling planU Krubong Industrial Park, Refilling of industrial gases 75250 Mukim Krubong, oxygen and carbon dioxide Malacca  such  as  1,904 square 5.5 yearsl meterl Freehold 149 square meter  307 Nil  5.  GRN 128880, Lot 10688, Single storey detached office and factoryl Jalan Permata % (previously Manufacturing of dissolved Acetylene gas known as Lot 114 HS(D) and Fuming Gas 110941, PT 16767), Kawasan Perindustrian Arab Malaysian, Mukim Setul Daerah Seremban, Negeri Sembilan  12,536 2 monthsl square meterl Freehold 1,977 square meter  7,873  Charged to RHB Bank Bhd  Total  18,396
There is no valuation undertaken on the properties of our Group as tabulated above pursuant to the listing exercise. 4. INFORMATION ON OUR GROUP (Cant’d) The Directors of our Company have confirmed that:­(i)  There are no other restrictions in interest or encumbrances;  (ii)  The eXisting use on all land is in accordance with land use conditions! permissible  land use;  (iii)  The buildings are in compliance with relevant land use and building regulations;  (iv)  The bUildings are in compliance with the express conditions attached; and  (v)  All the buildings have been issued with a Certificate of Fitness.
As at the LPD, we are the tenant of the following property:­Location No.1, Jalan 1M 14/8, Kawasan Perindustrian Ringan Sektor, Bandar Indera Mahkota, 25200 Kuantan, Pahang Note:-Descriptionl Existing Use Single storey semi-detached factory and refilling plant! Refilling of industrial gases such as oxygen Approximate Approximate  Annual  Land Areal Age of  Rental  Built-up Buildingl  (RM)  Area Tenure  Duration  1,799 square 6 years/  01.06.2010  31,200  meterl 99 years lease  to  354 square expiring on  31.05.2011  meter 9.3.2103
On 19 July 2007, Southern Industrial Gas has entered into a tenancy agreement with Saujana Perkasa Construction (Pahang) Sdn Bhd for the rental of the abovementioned property. Subsequently, Saujana Perkasa Construction (Pahang) Sdn Bhd has sold the abovementioned property to Um Jiew Yang and Um Ming Haur. Pursuant to this change of ownership of the abovementioned property, Southern Industrial Gas has entered into a new tenancy agreement with Um Jiew Yang and Um Ming Haur on 1 June 2010 for a term of 1 year commencing on 1 June 2010 and expiring on 31 May 2011. As at the LPD, there is no regulatory requirement or environmental issue, which may materially affect our Group’s operations and utilisation of assets. 4.6.13 APPROVALS, MAJOR LICENCES AND PERMITS OBTAINED The following are the approvals, major licences and permits issued to companies in our Group in order for us to carry out our operations, other than those pertaining to general business registration requirements:­Date of  Date of  Authority  Issuance  Expiry  MIDA and MITI  04.07.2008  –
Description Manufacturing Licence Licence No.-A 016842  Serial No.­028725  A  Product Refilling  -of
industrial gases such as oxygen, nitrogen, carbon dioxide, Argon and Acetylene Status of  Compliance  (Metl Not Metl Will  Major Conditions Imposed  Be Met)  MITI  (a)  Site:  Lot  114,  HS(D)  Met  110941, PT 16767 (now  known as GRN 128880,  Lot  10688,  Jalan  Pennata  ~),  Arab- Malaysian  Industrial  Park  Nilai  Negeri  Sembilan Darul Khusus  is  subject  to  approval  from the relevant State  Government  and  Department  of  Environment.
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expirv  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares. (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position. (d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia. MIDA (a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. Should there be a change in the company’s Registered Address (Form 44), the company is required to inform MIDA in writing concerning the same. (b) This project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licensing Officer.  Met Met Met Met Met
4. INFORMATION ON OUR GROUP (Cant’d) Authority  Date of Issuance  Date of Expiry  DescriDtion  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (c) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors. (d) For local sale, the company should, as much as possible, employ services endeavoured by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputera distributors. (e) This approval is subject to the provisions stated in the Industrial Co-Ordination Act, 1975 and any violation of conditions could result in the withdrawal of this Manufacturing Licence. (f) If the company decides to expand the capacity of its production or to diversify its products, the company is required to obtain approval from the Licensing Officer (Chief Secretary, MITI) by submitting applications using the relevant forms accessible vide MIDA’s website (www.mida.gov.my)  Met Will bernet. This condition has not·been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises. Met Not applicable. Southern Industrial Gas has not expanded the capacity of its production or diversified its products. Southern Industrial Gas will obtain approval from the Licensing Officer if the company decides to expand the capacity of its production or to diversify its products
4. INFORMATION ON OUR GROUP (Cont’d) Date of  Date of  Authoritv  Issuance  Expiry  MIDA and MITI  17.03.2009  –
Description Major Conditions Imposed Manufacturing MITI Licence (a) Site: Lot 114, HS(D) Licence No.-A 110941, PT 16767, 016842 Arab-Malaysian Industrial Park, Nilai, Serial No.-A Negeri Sembilan DaNI 029351 Khusus is subject to approval from the Product ­relevant State Refilling of Government and Fuming Gas Department of Environment. (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-Up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.
(c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.
(d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.

Status of Compliance
(Met! Not Met! Will Be Met) Met Met Met Met 4. INFORMATION ON OUR GROUP (Cont’d) 4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Maior Conditions Imposed (a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. Should there be a change in the company’s Registered Address (Form 44), the company is required to inform MIDA in writing concerning the same. (b) This project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licensing Officer. (c) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors. (d) For local sale, the company should, as much as possible, employ services endeavoured by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputera distributors.  Status of Compliance (Met! Not Met! Will Be Met) Met Met Met Will be met. This condition has not been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises.
Authoritv  Date of Issuance  Date of Expiry  Description  MIDA and MITI  04.12.1996  Manufacturing Licence Licence No.-A 010685 Serial No.­A 016258 Product -Carbon dioxide, Acetylene, oxygen, Argon & nitrogen
Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (e) This approval is subject to the provisions stated in the Industrial Co-Ordination Act. 1975 and any violation of conditions could result in the withdrawal of this Manufacturing Licence.  Met  If) If the company decides to expand the capacity of its production or to diversify its products, the company is required to obtain approval from the Licensing Officer {Chief Secretary, MITI by submitting applications using the relevant forms accessible vide MIDA’s website (www.mida.qov.my)  N/A. Southern Industrial Gas has not expanded the capacity of its production or diversified its products. Southern Industrial Gas will obtain approval from the Licensing Officer if the company decides to expand the capacity of its production or to diversify its products.  MITI  (a) Site: PLO 137, Kawasan Perindustrian Senai III 81400 Senai Johor Darul Ta’zim is subject to approval from the relevant State Government and Department of Environment.  Met  (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met  (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.  Met
4. . INFORMATION ON OUR GROUP (Cont’d) DescriptionAuthoritv  Date of Issuance  Date of Expiry
MIDA and MITI  12.06.2001  –

Manufacturing Licence Licence No.-A 010685  Serial No.­020055  A  Product Mixed gas  –
Majo r Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (d)  This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.  Met  MITI  (a)  Site: PLO 137, Kawasan Perindustrian Senai III, 81400 Senai, Johor Darul Ta’zim is subject to approval from the relevant State Government and Department of Environment.  Met  (b)  At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met  (c)  This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.  Met  (d)  This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.  Met
4. INFORMATION ON OUR GROUP (Cont’dj Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  MIDA and MITI  11.12.2003  — Manufacturing Licence Licence No.-A 010685 Serial No.­A 021987 Product -Liquid oxygen and liquid nitrogen  MITI (a) Site: PLO 137, Kawasan Perindustrian Senai III, 81400 Senai Johor Darul Ta’zim is subject to approval from the relevant State Government and Department of Environment. (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares. (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position. (d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.  Met Met Met Met
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  MIDA (a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. (b) This project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licensing Officer. (c) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors. (d) For local sale, the company should, as much as possible, employ services endeavouied by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputera distributors.
Status of Compliance (Met! Not Met! Will Be Met)
Met Met Met Will bernet. This condition has not been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises 86
4. INFORMATION ON OUR GROUP (Cont’d) Description Date of  Date of  Authority  Issuance  Expiry  Licence
MIDA and MITI  26.08.2000  – 012730  Serial 024693  Product Mixed gas
Manufacturing Licence No.-A No.-A -Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Metl  (e) The company is required to issue a report to MIDA vide forms attached herewith on the developments that were achieved subsequent to the execution of this project, 6 months from the date of issuance of this licence.  Met  (f) This approval is subject to the provisions stated in the Industrial Co-Ordination Act, 1975 and any violation of conditions could result in the withdrawal of this Manufacturing Licence.  Met  MITI (Attachment A4)  (a) Site: No. 17, Jalan BP 4/1, Bandar Bukit Puchong, 47100 Puchong, Selangor Darul Ehsan is subject to approval from the relevant State Government and Department of Environment.  Met  (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met  (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.  Met
4. INFORMATION ON OUR GROUP (Conf’dj 4. INFORMATION ON OUR GROUP (Conf’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia. MIDA (a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. Should there be a change in the company’s Registered Address (Form 44), the company is required to inform MIDA in writing concerning the same. (b) Please be informed that this is an approval for projects only. All applications to seek tariff protection and exemption from customs duties for manufacturing purposes should be done separately. (c) This company is advised to negotiate with Tenaga Nasional Berhad concerning the need for electricity supply, particularly on the level of power quality and high level of system viability. This will ensure a supply of electricity suitable for the company’s manufacturing activity.  Met Met Met Met
Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed (d) This company is also advised to inform the Water Supply Department (Jabatan Bekalan Air) and Telekom Malaysia Bhd, concerning the need of water and telecommunication facilities as soon as possible. Corresponding letters must be made available to MIDA for monitoring purposes. (e) The company is required to issue a report to MIDA and MITI vide forms attached herewith on the developments that were achieved subsequent to the execution of this project, 6 months from the date of issuance of this licence.  Status of Compliance (Metl Not Metl Will Be Met) Met Met  MIDA and MITI  31.10.2006  – Manufacturing Licence Licence No.-A 012730 Serial No.­A 024714 Product -Refilling of industrial gases such as oxygen, nitrogen, carbon dioxide and Argon.  MITI (a) Site: No. 17, Jalan BP 4/1, Bandar Bukit Puchong, 47100 Puchong, Selangor Darul Ehsan is subject to approval from the relevant State Government and Department of Environment. (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met Met
4. INFORMATION ON OUR GROUP (Conf’d) 4. INFORMATION ON OUR GR:0UP (Cont’d) Authoritv  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position. (d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia. MIDA  Met Met
(a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. Should there be a change in the company’s Registered Address (Form 44), the company is required to inform the Malaysian Industrial Development Authority (MIDA) in writing concerning the same. (b) This project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licence Officer.  Met Met

Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (c) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors. (d) For local sale, the company should, as much as possible, employ services endeavoured by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputra distributors. (e) This approval is subject to the provisions stated in the Industrial Co-Ordination Act, 1975 and any violation of conditions could result in the withdrawal of this Manufacturing Licence. (f) If the company decides to expand the capacity of its production or to diversify its products, the company is required to obtain approval from the Licence Officer (Chief Secretary, MITI) by . submitting applications using the relevant forms accessible vide the MIDA website (www.mida.qov.my)  Met Will be met. This condition has not been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises. Met Not applicable. Southern Industrial Gas has not expanded the capacity of its production or diversified its products. Southern Industrial Gas will obtain approval from the Licensing Officer if the company decides to expand the capacity of its production or to diversify its products.
