EC Excel Holdings Limited

Transcription

1 The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of EC Excel Holdings Limited (Incorporated in the Cayman Islands with limited liability) (the Company ) WARNING The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the Exchange )/the Securities and Futures Commission (the Commission ) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers and members of the underwriting syndicate that: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; the publication of this document or any supplemental, revised or replacement pages on the Exchange s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; this Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; no application for the securities mentioned in this document should be made by any person nor would such application be accepted; the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

2 IMPORTANT If you are in any doubt about any contents of this document, you should obtain independent professional advice. EC Excel Holdings Limited (incorporated in the Cayman Islands with limited liability) [REDACTED] Number of [REDACTED] under the [REDACTED] : [REDACTED] Shares (subject to the [REDACTED]) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation and the [REDACTED]) [REDACTED] : Not more than HK$[REDACTED] per [REDACTED] and expected to be no less than HK$[REDACTED] per [REDACTED], plus brokerage fee of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005% (payable in full upon application in Hong Kong dollars and subject to refund) Nominal Value : HK$0.01 per Share Stock Code : [REDACTED] Sole Sponsor [REDACTED] and [REDACTED] [REDACTED] Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the documents specified in the paragraph headed Documents Delivered to the Registrar of Companies in Hong Kong in Appendix V to this document, has been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above. The [REDACTED] is expected to be determined by the [REDACTED] between the [REDACTED] (for itself and on behalf of the Underwriters) and our Company on or about [REDACTED] or such later date as may be agreed between the parties. If, for any reason, the [REDACTED] (for itself and on behalf of the Underwriters) and our Company are unable to reach an agreement on the [REDACTED] by that date or such later date as agreed by our Company and the [REDACTED] (for itself and on behalf of the Underwriters), the [REDACTED] will not become unconditional and will lapse. The [REDACTED] will not be more than HK$[REDACTED] per [REDACTED] and is expected to be not less than HK$[REDACTED] per [REDACTED], unless otherwise announced. The [REDACTED] (for itself and on behalf of the Underwriters) may, with the consent of our Company, reduce the above indicative [REDACTED] range at any time prior to the [REDACTED]. In such a case, notice of the reduction in the indicative [REDACTED] range will be available on the website of the Stock Exchange at and the website of our Company at Prospective investors of the [REDACTED] should note that the [REDACTED] (for itself and on behalf of the Underwriters) may in its absolute discretion, upon giving notice in writing to our Company, terminate the Underwriting Agreements with immediate effect if any of the events set forth under the paragraph headed Underwriting [REDACTED] in this document occurs at any time prior to 8:00 a.m. (Hong Kong time) on the [REDACTED]. Should the [REDACTED] (for itself and on behalf of the Underwriters) terminate the Underwriting Agreements in accordance with the terms of the Underwriting Agreements, the [REDACTED] will not proceed and will lapse. Prior to making an investment decision, prospective investors should carefully consider all the information set out in this document, including the risk factors set out in the section headed Risk Factors in this document. [REDACTED]

3 EXPECTED TIMETABLE [REDACTED] i

4 EXPECTED TIMETABLE [REDACTED] ii

5 EXPECTED TIMETABLE [REDACTED] iii

6 CONTENTS IMPORTANT NOTICE TO INVESTORS This document is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document may not be used for the purpose of and does not constitute an offer to sell or a solicitation of an offer in any other jurisdiction or in any other circumstances. You should rely only on the information contained in this document to make your investment decision. We, the Sole Sponsor, the [REDACTED], and the [REDACTED] have not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representation not contained in this document must not be relied on by you as having been authorised by us, the Sole Sponsor, the [REDACTED] and the [REDACTED], any of their respective directors, officers, employees, agents or representatives, or any other person or party involved in the [REDACTED]. The contents on the website at which is the official website of our Company, do not form part of this document. Page Expected Timetable Contents i iv Summary Definitions Glossary of Technical Terms Forward-looking Statements Risk Factors Information about this Document and the [REDACTED] Directors and Parties Involved in the [REDACTED] Corporate Information Industry Overview Malaysian Regulatory Overview iv

7 CONTENTS Page History, Reorganisation and Corporate Structure Business Relationship with our Controlling Shareholders Connected Transactions Directors, Senior Management and Employees Share Capital Waiver from Strict Compliance with the Requirements under the Listing Rules Substantial Shareholders Financial Information Future Plans and Use of Proceeds Underwriting Structure and Conditions of the [REDACTED] How to Apply for [REDACTED] Appendix I Accountants Report I-1 Appendix II Unaudited Pro Forma Financial Information II-1 Appendix III Summary of the Constitution of the Company and Cayman Islands Company Law III-1 Appendix IV Statutory and General Information IV-1 Appendix V Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection V-1 v

8 SUMMARY OVERVIEW We mainly (i) manufacture and sell cold-rolled steel bars and steel wire products; and (ii) process and sell hot-rolled steel bars in Malaysia. We pride ourselves on our capability to supply both standard and customised products with different specifications, in terms of length, diameter and surface finish, which cater for the varying needs of our customers. Our history can be traced back to the establishment of EC Excel Wire, one of our operating subsidiaries in Malaysia, in 2007 by Mr. Ng, our executive Director, chief executive officer and chairman of the Board. Since then, we have accumulated more than 10 years of experience in the steel bar product and steel wire product industry in Malaysia and have established sales network covering most regions in Malaysia. OUR BUSINESS Our business model. Our steel bar products and steel wire products are generally used and applied in construction and infrastructure projects. They can be classified into (i) standard steel bar products and steel wire products; (ii) customised steel bar products and steel wire products with various specifications; and (iii) cut-to-size wire meshes with different physical properties. Regarding our standard steel bar products and steel wire products, we maintain an optimal inventory level based on our weekly production plan. On the other hand, we do not keep customised steel bar products and steel wire products as inventory as the product specifications and requirements under each order are different. As to our cut-to-size wire meshes, our in-house technical team comes up with cost-saving combinations of wire meshes to implement the architectural designs of customers such as property developers and construction contractors. Our in-house technical team can make appropriate adjustments of our wire meshes to suit our customers architectural needs. Products sourced by us from third parties for trading mainly comprise unprocessed hot-rolled bars, prestressed concrete steel strands and cement which can be sold to our customers on a standalone basis or together with our steel bar products and steel wire products to allow our customers to complete their purchase in one go. Intra-group transaction between our subsidiaries. During the Track Record Period, all the manufacturing and processing processes of our products took place in the Kuantan Plant held by EC Excel Wire, our wholly-owned subsidiary. On the other hand, we set up subsidiaries (including UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal) in different regions in Malaysia to cater for the needs of different local markets and these subsidiaries would place purchase orders to EC Excel Wire for our products and EC Excel Wire sold the products to these subsidiaries on a cost-plus basis and vice versa, EC Excel Wire purchases building materials and accessories from these subsidiaries (collectively, the Intra-group Transactions ). Our Malaysia Legal Advisers advised that the transfer pricing laws and guidelines are not applicable to the transactions between persons who are both assessable and changeable with tax and any adjustments made will not alter the total tax payable. These Intra-group Transactions are subject to transfer pricing related laws and guidelines in Malaysia. After seeking the views of the tax consultant engaged by us and our Malaysia Legal Advisers, our Directors confirm that our transfer pricing policies and transfer pricing documentation are in accordance with the relevant transfer pricing guidelines of Malaysia and are considered as compliant with the arm s length principle under the relevant transfer pricing laws and regulations of Malaysia. Our products. Our steel bar products include (i) hot-rolled steel bars; and (ii) cold-rolled steel bars. Our cold-rolled steel bars made by low carbon wire rods can be of different surface finish, length and diameters through cold rolling process and wire straightening and cutting processes. Our hot-rolled steel bars are processed simply by cutting, bending and packaging of unprocessed hot-rolled steel bars. Regarding our steel wire products, we mainly manufacture and sell (i) wire meshes, which mainly include standard and cut-to-size wire meshes; and (ii) fencing products including barbed wires, chain-link fences and welded fences. After the production stage, depending on the locations of individual customers, we either deliver our products to their designated sites with our own logistics team, or third party logistics service providers engaged by us. To complement our core business, we also trade building materials and accessories including unprocessed hot-rolled steel bars, prestressed concrete steel strand and cement. Our revenue, gross profit and gross profit margin. During the Track Record Period, our total revenue amounted to approximately RM160.4 million, RM187.1 million, RM306.8 million and RM132.1 million, respectively; and for the same year/period, we recorded gross profit of approximately RM23.6 million, RM27.4 million, RM33.3 million and RM13.7 million, respectively, and the gross profit margin of approximately 14.7%, 14.6%, 10.9% and 10.4%, respectively. The following tables sets forth a breakdown of our revenue, gross profit and gross profit margin by product categories during the Track Record Period: 1

9 SUMMARY For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products Hot-rolled steel bars 77, , , , , Cold-rolled steel bars 15, , , , , Subtotal 92, , , , , Manufacturing and sale of steel wire products Standard wire meshes 35, , , , , Cut-to-size wire meshes 4, , , , , Fencing products 3, , , Subtotal 44, , , , , Trading of building materials and accessories 23, , , , , Total 160, , , , , For the year ended 31 December For the four months ended 30 April Gross Gross Gross Gross profit Gross profit Gross profit Gross profit Gross margin profit margin profit margin profit margin profit 2 Gross profit margin Gross profit RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Steel bar products Hot-rolled steel bars 8, , , , , Cold-rolled steel bars 3, , , , , Subtotal 12, , , , , Steel wire products Standard wire meshes 7, , , , , Cut-to-size wire meshes 1, , , , Fencing products 1, Subtotal 10, , , , , Trading of building materials and accessories 1, , , Total 23, , , , ,

10 SUMMARY For detailed analysis of our Group s revenue, gross profit and gross profit margin, please refer to the paragraph headed Financial Information Discussion of selected combined statements of profit or loss and other comprehensive income items in this document. Our pricing policy. We generally price our products on a cost-plus basis comprising the following factors (i) the price of the raw materials; (ii) in respect of customised products (including cut-to-size wire meshes), the product specifications, functional and quality requirements and complexity of the production process and costs, sales volume, lead time and delivery schedules required by our customers; (iii) the competitive landscape of the products; (iv) prices of our competitors products; and (v) payment terms. Our Kuantan Plant and production capacity. We manufacture and process our steel bar products and steel wire products in our self-owned Kuantan Plant in Malaysia, which is located on two pieces of adjacent land with a total gross factory built-up area of approximately 19,663 m 2, of which approximately 8,450 m 2 has been designated for manufacturing or processing and approximately 11,213 m 2 has been designated for storage of our steel bar products and steel wire products. The table below sets out our total production capacities and utilisation rates of our production facilities by product categories during the Track Record Period: Our production facilities For the year ended 31 December For the four months ended 30 April Actual Actual Actual Actual Production production Utilisation Production production Utilisation Production production Utilisation Production production Utilisation capacity volume rate capacity volume rate capacity volume rate capacity volume rate (MT) (MT) (%) (MT) (MT) (%) (MT) (MT) (%) (MT) (MT) (%) Our Kuantan Plant Steel bar products: Hot-rolled steel bars 82, , , , , , , , Cold-rolled steel bars 10, , , , , , , , Steel wire products: Wire meshes 23, , , , , , , , Fencing products For further details of our production and utilisation rate, please refer to the paragraph headed Business Production facilities Production capacity in this document. COMPETITIVE LANDSCAPE According to the SMITH ZANDER Report, steel bar product and steel wire product industry is fragmented and our Group captured 1.3% and 1.7% within the steel bar product industry and steel wire product industry, respectively with sales of approximately 45,618 MT of steel bar products and 25,589 MT of steel wire products respectively in Key factors of competition in the industry include: (i) the availability of machinery and equipment to increase production efficiency; (ii) the ability to offer products with quality certification; (iii) the ability to mobilise a fleet of in-house logistics team to better manage delivery schedules and transportation costs; and (iv) economies of scale. On the other hand, there are high barriers of entry in respect of the steel wire product and steel bar product industry due to (i) high capital investment for new entrants; and (ii) advantages of economies of scale of established players. OUR CUSTOMERS, SALES NETWORK AND BUSINESS STRATEGIES Our customers and sales network. Our customers mainly include building material trading companies, construction contractors, property developers and hardware shops. During the Track Record Period, our top five customers accounted for approximately 16.9%, 11.0%, 22.2% and 27.6% of our total revenue, respectively, while our largest customer accounted for approximately 3.8%, 2.4%, 11.3% and 17.5% of our total revenue for the same year/period. We have established sales network reaching over 1,600 customers and cover most regions in Malaysia. The table below sets out a breakdown of our revenue by geographical locations of our customers for the periods indicated: 3

11 SUMMARY For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Central Region 103, , , , , East Coast Region 43, , , , , Southern Region 11, , , , , Northern Region 2, , , , , Total 160, , , , , The diagram below illustrates the coverage of our sales network by our respective subsidiaries: East Coast Region Pulau Langkawi PERLIS KEDAH X Central Region Southern Region Northern Region Northeastern States PENANG STRAITS OF MALACCA New Selangor Production Facility in Bukit Beruntung PERAK X SELANGOR KELANTAN PAHANG NEGERI SEMBILAN TERENGGANU X Our New Kelantan Plant in Tanah Merah Our Kuantan Plant SOUTH CHINA SEA N 0 80 KM MELAKA JOHOR Our business strategies. Our principal business objectives are to achieve sustainable growth, further strengthen our position in the steel bar product and steel wire product industry in Malaysia, and create long-term value for our Shareholders by executing the following strategies: (i) establish the New Kelantan Plant; (ii) setting up the New Selangor Production Facility; (iii) purchasing new trucks and forklifts and build an office premises at our Kuantan Plant; and (iv) upgrade our enterprise resource system and enhance our capabilities in information technology. The table below sets forth the details of our (i) existing Kuantan Plant; (ii) New Kelantan Production Plant; and (iii) New Selangor Production Facility: 4

12 SUMMARY Kuantan Plant New Kelantan Plant New Selangor Production Facility Land area 37,900 m 2 36,150 m 2 6,500 m 2 to 7,000 m 2 Major products i. Hot-rolled steel bar i. Hot-rolled steel bar i. Hot-rolled steel bar products; products; products; ii. Cold-rolled steel bar ii. Cold-rolled steel bar ii. Cold-rolled steel bar products; products; products; and iii. Wire meshes; and iv. Fencing products iii. Wire meshes; and iv. Fencing products iii. Wire meshes Total cost of investment to be incurred NA (our existing plant) approximately approximately HK$[REDACTED] (of HK$[REDACTED], which, approximately which shall be paid by HK$[REDACTED] will the proceeds of the be paid by the proceeds [REDACTED] of the [REDACTED] and the remaining of approximately HK$[REDACTED] will be financed by bank loan or our internal resources) Full production capacity in FY2021 (MT/annum) Steel bar products 89, ,820 (increase by stage and full ramp-up in FY2021) Steel wire products 37,418 16,916 (increase by stage and full ramp-up in FY2021) 167,178 (increase by stage and full ramp-up in FY2021) 9,141 (increase by stage and full ramp-up in FY2021) For more details, please refer to the paragraph headed Business Business strategies in this document. OUR SUPPLIERS, PROCUREMENT AND MAJOR RAW MATERIALS Our major raw materials and procurement. The major raw materials used in manufacturing or processing of steel bar products and steel wire products include unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires which are mainly sourced in Malaysia. Our procurement team and our production team formulate the procurement plan of our raw materials on a regular basis. Our suppliers. During the Track Record Period, purchases from our five largest suppliers accounted for approximately 74.5%, 67.0%, 80.1% and 78.6% of our total purchases, respectively, while our largest supplier accounted for approximately 33.1%, 25.2%, 26.9% and 36.5% of our total purchases for the same period, respectively. COMPETITIVE STRENGTHS Our Directors believe that the success of our Group is attributable to, among other things, the following competitive strengths: (i) possession of a wide array of machines, which, together with our industry knowledge and expertise, enable us to provide high quality standard and customised steel bar products and/or steel wire products to our customers; (ii) comprehensive quality assurance system; (iii) experienced management team; (iv) established sales network across Malaysia; and (v) stable business relationship with our suppliers and customers. For more details, please refer to the paragraph headed Business Competitive strengths in this document. SHAREHOLDER INFORMATION Immediately following completion of the Capitalisation Issue and the [REDACTED] (without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon the exercise of option granted under the Share Option Scheme), Decade Lion, which is wholly-owned by Mr. Ng, will be interested in approximately [REDACTED]% of the issued share capital of our Company. Accordingly, Decade Lion and Mr. Ng will be our Controlling Shareholders. 5

13 SUMMARY Our Controlling Shareholders have confirmed that none of them and their respective associates are interested in any business which compete or are likely to compete, directly or indirectly, with the business of our Group. Our Controlling Shareholders, Mr. Ng, is one of our executive Directors. For further details, please refer to the paragraph headed Directors, Senior management and Employees Directors in this document. [REDACTED] INVESTMENT On 6 March 2018, a subscription agreement was entered into between Strength Reach, Precise One, EC Excel Wire and Mr. Ng, pursuant to which Strength Reach agreed to subscribe for, and Precise One agreed to procure its holding company to allot and issue 130 Shares, representing 13% of the issued share capital of our Company. The consideration was arrived at after arm s length negotiation between Precise One, EC Excel Wire, Mr. Ng and Strength Reach and taking into account the respective unaudited net asset value of EC Excel Wire, UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal as at 31 December The allotment was properly and legally completed and settled on 25 May After the said share transfer, our Company was owned as to 87.0% by Decade Lion and 13.0% by Strength Reach. For further details, please refer to the paragraph headed History, Reorganisation and Corporate Structure [REDACTED] investment in this document. KEY OPERATIONAL AND FINANCIAL DATA The following tables present a summary of key operational and financial data during the Track Record Period and should be read in conjunction with our financial information included in the Accountants Report set forth in Appendix I to this document, including the notes thereto. Selected information extracted from the combined statements of profits or loss For the four months For the year ended 31 December ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Revenue 160, , ,813 90, ,139 Cost of sales (136,719) (159,758) (273,490) (79,592) (118,414) Gross profit 23,648 27,380 33,323 11,233 13,725 Other income and expenses Other gains and losses (161) (46) 60 Impairment loss on trade receivables, net of reversal (178) (490) (85) (26) Selling and distribution expenses (5,460) (6,045) (6,937) (2,351) (3,156) Administrative expenses (3,804) (5,426) (5,750) (2,152) (2,488) [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Finance costs (2,228) (2,513) (3,693) (951) (1,488) Profit before tax 12,251 13,548 17,522 5,949 5,053 Income tax expense (2,893) (3,266) (4,243) (1,190) (1,946) Profit and total comprehensive income for the year/period 9,358 10,282 13,279 4,759 3,107 Profit and total comprehensive income for the year/period attributable to: Owners of the Company 8,444 9,586 12,657 4,642 3,009 Non-controlling interests ,358 10,282 13,279 4,759 3,107 6

14 SUMMARY Malaysian Ringgit is converted into Hong Kong dollars at an exchange rate of RM1 to HK$ We generate revenue primarily from the sales of various types of steel bar products and steel wire products manufactured or processed by our Group. Our total revenue increased (i) from approximately RM160.4 million in FY2015 to approximately RM187.1 million in FY2016; (ii) to approximately RM306.8 million in FY2017; and (iii) from approximately RM90.8 million for the four months ended 30 April 2017 to approximately RM132.1 million for the four months ended 30 April 2018, mainly due to (i) the increase in our revenue derived from the sales of our steel bar products and steel wire products; (ii) the increase in our sales in Central Region and East Coast Region; and (iii) the increase in our revenue derived from the trading of building materials and accessories. For more details, please refer to the paragraph headed Financial Information Discussion of selected combined statements of profit or loss and other comprehensive income items Revenue in this document. Selected information extracted from the combined statements of financial position As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Non-current Assets 23,420 32,794 47,904 47,699 Current Assets 62,763 80, , ,127 Current Liabilities 49,407 60,868 95,311 98,461 Selected information extracted from the combined statements of cash flows Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Operating cash flows before movements in working capital 16,402 18,470 22,981 7,573 7,133 Net cash from (used in) operating activities 14,005 (5,084) 3,738 (4,409) (7,295) Net cash used in investing activities (6,458) (13,477) (4,867) (925) (1,006) Net cash (used in) from financing activities (1,507) 13,478 6,044 6,026 8,492 Net increase (decrease) in cash and cash equivalents 6,040 (5,083) 4, Cash and cash equivalents at beginning of the year/period 726 6,766 1,683 1,683 6,598 Cash and cash equivalents at end of the year/period 6,766 1,683 6,598 2,375 6,789 7

15 SUMMARY Cost of sales Our cost of raw materials, primarily comprised unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires, which formed our largest cost component, representing approximately 95.1%, 97.3%, 96.8% and 98.8% of our total cost of sales during the Track Record Period, respectively. The table below sets forth a breakdown of our cost of raw materials and trading products during the Track Record Period: For the four months For the year ended 31 December ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Cost of raw materials 129, , , , , Labour costs 1, , , Manufacturing overhead 4, , , , , Total cost of manufacturing 136, , , , , Inventory movement (Note) (2,282) (1.5) 1, (1,222) (1.0) Total 136, , , , , Note: Inventory movement represents finished goods as at the beginning of the year/period less finished goods as at the end of the year/period. KEY FINANCIAL RATIOS 8 As at/ For the four months ended As at/for the year ended 31 December 30 April Return on equity 32.8% 27.6% 26.4% N/A Return on assets 10.9% 9.1% 7.9% N/A Current ratio Quick ratio Gearing ratio 132.9% 151.4% 154.6% 166.9% Debt-to-equity ratio 79.7% 113.5% 110.3% 122.6% Interest coverage ratio For further details, please refer to the paragraph headed Financial Information Key financial ratio in this document. DIVIDENDS EC Excel Wire declared and paid the dividends of nil, approximately RM2.0 million, RM0.5 million and nil to the then respective shareholders in FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. No dividend has been proposed and declared by our Group after the Track Record Period and subsequent to 30 April 2018.

