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RISK FACTORS You should carefully consider the following risks before deciding whether to invest in our Shares. All the risks that would have a material adverse impact on our business, operations or financials have been disclosed, to the best of our knowledge and belief as at the date of this Prospectus. The trading price of our Shares could decline because of general market conditions or if any or all of these risks came to pass, and you could lose all or part of your investment. In evaluating the risks of investing in our Company, you should also evaluate the other information set forth in this Prospectus, including our financial statements and the notes accompanying them. RISKS RELATING TO OUR COMPANY AND THE INDUSTRY Our business is subject to the cyclical nature of the construction industry in Singapore We provide M&E services to main contractors in the construction and property industries in Singapore. With Singapore as our only market, a downturn in the Singapore construction industry would adversely affect our business and results. We are exposed to the cyclical fluctuations of the construction industry in Singapore as illustrated in the following. The construction industry in general tracks the overall performance of the Singapore economy. The Singapore economy grew by 0.4% in 1998 due to the economic downturn consequent to the Asian economic crisis, much lower than the 8% growth registered in 1997 1 . The total construction demand, measured in terms of contracts awarded, was $15.3 billion in 1998, representing a 34.9% decline from $23.5 billion in 1997. In 1999, the construction demand decreased even further to $11.7 billion 2 . Although the estimated construction demand for 2000 is $17.3 billion 3 , there is no assurance that this forecast will be achieved. Furthermore, the actual figures could be lower than projected. Any decrease in construction demand can adversely affect our business volume and result in significantly lower turnover. The construction industry in Singapore is also discussed on pages 46 and 55 of this Prospectus. HDB projects contribute to approximately 95% of our gross profit. Our business is therefore dependent on HDB For the last three financial years, HDB projects contributed to approximately 82% of our turnover and approximately 95% to our gross profit. Any significant reduction in housing projects by HDB or any major delay or cancellation of HDB housing projects will result in lower business volume and consequently lower earnings. Details of our customers are set out on page 58 of this Prospectus. Our revenue and gross profit derived from HDB projects and as a percentage of our Group’s turnover and gross profit for the last three financial years are shown below:- 1998 Financial year ended 31 March 1999 2000 ($’000) % ($’000) % ($’000) % Turnover derived from HDB projects 45,970 89.6 36,349 90.2 40,905 69.2 Gross profit derived from HDB projects 3,678 96.5 7,899 104.5 (1) 7,749 84.5 Note:- (1) In FY 1999, we had $0.4 million gross losses relating to private projects. This reduced the total profits earned for the year. As a result, the profits derived from HDB projects contributed to 104% of the total gross profits. 1 1999 Economic Survey of Singapore 2 Construction Economics Report, Second Quarter 2000 3 Construction Economics Report, Second Quarter 2000 16
We depend on four customers who contributed approximately 80% to our revenue in FY 2000. Therefore, any termination or loss of projects from any of these customers would materially adversely affect our business In FY 2000, four of our top customers accounted for approximately 80% of our turnover as elaborated on pages 58 and 59 of this Prospectus. These four customers accounted for approximately 67% of our gross profits in FY 2000. In the event that our business volume with any of these customers should decline or they terminate their relationship with us, our performance would decline significantly and our business, financial condition and operating results would be materially adversely affected. Cost overruns can adversely affect our Group’s profitability When providing quotation for a project, we may underestimate our project cost, particularly labour and time costs at the time of preparing our quotation. As such, we could incur cost overruns. Due to the long duration of certain projects, costs of materials, supplies and labour may increase beyond our estimate. Cost overruns may also occur due to poor site management, wastage or damage of materials. Unforeseen circumstances beyond our control, such as delays due to unanticipated difficulties, such as excavation difficulties due to unforeseen soil conditions or poor co-ordination in work schedules among sub-contractors, may also result in cost overruns. There is no assurance that we may not have any material cost overruns on our current and future projects. Such cost overruns would reduce our earnings on these projects or may even result in us incurring losses for a project. Disputes, claims and variation orders can erode our Group’s profitability In our business, it is common for claims to be made by customers against contractors or subcontractors for defective works and/or non-compliance with contract specifications. It is also common for our customers to retain a certain percentage of the contract sum as retention moneys for the costs of rectifying any defective works not rectified by us. Variation orders are usually additional works or changes requested by the customer for specifications not included in the original contract. Additional time would be extended to us to allow for