4. INFORMATION ON OUR GROUP (Cont’dj Status of Compliance
(Met! Not Met! WillDate of Date of Authority
Issuance Expiry Description MIDA and MITI 31.10.2006 Manufacturing Licence -Licence No.-A 015984 Serial No.-A 024715 Product ­Refilling of industrial gases such as oxygen, nitrogen, carbon dioxide and Argon. Major Conditions Imposed MITI (a) Site: No. 1, Jalan 1M 14/8, Kawasan Perindustrian Ringan Sektor 3, Bandar Indera Mahkota, 25200 Kuantan, Pahang Darul Makmur is subject to approval from the relevant State Government and Department of Environment.
(b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.
(c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.
(d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.

Be Met) Met Met Met Met 4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Maior Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  MIDA  (a) This Licence or a certified true copy is required to be displayed at the factory where the manufacturing activity is conducted. A renewal is not mandatory and is legitimate unless invalidated as stipulated under the Industrial Co-Ordination Act, 1975. Should there be a change in the company’s Registered Address (Form 44), the company is required to inform MIDA in writing concerning the same. (b) This project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licensing Officer. (c) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors.  Met Met Met  (d) For local sale, the company should, as much as possible, employ. services endeavoured by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputera distributors.  Will be met. This condition has not been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises.
93
4. INFORMATION ON OUR GROUP (Cont’dj Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed (e) This approval is subject to the provisions stated in the Industrial Co-Ordination Act, 1975· and any violation of conditions could result in the withdrawal of this Manufacturing Licence.  Status of Compliance (Metl Not Metl Will Be Met) Met  (f}  If the company decides to expand the capacity of its production or to diversify its products, the company is required to obtain approval from the Licensing Officer (Chief Secretary, MITt) by submitting applications using the relevant forms accessible vide MIDA’s website (www.mida.qov.my)  Not applicable. Southern Industrial Gas has not expanded the capacity of its production or diversified its products. Southern Industrial Gas will obtain approval from the Licensing Officer if the company decides to expand the capacity of its production or to diversify its products.  MIDA and MITI  31.10.2006  ManufactUring Licence Licence No.-A 016091 Serial No.­A 024883 Product -Refilling of industrial gases such as oxygen, nitrogen, carbon dioxide and Argon.  MITI (a) Site: PT 1984 & 1985, Krubong Industrial Park, 75250 Mukim Krubong, Malacca is subject to approval from the relevant State Government and Department of Environment.  Met  (b)  At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met
4. INFORMATION ON OUR GROUP (Cont’dj Description Date of  Date of  Authority  Issuance  Expiry
MIDA  14.07.2008  –
Manufacturing Licence Licence No.-A 017096  Serial No.­029122  A  Product Refilling  -of
industrial gases such as oxygen, nitrogen, carbon dioxide and Argon. Maior Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (c) This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.  Met  (d) This company is required to carry out the project as approved and in oompliance with the laws and other rules and regulations enacted in Malaysia.  Met  MIDA  (a) Site: Plot 235, Jalan  Met  Perindustrian Bukit  Minyak 7, Kawasan  Perindustrian Bukit  Minyak 13, Seberang  Perai, Pulau Pinang is  subject to approval  from the relevant State  Government and  Department of  Environment.  (b) At least 70% of the shares amounting to RM14.3 million are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Equity conditions are also not imposed on additional paid-up capital amounting to RM8.7 million. Approval of MITI must be obtained for the sale of the company’s shares.  Met  (cl This company is required to train the Malaysian public so that the transfer of technology and expertise may be channelled to all levels of position.  Met
4. INFORMATION ON OUR GROUP (Cant’d) DescriptionAuthority  Date of Issuance  Date of Expiry
MITI  10.11.2008  – MITI  24.06.2008  – MITI  June 2008  – Department of Environment Negeri Sembilan  23.05.2008  –
Letter of approval to transfer shares between foreigners, Bumiputeras and Non-Bumiputeras. Letter of approval to transfer shares from the Malaysian public (Bumiputeras and Non-Bumiputeras) to Bumiputeras. Letter of approval to increase paid-up share capital through issuance of new ordinary shares. Letter of approval for the proposal to construct a factory at Lot 10688, Kawasan Perindustrian Arab Malaysian, Nilai, Negeri Sembilan by Southern Industrial Gas. Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (d) This company is required to carry out the project as approved and in compliance with the laws and other rules and regulations enacted in Malaysia.  Met  This company is required to  Met  inform MITI when the  transaction of shares has  been completed.  This company is required to  Met  inform MITI when the  transaction of shares has  been completed.  None stated  N/A  This department only recognizes the usage of land for the following products:­(a) Compressed Oxygen­144,000 m3 (b) Compressed Nitrogen -144,000 m3 (c) Compressed Argon­144,000 m3 (d) Compresses Carbon Dioxide-200,000 kg (e) Acetylene -73,000 m 3 Any other manufacturing activity is forbidden altogether; 2.2 All effluent from the premise must be a hundred percent (100%) recycled in the premise. No effluent is allowed to be released from this premise;  Met Met
96
4. INFORMATION ON OUR GROUP (Conf’dj Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  2.3 A written approval from this Department must be obtained by an accredited negotiator prior to the construction of effluent treatment plant/system; 2.4 The release of untreated sewage and sullage waste water is forbidden altogether; 2.5 A written approval from the Negeri Sembilan Department of Environment must be obtained prior to the installation of fuel burning equipment or chimney. as stipulated under the Regulations of Environmental Quality (Clean Air). 1978; 2.6 Any gas emissions into the air and impurities must be controlled to comply with the Standard C. Regulations of Environmental Quality (Clean Air) 1978; 2.7 Waste which falls within the category of waste listed in the First Schedule of the Regulations of Environmental Quality (Scheduled Waste) 2005 must be managed in accordance to methods stated in the regulations;  Met Met Not applicable. Southern Industrial Gas does not install fuel burning equipment or chimney. Met Met  2.8 Fort should be built around the liquid fuel (diesel. lubricant etc) storage compartment and it should be able to accommodate at least 110% of the entire volume of the storage compartment  Met
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of EXDirv  Description  Maior Conditions Imposed  Status of Compliance (MetJ Not Met! Will Be Met)  – 2.9 Storage facilities for scheduled waste and chemicals should have roofs, concrete floors and be acid-and waterproof. Open storage is forbidden altogether; 2.10 Solid waste that is not scheduled in the Regulations of Environmental Quality (Scheduled Waste) 1989 shall be disposed of in landfills approved by the relevant state! local authorities; 2.11 Open burning of any waste from inside or outside of the premise is forbidden altogether as stated under Section 29A (Amendment) 1998, of the Environmental Quality Act; 2.12 Emergency Response Plan (“ERP”) to face any accidents, emergencies and unexpected incidents for “on-site” should be prepared three (3) months prior to operation of the premise. is to be made available after consultation with the Malaysian Department of Fire and Rescue Service, the Royal Malaysia Police Department, the Department of Occupational Safety and Health and the Local Authority. Plans shall be submitted to the Negeri Sembilan Department of Environment and updated from time to time according to the requirements;  Met Met Met Met
98 4. INFORMATION ON OUR GROUP (Cant’d) 4. INFORMATION ON OUR GROUP (Cont’d) Authoritv  Date of Issuance  Date of Expiry  Descri ption  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  – 2.13 Level of noise in the border area of the premise shall be controlled so as not to exceed the level of 60 dBA at night and 70 dBA in the morning as stipulated in the First Schedule, Annex A, Planning Guidelines For Environm ental Noise Limits and Control issued by the Department of Environment; 2.14 Factories should employ the ‘Best Practicable Means’ to prevent and control hazardous emissions as-required under Regulation 32 of the Regulations of Environmental Quality (Clean Air), 1978; 2.15 An approval from this Department must be obtained prior to any addition or change to the quantity! type of activity in the premise; 2.16 “Good House Keeping” should be practiced in the factory premise at all times; 2.17 Ensure the operation of this premise does not result in any pollution or disturbance to the residents surrounding this premise; and 2.18 Comply with the Department of Environment instructions from time to time.  Met Met Met Met Met Met  MITI  15.05.2007  – Letter of approval for the allotment of shares owned by Bumiputras  This company is required to inform MITI when the transaction of shares has been completed.  Met
Authority  Date of Issuance  Date of Expiry  Description  Maior Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  Penang Department of Environment  03.10.2006  – Letter of approval for appropriation of industrial land (Southern Industrial Gas Plot 235, Taman Perindustrian Bukit Minyak)  Factory Name: Southern Industrial Gas Site: Plot 235, Taman Perindustrian, Bukit Minyak, Mukim 13, Bukit Mertajam, Pulau Pinang. Type of Industries Permitted (c) Industrial activity permitted on this site is restricted to “refilling of oxygen, nitrogen, carbon dioxide and Argon”. Air Pollution Control (b) Air pollution control devices such as scrubber, dust collector and spray booth etc must be installed at the part which produces air pollution. Approval from this Department must be obtained prior to the installation of these control devices. (c) Any gas emissions into the air and impurities must be controlled to comply with standards set under the Regulations of Environmental Quality (Clean Air) 1978. An approval from this Department must be obtained prior to the installation of chimney through which air impurities are emitted or discharged. (d) Installation of fuel burning equipment such as boiler, burner and furnace etc is forbidden except for the installation of a generator. A written approval must be obtained from this Department prior to the installation of the generator.  Met Not applicable. The industrial activity of Southern Industrial Gas on this site which consists of refilling of oxygen, nitrogen, carbon dioxide and argon does not result in air pollution. Not applicable. No air impurities are emitted or discharged from the factory. Met
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Met/ Not Met/Will Be Met)  (e) Open burning of any waste from the factory premise is forbidden altogether. Waste that is not included in the scheduled waste category must be disposed of in landfills approved by the Seberang Perai City Council. (f) Appropriate and effective measures must be undertaken to control noise pollution caused by factory equipment! machinery that emits loud noises. (g) Level of noise in the border area of the premise shall be controlled so as not to exceed the level of 70 dB(A) in the morning (7.00 am -10.00 pm) and 60dB(A) at night (10 pm -7 am). (h) Any amplification and increase in the capacity of the factory or change in process is forbidden unless an approval is first obtained from this Department. Water Pollution Control (i) Processing activity which produces effluent is forbidden on this site. Scheduled Waste Control G) Management of scheduled waste should be in compliance with the requirements of the Environmental Quality Regulations (Scheduled Waste) 2005 as follow:­ Met Met Met Met Met Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon.