16 SUMMARY Our Company currently does not have any predetermined dividend payout ratio. To the extent profits are distributed as dividends, such profits will not be available to be reinvested in our operations. Our historical dividend distribution record may not be used as a reference or basis to determine the level of dividends that may be declared or paid in the future. We cannot assure you that dividends will be paid in the future or as to the timing of any dividends that may be paid in the future. RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE As at the Latest Practicable Date, there was no material change to our business model, revenue and cost structure. Based on our unaudited consolidated management accounts, our total revenue and gross profit for the month ended 31 May 2018 increased when compared to that for the same period in 2017 primarily attributable to the increase in average selling price of our products. Our net current assets as at 31 May 2018 also increased when compared to those as at 30 April 2018, which was primarily attributable to the net profit we generated during the one month ended 31 May 2018 and such net profit were retained and kept as cash and cash equivalents. On 21 June 2018, we were granted additional bank facilities of (i) RM550,000 (equivalent to approximately HK$1.1 million) for acquisition of a parcel of land in Tanah Merah of Kelantan on which the New Kelantan Plant will be built; (ii) RM6.0 million (equivalent to approximately HK$12.0 million) for construction of the New Kelantan Plant; and (iii) RM5.0 million (equivalent to approximately HK$10.0 million) for acquisition of machinery, trucks, trailers and forklifts for the New Kelantan Plant. Save as disclosed above, our Directors confirm that there has been no material adverse change in our business operations and business environment in which we are operating subsequent to the Track Record Period. Notwithstanding the above, we currently expect that our financial results for the year ending 31 December 2018 will be adversely impacted by our non-recurring [REDACTED] expenses recognised and to be recognised as expenses in our consolidated statements of profit or loss and other comprehensive income. Please refer to the paragraph headed Financial information [REDACTED] expenses in this document for further details of our [REDACTED] expenses. FUTURE PLANS AND USE OF PROCEEDS Based on the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] to HK$[REDACTED] per [REDACTED], we will receive gross proceeds of approximately HK$[REDACTED] million. The net proceeds from the [REDACTED] are estimated to be approximately HK$[REDACTED] million, after deducting the underwriting fees and other estimated expenses payable by our Company in connection thereto. We intend to apply such net proceeds from the [REDACTED] as follows: Approximate amount of net proceeds (HK$) Intended usage Fully utilised by year/period ending [REDACTED] million or [REDACTED]% [REDACTED] million or [REDACTED]% [REDACTED] million or [REDACTED]% [REDACTED] million or [REDACTED]% [REDACTED] million or [REDACTED]% Acquisition of land for the New Kelantan 31 December 2019 Plant and the New Selangor Production Facility Strengthen our logistics capability and 31 December 2020 expansion of our production capacity Repayment of bank borrowings 31 December 2018 Setting up an ERP System 30 June 2020 Working capital 31 December

17 SUMMARY [REDACTED] STATISTICS Based on the minimum [REDACTED] of HK$[REDACTED] per Share Based on the maximum [REDACTED] of HK$[REDACTED] per Share Market capitalisation (Note 1) HK$[REDACTED] HK$[REDACTED] Unaudited pro forma adjusted combined net tangible assets of our Group attributed to owners of our Company as at 30 April 2018 per Share (Note 2) RM[REDACTED] RM[REDACTED] Notes: 1. The calculation of our market capitalisation is based on [REDACTED] Shares which will be in issue immediately following the completion of the Capitalisation Issue and the [REDACTED], but takes no account of any Shares which may be issued pursuant to the [REDACTED] or any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by Company pursuant to the general mandate to issue shares and general mandate to repurchase shares as described in the section headed Share Capital in this document. 2. The unaudited pro forma adjusted combined net tangible assets of our Group attributed to owners of our Company per Share has been prepared with reference to certain estimation and adjustment. Please refer to Appendix II to this document for further details. RISK FACTORS We believe that there are certain risks involved in our business and operations. Our major risks include: (i) fluctuation in the prices of our major raw materials; (ii) our reliance on our top five suppliers for the supply of raw materials for the manufacturing or processing of our products; (iii) delay in the delivery of raw materials or defect in the raw materials supplied to us; (iv) mismatch between the time receipt of payments from our customers and payments to our suppliers if which may affect our cash flow; and (v) failure to implement our quality control systems effectively, which would result in our failure to conform with the requisite standards in relation to our products. A detailed discussion of the risk factors is set forth in the section headed Risk Factors in this document. Prospective investors should read the section headed Risk Factors in this document in its entirety before making any investment decision in the [REDACTED]. REASONS FOR [REDACTED] IN HONG KONG Our Directors believe that [REDACTED] in Hong Kong gives us long-term advantages given it would expand our shareholder and capital base by making our Shares available and accessible to investors in Hong Kong and greater China as the stock market in Hong Kong will attract different geographically based investors and Hong Kong provides a favourable environment for investors. We also believe that the access to international funding will underpin our expansion plans whereas the sole reliance on organic growth funding via self-operation will impose constraints on the overall growth of our Group. [REDACTED] would help raise our publicity, information transparency that facilitate building up trust and confidence of the potential and existing customers on us and as a result, strengthen our market position in steel bar product and steel wire product industry in Malaysia. [REDACTED] EXPENSES For the FY2015, FY2016 and FY2017, we did not incur any [REDACTED] expenses. For the four months ended 30 April 2018, we incurred [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]). We expect to incur total [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) of which our Group (i) has recognised approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) in the profit or loss for the four months ended 30 April 2018; (ii) expects to recognise approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) in the profit or loss for the eight months ending 31 December 2018; and (iii) expects to recognise approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) as a deduction in equity directly for the year ending 31 December Expenses in relation to the [REDACTED] are non-recurring in nature. Our Group s financial performance and result of operations for the four months ended 30 April 2018 and the year ending 31 December 2018 will be, significantly and adversely affected by the expenses in relation to the [REDACTED]. 10

18 DEFINITIONS Unless the context otherwise requires, the following expressions have the following meanings in this document. Certain other terms are explained in the sections headed Glossary of technical terms. Accountants Report Affiliate(s) [REDACTED] Arena Metal Resources Articles of Association or Articles associate(s) Audit Committee Board or Board of Directors Business Day(s) or business day(s) BVI Capitalisation Issue the accountants report of our Group prepared by the Reporting Accountants set out in Appendix I to the document any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person [REDACTED] Arena Metal Resources Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 19 July 2010, and an indirect non-wholly owned subsidiary of our Company the amended and restated articles of association of our Company c o n d i t i o n a l l y a d o p t e d o n [ ] w i t h e f f e c t f r o m t h e [REDACTED], a summary of which is set out in Appendix III to this document, and as amended from time to time has the meaning ascribed to it under the Listing Rules the audit committee of the Board the board of Directors a day on which banks in Hong Kong are generally open for business to the public and which is not (i) a Saturday, Sunday or public holiday in Hong Kong or (ii) a day on which a tropical cyclone warning signal no. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. the British Virgin Islands the allotment and issue of [REDACTED] Shares to be made upon capitalisation of certain sums standing to the credit of the share premium account of our Company referred to in the paragraph headed Statutory and general information A. Further information about the Company 3. Written resolutions of the Shareholders in Appendix IV to this document 11

19 DEFINITIONS CCASS CCASS Clearing Participant CCASS Custodian Participant CCASS Investor Participant CCASS Participant Central Region China or PRC close associate(s) Companies Law or Cayman Companies Law Companies Ordinance Companies (Winding Up and Miscellaneous Provisions) Ordinance Company or our Company connected person(s) Controlling Shareholder(s) core connected person(s) Corporate Governance Code the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a direct clearing participant or general clearing participant a person admitted to participate in CCASS as a custodian participant a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant refers to Selangor Darul Ehsan and federal territories of Kuala Lumpur and Putrajaya People s Republic of China, which excludes for the purpose of this document, Hong Kong, Macau and Taiwan has the meaning ascribed to it under the Listing Rules the Companies Law (as revised) of the Cayman Islands, as amended, modified and supplemented from time to time the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), which came into effect on 3 March 2014, as amended, modified and supplemented from time to time the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time EC Excel Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability on 27 March 2018 has the meaning ascribed to it under the Listing Rules has the meaning ascribed thereto in the Listing Rules and, unless the context requires otherwise, refers to Mr. Ng and the company wholly owned by him, namely, Decade Lion has the meaning ascribed to it under the Listing Rules the Corporate Governance Code as set out in Appendix 14 to the Listing Rules 12

20 DEFINITIONS Decade Lion Deed of Indemnity Deed of Non-competition Director(s) East Coast Region EC Excel Wire EC Excel Wire Holdings Euro or EUR Decade Lion Limited, a private company incorporated in the BVI on 27 December 2017 with limited liability, which is whollyowned by Mr. Ng, our executive Director, and a Controlling Shareholder the deed of indemnity dated [ ] entered into between each of the Controlling Shareholders and our Company (for itself and as trustee for other Group members), the particulars of which are set out in the paragraph headed Statutory and general information E. Other information 1. Tax and other indemnities in Appendix IV to this document the deed of non-competition dated [ ] made by our Controlling Shareholders in favour of our Company (for itself and as trustee for each of the subsidiaries of the Group), which contains certain non-compete undertakings given in favour of our Group, the particulars of which are set out in the paragraph headed Relationship with the Controlling Shareholders Noncompetition Undertakings in this document director(s) of our Company refers to Kelantan Darul Naim, Pahang Darul Makmur and Terengganu Darul Iman EC Excel Wire Sdn. Bhd., a private limited company incorporated in Malaysia on 5 March 2007, and an indirect wholly-owned subsidiary of our Company EC Excel Wire Holdings Sdn. Bhd., a private limited company incorporated in Malaysia on 27 March 2018, and an indirect wholly-owned subsidiary of our Company the lawful currency of the member states of the European Union FY2015 the financial year ended 31 December 2015 FY2016 the financial year ended 31 December 2016 FY2017 the financial year ended 31 December 2017 FY2018 the financial year ending 31 December 2018 FY2019 the financial year ending 31 December 2019 FY2020 the financial year ending 31 December 2020 FY2021 the financial year ending 31 December

21 DEFINITIONS GEM Good Favour [REDACTED] Group, our Group, we or us [REDACTED] [REDACTED] HK$ or Hong Kong dollar(s) or HKD or cents or $ HKSCC HKSCC Nominees Hong Kong or HKSAR Hong Kong Share Registrar IFRS(s) Independent Third Party(ies) Internal Control Consultant Klang Valley Wire GEM of the Stock Exchange Good Favour Limited, a private company incorporated in Hong Kong on 2 January 2018 with limited liability and an indirect wholly-owned subsidiary of our Company [REDACTED] our Company and our subsidiaries at the relevant time or, where the context otherwise requires, in respect of the period prior to our Company becoming the holding company of its present subsidiaries pursuant to the Reorganisation, its present subsidiaries [REDACTED] [REDACTED] Hong Kong dollars and cents respectively, the lawful currency for the time being of Hong Kong Hong Kong Securities Clearing Company Limited HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC the Hong Kong Special Administrative Region of the PRC [REDACTED], our Hong Kong branch share registrar and transfer office International Financial Reporting Standards issued by International Accounting Standards Board individual(s) or a company(ies) who is (or are) not a connected person (within the meaning of the Listing Rules) of our Company, any of its subsidiaries or any of their respective associates SHINEWING Risk Services Limited, the internal control consultant of our Company Klang Valley Wire Sdn. Bhd., a private limited company incorporated in Malaysia on 2 December 2015 and an indirect non-wholly owned subsidiary of our Company 14

22 DEFINITIONS Klaas Metal Kuantan Plant Latest Practicable Date laws [REDACTED] Listing Committee [REDACTED] Listing Rules Main Board Malaysia Legal Advisers Memorandum of Association or Memorandum Mr. Budihardjo or [REDACTED] Investor Mr. Ng Klaas Metal Sdn. Bhd., a private limited company incorporated in Malaysia on 18 August 2016 and an indirect non-wholly owned subsidiary of our Company our existing production plant located at Lot 77A, Lorong Gebeng 1/7, Gebeng Industrial Estate, Kuantan, Pahang Darul Makmur, Malaysia and Lot 77B, Off Jalan Gebeng 1/6, Kawasan Industrial Gebeng, Kuantan, Pahang Darul Makmur [19 July 2018], being the latest practicable date for the purpose of ascertaining certain information of this document to its printing include all laws, rules, regulations, guidelines, opinions (whether formally published or not), notices, circulars, orders, judgements, decrees or rulings of any court, government, governmental or regulatory authority whether or not ejusdem generis with any of the foregoing (including, without limitation, the Stock Exchange) and law shall be construed accordingly [REDACTED] the Listing Committee of the Stock Exchange [REDACTED] the Rules Governing the Listing of Securities on the Stock Exchange (as amended, supplemented or otherwise modified from time to time) the stock market (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with GEM of the Stock Exchange David Lai & Tan, the legal advisers to our Company as to Malaysian law the amended and restated memorandum of association of our Company conditionally adopted on [ ] with effect from the [REDACTED], a summary of which is set out in Appendix III to this document, and as amended from time to time Mr. Budihardjo Paul Soetadi, a [REDACTED] investor investing in our Group through Strength Reach Mr. Ng Heng Hong, our executive Director and one of the Controlling Shareholders of our Company 15

23 DEFINITIONS Ms. Sin New Kelantan Plant New Selangor Production Facility Nomination Committee Northeastern States Northern Region [REDACTED] [REDACTED] [REDACTED] Peninsular Malaysia [REDACTED] Ms. Sin Fun Chu, our executive Director and spouse of Mr. Ng our production plant to be established in Tanah Merah, Kelantan, Malaysia our production facility to be set up in Bukit Beruntung, Selangor, Malaysia the nomination committee of the Board refers to Kelantan and Terrengganu refers to Kedah Darul Aman, Penang, Perak Darul Ridzuan and Perlis Indera Kayangan [REDACTED] [REDACTED] [REDACTED] also known as West Malaysia and is the part of Malaysia which lies on the Malay Peninsula and surrounding islands, and consists of 11 states and two federal territories covering Central Region, Southern Region, Northern Region and East Coast Region [REDACTED] 16

24 DEFINITIONS [REDACTED] [REDACTED] Underwriters [REDACTED] Underwriting Agreement [REDACTED] Investment Precise One Predecessor Companies Ordinance [REDACTED] [REDACTED] [REDACTED] [REDACTED] the underwriters of the [REDACTED] that are expected to enter into the [REDACTED] Underwriting Agreement the conditional underwriting agreement relating to the [REDACTED] which is expected to be entered into by, among others, the [REDACTED] Underwriters, the executive Directors and the Company on or around the [REDACTED], as further described in the paragraph headed Underwriting in this document the [REDACTED] investment in our Group as set out in the paragraph headed History, Reorganisation and Corporate Structure [REDACTED] Investment in this document Precise One Limited, a private company incorporated in the BVI on 11 December 2017 with limited liability, and a direct whollyowned subsidiary of our Company after the Reorganisation the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as in force from time to time before 3 March 2014 [REDACTED] [REDACTED] [REDACTED] 17

25 DEFINITIONS [REDACTED] [REDACTED] Underwriters [REDACTED] Underwriting Agreement Regulation S Remuneration Committee Reorganisation Reorganisation Agreement Reporting Accountants RM or Malaysian dollar(s) SFC or Securities and Futures Commission SFO or Securities and Futures Ordinance Share(s) Shareholder(s) [REDACTED] the underwriters of the [REDACTED], whose names are set out in the paragraph headed Underwriting [REDACTED] Underwriters in this document the conditional [REDACTED] underwriting agreement dated [ ] relating to the [REDACTED] and entered into by our Company, our Controlling Shareholders, our executive Directors, the Sole Sponsor, the [REDACTED], the [REDACTED], and the [REDACTED] Underwriters, as further described in the paragraph headed Underwriting Underwriting arrangements and expenses [REDACTED] in this document Regulations S under the U.S. Securities Act the remuneration committee of the Board the corporate reorganisation of our Group conducted in preparation for the [REDACTED], details of which are set out in the section headed History, Reorganisation and Corporate Structure in this document the reorganisation agreement dated 18 May 2018 entered into between Decade Lion (as vendor) and our Company (as purchaser), pursuant to which our Company acquired the entire issued share capital of Precise One Deloitte Touche Tohmatsu Malaysian ringgit, the lawful currency of Malaysia the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time ordinary share(s) of nominal or par value HK$0.01 each in the share capital of our Company shareholder(s) of our Company from time to time 18

26 DEFINITIONS [REDACTED] Share Option Scheme SMITH ZANDER SMITH ZANDER Report [REDACTED] the share option scheme conditionally adopted by our Company on [ ], the principal terms of which are summarised under the paragraph headed Statutory and General Information D. Share Option Scheme in Appendix IV to this document Smith Zander International Sdn. Bhd., an independent market research firm an independent market research report in respect of the steel bar product and steel wire product industry in Malaysia, prepared by SMITH ZANDER which was commissioned by our Company Sole Sponsor or Dakin Capital Dakin Capital Limited, a licensed corporation to carry on type 6 (advising on corporate finance) regulated activity as defined under the SFO, acting as the sole sponsor to our Company s application for the [REDACTED] [REDACTED] Southern Region [REDACTED] Stock Exchange Strength Reach subsidiary(ies) Track Record Period Underwriters Underwriting Agreements U.S. or United States [REDACTED] refers to Johor Darul Ta zim, Malacca and Negeri Sembilan Darul Khusus [REDACTED] The Stock Exchange of Hong Kong Limited Strength Reach Limited, a private company incorporated in the BVI with limited liability on 6 February 2018, which is whollyowned by Mr. Budihardjo and through which Mr. Budihardjo invested in our Group has the meaning ascribed thereto under the Listing Rules comprises the three years ended 31 December 2017 and the four months ended 30 April 2018 the [REDACTED] Underwriters and the [REDACTED] Underwriters t h e [REDACTED] U n d e r w r i t i n g A g r e e m e n t a n d t h e [REDACTED] Underwriting Agreement the United States of America, its territories, its possessions and all areas subject to its jurisdiction 19

27 DEFINITIONS U.S. dollar(s) or US$ or USD U.S. Securities Act UVM Excel [REDACTED] [REDACTED] United States dollars, the lawful currency for the time being of the United States the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder UVM Excel Sdn. Bhd., a private limited company incorporated in Malaysia on 20 March 2015 and an indirect wholly-owned subsidiary of our Company [REDACTED] [REDACTED] % per cent. kg m kilogram meter m 2 square meter mm millimeter Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. Certain figures used in this document that are expressed in HK$ or RM are calculated based on the conversion rate of RM1.0 to HK$

28 GLOSSARY OF TECHNICAL TERMS This glossary contains explanations of certain terms and definitions used in this document in connection with our Group and its business. The terms and their meanings may not correspond to standard industry meaning or usage of those terms. apparent consumption AGT Ratio CAGR CIDB Malaysia galvanised iron or GI GDP IQNet ISO ISO9001:2008 JISG3505:2004 MS MSISO :2008 MS145:2006 or MS145:2014 MT PVC SIRIM tensile strength unprocessed hot-rolled steel bars a term adopted in the steel industry to represent domestic demand which is calculated by the sum of production value and import value minus export value percentage total elongation at maximum force compound annual growth rate, a method of assessing the average growth of a value over time Construction Industry Development Board Malaysia a layer of zinc coating which helps the metal to resist corrosion gross domestic product the International Certification Network, an international network of partner certification bodies International Organisation for Standardisation, a non-government organization based in Geneva, Switzerland, for assessing the quality systems of business organisations an internationally recognised standard for a quality management system the Japanese Industrial standards of low carbon steel wire rod published by the Japanese Standards Association Malaysian Standards the Malaysian Standard of general purpose wire rod published by the Department of Standards Malaysia the Malaysian Standard of steel fabric for the reinforcement of concrete published by the Department of Standards Malaysia metric tonnes polyviny chloride, a type of plastic which can be used for manufacturing pipes or helps the metal to resist corrosion Standard and Industrial Research Institute of Malaysia, an industrial research and technology organisation in Malaysia and wholly-owned by the Ministry of Finance Incorporated the capacity of a material or structure to withstand loads tending to elongate, as opposite to compressive strength refer to hot-rolled steel bars procured from our suppliers which have not been processed (i.e. cut, bent and/or packaged) by our Group 21

29 FORWARD-LOOKING STATEMENTS This document contains certain statements and information that are forward-looking and uses forward-looking terminology such as anticipate, believe, could, estimate, expect, may, ought to, should or will or similar terms, in particular, in the sections headed Business, Risk Factors and Financial Information in this document in relation to future events, our future financial, business or other performance and development, the future development of our industry and the future development of the general economy of our key markets. These statements are based on various assumptions regarding our present and future business strategy and the environment in which we will operate in the future. These forward-looking statements reflecting our current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions including the risk factors described in this document and the following: our business and operating strategies and the various measures to implement such strategies; our dividends; our operations and business prospects, including development plans for its existing and new businesses; the future competitive environment for the industries in which we operate; the regulatory environment as well as the general industry outlook for the industries in which we operate; future developments in the industries in which we operate; the effects of the global financial markets and economic crisis; and other factors beyond our control. Subject to the requirements of applicable laws, rules and regulations and the Listing Rules, we do not have any obligation to update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward looking events and circumstances discussed in this document might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this document are qualified by reference to the cautionary statements set out in this section. In this document, unless otherwise stated, statements of or references to our intentions or those of any of our Directors are made as at the date of this document. Any such intentions may change in light of future developments. 22

