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