4. INFORMATION ON OUR GROUP (Cont’dj 4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Mell  (i) Notification concerning the abovementioned scheduled waste must be presented to the Department of Environment one (1 ) month after the waste is produced, vide fonn in the Second Schedule, Regulation 3 of the Environmental Quality Regulations (Scheduled Waste) 2005. (ii) Scheduled waste is only pennitted to be stored for 180 days or less after its generation with condition that the quantity of scheduled waste accumulated on site does not exceed 20 metric tonnes. Scheduled wastes shall be stored in containers which are compatible with the scheduled wastes to be stored, durable and which are able to prevent spillage or leakage of the scheduled wastes into the environment in accordance to the Third Schedule, Regulations of Environmental Quality (Scheduled Waste) 2005.  Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon. Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon.
Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (iii) The scheduled waste must be clearly labelled according to type as specified in the Third Schedule, Regulations of Environmental Quality (Scheduled Waste) 2005. (iv) Areas for the storage of the containers shall be designed, constructed and maintained adequately to prevent spillage or leakage of scheduled wastes into the environment. (v) The manufacturer shall keep the inventory on scheduled wastes updated and submit an inventory report to this Department once in a month in accordance with the Fifth Schedule, Regulation 11, Environmental Quality Regulations (Scheduled Waste) 2005; (vi) Scheduled waste shall be disposed of at prescribed premises licensed by the Department of Environment only.  Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon. Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon. Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon. Not applicable The factory does not have schedule waste as the industrial activity of Southern Industrial Gas is to refill oxygen, nitrogen, carbon dioxide and Argon.
103 4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (MeU Not MeUWiII Be Met)  General Instructions (k) Fort should be built around fuel storage tanks to control any spills. Fort built must be capable of accommodating at least 110 percent of the largest tank in the fort. Site parking the tanks shall be made from resistant materials such as permeable concrete. Facilities for pumping the spilled material should be provided. Usage of environmentally-hazardous refri gerant materials in any cooling system is prohibited, as stipulated under the Regulations of Environmental Quality (Managing Refrigerants) 1999. (m) The manufacturer is required to appoint a qualified staff to be responsible for matters related to environmental management in the factory premise. (n) “Good Housekeeping Rules” should be practiced in the factory at all times. (0) The manufacturers are fully responsible for controlling pollutions from the factory and complying with the instructions of this Department from time to time.  Not applicable. The factory does not have any fuel storage. Met Met Met Met
104
4. INFORMATION ON OUR GROUP (Cont’d) Date of  Date of  Authoritv  Issuance  Expiry  MITI  29.09.2006  -~
Description Major Conditions Imposed Letter  of  approval  to  confinn  compliance  of  equity  conditions
(a) At least 70% of the shares are required to be purchased and held by the Malaysian public, of which at least 30% shall be made exclusive. Approval of MITI must be obtained for the sale of the company’s shares. Equity conditions are also not imposed on additional paid-up capital amounting to RM6.7 million.
(b) The following are effective equity conditions which must be complied with after. taking into consideration the additional capital:­
(i) The original paid-up share capital: RM9,185,OOO.00 at par value of RM1.00 per share.
(ii) The current paid-up share capital has been increased from RM9,815.000.00 to RM19,800,000.0 ovia:­

 

• Additional paid-up share capital of RM6.7mil executed in two stages involving RM3,000,00 0.00 (first stage) and RM3,685,OO 0.00 (second stage). Status of Compliance
(Metl Not Metl Will Be Met) Met Met 105
4. INFORMATION ON OUR GROUP (Cont’d) 4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  • Additional paid-up share capital of RM1.500.00 0.00 distributed to Bumiputera investor, Datin Hanifah Hajar “Taib, effected on 16 March 2006 vide letter of approval from MITI dated 19 December 2005. • Issuance of 1,800,000 units of bonus shares proposed to be carried out on 26 May 2006. • Additional paid-up share capital! issuance of new shares executed in several stages involving RM3,OOO,00 0.00 + RM3,685,00 0.00 + RM1,500,OO 0.00 + RM1,800,OO 0.00. (Sum total of RM9,985,00 O.OO) is exempted from equity conditions.
Authority  Date of Issuance  Date of Expirv  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  MIDA  30.01.2009  – Letter of approval to amend the approval conditions for the post of expatriate  (1 ) This decision is subject to conditions stipulated in Attachments ‘A’ and ‘S’ Attachment A (a) Expatriates are prohibited from changing their job occupationl position and are only permitted to hold positions that have been approved. A written approvall permission shall be obtained from the Immigration Department (Urusetia Pewarganegaraa n), prior to any change of job position as stipulated under Provision 9(3) of the Immigration Regulations 1963. (b) The company is required to and is responsible for submitting all passportsl travel documents and passes issued to this office or to the nearest State Immigration office upon the resignationl termination of an expatriate’s work contract for cancellation purposes. (c) Issuance of passes is subject to the provisions and procedures of the immigration.  Met Met Met
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Maior Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (d) It is the company’s responsibility to ensure that expatriates respect and comply with:­(i) All laws and regulations of the country, particularly those related to their professiona lism; and (ii) All National policy currently being enforced. Attachment B (a) The company shall ensure that the equity structurel status of employees, based on category and salary, reflect the racial composition consistent with the New National Policy. (b) The company shall identify and train local employees, particularly the Bumiputeras, within the stipulated period at all levels of occupation so as to replace the services of expatriates. The company is allowed to fill in all positions approved within five (5) years from the date of issuance of this letter of approval.  Met Met Met
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expiry  Description  Major Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (c) Applications to fill in positions after a period of five (5) years from the date of issuance of this letter of approval is allowed for major job positions and termed positions provided that the company has executed its projects within the said period of five (5) years and has fulfilled paid-up capital conditions for the aforesaid approved major positions. (d) A company is ineligible to fill in all approved positions should they fail to execute projects within a period of five (5) years from the date of issuance of this letter of approval. (e) Companies with approved Manufacturing Licence or exempted from applying Manufacturing Licence but subject to paid-up share capital conditions shall comply with the abovementioned conditions within a period of 5 years from the date of position fulfilment.  Met Met Met ,
109
4. INFORMATION ON OUR GROUP (Cont’d) Authority  Date of Issuance  Date of Expirv  Description  Major Conditions Imposed  Status of Compliance (Met! Not Met! Will Be Met)  (2) Only expatriates who fulfil the qualifications and job experiences required for the position and who own their respective national passports are allowed to hold the abovementioned positions. The company shall submit certified copies of the relevant certificates as supporting documents during the application for the issuance of Employment Pass from the Malaysian Immigration Department. (3) This additional activity project is required to be executed within a period of 12 months from the date of enforcement of this Manufacturing Licence or within a specified period approved by the Licensing Officer. (4) This company is encouraged to ensure that the composition of the Board of Directors should, as far as possible, reflect the company’s equity structure. MITI must be kept informed should there be any appointment and change of members in the company’s Board of Directors. (5) For local sale, the company should, as much as possible, employ services endeavoured by the Malaysian public including appointing Malaysian owned distributor companies where at least 30% of its sales to the domestic market need to be distributed by Bumiputera distributors.  Met Met Met Will be met. This condition has not been fully met. Southern Industrial Gas will continue to identify and appoint Bumiputra distributors when the opportunity arises.