30 RISK FACTORS Prospective investors should consider carefully all of the information set forth in this document and, in particular, should consider the following risks and special considerations in connection with an investment in our Company before making any investment decision in relation to the [REDACTED]. The occurrence of any of the following risks may have a material adverse effect on the business, results of operations, financial conditions and future prospects of our Group. This document contains certain forward-looking statements regarding our plans, objectives, expectations, and intentions which involve risks and uncertainties. Our Group s actual results could differ materially from those discussed in this document. Factors that could cause or contribute to such differences include those discussed below as well as those discussed elsewhere in this document. The trading price of the [REDACTED] could decline due to any of these risks and you may lose all or part of your investment. We believe that there are certain risks involved in our business and operations. They can be classified into: (i) risks relating to our business; (ii) risks relating to the industry in which we operate; (iii) risks relating to conducting business in Malaysia; (iv) risks relating to the [REDACTED] and our Shares; and (v) risks relating to statements made in this document. RISK RELATING TO OUR BUSINESS Fluctuation in the prices of our major raw materials may have adverse impacts on our financial results Our raw materials primarily comprise unprocessed hot-rolled steel bars, low carbon wires rods and galvanised iron wires. Certain raw materials used in our manufacturing or processing are subject to price volatility caused by external conditions, including commodity price fluctuations and changes in governmental policies. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our cost of raw materials amounted to approximately RM130.0 million, RM155.4 million, RM264.7 million and RM117.0 million, respectively, which accounted for approximately 95.1%, 97.3%, 96.8% and 98.8% of our total cost of sales, respectively. According to the SMITH ZANDER Report, fluctuation in the price of raw materials such as steel bars and wire rods is one of the challenges to players in the steel bar product and steel wire product industry. Price of wire rods and steel bars had been increasing from 2015 to The price of wire rods increased from approximately RM1,739 per MT in 2015 to RM2,291 per MT in The price of steel bars increased from approximately RM1,995 to RM2,057 per MT in 2015 to approximately RM2,457 to RM2,577 per MT in We cannot assure you that we will be able to effectively manage the risk of price fluctuation of our raw materials at all times. Therefore, if there is a material increase in the price of the raw materials that we require for our manufacturing and processing, we may not be able to shift such corresponding price increase to our customers in a timely manner, and this may have a material and adverse effect on our financial results. We cannot assure you that our key suppliers will continue to provide us with raw materials at reasonable price, or that our raw material prices will remain stable in the future. In addition, we may not be able to transfer some or all of the increase in costs of our raw materials to our customers. As a result, any increase or material fluctuation in the prices of our raw materials could have a material adverse effect on our business, financial condition and results of operations. 23

31 RISK FACTORS On 13 April 2017, pursuant to the Safeguards Act 2006, the Ministry of International Trade and Industry of Malaysia ( MITI ) announced the imposition of safeguard duties on imported steel wire rods, deformed bars in coils and steel concrete reinforcing bars effective from 14 April The aim of the safeguard duties was to protect domestic producers of steel wire rods, deformed bars in coils and steel concrete reinforcing bars. Although our Group did not import any low carbon wire rods during the Track Record Period, since our Group may use imported low carbon wire rods as raw materials in the future, the safeguard duties imposed may increase our procurement costs and affect our financial results. For further details on the safeguard duties imposed, please refer to the paragraph headed Malaysian Regulatory Overview the Safeguards Act 2006 in this document. We rely on our top five suppliers for the supply of raw materials for our manufacturing or processing of steel bar products and steel wire products. Any change of business relationship with these suppliers may adversely affect our operations and financial results During the Track Record Period, our top five suppliers accounted for approximately 74.5%, 67.0%, 80.1% and 78.6% of our total purchase, respectively, which indicate that our reliance on our top five suppliers has been relatively high. On the other hand, according to the SMITH ZANDER Report, there are only three major local manufacturers of low carbon wire rods, namely Amsteel Mills Sdn. Bhd., Ann Joo Steel Berhad and Southern Steel Berhad. Among these three local manufacturers, Amsteel Mills Sdn. Bhd. and Supplier A, a company controlled by Southern Steel Berhad, were our top five suppliers during the Track Record Period. Given that, pursuant to the Safeguards Act 2006, there are safeguard duties imposed on imported low carbon wire rods, our Directors believed that importing the same from other countries is a less feasible option. Therefore, we rely on these three major local suppliers to supply low carbon wire rods to us. In light of the aforesaid, if our business relationship with our suppliers in Malaysia deteriorates, or if we are unable to source raw materials from these suppliers in a timely manner, we may not be able to manufacture or process our steel bar products and steel wire products in accordance with our production schedule. Any such delay may hamper our ability to deliver our products to our customers on time, thereby damaging our business reputation and adversely affecting our operation and financial results. Delay in the delivery of raw materials or defect in the raw materials supplied to us may materially and adversely affect our business operations The supply of raw materials is subject to a variety of factors that are beyond our control, including interruptions in the supplier s business operations, market supply and demand of the raw materials, industry conditions and overall economic condition; whereas the quality of raw materials is dependent on the supplier s production capabilities, production facilities and the effectiveness of its quality control system. 24

32 RISK FACTORS Our ability to complete a customer s purchase order on time is therefore dependent on the timely delivery of the raw materials to us. There is no assurance that our suppliers will be able to supply and deliver the required raw materials to us in a timely manner or that the raw materials will not be defective or sub-standard. Any delay in the delivery of raw materials or any defect in the raw materials supplied to us may materially and adversely affect or delay our production schedule and, if we cannot secure raw materials of similar quality and at reasonable prices from alternative suppliers in a timely manner or at all, we may not be able to deliver our products to our customers on time. In such circumstances, we may lose customer loyalty and confidence on our services and products. This may also harm our reputation and our results of operations and financial condition may be materially and adversely affected. Our cash flow position may deteriorate owing to a mismatch between the time receipt of payments from our customers and payments to our suppliers if we are unable to manage our cash flow mismatch properly We have to purchase raw materials from our suppliers from time to time based on our procurement policy. We rely on cash inflow from our customers to meet our payment obligations to our suppliers. Our cash inflow is dependent on the prompt settlement of our payments. As at 31 December 2015, 2016, 2017 and 30 April 2018, we recorded trade receivables (less allowance for doubtful debts) amounted to approximately RM38.2 million, RM52.4 million, RM84.4 million and RM84.4 million, respectively, and the number of our average trade receivables turnover days was approximately 82 days, 88 days, 81 days and 77 days, respectively. As at 31 December 2015, 2016, 2017 and 30 April 2018, our Group s trade receivables of approximately RM17.4 million, RM24.5 million, RM41.6 million and RM36.5 million were past due but not impaired, respectively, and approximately 66.0% of the trade receivables as at 30 April 2018 had subsequently been settled as at the Latest Practicable Date. On the other hand, we generally grant our customers credit terms within the range of 14 to 90 days, while the credit period granted by our suppliers to us generally ranges from 14 days to 60 days. As at 31 December 2015, 2016, 2017 and 30 April 2018, our trade payables amounted to approximately RM14.9 million, RM12.5 million, RM28.2 million and RM19.5 million, respectively. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our Group had operating cash inflow before movements in working capital of approximately RM16.4 million, RM18.5 million, RM23.0 million and RM7.1 million, respectively. It is possible that we may experience a cash flow deficit if the settlement schedule of our customers falls far behind from our payment schedule to our suppliers. As we are subject to the credit risks of our customers and our liquidity and cash position are dependent on the timely settlement of payments by our customers, we cannot assure you that our customers will pay us on time and that they will be able to fulfil their payment obligations. Our customers sizeable operation and long bill settlement procedures may lead to a longer settlement period of accounts receivable which may in turn adversely affect our liquidity position and financial condition. Should we experience any unexpected delay or difficulty in collecting trade receivables from our customers, our operating results and financial condition may be adversely affected. If we fail to manage the aforesaid cash flow mismatches, or cannot function properly or at all, or if the cash flow mismatch is further aggravated, we may have to resort to reserve further funds from our internal resources and/or obtain banking facilities to meet our payment obligations, and our financial condition may be materially and adversely affected as a result. 25

33 RISK FACTORS We may not be able to implement our quality control systems effectively, which would result in our failure to conform with the requisite standards in relation to our products The quality of our products is crucial to the success of our business and depends significantly on the effectiveness of our quality control systems, which in turn, relies on a number of factors, including the procedures and criteria we apply in the selection of our raw material and trading product suppliers, our quality control training programme, and our employees awareness in adhering to our quality control policies and guidelines. Any significant failure or deterioration of our Group s quality control systems could result in the production of defective or substandard products, delay in delivery of our products, replacement of defective or substandard products and damage to our reputation. If our products do not meet the specifications and requirements of our customers, who are mainly building material trading companies, construction contractors, property developers and hardware shops in Malaysia, or if our products are defective, or result in our customers suffering losses as a result of our products, we may be subject to product liability claims. We may also incur significant legal costs regardless of the outcome of any claim of alleged defect. Product failure or defects, and any complaints or negative publicity resulting therefrom, could result in a decrease in the sale of our products, or claims or litigation against us regarding the quality of our products. As a result, it may have a material adverse effect on our business, reputation, financial conditions and results of operations. In addition, our Group has received certifications relating to quality management standards such as the ISO 9001:2008 certification for complying with the requirements for quality management system for the manufacturing of steel wire mesh (BRC) and MS145:2006 and MS145:2014 for product certification licence to use the certification mark on welded steel fabric for the reinforcement of concrete since 2012 and 2013 respectively. Accordingly, any significant failure or deterioration of our quality control systems could result in a loss of such recognitions and certifications, which in turn may have a material adverse effect on our sales performance, reputation and prospects. Our Group relies on the use of our machinery and equipment to carry out the manufacturing or processing of steel bar products and steel wire products and any break-down of such machinery and equipment will disrupt our operation The manufacturing or processing of steel bar products and steel wire products requires the use of a wide range of machinery and equipment such as welding machines, drawing machines and wire straightening and cutting machines. Accordingly, the number of steel bar products and steel wire products that can be produced by our Group at any given time, is limited by the availability of our resources such as the functionalities of our machinery and equipment to carry out the production process. On the other hand, if there are any unexpected breakdowns of our machinery and equipment during the production process, we may face difficulties in sourcing replacements or repairing the machinery and equipment in time. Our work progress may have to be delayed, whereby we may have to compensate our customers according to the terms of the contract between our customers and us. 26

34 RISK FACTORS We are dependent on foreign workers to undertake our manufacturing or processing activities According to the SMITH ZANDER Report, the Malaysian manufacturing industry is relatively dependent on foreign workers especially those from neighbouring developing nations in the Southeast Asia region. Although the advancement in industrial automation technology has eased the need for manual labour in many manufacturing industries, there is still a need for manual labour in many processes in the manufacturing or processing of steel bar products and steel wire products. While the employment of foreign workers is currently allowed in the steel bar product and steel wire product industry, these foreign workers can only be sourced from specific countries as determined by the Malaysian Government. Based on our Director s experiences, approval is generally granted based on the merits of each case and is subject to conditions imposed by the relevant authorities from time to time. Additionally, the Malaysian Government may amend policies relating to the employment of foreign workers in the construction industry and/or introduce new conditions from time to time. We have to maintain sufficient and regular production manpower to avoid any interruption to our business operation. However, as the response from local labour is poor and registration of foreign workers take a considerable amount of time, market players in the steel bar product and steel wire product industry in Malaysia may face difficulties in recruiting relatively low-skilled workers. As at the Latest Practicable Date, all of our production workers are foreign workers. On the other hand, the policy implemented in Malaysia under the Minimum Wages Order 2016 with effect from 1 July 2016 is another development that continues to exert pressure on the cost of employing workers. The minimum wage is a provision in the National Wages Consultative Council Act The minimum wage for private sector employees has been set at RM1,000 per month or RM4.81 per hour for employees in Peninsular Malaysia. If the minimum wage required under this policy further increases, the cost of operations for market players, like our Group, is likely to increase. This supply condition is expected to impact the market negatively in the future. Though we have not experienced any significant shortage in production workers in the past, there is no assurance that we will not experience any shortage in production workers for our production or that the costs of employing workers in Malaysia will not continue to increase in the future. Furthermore, if the cost of employing workers continues to increase in Malaysia, our production costs may eventually increase and we may not be able to shift these extra costs to our customers due to competitive pricing pressures from our competitors. If we fail to retain our existing workers and/or recruit sufficient workers in a timely manner, we may not be able to accommodate any increase in demand for our products or smoothly implement our expansion plans. Hence, our business operations and financial conditions would be materially and adversely affected. There is no assurance that our business strategies and future plans will be successfully implemented The successful implementation of our business strategies and future plans may be hindered by risks set out in this section and is subject to numerous factors, including but not limited to: our ability to retain our existing customers and secure new customers; 27

35 RISK FACTORS our ability to adapt to changing industry and market trends; the availability of management and financial resources; our ability to negotiate favourable terms with our major suppliers and customers; our ability to hire and retain skilled personnel to manage and operate our business; and the increase in labour costs. There is no assurance that we will be able to successfully implement our business strategies or future plans or such strategies or plans will result in increase in revenue or profits as expected. In addition, our expansion plans may place substantial demands on our management and our operational, technological, financial and other resources. We cannot assure you that we will be able to manage any future growth effectively and efficiently, and our ability to capitalise on new business opportunities may be adversely affected if we fail to do so, which would in turn adversely affect our business, results of operations, financial condition and prospect. Any unanticipated or prolonged interruption of our production facilities at our Kuantan Plant would materially and adversely affect our business and results of operation During the Track Record Period, our steel bar products and steel wire products were manufactured or processed at our Kuantan Plant where most of our production machinery and equipment are situated. Though we planned to set up (i) the New Kelantan Plant which is located in proximity to Terengganu in East Coast Region of Peninsular Malaysia; and (ii) the New Selangor Production Facility in Bukit Beruntung, which is located in the Central Region of Peninsular Malaysia, and acquire new machinery and equipment by phases, our business would largely be dependent on the continued and uninterrupted performance of our production facilities at our Kuantan Plant until the operation of the said new production plant and production facility are in full swing. However, the machinery and equipment in these production plants and production facility are subject to operating risks, such as equipment failures, disruptions in power supply, industrial accidents, labour shortages, strikes, fire or natural disasters. If any unanticipated or prolonged interruption of our operations at our Kuantan Plant happens due to any of the aforesaid risks, we may not be able to deliver our products to our customers in a timely manner or at all. As a result, our relationships with our customers could be adversely affected due to our failure and we may be subject to contractual claims for compensation from our customers, which may materially and adversely affect our business, financial condition and results of operations. Acquisition of land on which the New Kelantan Plant and the New Selangor Production Facility will be built as opposed to leasing may have adverse impact on our financial results Our Group plans to strengthen our market presence in the Northeastern States and Central Region and increase our production capacity by acquisition of land on which the New Kelantan Plant and the New Selangor Production Facility will be built. We prefer to acquire such land instead of leasing due to certain risks associated with leased properties and numerous advantages of an own model. For further details, please refer to the paragraph headed Business Business strategies Set up the new Selangor Production Facility Comparison between the lease model and the own model in this document. 28

36 RISK FACTORS Land is an amortisable asset. If the related amortisation expenses are higher than the future rentals, it will result in a lower net profit when compared with the situation of the continual leasing. In such circumstances, as opposed to leasing, our financial position may be more adversely affected, with a lower return on equity ratio and shareholders investment return. Further, if there is a decrease in the future rentals, that means we can lease the land with lower rentals if we continue to lease the land instead of acquiring it, and this represents an opportunity cost to us. Our profit margin could be adversely affected if we are unable to continuously maintain high utilisation of our production machinery and equipment Our ability to maintain our profitability depends partly on our ability to maintain a high utilisation rate of our production machinery and equipment in our Kuantan Plant, the New Kelantan Plant and the New Selangor Production Facility. The level of utilisation rate of our production machinery and equipment can impact on our operating results as a certain percentage of our costs of sales such as direct labour and production overhead are fixed in nature. A higher utilisation rate of our production machinery and equipment allows us to spread our fixed costs over a larger quantity of our steel bar products and steel wire products, resulting in a higher profit margin. Hence, if we are unable to continuously maintain a high utilisation of our production machineries and equipment, our profit margin would be adversely affected. We may not be able to obtain adequate financing for the development of our business in the future The daily operation of our business requires intensive working capital and we also require capital investment to purchase machinery, equipment and vehicles for our business growth. During the Track Record Period, we relied on our registered capital, bank borrowings and retained profits to maintain our cash flow and satisfy the needs of our daily productions. We cannot assure you that we will be able to obtain bank loans and/or other equity or debt financing on commercially reasonable terms and/or on a timely basis following the [REDACTED]. If we are unable to obtain necessary financing or obtain such financing on favourable terms due to various factors beyond our control, we may not have sufficient funds to develop our business and the future prospect and growth potentials of our Group may be adversely affected. Our historical results may not be indicative of our future revenue and profit margin Given that our profit margins in respect of our products are dependent on the price of our quotation provided to our customers such as, construction contractors and property developers in Malaysia, which may be affected by the factors that are specific to the our customers projects, such as the length of their project duration, the time gap between the date of our quotation and the delivery of our products and the specifications provided by the customers, there is no assurance that we will always be able to maintain similar levels of profitability as those during the Track Record Period. 29

37 RISK FACTORS During the Track Record Period, our gross profit amounted to approximately RM23.6 million, RM27.4 million, RM33.3 million and RM13.7 million, respectively, and our gross profit margin amounted to approximately 14.7%, 14.6%, 10.9% and 10.4%, respectively. We may not be able to sustain our historical gross profit and gross profit margin for various reasons, including but not limited to our Group s ability to cope with the changing demand and requirements from customers and the cost of our raw materials. Also, if our revenue mix changes and a product with lower gross profit margin gains larger proportion in our total revenue, our overall gross profit margin may be adversely affected. For detailed analysis of our Group s gross profit and gross profit margin, please refer to the paragraph headed Financial Information Decreasing trend in gross profit margin during the Track Record Period and Financial Information Gross profit and gross profit margin in this document. Furthermore, during the Track Record Period, our revenue amounted to approximately RM160.4 million, RM187.1 million, RM306.8 million and RM132.1 million, respectively and our adjusted net profit (excluding [REDACTED] expenses) amounted to approximately RM9.4 million, RM10.3 million, RM13.3 million and RM5.2 million, respectively. Such trends of the historical financial information of our Group is only an analysis of our past performance. It does not have any positive implication, nor would it necessarily reflect our financial performance in the future, which will largely depend on our capability to secure new purchase orders, control our costs and expenditures. The profit margins and income of our Group may fluctuate from time to time, and the historical revenue in the past may not be indicative of our future revenue or profitability. Prospective investors should be aware of the risk of our Group s failure to secure future purchase orders when considering our Group s financial results. Our insurance policies may not be sufficient to cover liabilities from claims and litigation and our insurance premium may increase from time to time We have taken out insurance policies in line with industry practice, which is also generally required by our customers to cover our business operations. However, there are certain types of losses for which insurance coverage is not generally available on commercial terms acceptable to us, or at all. Examples of these include insurance against losses suffered due to business interruptions, earthquakes, flooding or other natural disasters, wars, terrorist attacks or civil disorders, or losses or damages caused by industrial actions. If we suffer any losses, damages or liabilities in the course of our business operations arising from events for which we do not have any or adequate insurance covers, we may have to bear such losses, damages or liabilities by ourselves. In such case, our business operations and financial results may be adversely affected. Even if we have maintained relevant insurance policies, our insurers may not fully compensate us for all potential losses, damages or liabilities regarding our properties or business operations. We also cannot guarantee that the insurance premiums payable by us in relation to the implementation of projects will not increase. During the Track Record Period, our total insurance expenses amounted to approximately RM226,000, RM131,000, RM294,000 and RM92,000, respectively. Any further increases in insurance costs (such as an increase in insurance premiums) or reductions in insurance coverage may materially and adversely affect our business operations and financial results. 30

38 RISK FACTORS We generate revenue on a transaction by transaction basis which last for a short period and may be non-recurring in nature We normally do not enter into any long-term agreement with our customers. Our customers place purchase orders on a transaction-by-transaction basis in accordance with their actual requirements (in case our customers are construction contractors or property developers) or the orders of their own customers (in case our customers are building material trading companies or hardware shops). As such, our customers do not have long-term commitment with us and can vary from period-to-period. Therefore, our results of operations will continue to be dependent on our ability to retain our major customers and to seek new source of revenue by securing purchase orders from new customers. This can be demonstrated by the fact that the composition of our top five customers was different in each year during the Track Record Period. We cannot assure you that our customers will continue to place purchase orders with us at the same or higher level as in the previous years, or at all. The level of purchase by our customers might be affected by their or their own customers business performance, financial conditions and other factors relating to them that beyond our control. If our major customers face unexpected situations, such as financial difficulties caused by market downturn for a considerable period, such customers may reduce their purchase from us or delay in settlement of our invoices, thereby reducing business opportunities to us and/or affecting their credit quality. Furthermore, we cannot assure you that we will be able to maintain or improve business relationships with our existing major customers. Any loss of major customers or material reduction in the number or value of the orders secured from them could cause our revenue and profit to decrease significantly. We rely on key management personnel Our success and growth are, to a large extent, attributable to the continued commitment of our executive Directors, senior management team and our capability to identify, hire and retain suitable and qualified employees, including management personnel with the necessary industry expertise. Notwithstanding our efforts to reward them for their service and contribution to our Group, there is no assurance that our compensation packages and incentive schemes will successfully attract and retain key personnel. Any unanticipated departure of our executive Directors and/or senior management team may have an adverse impact on our business operations and profitability. RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE Personal injuries, property damages or fatal accidents may occur at work sites Although we generally supervise and monitor closely our employees in the implementation of all safety measures and procedures during the manufacturing process, we cannot guarantee that our employees will follow our safety measures and/or will not breach any applicable rules, laws or regulations. Any personal injuries and/or fatal accidents to the employees of our Group may lead to claims or other legal proceedings against our Group. As at the Latest Practicable Date, our Group was not subject to any claims from employees. 31

