final output

In view of the recent decline in the construction industry in Singapore and the large number of
contractors registered with the BCA, we expect competition to intensify for tenders of public and
private projects. Such intense competition among approximately 200 M&E plumbing and sanitary
BCA registered contractors (according to the BCA Directory 2000) for the same project is likely to
result in lower profit margins of our business and reduce our profitability.
Our competition is also discussed on page 60 of this Prospectus.
We are dependent on main contractors as all our projects are obtained through invited tenders
from them
Our projects are secured on an invited tender basis. We are invited by main contractors to provide
M&E quotes for the new projects that they are tendering. Our ability to secure M&E contracts depends
on such main contractors inviting us on a frequent and regular basis to provide M&E quotes to them.
These main contractors may not invite us to tender and quote for a project if they find that we do not
have relevant BCA gradings or adequate track record to carry on the scope and responsibilities
required for a particular project or sufficient manpower or financial resources to perform a project.
There is no assurance that these main contractors will continue to invite us to provide quotes for all
projects that they participate in. Our revenue and financial performance would be materially and
adversely affected in the event we are no longer invited by main contractors to quote on new projects.
We are subject to a pending litigation which may reduce our profitability
We had engaged a private company incorporated in Singapore (“the Contractor”) to construct a 4storey
factory at 22 Jurong Port Road. On 20 March 2000, the project architect issued a final certificate
certifying that a sum of $199,406.70 was payable by us to the Contractor. This amount was derived
after setting off the sum of $342,350 which we paid to a third party contractor engaged by us for
rectification of the defective works of the Contractor. We withheld payment to the Contractor after
having being advised by one of our solicitors that we have a valid set-off and counterclaim against
the Contractor for PUB charges and loss of rental income.
On 3 July 2000, the Contractor commenced legal proceedings against us to claim the sums of
$199,406.70 and $342,350, together with interest at 6% per annum and legal costs.
On 15 July 2000, we applied for a stay of the action in court and for the matter to be referred to
arbitration. On 25 July 2000, we made payment of the sum claimed of $199,406.70. However, we
made a counterclaim for an amount in excess of $500,000 against the Contractor for PUB charges
and damages caused by the defective works.
On 11 September 2000, a judgement was awarded by the Assistant Registrar of the High Court
against us for the sum $342,350. We successfully appealed to the High Court against such decision.
The High Court allowed our application for the entire proceedings to be referred to arbitration. The
High Court also ordered the Contractor to pay our legal costs. On 30 October 2000, the Contractor
filed an appeal to the Court of Appeal. We are waiting for the Court of Appeal to fix a date for the
hearing of the appeal. We have thus far acted on the advice of our legal counsel.
In the event we are unsuccessful in our counterclaim against the Contractor, we may have to pay the
Contractor the amount of $342,350 together with interests at 6% per annum and its legal costs.
Should we be unsuccessful, this may reduce our profitability in the future.
We may lose our credit facilities if certain of our Directors and substantial shareholders were
to withdraw their joint and several personal guarantees
As at 30 September 2000, our borrowings comprising bank overdrafts and hire purchase commitments
amounted to $0.7 million. In addition, we had credit facilities of $20.0 million as at 30 September
2000. These credit facilities are secured on fixed deposits of $265,000, our two properties at Sungei
Kadut Loop and Jurong Port Road and a joint and several personal guarantees of $24.25 million by
certain of our Directors and substantial shareholders, Messrs Chua Kim Hua, Chua Hai Kuey, Chua
Kon Seng and Chua Yan Peng.
20