110 4. INFORMATION ON OUR GROUP (Conf’dj Authority  Date of Issuance  Date of Expiry  Description  Maior Conditions Imposed  Status of Compliance (Metl Not Metl Will Be Met)  (6) This approval is subject to the provisions stated in the Industrial Co-Ordination Act, 1975 and any violation of conditions could result in the withdrawal of this Manufacturing Licence. (7) If the company decides to expand the capacity of its production or to diversify its products, the company is required to obtain approval from the Licensing Officer (Chief Secretary, MITI) by submitting applications using the relevant forms accessible vide MIDA’s website (www.mida.gov.my)  Met Met
4.6.14 Dependency on Contractsl Arrangementsl Licences Our Board is of the opinion that, we are not highly dependent on any single contracU arrangemenU licences. 4.6.15 Non-Interruption in Business Operations We did not experience any interruption in our business, which had a significant effect on our operations during the past 12 months prior to the date of this Prospectus. 4.7 COMPETITIVE ADVANTAGES AND KEY STRENGTHS We possess a number of competitive advantages and key strengths that form a strong platform for us to compete against our competitors and to facilitate business sustenance and growth as set out below:­(i) We operate an in-house ASU We operate our own ASU at our main manufacturing facility in Senai, Johor for the production of oxygen and nitrogen. By operating our own ASU, we are able to maintain a high degree of control over the supply and quality of liquid oxygen and liquid nitrogen. It also enables us to promptly meet customer needs without reliance on third party suppliers. By undertaking in-house production of oxygen and nitrogen as opposed to purchasing from third parties, we are able to obtain a higher profit margin. The resultant higher profit margin would enable us to be cost competitive. 111 4. INFORMATION ON OUR GROUP (Conf’d) (ii) We operate in-house Acetylene production facilities We operate Acetylene production plants at our main production facility in Senai, Johor and at our new manufacturing facility in Nilai, Negeri Sembilan. By operating our own Acetylene production plants, we are able to maintain a high degree of control over the supply and quality of Acetylene gas. It also enables us to promptly meet customer needs without reliance on third party suppliers. As a producer of Acetylene and Fuming Gas, our Group differentiates ourselves from dealers and refillers. The production of Acetylene is also complementary to our Group’s production of oxygen, as oxygen and Acetylene are used together in oxy-Acetylene gas welding. For the FYE 31 December 2009 and the 4-month FPE 30 April 2010, Acetylene was our highest revenue contributor. As such, having our own in-house Acetylene production facilities is key in ensuring our cost competitiveness. high product quality and good customer service to retain existing and attract new customers to sustain and grow our business. (iii) We operate in-house Fuming Gas production facilities We operate a Fuming Gas production plant at our new production facility in Nilai. The new Fuming Gas production plant will help us to diversify our production activities and potentially widen our customer base. Operating an in-house Fuming Gas production plant enables us to maintain a high degree of control over the supply and quality of the Fuming Gas produced. (iv) We have a network of refilling facilities We operate a network of gas refilling facilities distributed throughout Peninsular Malaysia. Our gas refilling facilities are positioned at the following strategic locations close to major industrial centres:­(a) Senai, Johor;
(b) Puchong, Selangor;
(c) Kuantan, Pahang;
(d) Bukit Minyak, Penang;
(e) Krubong, Malacca; and
(f) Nilai, Negeri Sembilan.

Gas refilling stations are essential as it is not cost effective to transport gases over long distances. As such, bulk liqUid gases are delivered to refilling stations, which we will vapourise and compress them for refilling into individual cylinders for final delivery to end-users. By maintaining a wide network of gas refilling facilities, we can promptly and cost effectively deliver gases in cylinder forms to our customers. 4. INFORMATION ON OUR GROUP (Cont’d) (v) Our products are of a high quality We are committed to product and service quality, and currently Southern Industrial Gas has ISO 9001 :2008 quality management certification for our Senai, Johor production facility. Our commitment to product quality is further enhanced by our in-house production of liquid oxygen, liquid nitrogen and Acetylene with a high degree of purity to meet demanding customer specifications. We currently have the capability to produce liquid oxygen that is up to 99.9% pure and liquid nitrogen that is 99.999% pure. Our commitment to product and service quality, coupled with our ability to produce high purity liquid oxygen and liquid nitrogen means that we have the ability to meet a wide range of exacting customer requirements. (vi) We have a good reputation and track record We have an established reputation and track record, having been involved in the industrial gas industry since 1997. We have also been producing Acetylene since 1997 and liquid oxygen and liquid nitrogen since 2003. Our reputation and proven track record provides new customers with the assurance that we are a quality and reliable supplier of industrial gases. . (vii) We serve a wide number of user industries The user industries served by SIG Gases includes, among others, the ship building industry, metal fabrication industry, building and construction industry, machinery and equipment industry, industrial gas industry and healthcare industry. The wide number of user industries that our Group serves provides us with the capability to address opportunities across a very wide spectrum of the market providing business growth for our Group. It also mitigates against any over­dependency of our Group’s business on anyone or small Group of industries. 4.8 BUSINESS STRATEGIES AND FUTURE PLANS Our future plans are focused on the areas depicted in the diagram below:­
Production Plant Facility in Krubong, Operate On-site Carbon Dioxide in Sarawak Melaka Hydrogen Plant Facility in Kuantan, DistributeHydrogenPahang Hydrogen 113 4. INFORMATION ON OUR GROUP (Cont’d) (i) We plan to set up a new production plant in Sarawak We plan to build a new industrial gas production plant and refilling plant in Sarawak and to equip the production plant in Sarawak with facilities to produce Acetylene and liquid carbon dioxide. The plant will also be equipped with facilities to refill oxygen and nitrogen cylinders. Liquid carbon dioxide will also be produced through a carbon dioxide plant using natural gas as the feedstock. Establishing a physical presence in Sarawak will enhance our ability to serve customers in Sabah and Sarawak. The plant will also enable us to explore opportunities to export our products to Brunei and Kalimantan, Indonesia. With our presence in Sarawak, our Group targets to penetrate the customers especially in the aluminium industry, solar industry, construction and engineering industry, electrical and electronic industry, silicon industry, food processing industry, oil base industry and others. The expected total capital investment, including acquisition of land, construction of new facilities in respect of our new industrial gas production plant and refilling plant is approximately RM11 million which we intend to finance partly from the Public Issue proceeds to be raised as detailed in Section 2.8 (i) of this Prospectus and the balance will be funded via our internally generated funds and/or borrowings. As at LPD, we have yet to incur or pay any capital outlay for the setting up of the new production plant in Sarawak. We plan to start the development of the Sarawak production plant in 2011 whereas the completion date has yet to be determined. At this juncture, our Group is unable to quantify the expected production capacities for the new industrial gas production plant and refilling plant in Sarawak. (ii) We plan to expand our existing facilities at Krubong, Malacca and Kuantan, Pahang (a) Facility in Krubong, Malacca We plan to relocate our operations from our existing facility in Krubong, Malacca to a new gas refilling plant to be built at a bigger land area to be acquired in the same location, i.e. Krubong, Malacca as our existing plant is too small for our operations and any other future expansion. The refilling plant will be equipped with gas refilling machinery and equipment for the refilling of oxygen and carbon dioxide. Although our Group is expected to build a new gas refilling plant at Krubong, Malacca, our Group does not expects an increase in the production capacity as it is more of a relocation rather than an expansion except for the expected increase in the land area to cater for future expansion when there is an increase in demand. As mentioned in Section 2.8 (i) (c) of this Prospectus, we had entered into two (2) agreements both dated 29 May 2010 with PB Realty Sdn Bhd to purchase 2 pieces of leasehold land in Malacca. The total cost for the 2 pieces of land is RM843,436 and as at the LPD. we have incurred and paid RM84,343 as down payment for the acquisition of the said land. 114 4. INFORMATION ON OUR GROUP (Cont’d) Although we have provided about RM2.5 million of the Public Issue proceeds to be raised to finance the acquisition of land and construction of a new facility as detailed in Section 2.8 (i) (c) of this Prospectus, the expected total capital investment which is inclusive of the acquisition of land, construction of a new facility and acquisition of plant and machinery required for our new gas refilling plant has yet to be determined. In the event the expected total capital investment is more than RM2.5 million, we will finance the balance via our internally generated funds and/or borrowings. We plan to start work on this new facility in Krubong, Malacca in 2010 whereas the completion date has yet to be determined. (b) Facilities in Kuantan, Pahang We plan to relocate our operations from our existing facility in Kuantan, Pahang to a new gas refilling plant as our tenancy agreement at our current location will be expiring, detail of which is disclosed in Section 4.6.12 of this Prospectus. As such, we had entered into two (2) agreements both dated 31 May 2010 with Perbadanan Kemajuan Negeri Pahang to purchase two (2) pieces of land in Kuantan, Pahang for the construction of our facilities. The new gas refilling plants will be equipped with machinery and equipment to refill oxygen and Argon. We have allocated RM2.5 million of the Public Issue proceeds to be raised to finance the total capital investment which is inclusive of the acquisition of said two (2) pieces of land as mentioned above and detailed in Section 2.8 (i) (b) of this Prospectus, construction of new facilities and acquisition of plant and machinery required for our new gas refilling plants. In the event the expected total capital investment is more than RM2.5 million, we will finance the balance via our internally generated funds and/or borrowings. Please refer to Section 2.8 (i) (b) of this Prospectus for further details of the two (2) pieces of land to be acquired in Kuantan, Pahang including the amount incurred and paid for as at LPD. The construction of the gas refilling plants in Kuantan, Pahang is expected to commence in third quarter of 2010 and to be completed in second quarter of 2011. The expected production capacities for the new gas refilling plants in Kuantan, Pahang are 99,424 m3 for oxygen and 97,552 m3 for Argon, calculated based on 8 production hours per day and 26 days per month. (iii) We plan to expand our product range by producing carbon dioxide and hydrogen (a) Carbon Dioxide We plan to expand our production capabilities by developing the capability to produce liquid carbon dioxide. We intend to set up a carbon dioxide plant at our new production plant in Sarawak. We intend to use natural gas as the feedstock for our carbon dioxide plant. By developing the ability to produce carbon dioxide in-house, we can reduce or even eliminate altogether our reliance on external industrial gas producers for the supply of this product. In-house production of carbon dioxide could also create opportunities to grow our existing carbon dioxide business, including opportunities to export carbon dioxide in bulk liquid form. 4. INFORMATION ON OUR GROUP (Conf’dj We plan to begin the setting up our carbon dioxide plant in 2011. The expected total capital investment for the setting up the carbon dioxide plant has yet to be determined and is expected to be financed from our internally generated funds and/or borrowings. As at LPD, we have yet to incur or pay any capital outlay for the setting up the carbon dioxide plant. At this juncture, our Group is unable to quantify the expected production capacities for the new carbon dioxide plant. (b) Hydrogen We also plan to produce hydrogen. We intend to set up the hydrogen generation plant at our new production plant in Nilai, Negeri Sembilan. The ability to produce hydrogen, coupled with our recent purchase of hydrogen transportation systems, will enable us to expand our customer base by serving customers that consume large quantities of hydrogen, such as edible oil hydrogenation plants. Development of our hydrogen generation plant is planned for 2011. The estimated cost of developing the hydrogen generation plant is approximately USD2 million and is expected to be financed from our internally generated funds and/or borrowings. As at LPD, we have yet to incur or pay any capital outlay for the setting up the hydrogen generation plant. At this juncture, our Group is unable to quantify the expected production capacities for the hydrogen generation plant. (iv) We plan to expand into a new business activity by operating on-site hydrogen plants on behalf of our customers and distributing hydrogen (a) Operate On-site Hydrogen Plant We plan to expand our range of business activities by offering a new service to our customers. We intend to utilise our expertise in efficiently operating industrial gas plants by operating hydrogen generation plants at the customer’s premises. The on-site hydrogen plant will generate hydrogen for the customer’s exclusive use. We plan to offer this service to industrial gas users that consume a steady and large volume of hydrogen as part of their production process, such as edible oil hydrogenation plants. We plan to begin offering the service to operate on-site hydrogen plants by 2011. The expected total capital investment for the operation of the on-site hydrogen plants has yet to be determined and is expected to be financed from our internally generated funds and/or borrowings. As at LPD, we have yet to incur or pay any capital outlay for the operation of the on-site hydrogen plants. At this juncture, our Group is unable to quantify the expected production capacities for the operation of the on-site hydrogen plants. 