39 RISK FACTORS We operate in a competitive and fragmented environment According to the SMITH ZANDER Report, the steel bar product and steel wire product industry is fragmented. According to SMITH ZANDER Report, key factors that determine the competitiveness of the industry players include their ability to offer products with quality certification and ability to increase production efficiency through adequate machinery and equipment. Our ability to compete also depends on a number of factors which may be beyond our control, including the price of the comparable products offered by our competitors in the market and our responsiveness to changes in our customers needs. Owing to the intense competition in steel bar product and steel wire product industry in which we operate, we cannot assure you that we can maintain our position in the industry at all times. In the event that our competitors lower their product prices, we might have to follow their act in order to maintain our market shares, competitiveness, or to lower our inventory level. There is no assurance that our attempts to remain competitive in the market will succeed. If our attempts to remain competitive fail and our market share shrinks, our overall performance may be adversely affected. We rely on the success of the construction industries as the success of our business, which is highly correlated to the performance of our customers industries Our steel bar products and steel wire products are mainly used in construction and infrastructure projects. According to the SMITH ZANDER Report, the steel bar product and steel wire product industry is heavily reliant on the construction industry which includes development of residential, commercial and industry properties as well as infrastructure projects. The success of our business relies on the construction markets as our customers are generally building material trading companies, construction contractors, property developers and hardware shops. The demand from our customers is therefore dependent on the demand and supply dynamics of the construction industry. As such, the demand for our products may fluctuate according to the cycles of the construction industry. On the other hand, the demand for our products is also affected by the business performance of our customers and/or their ultimate employers in the construction industry, which is beyond our control. Our customers business could underperform due to a number of factors, such as changes in their business strategies, failure to develop successful marketing strategies, changes in the market demand for their services and adverse market or economic conditions in the markets in which our customers operate. If our customers experience underperformance or are under financial difficulties, they could reduce their purchases from our Group, which could have a material and adverse impact on our business, results of operations, financial conditions and prospects. RISKS RELATING TO CONDUCTING BUSINESS IN MALAYSIA As all of our Group s assets, business operations and manufacturing facilities are in Malaysia, its economic, political and legal developments would affect the results of our operations, financial position and prospects accordingly. The major risks that we are exposed to are as follows: 32

40 RISK FACTORS Our business operations are subject to uncertainties with respect to the laws and regulations, social political and economic developments, and Malaysian government policies Our Group s business, prospects, financial condition and results of operations may be adversely affected by any changes in the laws and regulations, social, political and economic developments and changes in Malaysian government policies. All our products are sold in Malaysia, which will continue in the foreseeable future. Our operations will be subject to the risks of regional conflicts, terrorism, extremism, nationalism, changes in interest rates, imposition of capital controls, changes in government policies or introduction of new rules or regulations concerning construction industry or environmental or manufacturing regulations and methods of taxation in Malaysia. Any negative developments in the Malaysian economy may have a material adverse effect on business. Although the overall Malaysian economic environment (in which our Group predominantly operates) appears to be positive, there can be no assurance that this will continue to prevail in the future. Furthermore, the production of steel bar products and steel wire products may affect the environment in the neighbourhood of our Kuantan Plant, the New Kelantan Plant and/or the New Selangor Production Facility, and the Malaysian government may tighten regulations governing our industry to meet more stringent environmental requirements. It may expand the scope of existing regulations, tighten the rules governing the licence renewal process or even impose requirements to install certain equipment; these new measures may limit our Group s flexibility to operate and may increase our Group s costs of operations. Our Group s failure to comply with such laws and regulations could also result in reprimands, penalties, fines and legal proceedings against us. We require various permits, licences, approvals, certificates and qualifications to operate our business and any failure to obtain or renew any such permits, licences, approvals, certificates and qualifications may materially and adversely affect our business operations In accordance with Malaysia laws and regulations, we require various permits, licences, approvals, certificates and qualifications in order to carry on our business operations in Malaysia, including our manufacturing licence, business premises licence and approval granted by CIDB Malaysia. These permits, licences and approvals may be subject to review and periodic renewal by the relevant governmental or regulatory authorities as well as our continued compliance with certain standards and requirements. We cannot assure you that we will be able to renew all necessary permits, licences and approvals upon their expiration in a timely manner or at all. Non-renewal of, or delay in obtaining, all requisite permits, licences and approvals may disrupt our ongoing business operations, which may have a material adverse effect on our business and results of operations. Currency conversion and exchange rate risks Since a substantial amount of income and profit of our Group is denominated in RM, any fluctuations in the value of RM may adversely affect the amount of dividends, if any, payable to the Shares in HK$ to our Shareholders. 33

41 RISK FACTORS The Central Bank of Malaysia had, in the past, intervened in the foreign exchange market to stabilise the RM, and it pegged the RM to the US$ in September On 21 July 2005, the Central Bank of Malaysia adopted a managed float system which benchmarked the RM to a currency market to ensure that the RM remains close to its fair value. Our Group cannot assure you that the Malaysian government will not impose more restrictive or additional foreign exchange controls. Any imposition, variation or removal of exchange controls may lead to less independence in the Malaysian government s conduct of its domestic monetary policy and increased exposure of the Malaysian economy to the potential risks and vulnerability of external developments in the international markets. Furthermore, fluctuations in the RM s value against other currencies will create foreign currency translation gains or losses and may have an adverse effect on our Group s business, financial condition and results of operations. Any imposition, variation or removal of foreign exchange controls may adversely affect the value, translated or converted into HK$, of our Group s net assets, earnings or any declared dividends. Consequently, this may adversely affect our Group s ability to pay dividends or satisfy other foreign exchange requirements. Our ability to receive dividends and other payments from our subsidiaries in Malaysia may be restricted There are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered according to the Foreign Exchange Administration Rules as promulgated by the Central Bank of Malaysia. The foreign exchange policies apply to both residents and non-residents. Under the current Foreign Exchange Administration Rules issued by the Central Bank of Malaysia, non-residents are free, at any time, to repatriate any amount of investment proceeds, including capital, divestment proceeds, profits, dividends, or any income arising from investments in Malaysia, subject to the applicable reporting requirements and any withholding tax, provided that repatriation of funds must be made in a foreign currency. If the Central Bank of Malaysia introduces any new foreign exchange policies which restrict such proceeds from being repatriated in the future, the ability to repatriate dividends or distributions to our Company could adversely affect our business, results of operations and financial condition. Our Group s principal subsidiaries are incorporated in Malaysia and their main assets are located in Malaysia. It could be difficult to enforce a foreign judgment against our Malaysian subsidiaries, our Directors and the management in Malaysia Our Group s principal subsidiaries are incorporated under the laws of Malaysia. The majority of our Directors and members of management are residents of Malaysia and a substantial portion of the assets and the assets of our Directors and management are located in Malaysia. Enforceability of certain foreign judgment in Malaysia is by virtue of the Reciprocal Enforcement of Judgments Act 1958, in which a foreign judgement must be registered before it can be enforceable. The registration of such foreign judgments is only possible if the judgment is given by a superior court from a country listed in the First Schedule of the Reciprocal Enforcement of Judgment Act 1958, which includes United 34

42 RISK FACTORS Kingdom, Hong Kong, Singapore, New Zealand, Republic of Sri Lanka, India and Brunei Darussalam. In the alternative, a foreign judgment can be enforced by the commencement of civil action in Malaysia Court. As a result, it could be time consuming or difficult to enforce a foreign judgment against our Malaysian subsidiaries, our Directors and the management in Malaysia. RISKS RELATING TO THE [REDACTED] AND OUR SHARES The market price and trading volume of our Shares may be highly volatile Prior to the [REDACTED], there has been no public market for our Shares, and there is no assurance that an active trading market for our Shares will develop or be sustained upon completion of the [REDACTED]. The market price and trading volume of our Shares may be highly volatile. Factors such as variations in our Group s revenue, earnings or cash flow and/or announcements of new investments, strategic alliances could cause the market price of our Shares to change substantially. Any such factors may result in large and sudden changes in the volume and market price at which our Shares will be trading. There are no assurances that these developments will or will not occur in the future and it is difficult to quantify the impact on our Group and on the trading volume and market price of our Shares. In addition, our Shares may be subject to changes in the market price, which may not be directly related to our financial or business performance. Shareholders equity interests may be diluted Our Group may need to raise additional funds in the future to finance, inter alia, expansion or new developments relating to its existing operations or new acquisitions. If additional funds are raised through the issue of new equity and equity-linked securities of our Company other than on a pro-rata basis to the existing Shareholders, the percentage ownership of the Shareholders in our Company may be reduced and Shareholders may experience dilution in their percentage shareholdings in our Company. In addition, any such new securities may have preferred rights, options or pre-emptive rights that make them more valuable than or senior to the Shares. Investors of the Shares may experience dilution in the net asset value per Share of the Shares they invested if our Company issues additional Shares in the future at a price which is lower than the net asset value per Share. Future sale of Shares by existing Shareholders could materially and adversely affect the prevailing market price of our Shares The Shares beneficially owned by the existing Shareholders are subject to certain lock-up periods. There are no assurances that any Controlling Shareholders will not dispose of our Shares held by them following the expiration of the lock-up periods, on any Shares they may come to own in the future. Our Group cannot predict the effect, if any, of any future sales of our Shares by any Controlling Shareholder on the market price of our Shares. Sale of a substantial amount of Shares by any of them or the issue of a substantial amount of new Shares, or the market perception that such sale or issue may occur, could materially and adversely affect the prevailing market price of our Shares. 35

43 RISK FACTORS There has been no prior public market for our Shares and an active trading market for our Shares may not develop Prior to the [REDACTED], there has been no public market for our Shares. The [REDACTED] will be determined through negotiations between us and the [REDACTED] (for itself and on behalf of the Underwriters), and it may not necessarily be indicative of the market price of the Shares after the [REDACTED] is complete. While we have applied for the [REDACTED] of and permission to [REDACTED] the Shares on Main Board, we cannot assure you that an active trading market will develop, or, if it does develop, that it will be sustained following completion of the [REDACTED], or that the market price of the Shares will not fall below the [REDACTED]. Investors may experience difficulties in enforcing their shareholders rights because our Company is incorporated in the Cayman Islands, and the protection to minority shareholders under the Cayman Islands law may be different from that under the laws of Hong Kong or other jurisdictions Our Company is incorporated in the Cayman Islands and its affairs are governed by, among others, the Articles of Association, the Companies Law and common law applicable in the Cayman Islands. The laws of the Cayman Islands may differ from those of Hong Kong or other jurisdictions where investors may be located. As a result, minority Shareholders may not enjoy the same rights as pursuant to the laws of Hong Kong or such other jurisdictions. A summary of the Cayman Islands company law on protection of minority Shareholders is set out in Appendix III to this document. RISKS RELATING TO STATEMENTS MADE IN THIS document Investors should read the entire document and should not rely on any information contained in press articles or other media coverage regarding us and the [REDACTED] We strongly caution our investors not to rely on any information contained in press articles or other media regarding us and the [REDACTED]. Prior to the publication of this document, there may be press and media coverage regarding the [REDACTED] and us. Such press and media coverage may include references to certain information that does not appear in this document, including certain operating and financial information and projections, valuations and other information. We have not authorised the disclosure of any such information in the press or media and do not accept any responsibility for any such press or media coverage or the accuracy or completeness of any such information or publication. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. To the extent that any such information is inconsistent or conflicts with the information contained in this document, we disclaim responsibility for it and our investors should not rely on such information. Certain facts, forecast and other statistics in this document obtained from publicly available sources have not been independently verified and may not be reliable Certain facts, forecast and other statistics in this document are derived from various government and official resources. However, our Directors cannot guarantee the quality or reliability of such source materials. We believe that the sources of the said information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would 36

44 RISK FACTORS render such information false or misleading. Nevertheless, such information has not been independently verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the Underwriters or any of their respective affiliates or advisers and, therefore, we make no representation as to the accuracy of such facts and statistics. Further, we cannot assure our investors that they are stated or compiled on the same basis or with the same degree of accuracy as similar statistics presented elsewhere. In all cases, our investors should consider carefully how much weight or importance should be attached to or placed on such facts or statistics. Forward-looking statements contained in this document are subject to risks and uncertainties This document contains forward-looking statements with respect to our business strategies, operating efficiencies, competitive positions, growth opportunities for existing operations, plans and objectives of management, certain pro forma information and other matters. The words aim, anticipate, believe, could, predict, potential, continue, expect, intend, may, might, plan, seek, will, would, should and the negative of these terms and other similar expressions identify a number of these forward-looking statements. These forward looking statements, including, amongst others, those relating to our future business prospects, capital expenditure, cash flows, working capital, liquidity and capital resources are necessarily estimates reflecting the best judgment of our Directors and management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set out in the section headed Risk Factors in this document. Accordingly, such statements are not a guarantee of future performance and investors should not place undue reliance on any forward-looking information. All forward-looking statements in this document are qualified by reference to this cautionary statement. 37

45 INFORMATION ABOUT THIS document AND THE [REDACTED] [REDACTED] 38

46 INFORMATION ABOUT THIS document AND THE [REDACTED] [REDACTED] 39

47 INFORMATION ABOUT THIS document AND THE [REDACTED] [REDACTED] 40

48 INFORMATION ABOUT THIS document AND THE [REDACTED] [REDACTED] 41

49 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] DIRECTORS Name Address Nationality Executive Directors Mr. Ng Heng Hong No 6, Lorong Kubang Buaya 8 Perk Kubang Buaya Kuantan Malaysia Ms. Sin Fun Chu No 6, Lorong Kubang Buaya 8 Perk Kubang Buaya Kuantan Malaysia Malaysian Malaysian Independent non-executive Director Mr. Chow Shiu Wing Joseph Flat A, 10/F, Tower 1 Century Tower 1 Tregunter Path Hong Kong Mr. Choy Hiu Fai Eric Room A, 22/F Ford Glory Plaza 37 Wing Hong Street Lai Chi Kok Kowloon Hong Kong Mr. Wu Tsz Chung Thomas Flat 9A, Block 5 Constellation Cove Tai Po New Territories Hong Kong Chinese Chinese Chinese For further information on the profile and background of our Directors and senior management, please refer to the section headed Directors, Senior management and Employees in this document. 42

50 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] PARTIES INVOLVED IN THE [REDACTED] Sole Sponsor [REDACTED] and [REDACTED] Legal advisers to our Company Dakin Capital Limited Room 2701 Admiralty Centre, Tower 1 18 Harcourt Road Admiralty Hong Kong [REDACTED] As to Hong Kong Law TC & Co. Units , 22/F. Tai Tung Building 8 Fleming Road Wanchai Hong Kong As to Malaysian Law David Lai & Tan Level 8-3 & 8-4, Wisma Miramas No. 1, Jalan 2/109E Taman Desa Jalan Klang Lama Kuala Lumpur Wilayah Persekutuan As to Cayman Islands Law Appleby Jardine House 1 Connaught Place Central Hong Kong Legal advisers to the Sole Sponsor and the [REDACTED] As to Hong Kong Law Hastings & Co. 5th Floor, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong 43

51 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] Auditors and reporting accountants Receiving Bank Industry consultant Internal Control Consultant Deloitte Touche Tohmatsu Certified Public Accountants 35/F, One Pacific Place 88 Queensway Hong Kong [REDACTED] Smith Zander International Sdn. Bhd , Level 15, Menara MBMR 1 Jalan Syed Putra Kuala Lumpur Malaysia SHINEWING Risk Services Limited 43/F, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong 44

52 CORPORATE INFORMATION Headquarter and principal place of business in Malaysia Principal place of business in Hong Kong under Part 16 of the Companies Ordinance Registered office in the Cayman Islands Company s website address Company Secretary Authorised representative (for the purpose of the Listing Rules) 1st Floor No. B-98 Jalan Tun Ismail Kuantan Pahang Darul Makmur Unit , 22/F Tai Tung Building 8 Fleming Road Wan Chai Hong Kong P.O. Box 1350, Clifton House 75 Fort Street Grand Cayman KY Cayman Islands (information on this website does not form part of this document) Mr. Chan Hin Yeung ( ) Certified Public Accountant Flat C, 21/F, Coble Court 129 Apleichau Main Street Hong Kong Mr. Ng Heng Hong 1st Floor No. B-98 Jalan Tun Ismail Kuantan Pahang Darul Makmur Mr. Chan Hin Yeung ( ) Flat C, 21/F, Coble Court 129 Apleichau Main Street Hong Kong Audit Committee Remuneration Committee Nomination Committee Mr. Choy Hiu Fai Eric ( ) (Chairman) Mr. Chow Shiu Wing Joseph ( ) Mr. Wu Tsz Chung Thomas ( ) Mr. Wu Tsz Chung Thomas ( ) (Chairman) Mr. Choy Hiu Fai Eric ( ) Mr. Chow Shiu Wing Joseph ( ) Mr. Ng Heng Hong (Chairman) Mr. Chow Shiu Wing Joseph ( ) Mr. Choy Hiu Fai Eric ( ) 45

53 CORPORATE INFORMATION Cayman Islands principal share registrar and transfer office Hong Kong branch share registrar and transfer office Principal bankers Compliance adviser [REDACTED] [REDACTED] DBS Bank (Hong Kong) Limited 11 th Floor, The Center 99 Queen s Road Central Central, Hong Kong Dakin Capital Limited Room 2701 Admiralty Centre, Tower 1 18 Harcourt Road Admiralty Hong Kong 46

54 INDUSTRY OVERVIEW Certain information contained in this section and elsewhere in this document has been derived from various publicly available resources or extracted from the SMITH ZANDER Report prepared by SMITH ZANDER for the purposes of this document. Our Directors believe that the sources of the information in this section are appropriate and we have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading in any material respects, or that any fact has been omitted that would render such information false or misleading. In addition, our Directors confirm that, after taking reasonable care, there is no adverse change in market information since the date of the SMITH ZANDER Report which may qualify, contradict or otherwise have a material impact on the accuracy and completeness of such information. However, such information has not been independently verified by us or any of our Directors, the Sole Sponsor, the [REDACTED], the Underwriters or any other party involved in the [REDACTED]. No representation is given as to the accuracy and completeness of such information which should not be unduly relied upon in making any investment decisions. SMITH ZANDER is an independent professional market research company based in Kuala Lumpur, Malaysia, offering market research, industry intelligence and strategy consulting solutions. SMITH ZANDER specialises in the preparation of independent market research reports for capital market exercises, including initial public offerings on Bursa Malaysia Securities Berhad, the Stock Exchange and London Stock Exchange. We have commissioned to conduct an analysis of, and to report on, the steel bar product and steel wire product industry in Malaysia at a fee of RM280,000 (approximately HKD561,000), and our Directors consider that such fee reflects market rates and the payment of which was not contingent upon the [REDACTED] or on the result of the report. This Industry Overview section has been prepared by SMITH ZANDER independent of our Group s influence. SMITH ZANDER has exercised all reasonable and professional judgement, care and due diligence in preparing this Industry Overview section. The information contained in this Industry Overview section is derived by means of data and intelligence gathering which include: (i) secondary or desktop research; and (ii) detailed primary research when required, which involves discussing the status of the industry with leading industry participants and industry experts (e.g. Malaysian Iron and Steel Industry Federation). Quantitative market information could be sourced from interviews by way of primary research and therefore, the information is subject to fluctuations due to possible changes in business and industry conditions. Unless otherwise stated, all data contained in this section are derived from SMITH ZANDER Report. As at the Latest Practicable Date, the latest available data for certain information in SMITH ZANDER Report, including the steel bar product and steel wire product industry, the construction industry, as well as the real GDP of certain regions, in Malaysia is for The following assumptions were used for the preparation of this Industry Overview section: Malaysia s economic, social and political environment is likely to remain stable in the forecast period; there will be no external shocks, such as financial crises or raw material shortages, that may affect the demand and supply of steel bar products and steel wire products in Malaysia during the forecast period; and relevant industry key drivers are likely to drive the demand for steel bar products and steel wire products during the forecast period, comprising growth in the construction industry; growth in the manufacturing industry; and increasing disposable income and affluence of the population. Our Directors confirmed that, as at the Latest Practicable Date, after taking reasonable care, there is no adverse change in the market information since the date of the SMITH ZANDER Report which may qualify, contradict or have an impact on the information in this section. OVERVIEW OF THE ECONOMY IN MALAYSIA Malaysia is an upper-middle income developing economy with aspirations to achieve developed status by the year The mark of a country s economic development is reflected by its GDP and employment rate achievements. Malaysia s real GDP increased from approximately RM864.9 billion in 2011 to approximately RM1,174.3 billion in 2017, registering an average year-on-year growth of approximately 5.2%. 47