completion of the project. On certain occasions, the parties may agree that variation orders be performed before the costs for such additional works are <strong>final</strong>ised. Thus, the <strong>final</strong> values of such variation orders may be subject to dispute by our customers. In such an event, additional works resulting from variation orders that may not be chargeable to our customers arising from disputes as elaborated in the preceding sentences would be absorbed by us. As a result of absorbing such costs, we may have to suffer lower profits or even losses for that project. To date, we have not experienced any material variation orders, claims or disputes. However, there is no assurance that such variation orders, claims or disputes may not arise materially in the future. In the event that we are required to bear any part of the variation costs or, claims or disputes, our earnings would be adversely affected. We are subject to credit risk of our customers Our credit terms to our customers are typically between 45 days to 90 days from date of progress claim. However, actual collection may range up to 120 days, as payment may only be made after certification of the works completed. The longer collection period is due to the time required for the main contractor to receive the moneys from the developers who may only pay after works completed have been certified by qualified surveyors or architects. Therefore, our collection period depends, to a large extent, on payments by the developers to the main contractor. We may not be able to collect payment from our customers due to bad debts by our customers. Any bad debts written off due to our inability to collect payment would increase our operating expenses and thereby reduce our profitability. Details of our bad debts written off are set out on page 59 of this Prospectus. 17
Page 1 and 2: PROSPECTUS DATED 25 November 2000 A
Page 3 and 4: Competitive Strengths Extensive Exp
Page 5 and 6: CORPORATE INFORMATION BOARD OF DIRE
Page 7 and 8: “Executive Officers” : The exec
Page 9 and 10: GLOSSARY OF TECHNICAL TERMS To faci
Page 11 and 12: LISTING ON SGX SESDAQ DETAILS OF TH
Page 13 and 14: INDICATIVE TIMETABLE FOR LISTING In
Page 15 and 16: Our Competitive Strengths (a) We ha
Page 17 and 18: Our Restructuring Exercise Prior to
Page 19: THE INVITATION Issue Size : 30,000,
Page 23 and 24: If ongoing projects extend their da
Page 25 and 26: In the event that our Directors and
Page 27 and 28: NET OPERATING CASH FLOW (1) Histori
Page 29 and 30: DILUTION (1) (a) The dilution to ne
Page 31 and 32: HISTORY GENERAL INFORMATION ON OUR
Page 33 and 34: Each of our M&E engineering service
Page 35 and 36: (e) Communications & Security Syste
Page 37 and 38: To the best of our knowledge and be
Page 39 and 40: Contract Date of Date of Value Deta
Page 41 and 42: Contract Date of Date of Value Deta
Page 43 and 44: Our ISO manual sets out the guideli
Page 45 and 46: Our Licences We currently have two
Page 47 and 48: Financial Positions of the Proforma
Page 49 and 50: REVIEW OF PAST OPERATING RESULTS Ov
Page 51 and 52: Materials such as uPVC pipes and fi
Page 53 and 54: Despite the lower turnover, profit
Page 55 and 56: (c) In addition, our general and ad
Page 57 and 58: Current liabilities Our current lia
Page 59 and 60: As at 30 September 2000, certain of
Page 61 and 62: MAJOR SUPPLIERS Suppliers accountin
Page 63 and 64: We provided plumbing & sanitary and
Page 65 and 66: (b) Capabilities to provide integra
Page 67 and 68: Goh Chee Wee was appointed as an in
Page 69 and 70: Siow Nget Yuen joined our Group in
Page 71 and 72:
Our management reporting structure
Page 73 and 74:
Their current monthly remuneration
Page 75 and 76:
(g) that authority be given pursuan
Page 77 and 78:
(2) Mr Chua Kim Hua entered into a
Page 79 and 80:
Note:- (1) Comprises rental of prem
Page 81 and 82:
The transaction was on arm’s leng
Page 83 and 84:
Chip Eng Seng is one of our main cu
Page 85 and 86:
We supply sanitary and plumbing pro
Page 87 and 88:
Prior to the purchases, the employe
Page 89 and 90:
Corporate Governance Present Our Gr
Page 91 and 92:
PROPERTIES AND FIXED ASSETS Our Gro
Page 93 and 94:
25 November 2000 The Board of Direc
Page 95 and 96:
B. BASIS OF PRESENTATION OF FINANCI
Page 97 and 98:
D. PROFORMA STATEMENT OF GROUP BALA
Page 99 and 100:
F. PROFORMA STATEMENT OF NET ASSETS
Page 101 and 102:
G. SUMMARY OF SIGNIFICANT ACCOUNTIN
Page 103 and 104:
H. NOTES TO PROFORMA STATEMENT OF G
Page 105 and 106:
H. NOTES TO PROFORMA STATEMENT OF G
Page 107 and 108:
K. AUDITED FINANCIAL STATEMENTS No
Page 109 and 110:
UNAUDITED CONSOLIDATED BALANCE SHEE
Page 111 and 112:
GENERAL AND STATUTORY INFORMATION I
Page 113 and 114:
Name Present Directorships Past Dir
Page 115 and 116:
4. No Director or Executive Officer
Page 117 and 118:
Save as disclosed above, and for pa
Page 119 and 120:
Article 90 The Directors to retire
Page 121 and 122:
Article 23 The Directors may if the
Page 123 and 124:
Variation of rights of Shareholders
Page 125 and 126:
Article 50 (A) Every notice calling
Page 127 and 128:
BANK BORROWINGS AND WORKING CAPITAL
Page 129 and 130:
LITIGATION 26. Saved as disclosed b
Page 131 and 132:
32. Application moneys received by
Page 133 and 134:
TERMS AND CONDITIONS AND PROCEDURES
Page 135 and 136:
10. Share certificates will be regi
Page 137 and 138:
5. Applications for the New Shares
Page 139 and 140:
11. Applications for Placement Shar
Page 141 and 142:
1. In connection with his Electroni
Page 143 and 144:
The responsibility for timely refun
Page 145 and 146:
INSTRUCTIONS FOR ELECTRONIC APPLICA
Page 148:
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