4. INFORMATION ON OUR GROUP (Conf’d) (b) Distribute Hydrogen We have recently purchased 2 units of new hydrogen transportation systems known as “long tubes”. Our Group intends to sell and distribute the hydrogen gas by sourcing the hydrogen gas from local suppliers. The new hydrogen transportation systems will enable us to distribute large quantities of hydrogen in gas form to our customers. This capability will enable us to broaden our customer base, as we can now serve heavy consumers of hydrogen such as edible oil hydrogenation plants. The new hydrogen transportation systems will also complement our plans to produce hydrogen in-house. We expect to begin selling and distributing hydrogen by 2010. The two (2) units of new hydrogen transportation systems were acquired for a total of approximately RM1.00 million which will be financed fully from the Public Issue proceeds as disclosed in Section 2.8 (ii) of this Prospectus. Of the total RM1.00 million, our Group has already paid RMOA4 million which was financed via bank borrowings and the balance will be paid upon receipt of the Public Issue proceeds. Certain parts of the hydrogen transportation systems comprising of loose long tubes and hydrogen valves totalling to approximately RMOAO million or equivalent to approximately 40% of the total cost of the hydrogen transportation systems of RM1.00 million were purchased from Sing Swee Bee Enterprise Pte Ltd as disclosed in Section 7.1.1 of this Prospectus. The balance of the hydrogen transportation systems was purchased from third parties. The hydrogen transportation systems have estimated storage capacity of approximately 6,600 m3. The hydrogen transportation systems is as depicted in the diagram below:­THE REST OF THIS PAGE 15 INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’dj
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Future Plan Milestones The following table indicates the expected timing for the implementation of future plans:­Future Plans  2010  2011  New Facilities Production Plant in Sarawak  -J  Expand Facilities Facility in Krubong, Malacca Facility in Kuantan, Pahang  -J -J  Expand Production Carbon Dioxide Hydrogen  -J -J  New Business Operate On-site Hydrogen Plant Distribute Hydrogen  -J  -J
4. INFORMATION ON OUR GROUP (Cont’d) 4.9 INDUSTRY OVERVIEW 4.9.1 Overview and Outlook of the Malaysia Economy The Malaysian economy grew strongly in the first quarter The Malaysian economy registered a strong growth of 10.1 % in the first quarter of 2010, led by continued expansion in domestic demand and stronger external demand. The expansion in domestic demand was supported by higher private consumption and sustained public sector spending. The robust external demand provided further impetus to domestic growth through its spill-over effects on production, employment and overall sentiments. On the supply side, all economic sectors recorded positive growth during the quarter, led by strong growth in the manufacturing and services sectors. During the quarter, domestic demand expanded by 5.4% (4Q 09: 2.8%), due mainly to higher private consumption and sustained public sector spending. Private consumption spending grew by 5.1 % (4Q 09: 1.6%), supported by continued improvement in labour market conditions amidst an environment of low inflation and improved consumer sentiment. The public sector continued to provide additional impetus to growth, with public consumption registering an expansion of 6.3% during the quarter, due mainly to higher expenditure on emoluments as well as supplies and services. Gross fixed capital formation continued its positive growth momentum, growing by 5.4% (4Q 09: 8.2%), supported by sustained public sector capital spending and a modest recovery in private sector business spending activity. Private investment activity benefited from the significant increase in production and external demand, which led to improvements in both capacity utilization and business sentiments. Public sector capital spending continued to provide support to the domestic economy with the bulk of the development expenditure channelled into education, transportation and agriculture and rural development. On the supply side, all economic sectors registered positive growth during the first quarter, with strong performance in the manufacturing and services sectors. The recovery momentum in the manufacturing sector strengthened further, with the sector registering a strong growth of 16.9% (4Q 09: 5.0%). Similarly, the services sector recorded a higher growth of 8.5% (4Q 09: 5.2%), with strong performance across all sub-sectors. The agriculture sector expanded further, supported mainly by strong rubber production amid higher prices. The construction sector continued to expand at a strong pace of 8.7% during the quarter (4Q 09: 9.3%), supported by the implementation of construction-related projects under the second fiscal stimulus package and the Ninth Malaysia Plan. The mining sector turned around to register a positive growth of 2.1 % (4Q 09: -2.8%), largely reflecting the strong pick up in natural gas production. Growth of the domestic economy to be sustained going forward The recovery of the global economy continued to gather pace in the first quarter, with stronger growth performance across most regions, particularly the Asian economies. Economic activity was sustained in the advanced economies amid continued policy support, stabilisation of financial systems and improved business and consumer confidence. Meanwhile, the regional economies continued their robust expansion in the first quarter, supported by sustained domestic demand and strong export growth. Going forward, considerable uncertainties remain due to the ongoing sovereign debt problems in Europe and the diminishing support from policy stimulus. Despite these developments and the potential destabilising effects on financial markets, the assessment is that it would generally have limited effects on emerging market economies. 119 4. INFORMATION ON OUR GROUP (Cont’d) The strong and broad-based expansion of the domestic economy in the first quarter affirms that the recovery of the Malaysian economy is firmly established. Going forward, growth is expected to be sustained, supported by the continued expansion in domestic and external demand. Expansion in domestic demand is expected to be supported by the favourable employment conditions, improving consumer and business confidence and an accommodative policy environment, while external demand will be supported by stronger regional trade and the global upturn in the electrical and electronics cycle. (Source: Bank Negara Malaysia, “Quarterly Bulletin First Quarter 2010” 4.9.2 Overview of the Industrial Gas Industry in Malaysia The industrial gas industry in Malaysia may be segmented into the following categories:­
Overall Structure of the Industrial Gas Industry Industrial gases are manufactured on a commercial scale for use in various applications. Industrial gases may be produced through the following methods:­extraction from atmospheric air through a process of physical separation; extraction from underground reservoirs and further processed; chemical synthesis; and extraction of gas arising from decaying organic matters or biomass.
Atmospheric gases are primarily produced on an industrial scale through the physical separation of the various gases contained in the air. Types of gases most commonly manufactured using atmospheric air are nitrogen, oxygen and Argon. Hydrocarbon gases are organic compounds that consist entirely of the elements carbon and hydrogen, and are in gaseous state under normal temperature and pressure. Hydrocarbon gases are normally produced by chemical synthesis or through the Fractional Distillation of crude oil and natural gas. 4. INFORMATION ON OUR GROUP (Cont’dj Acetylene is classified as a hydrocarbon gas. Other examples of hydrocarbon gases include methane. ethane, ethene, propane, propene, butane, butene, hexane and heptane. Examples of other industrial gases include:­Noble gases such as helium, krypton, neon and xenon; Other elemental gases such as hydrogen, chlorine and fluorine; Compound gases such as ammonia, carbon monoxide, nitrous oxide and sulphur dioxide; and Gas Mixtures, which are blends of two or more gases mixed in accordance with a user’s specifications. There are six (6) naturally occurring noble gases (helium, krypton, neon, xenon, Argon and radon). One of the key characteristics of noble gases is that they have low chemical reactivity. They are also commonly referred to as inert gases. Elemental gases are gases that exist under normal temperature and pressure in their pure atomic state without combining with other elements. Elemental gases include atmospheric gases (oxygen. nitrogen, Argon), halogens (hydrogen, fluorine, chlorine), noble gases (helium, krypton, neon, xenon) and others. Compound gases are gases that exist in its gaseous state under normal temperature and pressure comprising more than one chemical element. Carbon dioxide is an example of a compound gas. Carbon dioxide is normally produced by the combustion of substances containing carbon such as wood, petroleum or natural gas, as a by-product of fermentation or hydrogen production, or by chemical synthesis. Gas Mixtures are two or more gases mixed according to specification. We are engaged in the production of nitrogen, oxygen and Acetylene. We are also a producer of Gas Mixtures. We are also engaged in refilling gas cylinders with Argon and carbon dioxide. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’d) 4.9.3 Industry Supply and Value Chain
Producers of industrial gases normally uses three (3) methods to supply gases to its customers:­bulk liquid; gas cylinder; and pipeline.
Industrial gas producers may supply directly to end-users or to intermediaries like refillers and dealers. If a major end-user is located close to an industrial gas producer, a pipeline may be used to provide gases directly to the end-user. Industrial gas producers normally supply end-users and intermediaries that consume a large quantity of industrial gases in bulk liquid form. Bulk liquid gases are stored and transported in specialised cryogenic storage vessels and tankers. Liquid gases are either used directly or vaporisers are used to convert them into gas form. Industrial gas producers normally supply end-users and intermediaries that consume smaller quantities of industrial gases using refillable gas cylinders. Due to the highly flammable and unstable nature of Acetylene, Acetylene is not commonly transported or stored in bulk liquid form and is not delivered to customers via direct pipeline. Acetylene is delivered to customers in refillable gas cylinders. In general, it is not common for industrial gas refillers to be engaged in refilling gas cylinders with Acetylene, as Acetylene is not commonly delivered in bulk liquid form. Acetylene producers may supply Acetylene in gas cylinders to dealers. 4. INFORMATION ON OUR GROUP (Conf’d) Some end-users utilise an on-site plant to produce industrial gases for their own consumption. The on-site plant may be owned and operated by the user, or by a third-party. We are an industrial gas producer that operates our own ASU, which is located at our production facility in Senai, Johor. We currently use our ASU to produce liquid nitrogen and liquid oxygen. We currently supply oxygen, nitrogen, Argon and carbon dioxide to users in bulk liquid form and in gas cylinders. We supply directly to end-users as well as intermediaries like dealers and refillers. 4.9.4 Industry Players and Competition Listed below are all of the industrial gas producers in Malaysia that operate ASU and produce atmospheric gases such as nitrogen and oxygen (listed in alphabetical order): Air Products Malaysia Sdn Bhd; B.I.G. Industries Sdn Bhd; Eastern Oxygen Industries Sdn Bhd; Gas Pantai Timur Sdn Bhd; Malaysian Oxygen (MOX) Group; Piasau Gas Sdn Bhd; Sabah Oxygen Sdn Bhd; Secomex Manufacturing (M) Sdn Bhd; and SIG Gases Group.