55 INDUSTRY OVERVIEW Economic growth has the potential to contribute to increased disposable incomes among the population arising from higher employment and increased earnings for businesses and companies due to greater operating scale and wider reach. Malaysia s gross national income per capita increased by approximately 34.2% from approximately RM30,629 in 2011 to RM41,093 in 2017 indicating a rise in a more affluent population. Malaysia s real GDP and growth rate Real GDP (RM billion) 1,200 1, % 5.48% % % 1, % 1, % 1, % 1, GDP growth rate (%) Source: Real GDP GDP growth Department of Statistics Malaysia, SMITH ZANDER Report STEEL INDUSTRY IN MALAYSIA Steel is an alloy primarily comprising iron and smaller volumes of carbon which act as a hardening agent. The steel industry is a key pillar and driver of the global economy, employing more than 50 million people worldwide either directly or indirectly in downstream and supporting industries such as construction, transportation, energy and mining, machinery and equipment, agriculture as well as furniture and appliances. Steel is a vital multi-purpose raw material, which finds its use ranging from ordinary household consumer goods such as cutlery, food cans and cars, to major industrial equipment such as those used to build steel structures and power plant turbines. Segmentation of the steel industry (Note) Production of molten steel liquid Molten Steel Upstream (integrated steel mills) Casting into semi-finished products Rolling into finished products Flat Products Billets Blooms Slabs Bars Long Products Wire rods Sections I-beam H-beam Wide flanges Sheet piles Angles Plates Hot-rolled coils Cold-rolled coils Downstream (downstream players) Downstream processing/ manufacturing Sales (includes trading) Steel bar products Hot-rolled steel bars Cold-rolled steel bars Steel wire products Wire mesh Fencing products Steel processing centres Sheets Galvanised sheets Colour coated sheets Hot-rolled sheets Cold-rollded sheets Pipes Marketing arm of integrated steel mills, building material trading companies and hardware shops Note: Source: The examples in the list are not exhaustive Denotes our Group s key products. Our Group is involved in the manufacturing and selling of cold-rolled steel bars and steel wire products and processing and selling hot-rolled steel bars. SMITH ZANDER Report, our Group 48

56 INDUSTRY OVERVIEW The steel industry can be segmented into upstream processes where the raw material is processed to finished products generally by the integrated steel mills, while the downstream process involves manufacturing end-user products such as steel bar products, steel wire products, sheets and pipes by downstream players. The finished products and end-user products are sold and distributed by marketing arms of integrated steel mills, building material trading companies and hardware shops. STEEL BAR PRODUCT AND STEEL WIRE PRODUCT INDUSTRY IN MALAYSIA Supply Chain Supply chain of the steel bar product and steel wire product industry Steel bar product and steel wire product manufacturers Property developers Construction contractors Building material trading companies Hardware shops Notes: one-way customer-supplier relationship where suppliers supply products to customers two-way customer-supplier relationship where suppliers and customers purchase and supply different products from/ to each other Source: SMITH ZANDER Report Steel bar products and steel wire products are sold and distributed by manufacturers to property developers, construction contractors, building material trading companies and hardware shops for use in the construction industry. Property developers and construction contractors may also purchase steel bar products and steel wire products from building material trading companies and hardware shops to be used as building materials for construction projects. However, the supply chain of the steel bar product and steel wire product industry as shown in the diagram above is fragmented in nature with many companies in Malaysia involved in the manufacturing and/or trading of steel bar products and steel wire products. In addition, industry players may also supply an extensive range of products, including building materials other than steel bar products and steel wire products, to their customers when requested. Steel bar product and steel wire product manufacturers may also purchase raw materials and/or trading products, including building materials other than steel bar products and steel wire products, from their suppliers and may also sell finished products (e.g. cold-rolled steel bars and wire mesh) to the same companies when requested. Industry Performance, Outlook and Prospects Steel bar product Apparent consumption of steel bar products in Malaysia 4,000,000 3,000,000 MT 2,000,000 1,000,000 2,295,471 2,492,845 2,905,777 3,425,348 4,052,747 3,483, Source: Malaysian Iron and Steel Industry Federation ( MISIF ), South East Asia Iron and Steel Institute ( SEAISI ), SMITH ZANDER Report 49

57 INDUSTRY OVERVIEW Overall, the apparent consumption of steel bar products increased at a CAGR of approximately 8.8% from approximately 2.3 million MT in 2011 to approximately 3.5 million MT in 2016, signifying that there is growing domestic demand for steel bar products, driven by the growing construction industry during the same period, measured in terms of value of projects awarded. SMITH ZANDER forecasts the apparent consumption of steel bar products to grow from approximately 3.7 million MT in 2017 to approximately 4.8 million MT in 2021, registering a CAGR of approximately 6.7% during the period. Steel wire products Apparent consumption of steel wire products in Malaysia 2,000,000 1,500,000 MT 1,000, ,000 1,213,684 1,168,730 1,093,391 1,291,945 1,456,098 1,485, Source: MISIF, SEAISI, SMITH ZANDER Report The apparent consumption of steel wire products increased between 2011 and 2016, from approximately 1.2 million MT to approximately 1.5 million MT at a CAGR of approximately 4.6%, indicating that there is growing demand for steel wire products, mainly driven by the continued growth of the construction industry as measured by the value of projects awarded during the same period. The value of projects awarded grew from approximately RM99.5 billion in 2011 to approximately RM229.0 billion in 2016 at a CAGR of approximately 18.1%. Steel wire products such as wire mesh are increasingly used in place of steel bar products as concrete reinforcement materials because of the lower installation cost and time as compared to steel bar products. As wire mesh is manufactured at the manufacturer s premises rather than on a construction site, it allows for construction activities to be conducted simultaneously and thus shortens overall construction time. Thus, apparent consumption of steel wire products increased from approximately 1.2 million MT in 2011 to approximately 1.5 million MT in 2016, with production of steel wire products increasing during the same period, from approximately 1.3 million MT to approximately 1.5 million MT. SMITH ZANDER forecasts the apparent consumption of steel wire products to grow from approximately 1.6 million MT in 2017 to approximately 2.0 million MT in 2021, registering a CAGR of approximately 5.7% during that period. Key Market Drivers, Trends and Development Growth in the construction industry will generate demand for steel bar products and steel wire products in Malaysia Construction activities in Malaysia are largely influenced by the nation s economic development as the construction of buildings and infrastructure are essential for national development and progress. With economic development comes an increase in demand for residential, commercial and industrial properties due to the increase in the average income of the population and business activities. 50

58 INDUSTRY OVERVIEW Value of projects awarded in the construction industry in Malaysia (Note) RM billion Note: In Malaysia, construction activities are measured based on the value of projects awarded during a certain period. This data is collated from the CIDB Malaysia. Thus, the value of projects awarded is used as a benchmark to measure growth of the construction sector in Malaysia. Source: CIDB, SMITH ZANDER Report The value of projects awarded grew from approximately RM99.5 billion in 2011 to approximately RM229.0 billion in 2016 at a CAGR of approximately 18.1%. Construction activities in Malaysia witnessed exceptionally high growth in 2014 due largely to the Iskandar Malaysia development in Johor, registering an approximately 36.5% increase from Construction activities normalised in 2015, recording growth of approximately 8.3% over 2013 if the outlying year of 2014 was excluded. SMITH ZANDER forecasts the value of projects awarded to grow from approximately RM249.0 billion in 2017 to approximately RM375.5 billion in 2021, registering a CAGR of approximately 10.8% during the period. Malaysia s commercial and industrial sectors continue to grow at a healthy pace spurred by strong levels of foreign and domestic investments. The value of awarded commercial and infrastructure projects increased from RM74.8 billion in 2011 to RM188.4 billion in 2016 registering a CAGR of approximately 20.3%. In addition, Malaysia is an upper-middle income developing economy with aspirations to achieve developed status by the year Malaysia s gross national income per capital increased by approximately 34.2% from approximately RM30,629 in 2011 to RM41,093 in 2017, indicating the growing disposable income and the improving standard of living of the population. This increase in disposable income has led to a more affluent population that has greater spending power. The increasing disposable income of Malaysia s population has a positive correlation to the demand for residential properties. The value of awarded residential projects increased from RM24.6 billion in 2011 to RM40.6 billion in 2016 registering a CAGR of approximately 10.5%. As the construction of property segments (i.e. residential, commercial and industrial) develops, the infrastructure and social amenities supporting these developments must be likewise built or improved. This drives demand for steel bar products and steel wire products. Growth in the manufacturing industry will drive demand for steel bar products and steel wire products The manufacturing industry, as measured by manufacturing sales value, grew from approximately RM586.1 billion in 2011 to approximately RM765.8 billion in 2017 at a CAGR of approximately 4.6%. The steel bar product and steel wire product industry is a supporting industry to manufacturers in the automotive, machinery and equipment, and rail industries, amongst others. This drives demand for steel bar products and steel wire products as concrete reinforcement materials are required to support the growth of these manufacturing industries. Steel bar products and steel wire products can also be used for the purposes such as partition making, machine protection fencing, general fencing and security barrier. Thus, there will be increased demand in steel bar products and steel wire products as construction services rise as well as increased usage in the related manufacturing sectors. 51

59 INDUSTRY OVERVIEW Raw Material and Finished Product Trends Raw materials and labour costs are material expenditure incurred by players in the steel bar product and steel wire product industry. As such, any significant increases or decreases in these costs will impact the profitability of the manufacturers. Steel bar product and steel wire product manufacturers may transfer the increase in production costs to their customers as their raw materials fluctuate according to global steel prices. Raw material prices in Malaysia The average price of steel bars and wire rods increased between 2015 and Despite such upward trend, the prices of steel bars and wire rods fluctuated significantly during the same period. The prices of steel bars and wire rods are volatile and dependent on the supply and demand factors especially the production and export volume of steel from China, hence any forecast prices of steel bars and wire rods may be academic as it is difficult to predict the factors affecting the volatility of these prices. As an industry norm, steel bar product and steel wire product manufacturers generally do not enter into long-term contracts with their suppliers as the prices of the raw materials fluctuate with global steel prices. Therefore, industry players may place purchases at frequent intervals in order to minimise the impact on the price fluctuations of the cost of raw materials (Note 1) Average price of raw materials (RM per MT) Raw material Steel bars (Note 2) 1,995 2,057 2,125 2,239 2,457 2,577 Wire rods (Note 3) 1,739 1,904 2,291 Notes: 1 Comprises average prices in Peninsula Malaysia 2 Comprises the average price of various types of mild steel round bars and high tensile deformed bars 3 Refers to low carbon wire rods Source: CIDB Malaysia, our Group, SMITH ZANDER Report In Malaysia, there are three major local manufacturers of wire rods namely Amsteel Mills Sdn. Bhd., Ann Joo Steel Berhad and Southern Steel Berhad. Amsteel Mills Sdn. Bhd. is a subsidiary of Lion Industries Corporation Berhad which is listed on the Main Market of Bursa Malaysia Securities Berhad. Ann Joo Steel Berhad and Southern Steel Berhad are also listed on the Main Market of Bursa Malaysia Securities Berhad. The steel wire products manufacturers generally source wire rods from these major local manufacturers as imported wire rods are subject to import duties. The steel wire products manufacturers may also source the wire rods in lower quantities from trading houses if they are not able to meet the minimum order quantity to purchase directly from the local manufacturers. Historically, cheap imports of steel from the PRC has put pressure on steel prices in Malaysia. However, in 2016 the PRC government announced the 13th Five-Year Plan which includes effort to curb pollution by reducing steel production and also shut down steel mills with outdated production facilities, which has subsequently contributed to an increase in steel prices. Labour wage rates in Malaysia Since the manufacturing of steel bar products and steel wire products is largely carried out by general workers and machine operators, labour costs in the steel bar product and steel wire product industry is represented by the average monthly labour wage for plant and machine operators and assemblers in Malaysia. From 2015 to 2017, the average monthly labour wage rate has been increasing. Average monthly labour wage rate (RM) Category of labour Plant and machine operators and assemblers (Note) 1,551 1,662 1,869 Note: Comprises workers with tasks that include operating and monitoring wire-drawing machines, operating and monitoring press machines to make rods, bars and seamless tubing from metal, operating and monitoring equipment which cleans metal compounds in preparation for electroplating, galvanising, enameling or similar processes, and operating and monitoring machines which automatically coat wire with non-ferrous metal Source: Department of Statistics Malaysia, SMITH ZANDER Report 4 Source: Malaysian Investment Development Authority ( MIDA ) 52

60 INDUSTRY OVERVIEW The manufacturing of steel bar products and steel wire products involves the use of machinery. However, labour will be required to operate the machineries as well as transferring intermediary products from one machine to another. In Malaysia, the manufacturing industry is relatively dependent on foreign workers as plant and machine operators, especially those from neighbouring developing nations in the Southeast Asia region, as a result of poor response from local labour. Over the years, the manufacturing industry has evolved from mass production to lean manufacturing to address the issue of rising costs and to cater for rapidly evolving end user markets. Thus, the manufacturing industry is shifting towards automation in production lines to achieve higher productivity as well as cost-efficiency. In Malaysia, the government also announced initiatives under the 11th Malaysia Plan ( 11MP ) specific to the manufacturing industry which includes enhancing productivity through automation by providing developmental and performance-based financial assistance to reduce the high dependence on unskilled foreign workers. Manufacturers of steel bar products and steel wire products are also expected to increase automation in their manufacturing processes by eliminating the need for manual labour. Wire mesh prices in Malaysia The average price of wire mesh also increased between 2015 and In 2016, the goods and services tax implementation in Malaysia as well as the PRC government s effort to reduce steel production and shut down steel mills caused the price of wire mesh to increase before normalising in Average price of wire mesh (RM per m 2 ) Wire mesh (Note) Note: Comprises the average price of various types of BRC wire mesh. Source: CIDB Malaysia, SMITH ZANDER Report Entry Barriers High capital investment The steel bar product and steel wire product industry involves high initial capital required for investments in manufacturing facilities, machinery and equipment, and storage facilities. In addition, high capital investment is also required for future upgrading of machinery. Economies of scale In order to purchase raw materials directly from the major local upstream manufacturers to enjoy cost advantages, steel bar product and steel wire product industry players are required to have relatively large order volumes. As such, steel bar product and steel wire product industry players with larger economies of scale will benefit from lower raw material prices as they are able to purchase in bulk. Smaller industry players who are not able to purchase directly from the major local wire rods manufacturer will purchase from trading houses or distributors, which may translate to higher costs as compared to purchasing directly from the major local upstream manufacturers, as they purchase in lower volumes. Industry Challenges, Risks and Threats Fluctuation in the prices of raw material impact the profitability of steel bar product and steel wire product manufacturers Raw materials are material component of expenditure incurred by manufacturers of steel bar products and steel wire products. Steel bars and wire rods are key raw materials for players in the steel bar product and steel wire product industry. The prices of steel bars and wire rods fluctuate according to global steel prices. Global steel prices are, amongst others, subject to the demand and supply conditions of steel in the global market, prices of raw materials for the production of steel such as coal and iron as well as prevailing energy costs. Any changes in the steel prices may lead to rise in the cost of production for manufacturers of steel bars and steel wire rods as the cost of raw materials also increases. Dependency on the construction industry in Malaysia The construction industry is a major end-user industry for steel bar products and steel wire products as reinforcement materials. As the steel bar product and steel wire product industry grow in tandem with the construction industry, any slowdown in the construction industry may lead to a decrease in demand for steel bar products and steel wire products, affecting the financial performance of industry players. 53

61 INDUSTRY OVERVIEW Vulnerability to political, economic and regulatory risks The financial, business and market prospects of players in the steel bar product and steel wire product industry depend to some degree on the developments in the political, economic and regulatory front in Malaysia. Amongst the political, economic and regulatory factors are changes in inflation rates, interest rates and foreign exchange rates, war, terrorism activities, riots, expropriations, changes in political leadership and unfavourable changes in government policies and regulations. In May 2018, there was a change in political leadership in Malaysia, leading to a review of major infrastructure projects proposed by the former government, raising uncertainty about continuity of several proposed infrastructure projects. Competitive Landscape The top five industry players and ranking among the industry players in the steel bar product and steel wire product industry are not made available in this Industry Overview due to (i) the fragmented nature of the steel bar product and steel wire product industry, as there is a large pool of companies in Malaysia ranging from subsidiaries of public-listed companies to family-owned small and medium enterprises who are involved in the manufacturing and/or trading of steel bar products and steel wire products; and (ii) the financial information pertaining to industry players revenues for steel bar products and steel wire products are not made publicly available as most of the players in the industry are private companies. Having considered the above, the table below sets forth the profiles of some major players in Malaysia whose core business activities are in the manufacturing and/or trading of steel bar products and/ or steel wire products. Major steel bar product and steel wire product industry players in Malaysia (Note) Industry player Product offerings Location and region of manufacturing plant Our Group Steel bars, reinforced wire mesh, cut-to-size wire mesh, barbed wire, Kuantan, Malaysia (East Coast 2007 chain-link fences and welded fences Region) Company A Steel wire mesh, concrete wires, fencing panels and cut and bend bars Klang, Prai, Tanjung Langsat 1980 and Kuantan, Malaysia (East Coast Region) Company B Welded fabric mesh, hard drawn wire, bars, fences and nails Ijok, Selangor and Johor, 1995 Malaysia (Southern Region) Company C Steel fabric, bars, hard drawn wire, galvanised steel fences and reinforcement bar Penang, Malaysia (Northern 1989 Region) Company D Galvanised steel wire, security welded fence, welded wire mesh, steel bars, Ipoh, Malaysia (Northern 1982 chain-link fence and barbed wire Region) Company E Welded mesh, steel wire products, metal roofing and light weight trusses system Kuala Lumpur, Malaysia 2011 (Central Region) Company F Galvanised wire, annealing wire, bright wire, hard drawn wire, steel bar and grill mesh Penang, Malaysia (Northern 1993 Region) Year of establishment Note: The major steel bar product and steel wire product industry players include industry players that were identified by SMITH ZANDER based on sources available, such as the internet, published documents and industry directories. Source: Companies Commission of Malaysia, annual reports of various industry players, SMITH ZANDER Report Market Share Steel bar products In 2016, the apparent consumption of steel bar products in Malaysia was registered at 3,483,782 MT. Our Group s sale of steel bar products amounted to approximately 45,618 MT in 2016 and thereby, our Group captured a market share of approximately 1.3% in steel bar products in Malaysia. Steel wire products In 2016, the apparent consumption of steel wire products in Malaysia was registered at 1,485,669 MT. Our Group s sale of steel wire products amounted to approximately 25,589 MT in 2016 and thereby, our Group captured a market share of approximately 1.7% in steel wire products in Malaysia. Key factors of competition The key factors that determine the competitiveness of the industry players are as follows: Automation With adequate machinery and equipment, steel bar product and steel wire product industry players will be able to increase production efficiency as well as reduce dependency on manual labour. 54

62 INDUSTRY OVERVIEW Quality certification Steel bar products and steel wire products are required to be certified by the CIDB Malaysia to ensure that the quality of the steel bar products and steel wire products are in accordance to the Malaysian Standards in order to be used as construction materials in Malaysia. Steel bar product and steel wire product industry players who manufacture products certified by the CIDB Malaysia will be able to supply to the construction industry as construction materials. Logistics Steel bar product and steel wire product industry players with in-house logistics teams and fleet of lorries are able to better manage delivery schedules and transportation costs as deliveries can be consolidated to be delivered to multiple locations. Having an in-house logistics team also enables the industry players to service customers that are situated in rural or outskirt areas or areas in which outsourced logistic companies may not serve. Further, having offices with in-house logistics team in closer proximity to their customers also enable industry players to achieve cost-saving in terms of transportation costs. Economies of scale Steel bar product and steel wire product industry players that purchase raw materials directly from wire rod manufacturers are able to have better cost advantage as compared to smaller industry players who purchase in smaller volumes from trading houses or distributors. Geography of Malaysia West Malaysia (also known as Peninsular Malaysia) describes Peninsular Malaysia, bordering Thailand, with Singapore at the end of the peninsula. Peninsular Malaysia consists of the following 11 states and two federal territories: Central Region refers to Selangor Darul Ehsan and federal territories of Kuala Lumpur and Putrajaya. East Coast Region refers to Kelantan Darul Naim, Pahang Darul Makmur and Terengganu Darul Iman. Southern Region refers to Johor Darul Ta zim, Malacca and Negeri Sembilan Darul Khusus. Northern Region refers to Kedah Darul Aman, Penang, Perak Darul Ridzuan and Perlis Indera Kayangan. East Malaysia describes Sabah and Sarawak, and Federal Territory of Labuan, located on the island of Borneo shared with Indonesia, separated by the South China Sea from Peninsular Malaysia. Economic Conditions and Construction Landscape in Central Region of Malaysia The Central Region s real GDP increased from approximately RM310.3 billion in 2011 to approximately RM421.6 billion in 2016, registering a year-on-year average of approximately 6.3%. Moving forward, it is forecast that the GDP growth between 2017 and 2021 will be between 5% and 8%. Real GDP of Central Region of Malaysia Year GDP (% change) Source: Department of Statistics Malaysia, SMITH ZANDER Report From 2011 to 2016, construction activities in the Central Region, as measured by the value of projects awarded, grew from approximately RM35.5 billion in 2011 to approximately RM134.7 billion in 2016 at a CAGR of approximately 30.6%. The significant growth is contributed by mega projects being implemented in Malaysia during the period such as the MRT, Damansara-Shah Alam Elevated Expressway, Tun Razak Exchange (centre for international finance and business) and Merdeka PNB 118 (118-storey mixed development). SMITH ZANDER forecasts construction activities in the Central Region to grow from approximately RM155.9 billion in 2017 to approximately RM301.3 billion in 2021, registering a CAGR of approximately 17.9% during the period. The change in Malaysia s political leadership in May 2018 leading to the review of several mega infrastructure projects proposed by the former government has been factored into the forecast as there is uncertainty about the continuity of several proposed infrastructure projects. 55

63 INDUSTRY OVERVIEW Economic Conditions and Construction Landscape in the Northeastern States Kelantan and Terengganu are among the states covered within the East Coast Economic Region ( ECER ) together with Pahang and the district of Mersing in Johor. The ECER Development Council is a statutory body established to head the socio-economic development of the ECER. A ECER Master Plan is formulated with the objective of accelerating growth in the ECER to be a developed region by These development plans and initiatives will require supporting industries such as the steel bar product and steel wire product industry for the construction of physical infrastructure and amenities. Kelantan Kelantan s real GDP increased at a year-on-year average of approximately 4.4% between 2011 and Moving forward, it is forecast that the GDP growth between 2017 and 2021 will be between 3% and 6%. Real GDP of Kelantan Year GDP (% change) Source: Department of Statistics Malaysia, SMITH ZANDER Report From 2011 to 2016, construction activities in Kelantan, as measured by the value of projects awarded, grew from approximately RM874.0 million to approximately RM1.6 billion at a CAGR of 12.9%. Among the key development areas involving Kelantan is the Cross Border Development from the coastal areas of Besut in Terengganu to the Kelantan-Thai border at Tumpat. Key initiatives involving Kelantan include Pasir Mas Halal Park, Pengkalan Kubor Collection, Tok Bali Fisheries Park and the Jeli-Bukit Bunga Conurbation. Among the initiatives in Kelantan announced under the 11th Malaysia Plan, specific to the construction industry, include the Central Spine Road and Kota Bharu-Kuala Krai Highway to increase connectivity in the ECER. SMITH ZANDER forecasts construction activities in Kelantan to grow from approximately RM1.8 billion in 2017 to approximately RM2.6 billion in 2021, registering a CAGR of approximately 9.6% during the period. Terengganu Terengganu s real GDP increased at a year-on-year average of approximately 4.0% between 2011 and Moving forward, it is forecast that the GDP growth between 2017 and 2021 will be between 3% and 7%. Real GDP of Terengganu Year GDP % change Source: Department of Statistics Malaysia, SMITH ZANDER Report From 2011 to 2016, construction activities in Terengganu, as measured by the value of projects awarded, grew from approximately RM1.7 billion to approximately RM3.5 billion at a CAGR of approximately 15.5%. Among the key development areas involving Terengganu is Dungun Coastal Tourism Development, Pasir Raja Herbal Park, Kuala Berang Sheep Breeding Centre and Telaga Papan Goat Multiplier Farm. SMITH ZANDER forecasts construction activities in Terengganu to grow from approximately RM3.7 billion in 2017 to approximately RM5.7 billion in 2021, registering a CAGR of approximately 11.4% during the period. 56

64 MALAYSIAN REGULATORY OVERVIEW OVERVIEW OF MALAYSIAN LAWS AND REGULATIONS During the Track Record Period and up to the Latest Practicable Date, our Group had business operations in Malaysia primarily focusing on (i) manufacturing and selling of cold-rolled steel bars and steel wire products; and (ii) processing and selling of hot-rolled steel bars. A summary of salient Malaysian legal and regulatory frameworks that may be applicable in our business operations are subject to the following: (i) Business Operation The Industrial Co-ordination Act 1975 The Industrial Co-ordination Act 1975 ( ICA 1975 ) requires any person(s) engaging in any manufacturing activity with shareholders funds of RM2,500,000 or above and employing 75 or more full time paid employees to obtain a manufacturing license from MITI. Under ICA 1975, a manufacturing activity includes making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade. Any person who fails to obtain the said manufacturing license shall be liable on conviction to a fine not exceeding RM2,000 or to a term of imprisonment not exceeding six months and to a further fine not exceeding RM1,000 for every day during which such default continues. There is no expiry for the manufacturing license, however, the licensing officer may in his discretion revoke a manufacturing license if the manufacturer: (i) (ii) (iii) has not complied with any condition imposed in the license; is no longer engaged in the manufacturing activity in respect of which the license is issued; or has made a false statement in his application for the license. This licensing requirement only applies to companies with shareholders funds of RM2,500,000 or above and employing 75 or more full-time paid employees. In respect of companies below those thresholds, they will be exempted from the requirement to hold a manufacturing license. The Construction Industry Development Board Act 1994 The implementation of the Construction Industry Development Board Act 1994 ( CIDBA 1994 ) empowers the CIDB Malaysia to regulate the construction industry and the matters connected. Pursuant to the amendments of CIDBA 1994 which was gazetted and come into force on 1 June 2015, the CIDB Malaysia shall certify the construction material available in the market 57

65 MALAYSIAN REGULATORY OVERVIEW as specified in Fourth Schedule of CIDBA 1994 and subsequently issue the certifications to ensure that the quality of the construction materials are in accordance to the standard specified in the said schedule. Any person who deals or undertakes to deal with the construction materials in the Fourth Schedule without the certification of CIDB Malaysia shall be guilty of an offence and shall, on conviction, be liable to a fine not less than RM10,000 but not more than RM500,000. The Local Government Act 1976 and Trade By-Laws It is a requirement for a company carrying out business in Malaysia to obtain a business license for each operating premise from the relevant local authority which is empowered under the Local Government Act 1976 ( LGA 1976 ). LGA 1976 confers the power to the local authority to make by-laws which provide that no person shall use any premise within the jurisdiction of respective Municipal Council without a license issued by respective Municipal Council. The validity of a business license shall be valid for a period not exceeding three years and subject to renewal. It is provided under LGA 1976 that any person who fails to exhibit his license at all times in some prominent place on the licensed premises or to produce such license when required shall be liable to a fine not exceeding RM500 or to imprisonment for a term not exceeding six months or to both. Our Group is running its businesses at the District of Kuantan and Kuala Lumpur and therefore it is a requirement to comply with the following by-laws: (i) (ii) Licensing of Trade, Business and Industries (Kuantan Municipal Council) By- Laws 1983 no person shall use any place or premises, within the Kuantan Municipal Council for any trade, business or industry without a license issued by the Kuantan Municipal Council. Any person who contravenes any provisions of the by-laws stated therein shall be liable to a fine not exceeding RM2,000 and to a further fine not exceeding RM200 for every day during which the offence is continued after conviction. Licensing of Trades, Businesses and Industries (Federal Territory of Kuala Lumpur) By-Laws 1986 no person shall use any place or premises within the Federal Territory for any trade, business or industry without a license issued by the Kuala Lumpur City Council. Any person who contravenes any provisions of the by-laws stated therein shall be liable to a fine not exceeding RM2,000 and to a further fine not exceeding RM200 for every day during which the offence is continued after conviction. (collectively referred to as Trade By-Laws in this section) 58

66 MALAYSIAN REGULATORY OVERVIEW Where an offence has been committed by any body corporate, any person who at the time of the commission of such offence was a director, general manager, secretary or other similar officer of the body corporate or was purporting to act in any such capacity, shall be deemed to be guilty of that offence unless he proves that the offence was committed without his consent of connivance and that having regards to the nature of his functions in that capacity and to all the circumstances he took all reasonable means and precautions to prevent the commission of the offence. The Factories And Machinery Act 1967 The Factories and Machinery Act 1967 ( FMA 1967 ) provides for the control of factories particularly on the matters relating to safety, health and welfare of person therein. It also provides that no person shall operate or cause or permit to be operated any machinery in respect of which a certificate of fitness is prescribed, unless there is in force in relation to the operation of the machinery a valid certificate of fitness issued under FMA Any person who operates any machinery without a certificate of fitness shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM150,000 or to imprisonment for a term not exceeding 3 years or both. It is provided under FMA 1967 that any contravention under FMA 1967, the occupier of a factory or the owner (as the case may be) shall be guilty of an offence. However, if it is proved to the satisfaction of a court that a contravention under FMA 1967 has been committed by any person other than the occupier or owner of the factory or machinery in respect of which the contravention has been committed, the owner or the occupier as the case may be shall also be held to be liable for that contravention and to the penalty provided therefor, unless he shall prove to the satisfaction of the court that the same was committed without his knowledge or consent and that he had taken all reasonable means to prevent the same and to ensure the observance of the FMA (ii) Intellectual Properties Rights The Trade Marks Act 1976 It is provided under the Trade Marks Act ( TMA 1976 ) that the valid registration of a person as registered proprietor of a trade mark (other than a certification trade mark) in respect of any goods or services shall be given or be deemed to have been given to that person the exclusive right to the use of the trade mark in relation to those goods or services subject to any conditions, amendments, modifications or limitations entered in the register of trade marks kept under TMA Only the proprietor of a registered trade mark may claim for trade mark infringement under TMA A registered trade mark is infringed by a person who, not being the registered proprietor of the trade mark or registered user of the trade mark using by way of permitted use, uses a mark which is identical with it or so nearly resembling it, as it is likely to deceive or cause confusion in the course of trade in relation to goods or services in respect of which the trade mark is registered. 59

67 MALAYSIAN REGULATORY OVERVIEW A trade mark, once registered with the Malaysian Intellectual Property Corporation is valid for 10 years and may be renewed every 10 years. Proceedings for trade mark infringement can be initiated when a person other than the registered user or proprietor uses a mark identical to, or resembling, the registered mark so that it is likely to deceive, or cause confusion, in the course of trade in relation to goods or services in respect of which the trade mark is registered. The Common Law Protection towards Unregistered Trade Marks Despite the non-registration of the trade mark under the TMA 1976, there is an alternative cause of action for passing off goods or services under common law. To succeed in a valid cause of action for passing off, the following requirements shall be satisfied: (a) (b) (c) (d) (e) the mark used by the other party is a misrepresentation; it is made by a trader in the course of trade; it is in the course of trade to prospective customers of his or ultimate consumers of goods or services supplied by him; it is calculated to injure the business or goodwill of another trader; and it causes actual damage to a business or goodwill of the trader by whom the action is brought. (iii) Employment and Labour Protection The Industrial Relations Act 1967 The Industrial Relations Act 1967 ( IRA 1967 ) provides the legal framework and procedures for employees who have been unfairly dismissed and/or constructively dismissed by their employers. The IRA 1967 provides an avenue to seek redress via the Malaysian industrial court, which specializes in handling industrial relation matters only. The Employment Act 1955 The Employment Act 1955 ( EA 1955 ) regulates all labour relations including contracts of service, payment of wages, employment of women, maternity protection, rest days, hours of work, holidays, termination, lay-off and retirement benefits, employment of foreign employees and keeping of registers of employees. 60

68 MALAYSIAN REGULATORY OVERVIEW For the purpose of EA 1955, the Employment (Amendment) Act 2012 ( EAA 2012 ) provides that employee means any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person s wages do not exceed RM2,000 a month and employees involve in manual labour, supervisors of such manual labourers and drivers, irrespective of their monthly wages. In the event of inconsistencies between the terms of employment contract and the minimum standards of the EA 1955, the more favourable terms will be enjoyed by the employees. Every employer is required to prepare and keep the registers of employees in the prescribed form. Unless otherwise permitted by the Director General of Labour, the register of employees is required to be kept under the Employment Regulations 1957 ( ER 1957 ) in the office within the place of employment where employees are employed and the employer shall make such register of employees available for inspection by the Director General of Labour as and when required to do so. Any person who commits any offence under, or contravenes any provision of EA 1955, or any regulations, order or other subsidiary legislation whatsoever made thereunder, in respect of which no penalty is provided, shall be liable, on conviction, to a fine not exceeding RM10,000. The Employment (Restriction) Act 1968 The Employment (Restriction) Act 1968 ( ERA 1968 ) provides that no person shall employ in Malaysia, a non-citizen unless there has been a valid employment permit issued. Upon obtaining the approval from the Ministry of Home Affairs, a company is required to submit applications for Visit Pass (Temporary Employment) to the Foreign Workers Division, Immigration Department of Malaysia. The approval of the Visit Pass (Temporary Employment) can be revoked if its conditions are contravened. Failure to comply will result the employer being fined not exceeding RM5,000 or to imprisonment for a term not exceeding one year or both wherein the word of employer is defined under ERA 1968 as any person who has entered into a contract of service to employ any other person as an employee includes the agent, manager or factor of such first mentioned person. The Employees Provident Fund Act 1991 The Employees Provident Fund ( EPF ) is a social security institution formed in accordance to the Employees Provident Fund Act 1991 ( EPFA 1991 ) providing for the retirement benefits for employees through management of their savings in an efficient and reliable manner. 61

69 MALAYSIAN REGULATORY OVERVIEW Under EPFA 1991, both the employer and employee are required to make contributions into the employee s individual account in the EPF. The employers are required to contribute EPF to employees who are Malaysian citizens or permanent residents. Expatriates and foreign workers, who are not Malaysian citizens or permanent residents are not required to contribute EPF unless they elect to do so. The amount is calculated based on the monthly wage of the employee and the contribution rate is based on the wage or salary received by the employee. The rate of contribution for employers and employees effective on 1 March 2016 are as follows: MALAYSIAN CITIZENS AND PERMANENT RESIDENTS Contributed by Employer Employee Up to age 60 12% 8% Above age 60 6% 4% If the employer fails to make the required contribution to the EPF within the prescribed period, the company and the directors are liable to pay in respect of or on behalf of any employee shall, on conviction, be liable to imprisonment for a term not exceeding three years or to a fine not exceeding RM10,000 or to both. The Employees Social Security Act 1969 The Social Security Organization ( SOCSO ) was mandated to administer and enforce the Employees Social Security Act 1969 ( ESSA 1969 ) and Employee Social Security General Rules 1971 ( ESSGR 1971 ). Through the ESSA 1969 and ESSGR 1971, SOCSO is able to provide free medical treatment, facility for physical or vocational rehabilitation, and financial assistance to employees if they have lost their abilities due to accidents or disease that have reduced their abilities to work or rendered them incapacitated. Before 1 June 2016, ESSA 1969 covers all employees who work under employers with a monthly salary RM3,000 or below. Amendment effective from 1 June 2016 with the ESSA 1969, all the employees whom being employed under an employer under contract of service or apprenticeship in private sector is required to be insured. The ceiling of wages for contribution payment is capped at RM4,000. The contribution to employee under ESSA 1969 shall comprise the contribution by the employer and employee respectively. The contributions shall fall into the following two categories, namely: (a) (b) First category (employment injury and invalidity schemes) The rates of contribution under this category comprise of 1.75% employer s share and 0.5% employee s monthly wages; Second category (employment injury scheme) The rates of contribution under this category is 1.25% of the employee s monthly wages solely borne by the employer. 62

70 MALAYSIAN REGULATORY OVERVIEW If the employer fails to make the required contribution to SOCSO, the company and the directors shall be punishable with imprisonment for a term which may extend to two years, or with a fine not exceeding RM10,000 or with both. Court may also order the employer to pay to the SOCSO the amount of any contributions, together with any interest credited on it, due and payable to SOCSO. The Employment Insurance System Act 2017 The Employment Insurance System Act 2017 ( EISA 2017 ) is an employment insurance system which aims to provide certain benefit and re-employment placement programme for insured persons in the event of loss of employment which will promote active labour market policies. The said system was administered by SOCSO. With effect from January 2018, an employer that has registered his industry with SOCSO in accordance to ESSA 1969 shall be deemed to have registered his industry under EISA 2017 and shall make contribution at the rate as specified in the Second Schedule of EISA 2017 based on the amount of the monthly wages of the employees insured under EISA Such contribution shall cease when the employee attains the minimum retirement age. Any employer who fails to register his industry shall on conviction, be liable to a fine not exceeding RM10,000 or to imprisonment for a term not exceeding two years or to both. Any question, dispute, claim, or appeal by an insured person, employer, training provider or any person in relation to any matter under EISA 2017 shall be filed to the Social Security Appellate Board instituted under Section 83 of the ESSA 1969 for decisions. The Minimum Wages Order 2016 The Minimum Wages Order 2016 imposes minimum wages on all employees. The current minimum wages of employees in Peninsular Malaysia is RM1,000 per month. The Occupational Safety and Health Act 1994 The Occupational Safety and Health Act 1994 ( OSHA 1994 ) provides a legislative framework to promote standards for safety and health at work. Pursuant to the provisions contained the OSHA 1994, the employer has a duty to ensure, so far as is practicable, the safety, health and welfare at work of the employees. It is the duty of employers to provide the employees with the training, knowledge, information and supervision to provide a safe working environment without risks to their health, safety and welfare. The safety, health and welfare of persons at work are regulated under OSHA 1994 which is under the purview of the Department of Occupational Safety and Health and the Ministry of Human Resources. 63

71 MALAYSIAN REGULATORY OVERVIEW It is required by OSHA 1994 that every employer shall establish a safety and health committee at the place of work if (a) there are 40 or more persons employed at the place of work; or (b) the Director General of Occupational Safety and Health directs the establishment of such a committee at the place of work. The committee s main function is to review the safety and health measures and investigate any maters arising thereof. Companies engaging in manufacturing activities which employ more than 500 employees are required to employ a competent person to act as a safety and health officer at the place of work. Failure to comply will attract a fine of not exceeding RM5,000 or to imprisonment for a term not exceeding six months or to both. Where a body corporate contravenes any provisions of the OSHA 1994 or any regulations made thereunder, every person, who at the time of the commission of the offence is a director, manager, secretary or other like officer of the body corporate shall be deemed to have contravened the provision and may be charged jointly in the same proceedings with the body corporate or severally, and every such director, manager, secretary or other like officer of the body corporate shall be deemed to be guilty of the offence. However, it is further provided under OSHA 1994, it shall be a defence in any proceedings against a person for an offence under the OSHA 1994 or any regulations made thereunder to satisfy the court that the offence was committed without his consent or connivance and that he exercised all such due diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his functions in that capacity and to all the circumstances. (iv) Environment Protection The Environmental Quality Act 1974 The Environmental Quality Act 1974 ( EQA 1974 ) restricts pollution of the atmosphere, noise pollution, and soil pollution. It also prohibits unlicensed discharge of oil and wastes into Malaysian waters, and prohibits open burning. The Environmental Quality (Schedule Waste) Regulations 2005 ( EQSWR 2005 ) is the relevant regulation in governing the disposal of special type of waste named in the first schedule of EQSWR Any person who place, deposit or dispose of the scheduled waste in contravention with EQA 1974 and EQSWR 2005 shall be guilty of an offence and shall be liable to a fine not exceeding RM500,000 or to imprisonment for a term not exceeding five years or both. EQA 1974 further provides that where an offence against EQA 1974 or any regulations made thereunder has been committed by a company, firm, society or other body of persons, any person who at the time of the commission of the offence was a director, chief executive officer, manager, or other similar officer or a partner of the company, firm, society or other body of persons or was purporting to act in such capacity shall be deemed to be guilty of that offence unless he proves that the offence was committed without his consent or connivance and that he had exercised all such diligence as to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his functions in that capacity and to all the circumstances. 64

72 MALAYSIAN REGULATORY OVERVIEW Pursuant to section 45 of EQA 1974, the Director General or any Deputy Director General of Environmental Quality or any other public officer or any local authority to whom the Director General of Environmental Quality has delegated such power in writing, may compound any offence under EQA 1974 or the regulations made thereunder which is prescribed by the Minister to be a compoundable offence by accepting from the person reasonably suspected of having committed the offence a sum of money not exceeding RM2,000. (v) Taxation The Income Tax Act 1967 Pursuant to the Income Tax Act 1967 ( ITA 1967 ), income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. A company will be a tax resident in Malaysia if its management and control is exercised in Malaysia. In normal circumstances, the place where the directors meetings are held concerning management and control of the company will be considered in determining where the management and control is exercised. Resident companies with a paid-up capital of RM2,500,000 or more and non-resident companies are subject to a tax rate of 24% with effect from year of assessment In cases of resident companies with a paid up capital of less than RM2,500,000, they are taxed at the rate of 18% for the first RM500,000 and 24% for any sum in excess of RM500,000. Withholding tax is applicable to corporations making payments for certain types of income to non-residents as prescribed under the ITA However, Malaysia does not levy withholding tax for dividends paid by a company incorporated in Malaysia to non-resident shareholders. The Goods and Services Tax Act 2014 The Goods and Services Tax Act 2014 ( GSTA 2014 ) provides that goods and services tax ( GST ) is chargeable on all taxable supplies of goods and services made in the course or furtherance of a business in Malaysia and importation of goods into Malaysia by a taxable person. A taxable person is a person who makes taxable supplies in Malaysia with annual turnover exceeding RM500,000 and who is required to be registered with the Royal Malaysian Customs. Pursuant to the Goods and Services Tax (Rate of Tax) (Amendment) Order 2018 which came into operation on 1 June 2018, the rate of tax was revised from 6% to 0%. Further thereto, the Prime Minister Mahatir Mohamad has announced that Malaysia will implement the sales and services tax (SST) in September 2018 to replace GST. 65

73 MALAYSIAN REGULATORY OVERVIEW The Countervailing and Anti-dumping Duties Act 1993 The Countervailing and Anti-dumping Duties Act 1993 ( CADA 1993 ) provides the remedial measures against any unfair trading by the foreign manufacturers or exporters and the framework for investigating allegations or injury caused by dumped and subsidised imports. It further provides that the countervailing and anti-dumping duties may be imposed by the MITI to offset such subsidised or dumping merchandise. In essence, in the event that any of the Malaysian domestic industry is of the view that there is evidence of subsidy and/or dumping and the subsidy and/or dumping in causing injury, they may file a written petition to MITI in applying anti-dumping duties to be imposed on the imports. If there are sufficient evidence found and warrant anti-dumping measures, MITI will initiate an investigation of the same and anti-dumping duties will be imposed if MITI is of the view that the dumping is materially injurious to the Malaysian domestic market. The Safeguards Act 2006 The Safeguards Act 2006 ( SA 2006 ) provides safeguard measures on the products imported into Malaysia. MITI is empowered to conduct investigation and determination of whether the increased imports have caused or are threatening to cause serious injury to a domestic industry. Pursuant to the SA 2006, MITI will evaluate by taking into account all the relevant factors including but not limited to the objective and quantifiable nature of the product under investigation, the like products and directly competitive products of the domestic industry. There must be an existence of the causal link between the increased imports of the product under investigation and serious injury or threat thereof and not merely on allegation, conjecture or remote possibility. On 13 April 2017, the Government of Malaysia made a final determination to impose definitive safeguard duties to the imports of steel concrete reinforcing bar and steel wire rods & deformed bar in coils for the period of three years, i.e. from 14 April 2017 to 13 April (vi) Foreign Exchange Control The Financial Services Act 2013 The business of the Group in Malaysia is subject to foreign exchange laws and regulations in Malaysia. There are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The Financial Services Act 2013 ( FSA 2013 ) provides regulation and supervision of financial institutions, payment systems and other relevant entities and the oversight of the money market and foreign exchange market to promote financial stability and for related, consequential or incidental matters. 66