In 2009, the SIG Gases Group ranked fifth (5th) among industrial gas producers in Malaysia that operate ASU and produce atmospheric gases such as nitrogen and oxygen. Note: The market ranking based on total revenue is only indicative of the overall financial size of companies that operate ASU and produce atmospheric gases such as nitrogen and oxygen. As such, the ranking is only indicative of the overall financial size of the companies under consideration. (Source: Vital Factor Consulting Sdn Bhd) Listed below are some of the major producers of Acetylene in Malaysia (listed in alphabetical order): Air Products Malaysia Sdn Bhd; Bee Hua Industrial Gases Sdn Bhd;
B.I.G. Industries Sdn Bhd; Eastern Oxygen Industries Sdn Bhd; Gas Pantai Timur Sdn Bhd; Magnalium Sdn Bhd; MCB Industries Sdn Bhd; Malaysian Oxygen (MOX) group; Piasau Gas Sdn Bhd; Polygas Sdn Bhd; Sabah Oxygen Sdn Bhd; and SIG Gases Group.
Note: The list above is not an exhaustive list ofthe producers ofAcetylene in Malaysia. 4. INFORMATION ON OUR GROUP (Cont’d) In 2009, the SIG Gases Group ranked fifth (5th) among producers of Acetylene in Malaysia. Note: The market ranking based on total revenue is only indicative of the overall financial size of companies that produce Acetylene. As such, the ranking is only indicative of the overall financial size of the companies under consideration. (Source: Vital Factor Consulting Sdn Bhd) 4.9.4.1 Nature of Competition in the Industry In general, operators in the industrial gas industry face normal competitive conditions, which is similar to a free enterprise environment, which is characterised by the following:­There are no undue government regulations or licensing requirements; There are a relatively large number of operators; Operators may enter and leave the industry freely; and No individual operator is large enough to dictate pricing.
In such an environment, the industry is subjected to normal supply and demand conditions moderated by the price mechanism. Operators compete on product and service differentiations, and other factors of competition. In general, there are no regulations or other circumstances that restrict our Group from exporting our products. The cost of transporting filled gas cylinders to customers and returning empty gas cylinders to our Group places some commercial restriction on the export of our Group’s products. In overseas countries, the additional transportation costs may make our Group’s products more expensive than similar products produced by local operators. It should be noted that this commercial restriction applies to the industrial gas industry as a whole. The high barriers to exit may, to a certain extent, deter new operators from entering the industry. Existing operators may be encouraged to sustain their operations even if they are facing losses as it is difficult to leave the industry. If such a situation arises, this may increase the competitive pressure faced by other operators in the industry. 4.9.4.2 Factors of Competition As with most free enterprise environments, competition amongst operators in the industrial gas industry is based on a number of factors, including:­In-house industrial gas production; Product quality; Established reputation and track record; and Network of gas refilling facilities.
4. INFORMATION ON OUR GROUP (Cont’d) 4.9.4.3 Impact of Factors of Competition on Our Group (i) In-house Industrial Gas Production The capability to produce industrial gases in-house is a key factor of competition. Operators with in-house gas production facilities can exercise a high degree of control over the quality of the industrial gases that they produce. The operator is also likely to enjoy more flexibility in terms of pricing as they are less dependent on industrial gases purchased from third-parties. We operate an ASU to produce liquid oxygen and liquid nitrogen at our main manufacturing facility in Senai. We also produce Acetylene at the same facility. . We have begun producing Acetylene and Fuming Gas at our new manufacturing facility in Nilai. (ii) Product Quality Product quality is an important factor of competition in the industrial gas industry as industrial gases are commonly used in industrial processes. As a result, users normally do not tolerate the presence of impurities and deviations from their specifications. We have the capability to produce high-purity liquid nitrogen and liquid oxygen:­We normally produce liquid nitrogen that is 99.999% pure; and We normally produce liquid oxygen that is 99.6% pure and can produce liquid oxygen that is 99.9% pure to meet more stringent customer specifications. Our subsidiary, Southern Industrial Gas, obtained ISO 9001 :2000 quality management system certification in the scope of “Production of liquid nitrogen and oxygen” and ”Trading of liquid nitrogen, oxygen and Argon for applications in steel, electronics, medical, construction, shipbuilding and food processing” from SIRIM QAS International Sdn Bhd in 2004. In 2009, this was updated to ISO 9001 :2008 quality management system certification for the same scope of work. (iii) Established Reputation and Track Record Users are more likely to purchase industrial gases from operators that have an established reputation and track record of supplying high quality industrial gases. We have an established reputation and track record that dates back to 1997. When we were first established, we were initially engaged in producing Acetylene and refilling industrial gas cylinders. We began producing liquid oxygen and liquid nitrogen in 2003. 4. INFORMATION ON OUR GROUP (Cont’d) (iv) Network of Gas Refilling Facilities It is normally uneconomical to ship large numbers of filled gas cylinders over long distances and to collect the empty gas cylinders for refilling. As a result, operators who wish to cover a wide geographic market will need to establish a network of gas refilling facilities. With a gas refilling facility, an operator will be able to transport large quantities of industrial gases in bulk liquid form to the facility, where the gases are converted into gas form and used to refill gas cylinders. We operate a network of gas refilling facilities distributed throughout Peninsular Malaysia. Our gas refilling facilities are at positioned at the following strategic locations close to major industrial centres:­(a) Puchong, Selangor;
(b) Kuantan, Pahang;
(c) Bukit Minyak, Penang;
(d) Krubong, Malacca; and
(e) Nilai, Negeri Sembilan.

4.9.4.4 Competitive Intensity The overall level of competition among operators in the industrial gas industry in Malaysia is moderate. In general, operators in the industrial gas industry that have the capability to produce industrial gases in-house, such as our Group, compete primarily with the relatively small number of operators that also have the capability to produce industrial gases in-house. As at May 2010, there were 9 industrial gas producers in Malaysia (including us) that operate ASU and produce atmospheric gases such as oxygen and nitrogen. The industrial gas producers referred to are:­Air Products Malaysia Sdn Bhd; B.I.G. Industries Berhad; Eastern Oxygen Industries Sdn Bhd; Gas Pantai Timur Sdn Bhd; Malaysian Oxygen (MOX) Group; Piasau Gas Sdn Bhd; Sabah Oxygen Sdn Bhd; Secomex Manufacturing (M) Sdn Bhd; and SIG Gases Group.
Competition from industrial gas refillers and industrial gas dealers is moderated by the fact that these operators have to purchase their industrial gases from Malaysian producers or have to import their industrial gases and are therefore at a disadvantage, particularly in terms of pricing. 4. INFORMATION ON OUR GROUP (Conf’d) 4.9.4.5 Barriers to Entry The barriers to entry faced by a new entrant wishing to produce liquid oxygen and liquid nitrogen are high and include the following:­(i) Capital and set-up costs The capital and set-up costs associated with establishing a new industrial gas production plant equipped with an ASU will constitute a high barrier to entry for a new entrant. The capital and set-up cost to establish an entry-level industrial gas production plant equipped with an ASU is estimated at RM40 million. This will comprise the following:­ASU; Cryogenic storage tanks; 4 Cryogenic tankers for transportation; Gas cylinder refilling station; and 20,000 gas cylinders In addition, it is estimated that working capital of RM10 million is required to finance day-to-day operations, trade debtors, gas cylinders in transit and for other miscellaneous expenses. It is estimated that this entry-level industrial gas producer will be able to generate revenue of approximately RM20 million per year. (ii) Establishing a Distribution Network The requirement to establish a distribution network comprising facilities to refill gas cylinders will create a barrier to entry for new entrants into the industrial gas industry. Facilities to refill gas cylinders are necessary due to the high cost of transporting industrial gas cylinders over long distances. Not only are filled gas cylinders transported to the client, but empty gas cylinders must also be transported back to the industrial gas producer for refilling. It is more economical for an industrial gas producer to transport industrial gases in bulk liquid form to a refilling facility, where it is converted into gas and used to refill gas cylinders. As a result, an industrial gas producer that does not have facilities to refill industrial gas cylinders will be restricted to serving customers that are located close to the industrial gas plant. A new entrant will require time and resources to establish a network of refilling facilities, which are crucial if it wishes to serve new customers and expand its market. This creates a moderate barrier to entry. (iii) Safety The need to establish and maintain stringent safety procedures creates a barrier to entry for new entrants. This is particularly true for new entrants who intend to manufacture Acetylene, as Acetylene is a highly flammable gas that requires special packaging and handling procedures to be transported and stored safely. The new entrant will also require technicians and workers who have experience in handling Acetylene. It is likely that a new entrant will require time and resources to establish and maintain the required safety procedures, particularly for new entrants who intend to manufacture Acetylene. This creates a moderate barrier to entry. 4. INFORMATION ON OUR GROUP (Conf’d) (iv) Technical Skills In general, technical skills are required to efficiently and safely operate an industrial gas production facility equipped with an ASU. Some of the key personnel required include the following:­Professional chemical engineers and qualified technicians to carry out chemical analysis on the industrial gases produced; and Professional mechanical engineers and qualified technicians to keep the ASU in good working order. A higher level of skill and experience is required if the new entrant intends to produce more specialised industrial gas products such as Gas Mixtures. Gas Mixtures consist of two or more gases that are mixed together in a specified proportion. The proportion of gases mixed must be tightly controlled, as Gas Mixtures are often used in specialised applications. Gas Mixtures that fail to meet the client’s specifications are commonly discarded, as they cannot be used for other applications. This results in monetary loses. Having access to a pool of professional engineers and technicians that have the necessary qualifications and experience would create some barrier to entry for new entrants. (v) Product Quality The need to demonstrate a consistently high level of product quality creates a barrier to entry for new entrants to the industrial gas industry. The requirement to demonstrate a consistently high level of product quality is important in the industrial gas industry, as industrial gases are commonly used in industrial processes. Users normally do not tolerate the presence of impurities and deviations from their specifications. As a result, a new entrant will have to demonstrate that their products are of a high quality and are able to consistently meet with their prospective customer’s specifications. Industrial gas producers that have obtained the relevant ISO certification are in a stronger position to assure their customers that their quality management systems meet with internationally recognised standards. (vi) Established Reputation and Track Record The need to demonstrate a proven track record in the industrial gas industry creates a barrier to entry for new entrants. An operator with a proven track record will have a significant advantage in securing new orders compared to new entrants. 