74 MALAYSIAN REGULATORY OVERVIEW The foreign exchange administration provides for the regulation and supervision of financial in situations, payment systems and other relevant entities and the oversight of the money market and foreign exchange market to promote financial stability and for related, consequential or incidental matters. Pursuant to Notice 4 issued by Central Bank of Malaysia, a non-resident is allowed to repatriate funds from Malaysia, including any income earned or proceeds from divestment of ringgit asset, provided that the repatriation is made in foreign currency. The foreign exchange administration rules allow non-residents to remit out divestment proceeds, profits, dividends or any income arising from investments in Malaysia. Repatriation, however, must be made in foreign currency. Based on the aforementioned, the subsidiaries of the Company in Malaysia are is free to remit out divestment proceeds, profits, dividends or any income arising from the investments in Malaysia to its overseas holding company. However, there is no assurance that the relevant rules and regulations on foreign exchange control in Malaysia will not change. Any future restriction on repatriation of funds may limit the dividends or distribution to the Company and could adversely affect the Group s financial condition. 67

75 HISTORY, REORGANISATION AND CORPORATE STRUCTURE OVERVIEW Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law on 27 March 2018 in preparation for the [REDACTED] and is the holding company of our Group. As at the Latest Practicable Date, in addition to our Company, our Group had eight subsidiaries. Details of these subsidiaries and the corporate structure of our Group are set out in the paragraph headed Establishment and development of the subsidiaries of our Company in this section. Prior to the [REDACTED], our Group underwent the Reorganisation and immediately following the completion of the Reorganisation, Strength Reach and Decade Lion will hold the entire issued share capital of our Company. Immediately following the completion of the Capitalisation Issue and the [REDACTED], Strength Reach and Decade Lion will own in aggregate [REDACTED]% of the issued share capital in our Company (without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme). Business Development Our Group s history can be traced back to the establishment of EC Excel Wire, one of our operating subsidiaries, in Malaysia in 2007 by our executive Director, chief executive officer and chairman of the Board, Mr. Ng. At the time of incorporation, EC Excel Wire mainly engaged in trading of steel wire products. Before the establishment of EC Excel Wire, Mr. Ng worked in Maran Hardware, a partnership owned by Mr. Ng s father Mr. Ng Eng Yat, Mr. Ng s brother Mr. Ng Heng Oon and an Indepenent Third Party Mr. Loo Eng Hwa in 2003, where he was primarily involved in the sale of steel products and building materials in Malaysia. In 2005, Mr. Ng with his personal wealth co-founded East Coast Wire & Hardware Supplies, a partnership with an Independent Third Party Mr. Tan Kean Heong, which ceased operation before the Track Record Period. In 2007, EC Excel Wire, the first subsidiary of the Group, was established in Malaysia by Mr. Ng, Mr. Ng Heng Oon and Mr. Tan Kean Heong. In 2010, in order to strengthen our market presence in the East Coast Region, Mr. Ng acquired 75% of the share capital of Arena Metal Resources. In 2014, EC Excel Wire established its office in Kuala Lumpur, which enabled our Group to venture into potential business opportunities in the Central Region. In 2015, UVM Excel was incorporated with 25% of its entire share capital allotted and issued to Mr. Ng. In 2016, Klaas Metal was incorporated with 33.33% of its entire share capital allotted and issued to Mr. Ng. In 2017, Mr. Ng acquired 60% of the entire shareholding of Klang Valley Wire from his mother Ms. Tan Ei, to strengthen our market presence in East Pahang of the East Coast Region and the Central Region. 68

76 HISTORY, REORGANISATION AND CORPORATE STRUCTURE To explore growth and expansion opportunities for our business, our Group has considered flotation on a stock market. In April 2017, our Group engaged a sponsor in relation to the proposed public offering of our shares on the ACE market of Bursa Malaysia Securities Berhad (the Proposed Malaysia Listing ). Subsequently, after due and careful consideration of the better market sentiment of the Hong Kong stock market and better liquidity of the shares of Hong Kong listed companies, the management of our Group eventually deliberated that a Malaysia listing might not be conducive to the needs of our Group taking into account our business strategies and funding needs to implement our business plan, we decided to discontinue the Proposed Malaysia Listing prior to making any formal listing application to Bursa Malaysia Securities Berhad and to instead apply for [REDACTED] in Hong Kong. In this regard, the Proposed Malaysia Listing has been discontinued and our Group has not submitted any formal listing application to Bursa Malaysia Securities Berhad. Milestones and Business Awards of our Group The chronological overview of the key events in respect of the major business development of our Group is set out below: Year Events 2007 EC Excel Wire, our first operating subsidiary, was incorporated in Malaysia We set up our Kuantan Plant in Kuantan Pahang, East Coast Region of Malaysia. We began manufacturing of wire meshes Our Kuantan Plant was expanded by an additional built-up of approximately 44,343 sq. ft Our Kuantan Plant was expanded by an additional built-up of approximately 30,399 sq. ft. We invested in Arena Metal Resources, a company involved in the trading of building materials in the East Coast Region We secured a 12-month contract with one of Malaysia s leading infrastructure maintenance specialists. We received ISO 9001:2008 certification We received MS 145:2006 Product Certification License EC Excel Wire established its branch office in Kuala Lumpur to venture into business opportunities in the Central Region We received the Standard Compliance Certificate from the CIDB Malaysia. We acquired 25% of the entire shareholding of UVM Excel to strengthen our market presence in the Central Region. 69

77 HISTORY, REORGANISATION AND CORPORATE STRUCTURE 2016 Klaas Metal was incorporated with 33.3% of its entire share capital allotted and issued to Mr. Ng to strengthen our presence in the East Coast Region, with a focus in western Pahang. We purchased a fully-automated wire mesh machine (i.e. MG800 series) to increase our production capacity for wire meshes Mr. Ng acquired 60% of the entire shareholding of Klang Valley Wire to venture into business opportunities in the East Coast Region and the Central Region We obtained MS145:2014 certification. Establishment and development of the subsidiaries of our Company As at the Latest Practicable Date, the subsidiaries of our Group comprised our Company, Precise One, Good Favour, EC Excel Wire Holdings, EC Excel Wire, UVM Excel, Arena Metal Resources, Klang Valley Wire, and Klaas Metal. Set out below is the brief corporate history of our Company and the subsidiaries of our Company. Our Company Our Company, being the [REDACTED] vehicle of our Group, was incorporated in the Cayman Islands as an exempted company with limited liability on 27 March 2018 and was registered as a non- Hong Kong company under Part 16 of the Companies Ordinance on 21 June As at the date of incorporation, our Company had an authorised share capital of HK$380,000 divided into 38,000,000 Shares of a par value HK$0.01 each. On the same date, one Share was allotted and issued as fully paid to an initial subscriber at par, which was then transferred to Decade Lion on the same date. Following completion of the Reorganisation, our Company became the holding company of our subsidiaries. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, our Company was mainly an investment holding company. Precise One Precise One was incorporated in the BVI with limited liability on 11 December 2017 and was authorised to issue a maximum of 50,000 shares with a par value of US$1.00 each, of which 1,000 shares were allotted and issued as fully paid to Decade Lion on 10 January On 18 May 2018, as part of the Reorganisation, our Company acquired entire shareholding interests in Precise One from Decade Lion in consideration of which our Company allotted and issued 869 Shares as fully paid to Decade Lion. Upon completion of the Reorganisation, Precise One became a wholly-owned subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, Precise One was mainly an investment holding company. 70

78 HISTORY, REORGANISATION AND CORPORATE STRUCTURE EC Excel Wire Holdings EC Excel Wire Holdings was incorporated in Malaysia with limited liability on 27 March On the same date, one share was allotted and issued at par to each of Mr. Ng and Ms. Sin, respectively. On 5 April 2018, Mr. Ng and Ms. Sin transferred an aggregate of two shares, representing all of their shareholdings in EC Excel Wire Holdings, to Precise One at a consideration of RM1 each. Upon completion of the Reorganisation, EC Excel Wire Holdings became an indirect wholly-owned subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, EC Excel Wire Holdings was mainly an investment holding company. Good Favour On 2 January 2018, Good Favour was incorporated in Hong Kong with limited liability. At the date of its incorporation, one share was allotted and issued to an initial subscriber, who is an Independent Third Party credited as fully paid. On 11 January 2018, Precise One acquired one share in Good Favour, being the entire issued share capital of Good Favour, from the initial subscriber of Good Favour at the nominal consideration of HK$1. Upon completion of the Reorganisation, Good Favour became an indirect wholly-owned subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. Good Favour was incorporated to established a presence in Hong Kong. EC Excel Wire EC Excel Wire was incorporated in Malaysia with limited liability on 5 March 2007 having an authorised share capital of RM100,000 divided into 100,000 ordinary shares of RM1 each. On the same date, 60 shares were allotted and issued to Mr. Ng and at par, 20 shares were allotted and issued at par to each of Mr. Ng s brother Mr. Ng Heng Oon and Mr. Tan Kean Heong (both were former directors of EC Excel Wire), respectively. After the said allotments, EC Excel Wire was owned as to 60% by Mr. Ng, 20% by Mr. Ng Heng Oon and 20% by Mr. Tan Kean Heong. On 27 November 2007, EC Excel Wire further allotted and issued at par 150,000 shares to each of Mr. Ng and Mr. Tan Kean Heong. After the said allotments, Mr. Ng owned 150,060 shares, Mr. Tan Kean Heong owned 150,020 shares and Mr. Ng Heng Oon owned 20 shares of EC Excel Wire, representing approximately 50.0%, 49.9% and less than 0.1% of EC Excel Wire, respectively. 71

79 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 21 March 2008, Mr. Tan Kean Heong transferred 150,020 shares, representing all of his shareholding in EC Excel Wire, to Mr. Ng Heng Oon at par. After the said transfer, Mr. Ng owned 150,060 shares and Mr. Ng Heng Oon owned 150,040 shares of EC Excel Wire. On 4 June 2008, EC Excel Wire further allotted and issued at par (i) 100,000 shares to Bersatu Wire Mesh Trading Sdn. Bhd., an Independent Third Party, and (ii) 100,000 shares to Mr. Tee Choon Meng, former director of EC Excel Wire. After the said allotments, Mr. Ng, Mr. Ng Heng Oon, Bersatu Wire Mesh Trading Sdn. Bhd. and Mr. Tee Choon Meng owned 150,060 shares, 150,040 shares, 100,000 shares and 100,000 shares of EC Excel Wire, respectively, representing approximately 30%, 30%, 20% and 20% of EC Excel Wire, respectively. On 25 July 2008, Bersatu Wire Mesh Trading Sdn. Bhd. transferred 100,000 shares, representing all of its shareholding in EC Excel Wire, to Ms. Ooi Lay Ni, an Independent Third Party at par. After the said transfer, Mr. Ng, Mr. Ng Heng Oon, Mr. Tee Choon Meng and Ms. Ooi Lay Ni owned 150,060 shares, 150,040 shares, 100,000 shares and 100,000 shares of EC Excel Wire, respectively. On 29 July 2008, EC Excel Wire further allotted and issued at par (i) 99,940 shares to Mr. Ng, (ii) 99,960 shares to Mr. Ng Heng Oon, (iii) 150,000 shares to Mr. Tee Choon Meng, and (iv) 150,000 shares to Ms. Ooi Lay Ni. After said allotments, each of Mr. Ng, Mr. Ng Heng Oon, Mr. Tee Choon Meng and Ms. Ooi Lay Ni owned 250,000 shares, representing 25% of EC Excel Wire, respectively. On 20 November 2009, Ms. Ooi Lay Ni transferred 250,000 shares, representing all of her shareholding in EC Excel Wire, to Mr. Ang Chin Siong, former director of EC Excel Wire, at par. After the said transfer, each of Mr. Ng, Mr. Ng Heng Oon, Mr. Tee Choon Meng and Mr. Ang Chin Siong owned 250,000 shares, representing 25% of EC Excel Wire, respectively. On 7 March 2011, Mr. Ang Chin Siong transferred 250,000 shares, representing all of his shareholding in EC Excel Wire, to Mr. Tee Choon Meng at the consideration of RM250,000. After the said transfer, Mr. Ng, Mr. Ng Heng Oon and Mr. Tee Choon Meng owned 250,000 shares, 250,000 shares and 500,000 shares of EC Excel Wire, respectively, representing 25%, 25% and 50% of EC Excel Wire, respectively. On 11 March 2011, EC Excel Wire further allotted and issued at par (i) 100,000 shares to Mr. Ng, (ii) 100,000 shares to Mr. Ng Heng Oon and (iii) 200,000 shares to Mr. Tee Choon Meng. After the said allotments, Mr. Ng, Mr. Ng Heng Oon and Mr. Tee Choon Meng owned 350,000 shares, 350,000 shares and 700,000 shares of EC Excel Wire, respectively, representing 25%, 25% and 50% of EC Excel Wire, respectively. On 28 October 2011, Mr. Tee Choon Meng transferred 700,000 shares, representing all of his shareholding in EC Excel Wire, to Mr. Ng and Mr. Ng Heng Oon in equal shares at par. After the said transfers, each of Mr. Ng and Mr. Ng Heng Oon owned 700,000 shares, representing 50% of EC Excel Wire, respectively. On 8 March 2012, EC Excel Wire further allotted and issued at par (i) 550,000 shares to Mr. Ng and (ii) 550,000 shares to Mr. Ng Heng Oon. After the said allotments, each of Mr. Ng and Mr. Ng Heng Oon owned 1,250,000 shares of EC Excel Wire, respectively. 72

80 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 19 November 2014, Mr. Ng Heng Oon transferred 1,250,000 shares, representing all of his shareholding in EC Excel Wire, to Mr. Ng at the consideration of RM3,000,000. On the same date, EC Excel Wire further allotted and issued at par (i) one share to Mr. Ng s father Mr. Ng Eng Yat, who is also former director of EC Excel Wire, and (ii) one share to Ms. Sin, existing director of EC Excel Wire. After the said transfer and allotments, Mr. Ng, Mr. Ng Eng Yat and Ms. Sin owned 2,500,000 shares, one share and one share of EC Excel Wire, respectively. On 3 March 2016, EC Excel Wire further allotted and issued at par 2,000,000 shares to Mr. Ng. After the said allotment, Mr. Ng, Mr. Ng Eng Yat and Ms. Sin owned 4,500,000 shares, one share and one share of EC Excel Wire, respectively. On 23 October 2017, Mr. Ng Eng Yat transferred one share, representing all of his shareholding in EC Excel Wire, to Mr. Ng at par. After the said transfer, Mr. Ng and Ms. Sin owned 4,500,001 shares and one share of EC Excel Wire, respectively. On 18 April 2018, as part of the Reorganisation, EC Excel Wire Holdings executed an instrument of transfer to acquire the entire issued share capital of EC Excel Wire from Mr. Ng and Ms. Sin at a consideration of RM1, respectively. Such transfers were properly and legally completed on 15 May After such transfers of shares, EC Excel Wire became wholly-owned by EC Excel Wire Holdings. Upon completion of the Reorganisation, EC Excel Wire became an indirect wholly-owned subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, EC Excel Wire mainly engaged in manufacturing, processing and and sales of steel bar products, steel wire products, building materials and accessories in Malaysia. UVM Excel UVM Excel was incorporated in Malaysia with limited liability on 20 March 2015 having an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. On 23 March 2015, one share was allotted and issued to each of Mr. Ng, Mr. Yap Wing Sang, Mr. Yat Chun Kiat and Mr. Lee Kee Weng, former director of UVM Excel, respectively. Mr. Ng, Mr. Yap Wing Sang and Mr. Yat Chun Kiat are existing directors of UVM Excel. After the said allotments, UVM Excel was owned as to 25% by each of Mr. Ng, Mr. Yap Wing Sang, Mr. Yat Chun Kiat and Mr. Lee Kee Weng, respectively. On 13 April 2015, Mr. Ng transferred his one share, representing his entire shareholding in UVM Excel, to EC Excel Wire at par. After the said transfer, each of EC Excel Wire, Mr. Yap Wing Sang, Mr. Yat Chun Kiat and Mr. Lee Kee Weng owned one share in UVM Excel, respectively. On 15 April 2015, UVM Excel further allotted and issued 30,000 shares, 20,000 shares, 20,000 shares and 30,000 shares to Mr. Yap Wing Sang, Mr. Yat Chun Kiat, Mr. Lee Kee Weng and EC Excel Wire at par, respectively. After the said allotments, Mr. Yap Wing Sang, Mr. Yat Chun Kiat, Mr. Lee Kee Weng and EC Excel Wire owned 30,001 shares, 20,001 shares, 20,001 shares and 30,001 shares in UVM Excel, respectively, representing approximately 30%, 20%, 20% and 30% of UVM Excel, respectively. 73

81 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 7 March 2017, Mr. Lee Kee Weng transferred 20,001 shares, representing his entire shareholding in UVM Excel, to Mr. Ng at par. After the said transfer, Mr. Yap Wing Sang, Mr. Yat Chun Kiat, Mr. Ng and EC Excel Wire owned 30,001 shares, 20,001 shares, 20,001 shares and 30,001 shares in UVM Excel, respectively. On 15 June 2017, UVM Excel further allotted and issued 200,000 shares at par to Mr. Ng. On the same date, EC Excel Wire transferred 22,001 shares, 4,000 shares and 4,000 shares to Mr. Ng, Mr. Yap Wing Sang and Mr. Yat Chun Kiat at par, respectively. After the said allotment and transfers, Mr. Ng, Mr. Yap Wing Sang and Mr. Yat Chun Kiat owned 242,002 shares, 34,001 shares and 24,001 shares in UVM Excel, respectively, representing approximately 80.7%, 11.3% and 8% of UVM Excel, respectively. On 23 February 2018, Mr. Yap Wing Sang and Mr. Yat Chun Kiat transferred 34,001 shares and 24,000 shares to Mr. Ng with reference to net assets value of the management account of UVM Excel as at 31 January 2018 at the consideration of RM938,000 and RM662,000, respectively. On the same date, Mr. Yat Chun Kiat transferred one share to EC Excel Wire at par. After the said transfers, Mr. Ng and EC Excel Wire owned 300,003 shares and one share in UVM Excel, respectively. On 18 April 2018, as part of the Reorganisation, EC Excel Wire Holdings executed an instrument of transfer to acquire the entire issued share capital of UVM Excel from Mr. Ng and EC Excel Wire at a consideration of RM1, respectively. Such transfers were properly and legally completed on 15 May After such transfers of shares, UVM Excel became wholly-owned by EC Excel Wire Holdings. Upon completion of the Reorganisation, UVM Excel became an indirect wholly-owned subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, UVM Excel mainly engaged in (i) the sales of steel bar products and steel wire products; and (ii) trading of building materials and accessories in the Central Region of Malaysia. Arena Metal Resources Arena Metal Resources was incorporated in Malaysia with limited liability on 19 July 2010 having an authorised share capital of RM100,000 divided into 100,000 ordinary shares of RM1 each, with 75 shares and 25 shares allotted and issued to Mr. Ng and Mr. Kong Fook Kit, both are existing directors of Arena Metal Resources, respectively. On 27 July 2010, Mr. Ng transferred 75 shares, representing his entire shareholding in Arena Metal Resources, to EC Excel Wire at par. After the said transfer, EC Excel Wire and Mr. Kong Fook Kit owned 75 shares and 25 shares in Arena Metal Resources, respectively, representing 75% and 25% in Arena Metal Resources, respectively. On 21 September 2010, EC Excel Wire transferred 15 shares to Mr. Kong Fook Kit at par. After the said transfer, EC Excel Wire and Mr. Kong Fook Kit owned 60 shares and 40 shares in Arena Metal Resources, respectively, representing 60% and 40% in Arena Metal Resources, respectively. 74