4.9.4.6 Barriers to Exit The barriers to exit from the industrial gas industry for an operator that owns an ASU and/or Acetylene production plant are high. Most of the plant and machinery used by industrial gas producers, particularly the ASU and machinery and equipment used to produce Acetylene, are highly specialised and cannot be modified to fulfil other functions. 4. INFORMATION ON OUR GROUP (Cont’d) 4.9.5 Market Size and Share (i) Market Size Based on Domestic Production Oxygen In 2009, the market size for oxygen in Malaysia based on the sales value of domestic production was RM76.4 million. (Source: Department of Statistics). Nitrogen In 2009, the market size for nitrogen in Malaysia based on the sales value of domestic production was RM156.1 million. (Source: Department of Statistics) (ii) Market Size Based on Apparent Consumption Oxygen In 2009, the market size for oxygen in Malaysia based on apparent consumption was RM81 million. (Source: Vital Factor Consulting Sdn Bhd). Nitrogen In 2009, the market size for nitrogen in Malaysia based on apparent consumption was estimated at RM180 million. (Source: Vital Factor Consulting Sdn Bhd). Note: Apparent consumption is estimated as the sum of the sales value of domestic production and imporls, less exports. (iii) Market Share Based on Domestic Production Market Share for Oxygen In 2009, the SIG Gases Group’s market share for oxygen based on local production was estimated at 13%. (Source: Vital Factor Consulting Sdn Bhd). Note: The S/G Gases Group’s market share for oxygen based on local production was estimated by dividing the S/G Gases Group’s revenue from the manufacture of oxygen with the market size for oxygen based on local production. Market Share for Nitrogen In 2009, the SIG Gases Group’s market share for nitrogen based on local production was estimated at 2%. (Source: Vital Factor Consulting Sdn Bhd). Note: The S/G Gases Group’s market share for nitrogen based on local production was estimated by dividing the S/G Gases Group’s revenue from the manufacture of nitrogen with the market size for nitrogen based on local production. (iv) Market Share Based on Apparent Consumption Market Share for Oxygen In 2009, the SIG Gases Group’s market share for oxygen based on apparent consumption was estimated at 12% (Source: Vital Factor Consulting Sdn Bhd). Note: The S/G Gases Group’s market share for oxygen based on apparent consumption was estimated by dividing the S/G Gases Group’s revenue from the manufacture of oxygen with the estimated market size for oxygen based on apparent consumption. 4. INFORMATION ON OUR GROUP (Cont’d) Market Share for Nitrogen In 2009, the SIG Gases Group’s market share for nitrogen based on apparent consumption was estimated at 2%. (Source: Vital Factor Consulting Sdn Bhd). Note: The SIG Gases Group’s market share for nitrogen based on apparent consumption was estimated by dividing the SIG Gases Group revenue from the manufacture of nitrogen with the estimated market size for nitrogen based on apparent c:onsumption. 4.9.6 Relevant Laws and Regulations (i) Manufacturing Licence Application of a manufacturing licence under the Industrial Coordination Act, 1975 is required for companies with shareholders’ funds of RM2.5 million or above or engaging 75 or more full-time employees (Source: MIDA). Southern Industrial Gas has obtained various manufacturing licenses, details of which were disclosed in Section 4.6.13 of this Prospectus. (ii) Wholesaler’s Poison Licence An organisation that is involved in importation, possession, manufacture, compounding, storage, transport, sale and use of poisons, is subjected to The Poisons Act 1952. The licence is granted to an individual person and notto a company with a business address. The following persons employed by Southern Industrial Gas hold the following Wholesaler’s Poison Licence (Type B License):­Item  Information  Address  PLO 137, Kawasan Perindustrian Senai III, 81400 Senai  License Holder  Chong Joon Kiong  Licensing Officer  Director of Health, Johor  Valid Period  1 January 2010 to 31 December 2010  Approved Poison List  Ammonia  Address  17, Jalan BP 4/1, Bandar Bukit Puchong, 47100 Puchong  License Holder  Foo Peng Boon  Licensing Officer  Director of Health, Selangor  Valid Period  1 January 2010 to 31 December 2010  Approved Poison List  Ammonia
4. INFORMATION ON OUR GROUP (Cont’dj (iii) Government Incentives The major government incentives for companies engaged in the manufacturing sector include:­Pioneer Status; Investment Tax Allowance; Reinvestment Allowance; and Tax Exemption on the Value of Increased Exports. Southern Industrial Gas is eligible for reinvestment allowance benefits and is currently enjoying the incentive for a period of 15 years (from 2001 to 2015). (iv) Environmental Regulations During the normal course of its business operations at its Senai plant, we generate the following waste that is classified as a Scheduled Waste under the Environmental Quality (Scheduled Waste) Regulations 2005:­SW 427, “Mineral sludge including calcium hydroxide sludge, phosphating sludge, calcium sulphite sludge and carbonates sludge”. Southern Industrial Gas has appointed companies licensed by the Department of Environment under Section 11 of the Environmental Quality Act, 1974, to collect and transport the scheduled waste from its premises. 4.9.7 Demand and Supply Conditions 4.9.7.1 Supply Our principal business activities are focused on supplying a range of industrial gases to commercial users. Our core revenue streams are gas manufacturing, industrial gas refilling and the distribution of industrial gases. With the exception of carbon dioxide, most of the industrial gases currently used in Malaysia are produced locally. Sales Value of the Manufacture of Industrial Gases, Whether Compressed, Liquefied or in Solid State Between 2005 and 2009, the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state increased at an average annual rate of 0.7%. In 2009, the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state declined by 27.7% to RM3.3 billion. However, the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state recorded quarter-on-quarter growth during most of 2009. Sales value for the second quarter of 2009 was 24.9% higher compared to the first quarter of 2009 and sales value for the third quarter of 2009 was 34.1 % higher compared to the second quarter of 2009. However, in the fourth quarter of 2009, the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state declined slightly by 2.4% compared to the third quarter of 2009. 4. INFORMATION ON OUR GROUP (Cont’d) Sales Value of the Manufacture of Oxygen Between 2005 and 2009, the sales value of the manufacture of oxygen increased at an average annual rate of 0.8%. In 2009, the sales value of the manufacture of oxygen declined by 37.1% to RM76,4 million. Sales Value of the Manufacture of Nitrogen Between 2005 and 2009, the sales value of the manufacture of nitrogen declined slightly at an average annual rate of 0.1 %. In 2009, the sales value of the manufacture of nitrogen declined by 32.1% to RM156.1 million. Sales Value of the Manufacture of Argon Between 2005 and 2009, the sales value of the manufacture of Argon declined at an average annual rate of 4.3%. In 2009, the sales value of the manufacture of Argon declined by 32.2% to RM25,4 million. Sales Value of the Manufacture of Carbon Dioxide Between 2005 and 2009, the sales value of the manufacture of carbon dioxide declined at an average annual rate of 31.6%. In 2009, the sales value of the manufacture of carbon dioxide declined by 66.3% to RM5.0 million. Imports of Carbon Dioxide Between 2005 and 2009, the import value of carbon dioxide increased at an average annual rate of 59.8% (albeit from a relatively low base of RM2.1 million in 2005). In 2009, the import value of carbon dioxide declined by 31.2% to RM13.7 million. In 2009, Thailand was the largest source of imports for carbon dioxide, accounting for 78.2% of total imports by value. Singapore and Germany were the second and third largest sources of imports, accounting for 13.0% and 4.0% of imports by value respectively. The other sources of imports for carbon dioxide in 2009 included Japan, Germany, Belgium and other countries. Sales Value of the Manufacture of Acetylene Between 2004 and 2008, the sales value of the manufacture of Acetylene increased at an average annual rate of 4.5%. In 2008, the sales value of the manufacture of Acetylene increased by 14.8% to reach RM42.6 million. According to the Department of Statistics, data on the sales value of the manufacture of Acetylene in 2009 is not directly comparable with the sales value of the manufacture of Acetylene in 2008 due to changes in sampling methodology. For 2009, the Department of Statistics covered only companies with 200 workers or more, whereas in previous years all companies were covered. As a result, many of the companies that were covered in 2008 were not covered in 2009. In 2009, the sales value of the manufacture of Acetylene was RM17.1 million. 4. INFORMATION ON OUR GROUP (Cont’d) 4.9.7.2 Demand (Exports) With the exception of Argon and carbon dioxide, a large proportion of the industrial gases currently produced in Malaysia are used locally. In many cases, the export value of these industrial gases represents only a small percentage of the sales value of domestic production for the corresponding industrial gas. Exports of Argon Between 2005 and 2009, the export value of Argon increased at an average annual rate of 21.1 %. In 2009, the export value of Argon declined by 30.6% to RM11.6 million. In 2009, Thailand was the largest export destination for Argon, representing 50.3% of total exports by value. Singapore and Brunei were the second and third largest export destinations, accounting for 23.2% and 12.7% of exports by value respectively. The other export markets for Argon in 2009 included Indonesia, Pakistan, Bangladesh, New Zealand, Australia and other countries. Exports of Carbon Dioxide Between 2005 and 2009, the export value of carbon dioxide increased at an average annual rate of 24.5%. In 2009, the export value of carbon dioxide declined by 47.4% to RM13.2 million. In 2009, Singapore was the largest export destination for carbon dioxide, representing 98.5% of total exports by value. Brunei and Indonesia were the second and third largest export destinations, accounting for 1.1 % and 0.4% of exports by value respectively. 4.9.7.3 Supply Dependencies The main inputs used by our Group in producing industrial gases are calcium carbide and electricity. We use calcium carbide as a raw material to produce Acetylene, while electricity is primarily used to operate our ASU to produce liquid nitrogen and liquid oxygen. Manufacture of Calcium Carbide Most of the calcium carbide used in Malaysia is produced locally and Malaysia is a net exporter of calcium carbide. In 2009, the import value of calcium carbide was only RM1.6 million, which is considerable smaller than the export value, which was RM40.5 million Electricity Consumption Electricity consumption in Malaysia is summarized in the following table:­Consumption by Units  Consumption by Value  Units (‘000 GWh)  Growth Rate (%)  Value (RM Million)  Growth Rate (%)  2004  78.8  18,112  7.9  2005  83.2  5.6  19,087  5.4  2006  86.6  4.1  20,941  9.7  2007  91.6  5.8  23,276  11.2  2008  95.2  3.9  26,216  12.6  1sl half 2009  45.0  13,877
(Source: Ministry of Finance) 4. INFORMATION ON OUR GROUP (Cont’d) Between 2004 and 2008, electricity consumption in Malaysia increased at an average annual rate of 4.8%. In 2008, electricity consumption grew by 3.9% in terms of units to reach 95,200 Gigawatt hours (GWh). During the first half of 2009, the electricity consumption in Malaysia amounted to 45,000 GWh. Between 2004 and 2008, the value of electricity consumption in Malaysia increased at an average annual rate of 9.7%. In 2008, the value of electricity consumption grew by 12.6% to reach RM26.2 billion. During the first half of 2009, the electricity consumption in Malaysia by value amounted to RM13.9 billion. Installed Capacity and Peak Demand for Electricity Installed generating capacity and peak demand for electricity in Malaysia are summarised in the following table:­Accumulated Installed Capacity  Peak Demand*  (Megawatt)  Growth Rate (%)  (Megawatt)  Growth Rate (%)  2000  14,291  10,657  2005  19,217  34.5  13,779  29.3  2010  25,258  31.4  20,087  45.8
Note:­* . Peak demand is the maximum power demand registered by the system in a stated period of time. The above are accumulated installed capacity and peak demand of electricity from Tenaga Nasional Berhad, Sabah Electricity Sdn Bhd and Syarikat SESCO Berhad. (Source: Ninth Malaysia Plan) Between 2000 and 2005, installed electricity generating capacity grew by 34.5% to reach 19,217 Megawatts (MW). In 2010, installed electricity generating capacity is expected to increase to 25,258 MW, which is 31.4% higher compared to 2005. This is equivalent to an average annual growth rate of 7.1 %. Between 2000 and 2005, peak demand for electricity increased by 29.3% to reach 13,779 MW. In 2010, peak demand for electricity expected to increase by 45.8% compared to 2005 to reach 20,087 MW. This is equivalent to an average annual growth rate of 9.9%. Although peak demand for electricity is expected to grow at a slightly higher rate compared to installed electricity generating capacity, there is still a healthy cushion between planned installed capacity and expected peak demand. In 2010, installed electricity generating capacity is expected to be 25.7% higher than peak demand for electricity. 4. INFORMATION ON OUR GROUP (Cont’d) 4.9.7.4 Demand Dependencies As industrial gases are widely used in various manufacturing processes, the following section will also cover the performance of the overall manufacturing industry to provide an overall indication of demand for the industrial gas industry. Output of the Overall Manufacturing Sector Between 2005 and 2009, the sales value of the overall manufacturing sector grew at an average annual rate of 0.3%. In 2009, the sales value of the overall manufacturing sector declined by 19.0% to RM469.5 billion. However, the overall manufacturing sector recorded quarter-on-quarter growth in sales value during the whole of 2009. The sales value of output for the second quarter of 2009 was 7.2% higher than the sales value of output for the first quarter of 2009, while the sales value of output for the third quarter of 2009 was 10.6% higher than the second quarter of 2009. The sales value of output for the fourth quarter of 2009 was 4.1 % higher than the third quarter of 2009. Building and Repairing of Ships Between 2003 and 2007 (the most recent year for which data is available), the value of gross output for the building and repairing of ships increased at an average annual rate of 12.4%. In 2007, the value of gross output for the building and repairing of ships increased by 37.2% to RM4.7 billion (based on 141 establishments). Manufacture of Basic Iron and Steel Products Between 2005 and 2009, the sales value of the manufacture of basic iron and steel products declined at an average annual rate of 3.0%. In 2009, the sales value of manufacture of basic iron and steel products declined by 42.3% to RM16.4 billion. Manufacture of General Purpose Machinery Between 2003 and 2007 (the most recent year for which data is available), the value of gross output for the manufacture of general purpose machinery increased at an average annual rate of 17.5%. In 2007, the value of gross output for the manufacture of general purpose machinery declined by 10.4% to RM11.9 billion (based on 492 establishments). Manufacture of Special Purpose Machinery Between 2003 and 2007 (the most recent year for which data is available), the value of gross output for the manufacture of special purpose machinery increased at an average annual rate of 15.8%. In 2007, the value of gross output for the manufacture of special purpose machinery increased by 22.9% to reach RM5.0 billion (based on 731 establishments). GDP Contribution of the Construction Sector Between 2005 and 2009, the GDP contribution of the construction sector (at current prices) grew at an average annual rate of 7.8%. In 2009, the GDP contribution of the construction sector (at current prices) increased by 8.1 % to reach RM21.2 billion. 4. INFORMATION ON OUR GROUP (Conf’d) 4.9.8 Substitute Product I Services In general, there are no practical substitutes for most types of industrial gases in most of their current applications. In many instances, a specific gas is required as part of a process or reaction, for which no other substance may be used as a substitute. Argon and nitrogen may be used as substitutes for one another in some applications, including:­(i) Applications where an inert gas is required, such as in creating an inert environment to protect substances from coming into contact with oxygen and moisture in the chemical, pharmaceutical and food industry; and
(ii) In cooling and freezing applications.

There are currently a number of practical substitutes for metal cutting and welding using a flame produced by the combustion of Acetylene and another gas (commonly oxygen). Alternative metal cutting methods include plasma cutting, laser beam cutting and mechanical cutting. Alternative metal welding techniques include electric arc welding, resistance welding and welding with flames produced by the combustion of other gases such as oxygen­hydrogen welding. However, metal cutting and welding using a flame produced by the combustion of Acetylene and another gas are widely used by users in many industries and is well established and understood. There are also a large number of welders who are trained in and familiar with the process. As a result, it is not likely that the method will be completely replaced by any of its current substitutes. 4.9.9 Reliance on and Vulnerability to Imports 4.9.9.1 Reliance on Imports In general, the industrial gas industry is not reliant on imports for the supply of the main inputs used to produce industrial gases. The electricity used to operate ASU is generated locally, while most of the calcium carbide used to produce Acetylene is also produced locally. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cont’d) 4.9.9.2 Vulnerability to Imports In general, the industrial gas industry is not vulnerable to competition from imports. With the exception of carbon dioxide, most of the industrial gases currently used in Malaysia are produced locally. As the table below indicates, in many cases the sales value of domestically produced industrial gas greatly exceeds the import value of the corresponding industrial gas in 2009. Industrial Gas  Sales Value of Domestic Production (RM’OOO)  Import Value (RM’OOO)  Import Value as a Percentage of the Sales Value of Domestic Production (%)  OXYQen  76,373  6,002  7.9  Nitrogen  156,145  24,771  15.9  Argon  25,412  4,434  17.4  Carbon Dioxide  5,036  13,730  272.6  Acetylene  17,068 *  348  2.0
Note:  *  According to the Department of Statistics, the sampling methodology used to calculate sales  value of domestic production in 2009 changed. For 2009, the Department of Statistics covered  only companies with 200 workers  or more,  whereas in previous years a/l companies  were  covered.  As a result, many of the companies that were covered in 2008 were not covered in  2009
(Source: Department of Statistics) Although the import value of carbon dioxide in 2009 exceeded the sales value of domestic production, the industry is generally not vulnerable to imports, as a relatively large quantity of carbon dioxide is exported from Malaysia. In 2009, the export value of carbon dioxide was RM13.2 million, which was close to the value of both locally produced and imported carbon dioxide. THE REST OF THIS PAGE 15 INTENTIONALLY LEFT BLANK 4. INFORMATION ON OUR GROUP (Cant’d) 4.10 OUTLOOK OFTHE INDUSTRY There are strong indications that economic conditions in Malaysia are improving from the negative effects of the global financial crisis that began in mid-2007. The near term outlook, particularly for 2010, is likely to be more positive than 2009. In 2009, Malaysia’s real GOP contracted by 1.7%. However, the real GOP growth forecast for 2010 is 4.5% to 5.5% (Source: Bank Negara Malaysia). The Malaysian economy registered strong real GOP growth of 10.1 % in the first quarter of 2010, led by continued expansion in domestic demand and stronger external demand (Source: Bank Negara Malaysia). There are also indications of improvement in the manufacturing sector in general and the Industrial Gases Industry in particular: While the sales value of the output of the overall manufacturing sector for the first, second, third and fourth quarters of 2009 were lower than the corresponding quarters in 2008, there are some indications that the performance of the overall manufacturing sector may be improving. The sales value of output for the second quarter of 2009 was 7.2% higher than the sales value of output for the first quarter of 2009, while the sales value of output for the third quarter of 2009 was 10.6% higher than the second quarter of 2009. The sales value of output for the fourth quarter of 2009 was 4.1 % higher than the third quarter of 2009 (Source: Department of Statistics). Similarly, while the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state for the first, second and third quarters of 2009 were lower than the corresponding quarters of 2008, the sales value for the second quarter of 2009 was 24.9% higher compared to the first quarter of 2009 and sales value for the third quarter of 2009 was 34.1 % higher compared to the second quarter of 2009. However, in the fourth quarter of 2009, the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state declined slightly by 2.4% compared to the third quarter of 2009 (Source: Department of Statistics). The relatively strong quarter on quarter increases in the sales value of the manufacture of industrial gases, whether compressed, liquefied or in solid state reported in the first three quarters of 2009 indicates that demand for industrial gases is recovering in line with the improvement seen in the overall manufacturing sector. Moving forward, this is a positive development for the outlook of the Industrial Gases Industry. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

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