82 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 25 February 2015, Arena Metal Resources allotted and issued at par 90,000 shares and 60,000 shares to EC Excel Wire and Mr. Kong Fook Kit, respectively. After the said allotments, EC Excel Wire and Mr. Kong Fook Kit owned 90,060 shares and 60,040 shares in Arena Metal Resources, respectively. On 17 October 2016, EC Excel Wire transferred 90,060 shares, representing its entire shareholding in Area Metal Resources, to Mr. Ng at par. After the said transfer, Mr. Ng and Mr. Kong Fook Kit owned 90,060 shares and 60,040 shares in Arena Metal Resources, respectively. On 18 April 2018, as part of the Reorganisation, EC Excel Wire Holdings executed an instrument of transfer to acquire 90,060 shares of Arena Metal Resources, representing 60% of the entire issued share capital of Arena Metal Resources, from Mr. Ng at a consideration of RM1. Such transfer was properly and legally completed on 2 May After such transfer of shares, Arena Metal Resources was owned as to 60% by EC Excel Wire Holdings and 40% by Mr. Kong Fook Kit, respectively. Upon completion of the Reorganisation, Arena Metal Resources became an indirect subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, Arena Metal Resources mainly engaged in (i) the sales of steel bar products and steel wire products; and (ii) trading of building materials and accessories in the East Coast Region of Malaysia. Klang Valley Wire Klang Valley Wire was incorporated in Malaysia with limited liability on 2 December 2015 having an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. On 3 December 2015, one share was allotted and issued at par to each of Mr. Ng s mother Ms. Tan Ei, and Ms. Ng Poh Lee (both were former directors of Klang Valley Wire), respectively. On 21 January 2016, 35,999 shares and 23,999 shares were allotted and issued at par to Ms. Tan Ei and Ms. Ng Poh Lee, respectively. After the said allotments, Ms. Tan Ei and Ms. Ng Poh Lee owned 36,000 shares and 24,000 shares of Klang Valley Wire, respectively, representing 60% and 40% of Klang Valley Wire, respectively. On 31 March 2016, Klang Valley Wire allotted and issued at par 204,000 shares and 136,000 shares to Ms. Tan Ei and Ms. Ng Poh Lee, respectively. After the said allotments, Ms. Tan Ei and Ms. Ng Poh Lee owned 240,000 shares and 160,000 shares of Klang Valley Wire, respectively. On 20 March 2017, Ms. Tan Ei transferred 240,000 shares, representing her entire shareholding in Klang Valley Wire, to Mr. Ng at par. On the same date, Ms. Ng Poh Lee transferred 160,000 shares, representing her entire shareholding in Klang Valley Wire, to Mr. Fu Woi Loong who is an existing director of Klang Valley Wire at par. After the said transfers, Mr. Ng and Mr. Fu Woi Loong owned 240,000 shares and 160,000 shares of Klang Valley Wire, respectively, representing 60% and 40% of Klang Valley Wire, respectively. On 18 April 2018, as part of the Reorganisation, EC Excel Wire Holdings execute an instrument of transfer to acquire 60% of the entire issued share capital of Klang Valley Wire from Mr. Ng at a consideration of RM1. Such transfer was properly and legally completed on 2 May After such transfer of shares, Klang Valley Wire was owned as to 60% by EC Excel Wire Holdings and 40% by Mr. Fu Woi Loong, respectively. 75

83 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Upon completion of the Reorganisation, Klang Valley Wire became an indirect subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, Klang Valley Wire mainly engaged in the sales of steel bar products and steel wire products in the East Coast Region and Central Region of Malaysia. Klaas Metal Klaas Metal was incorporated in Malaysia with limited liability on 18 August 2016 having an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each, with one share allotted and issued to each of Mr. Ng, Mr. Kuck Chik Yee and Mr. Chan Peng Chai, respectively. Mr. Ng, Mr. Kuck Chik Yee and Mr. Chan Peng Chai are all existing directors of Klaas Metal. On 23 August 2017, 9,999 shares were allotted and issued at par to each of Mr. Ng, Mr. Kuck Chik Yee and Mr. Chan Peng Chai, respectively. After the said allotments, Mr. Ng, Mr. Kuck Chik Yee and Mr. Chan Peng Chai owned 10,000 shares each of Klaas Metal, respectively, representing approximately 33.33%, 33.33% and 33.33% of Klaas Metal, respectively. On 18 April 2018, as part of the Reorganisation, EC Excel Wire Holdings executed an instrument of transfer to acquire 10,000 shares, representing 33.33% of the entire issued share capital of Klaas Metal from Mr. Ng at a consideration of RM1. Such transfer was properly and legally completed on 2 May After such transfer of shares, Klaas Metal was owned as to 33.33% by each of EC Excel Wire Holdings, Mr. Kuck Chik Yee and Mr. Chan Peng Chai, respectively. Upon completion of the Reorganisation, Klaas Metal became an indirect subsidiary of the Company. For details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section. As at the Latest Practicable Date, Klaas Metal mainly engaged in the sales of steel bar products and steel wire products in the East Coast Region, with a focus in western Pahang. [REDACTED] Investment Background of the [REDACTED] Investor Strength Reach is an investment holding company incorporated in BVI on 6 February 2018, and the shares of which are legally and beneficially and wholly-owned by Mr. Budihardjo, who is also the sole director of Strength Reach. Prior to its investment in our Group, Strength Reach was an Independent Third Party. To the best knowledge and belief of our Directors, Mr. Budihardjo became acquainted with Mr. Ng, our executive Director and Controlling Shareholder, through business opportunities, and decided to invest in our Group through Strength Reach in view of the prospects and growth potential of our Group. Mr. Budihardjo has over 20 years working experience in banking industry whereby he gained exposure to the financial services sector and capital markets. The source of funding of Strength Reach s investment in our Group was from the personal wealth of Mr. Budihardjo. 76

84 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Investment On 6 March 2018, a subscription agreement (the Subscription Agreement ) was entered into between Strength Reach, Precise One, EC Excel Wire and Mr. Ng, pursuant to which Strength Reach agreed to subscribe for, and Precise One agreed to procure its holding company to allot and issue 130 Shares, representing 13% of the issued share capital of our Company. The consideration was arrived at after arm s length negotiation between Precise One, EC Excel Wire, Mr. Ng and Strength Reach and taking into account the respective unaudited net asset value of EC Excel Wire, UVM Excel, Arena Metal Resources and Klang Valley Wire as at 31 December The allotment was properly and legally completed and settled on 25 May After the said allotment, our Company was owned as to 87% by Decade Lion and 13% by Strength Reach. Set out below is a summary of the details for the [REDACTED] Investment mentioned above: Name of [REDACTED] investor: Strength Reach Date of subscription agreement: 6 March 2018 Subscription price: Payment dates of subscription price: Number of shares of our Company subscribed: Shareholding in our Company immediately after completion of the [REDACTED] and the Capitalisation Issue: Investment cost per Share on the basis of the enlarged share capital of our Company immediately after completion of the [REDACTED] and the Capitalisation Issue and discount to mid-point of the [REDACTED] range: HK$18,000, March 2018 for HK$9,000, May 2018 for HK$9,000, shares (representing 13% of the total issued share capital of our Company upon completion of the [REDACTED] Investment) Approximately [REDACTED]% Approximately HK$[REDACTED] per Share, representing approximately [REDACTED]% discount to the mid-point of the indicative [REDACTED] range 77

85 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Use of proceeds: Strategic benefits that the [REDACTED] investor will bring to our Group: Special rights: Lock-up: Working capital of our Group (Note) Our Directors believe that the investment made by Strength Reach, as a shareholder of our Company, will bring strategic benefits to our Group by providing financing and strategic advice to our Group s businesses Nil The Shares held by Strength Reach are subject to lock-up period of six months from the [REDACTED] Note: As at the Latest Practicable Date, approximately 53% out of the net proceeds from the [REDACTED] Investment has been utilised. Public float As each of Strength Reach and its beneficial owner is not a connected person of our Company, Shares held by Strength Reach will be counted towards the public float after the [REDACTED]. Sole Sponsor s confirmation Given that (i) no special rights have been granted to Strength Reach in respect of its investment; (ii) our Directors have confirmed that the terms of the investment by Strength Reach (including the consideration) was determined on arm s length basis taking into account the historical financial performance and the future prospects of our Group; and (iii) the consideration under the [REDACTED] Investment has been settled on 25 May 2018, which was more than 28 clear days before the date of submission of the [REDACTED] application, the Sole Sponsor is of the view that the [REDACTED] Investment by Strength Reach is in compliance with the Interim Guidance on [REDACTED] Investments (HKEx-GL29-12) and the Guidance on [REDACTED] Investments (HKEx-GL43-12) issued by the Stock Exchange. 78

86 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Reorganisation Prior to the Reorganisation, the structure of our Group was as follows: Mr. Ng Mr. Kuck Chik Yee Mr. Chan Peng Chai Mr. Fu Woi Loong Mr. Kong Fook Kit 33.33% 33.33% 33.33% 40% 60% 40% 60% 100% 100% Klaas Metal (Malaysia) (Note 1) Klang Valley Wire (Malaysia) Arena Metal Resources (Malaysia) EC Excel Wire (Malaysia) (Note 2) UVM Excel (Malaysia) (Note 3) Note 1: The aggregate of the shareholding percentage figures in the table does not add up to 100 percentage due to rounding issue of the decimal places. Note 2: Before Reorganisation, EC Excel Wire was owned as to 4,500,001 shares and one share by Mr. Ng and Ms. Sin respectively. Note 3: Before Reorganisation, UVM Excel was owned as to 300,003 shares and one share by Mr. Ng and EC Excel Wire respectively. Corporate restructuring To rationalise our Group s structure in preparation for the [REDACTED], our Group underwent various corporate restructuring as more particularly described as follows: (1) Precise One was incorporated in the BVI with liability limited by shares on 11 December For details of Precise One, please refer to the paragraph headed Establishment and development of the subsidiaries of our Company Precise One in this section. (2) Decade Lion was incorporated in the BVI with liability limited by shares on 27 December 2017, and was authorised to issue a maximum of 50,000 ordinary shares of US$1.00 each. On 10 January 2018, one ordinary share of Decade Lion was allotted and issued to Mr. Ng which was credited as fully paid. Decade Lion was set up as a vehicle of Mr. Ng to hold his interests in our Company. (3) Good Favour was incorporated in Hong Kong with limited liability on 2 January For details of Good Favour, please refer to the paragraph headed Establishment and development of the subsidiaries of our Company Good Favour in this section. 79

87 HISTORY, REORGANISATION AND CORPORATE STRUCTURE (4) On 11 January 2018, Precise One acquired one share in Good Favour, being the entire issued share capital of Good Favour, from the initial subscriber of Good Favour at the nominal consideration of HK$1.00. The above transfer was properly and legally completed and settled. (5) On 6 March 2018, Preicse One, EC Excel Wire and Mr. Ng entered into a subscription agreement with Strength Reach, pursuant to which Strength Reach subscribed, and our Company allotted and issued 130 ordinary shares, representing approximately 13% of the enlarged issued share capital of our Company upon issuance of the said 130 shares, at a consideration of HK$18,000,000. The allotment was properly and legally completed and settled on 25 May For further details of this [REDACTED] investment, please refer to the paragraph headed [REDACTED] Investment in this section. (6) On 27 March 2018, EC Excel Wire Holdings was incorporated in Malaysia with limited liability. For details of EC Excel Wire Holdings, please refer to the paragraph headed Establishment and development of the subsidiaries of our Company EC Excel Wire Holdings in this section. (7) On 5 April 2018, Mr. Ng and Ms. Sin transferred an aggregate of two shares, representing all of their shareholdings in EC Excel Wire Holdings, to Precise One at a consideration of RM1 each. The transfers were properly and legally completed. (8) On 27 March 2018, our Company was incorporated in the Cayman Islands as an exempted company with limited liability. For details of the Company, please refer to the paragraph headed Establishment and development of the subsidiaries of our Company The Company in this section. (9) On 18 April 2018, EC Excel Wire Holdings executed an instrument of transfer to acquire 90,060 shares in Arena Metal Resources, representing approximately 60% of the entire issued shares of Arena Metal Resources, from Mr. Ng at the consideration of RM1. The transfer was properly and legally completed on 2 May (10) On 18 April 2018, EC Excel Wire Holdings executed an instrument of transfer to acquire 240,000 shares in Klang Valley Wire, representing approximately 60% of the entire issued shares of Klang Valley Wire, from Mr. Ng at the consideration of RM1. The transfer was properly and legally completed on 2 May (11) On 18 April 2018, EC Excel Wire Holdings executed an instrument of transfer to acquire 10,000 shares in Klaas Metal, representing approximately 33.33% of the entire issued shares of Klaas Metal, from Mr. Ng at the consideration of RM1. The transfer was properly and legally completed on 2 May (12) On 18 April 2018, EC Excel Wire Holdings executed instruments of transfer to acquire (i) 4,500,001 shares in EC Excel Wire from Mr. Ng at the nominal consideration of RM1; and (ii) one share in EC Excel Wire from Ms. Sin at the consideration of RM1. The transfers were properly and legally completed on 15 May After the said transfers, EC Excel Wire became a wholly-owned subsidiary of EC Excel Wire Holdings. (13) On 18 April 2018, EC Excel Wire Holdings executed instruments of transfer to acquire (i) 300,003 shares in UVM Excel from Mr. Ng at the nominal consideration of RM1; and (ii) one share in UVM Excel from EC Excel Wire at the consideration of RM1. The transfers were properly and legally completed on 15 May After the said transfers, UVM Excel became a wholly-owned subsidiary of EC Excel Wire Holdings. 80

88 HISTORY, REORGANISATION AND CORPORATE STRUCTURE (14) On 18 May 2018, pursuant to the Reorganisation Agreement, our Company acquired all the issued shares of Precise One from Decade Lion, in consideration of which, our Company allotted and issued 869 shares to Decade Lion. After the said share transfer, Precise One became a wholly-owned subsidiary of our Company. The above share transfer was properly and legally completed and settled. Upon completion of the Reorganisation set out above, our Company became the holding company of our Group. The following chart sets out the shareholding and corporate structure of our Group immediately after the Reorganisation but prior to completion of the [REDACTED] and the Capitalisation Issue: Mr. Budihardjo Mr. Ng 100% 100% Strength Reach (BVI) 13% Decade Lion (BVI) 87% Our Company (Cayman Islands) 100% Precise One (BVI) 100% EC Excel Wire Holdings (Malaysia) 100% Good Favour (Hong Kong) 100% 100% 60% 60% 33.33% EC Excel Wire (Malaysia) UVM Excel (Malaysia) Arena Metal Resources (Malaysia) Klang Valley Wire (Malaysia) Klaas Metal (Malaysia) Conditional on the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the allotment and issue of the [REDACTED] by our Company pursuant to the [REDACTED], certain amounts standing to the credit of the share premium account of our Company will be capitalised and applied in paying up in full at par such number of Shares for allotment and issue to its shareholders (i.e. Strength Reach and Decade Lion) in proportion to their respective shareholdings prior to the commencement of the [REDACTED] and [REDACTED] of the Shares on the Main Board of the Stock Exchange, so that the number of Shares so allotted and issued, when aggregated with the number of Shares already owned by them, will constitute not more than [REDACTED]% of the total issued share capital of our Company. 81

89 HISTORY, REORGANISATION AND CORPORATE STRUCTURE The following chart sets forth the shareholding structure of our Group immediately following the [REDACTED] and the Capitalisation Issue (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme): Mr. Budihardjo Mr. Ng 100% 100% Public Shareholders Strength Reach (BVI) [REDACTED]% 25% [REDACTED]% 9.75% Decade Lion (BVI) [REDACTED]% 65.25% Our Company (Cayman Islands) 100% Precise One (BVI) 100% EC Excel Wire Holdings (Malaysia) 100% Good Favour (Hong Kong) 100% 100% 60% 60% 33.33% EC Excel Wire (Malaysia) UVM Excel (Malaysia) Arena Metal Resources (Malaysia) Klang Valley Wire (Malaysia) Klaas Metal (Malaysia) 82

90 BUSINESS OVERVIEW Our business: We mainly (i) manufacture and sell cold-rolled steel bars and steel wire products; and (ii) process and sell hot-rolled steel bars in Malaysia. We have more than 10 years of experience in the steel bar product and steel wire product industry in Malaysia. To complement our core business, we also engage in trading of building materials and accessories. Our products: We mainly manufacture or process two types of steel bar products, namely (i) hot-rolled steel bars; and (ii) cold-rolled steel bars. We processed hot-rolled steel bars by cutting, bending and packaging of unprocessed hot-rolled steel bars. We manufacture cold-rolled steel bars with different surface finish, length and diameter from low carbon wire rods with cold rolling process and wire straightening and cutting processes to cater for a variety of customer-specific requirements. Regarding our steel wire products, we mainly manufacture and sell (i) wire meshes, which include standard and cut-to-size wire meshes; and (ii) fencing products, which include barbed wires, chain-link fences and welded fences. We also trade building materials and accessories including unprocessed hot-rolled steel bars, prestressed concrete steel strand and cement. Our production plant and production capacity: During the Track Record Period and up to the Latest Practicable Date, we carried out all our manufacturing and processing activities in our Kuantan Plant in Malaysia. The actual production volume of steel bar products was approximately 52,812.6 MT, 45,388.8 MT, 73,977.2 MT and 28,187.1 MT for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively, and the average utilisation rate of which was approximately 57.2%, 49.0%, 80.1% and 95.3%, respectively. The actual production volume of steel wire products was approximately 16,609.7 MT, 26,982.4 MT, 20,942.9 MT and 10,175.6 MT for the same periods, respectively and the average utilisation rate of which was approximately 68.5%, 98.7%, 76.9% and 67.4%, respectively for the same periods. Our revenue and growth: During the Track Record Period, our total revenue amounted to approximately RM160.4 million, RM187.1 million, RM306.8 million and RM132.1 million, respectively. Our total revenue increased by approximately RM146.4 million from FY2015 to FY2017, representing a CAGR of approximately 38.3%. During the Track Record Period, manufacturing or processing and sale of steel bar products and manufacturing and sale of steel wire products represented approximately 85.1%, 84.0%, 80.2% and 82.1% of our total revenue, whereas our trading of building materials and accessories represented approximately 14.9%, 16.0%, 19.8% and 17.9% of our total revenue, respectively. The following table sets forth the breakdown of our revenue by business categories during the Track Record Period: 83

91 BUSINESS For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products Hot-rolled steel bars 77, , , , , Cold-rolled steel bars 15, , , , , Subtotal 92, , , , , Manufacturing and sale of steel wire products Standard wire meshes 35, , , , , Cut-to-size wire meshes 4, , , , , Fencing products 3, , , Subtotal 44, , , , , Trading of building materials and accessories 23, , , , , Total 160, , , , , Our customers: During the Track Record Period, our customers mainly included building material trading companies, construction contractors, property developers and hardware shops. During the Track Record Period, our top five customers accounted for approximately 16.9%, 11.0%, 22.2% and 27.6% of our total revenue, respectively, and our largest customer accounted for approximately 3.8%, 2.4%, 11.3% and 17.5% of our total revenue during the same periods. Our sales network: We have established sales network covering most regions in Malaysia. Central Region was our largest market for FY2015, FY2016 and FY2017 and our second largest market for the four months ended 30 April 2018, which contributed approximately 64.4%, 63.1%, 50.1% and 42.5% of our total revenue during the Track Record Period, respectively. Major raw materials and our suppliers: The major raw materials used in manufacturing or processing of steel bar products and steel wire products include unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires. Purchases from our five largest suppliers accounted for approximately 74.5%, 67.0%, 80.1% and 78.6% of our total purchases for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively, and our largest supplier accounted for approximately 33.1%, 25.2%, 26.9% and 36.5% of our total purchases during the same periods. Outlook of our Group: According to the SMITH ZANDER Report, the apparent consumption of steel bar products in Malaysia increased at a CAGR of 8.8% from approximately 2.3 million MT in 2011 to approximately 3.5 million MT in 2016 and the apparent consumption of steel wire products increased between 2011 and 2016, from approximately 1.2 million MT to approximately 1.5 million MT at a CAGR 84

92 BUSINESS of approximately 4.6%. The steadily increasing consumption of steel bar products and steel wire products in Malaysia was due to the growth of the construction industry during the same period. It is anticipated that the consumption of (i) steel bar products will grow from approximately 3.7 million MT in 2017 to approximately 4.8 million MT in 2021, representing a CAGR of approximately 6.7%; and (ii) steel wire products will grow from approximately 1.6 million MT in 2017 to approximately 2.0 million MT in 2021, representing a CAGR of approximately 5.7%. Given the aforesaid, our Directors believe that with our competitive strengths and business strategies, our Group will continue to grow in the foreseeable future. COMPETITIVE STRENGTHS Our Directors believe that our success to date and our potential for future growth are attributable to the following competitive strengths: We possess a wide array of machines, which, together with our industry knowledge and expertise, enable us to provide high quality standard and customised steel bar products and/or steel wire products to our customers As at the Latest Practicable Date, we owned and operated various types of machines mainly including eight drawing machines, six mesh welding machines, 11 straightening and cutting machines, six bending machines and five chain-link machines for the manufacture or processing of our steel bar products and steel wire products. More importantly, we purchased a fully-automated mesh welding machine manufactured in Switzerland (i.e. MG 800 series) at a cost of approximately EUR2.2 million that can manufacture wire meshes at high speed with minimal reliance on manual workers. Certain steps involved in the manufacturing of wire meshes such as wire straightening, cutting and welding can be combined to produce approximately 1.5 pieces wire meshes per minute (compared to 0.5 piece per minute using traditional machinery). For further details, please refer to the paragraph headed Manufacturing of wire meshes in this section. Furthermore, there is less downtime for changing the mesh geometry with the wire diameter. Hence, our productivity of wire meshes can be further increased. This fully-automated wire mesh machine has started its operation by phase since the end of 2017 and, together with three new drawing machines acquired in June 2017, is expected to increase the production capacity of wire mesh production by approximately 18,076 MT per year. With the expertise and experience of our technical team, we are capable of providing cut-to-size wire meshes customised for our customers. Upon receiving the architectural plan of a building from our customers (mostly construction contractors and property developers), our technical team comes up with a proposed plan of a combination of wire meshes of different size and shapes that can implement our customers architectural plan and satisfy their requirements on weight, diameter and size in an economical and cost-effective way. This proposed plan will be endorsed by the third party qualified civil engineers engaged by our Group. Apart from wire meshes, our cold-rolled steel bars can be customised in terms of their length and diameter. Our cold-rolled steel bars, hot-rolled steel bars as well as wire meshes can be bent by our benders to suit individual customers varying needs. Our Directors believe that our ability to provide customisation of our products is a value-added service rendered to our customers, which gives us an edge in the industry. 85

93 BUSINESS Our production team also deploys its expertise and experience to enhance our efficiency in production and maximises the utilisation of our production capacity by planning our production schedule ahead (and improving our industry techniques in the manufacturing or processing of steel bar products and of steel wire products). It can also shorten the time lag between each production step and optimise production speed, which in turn would reduce the production cost of our steel bar products and steel wire products. By offering a wide range of quality steel bar products and steel wire products, coupled with our ability to provide cut-to-size wire meshes, customised steel bar products and steel wire products and to source varying kinds of building materials and accessories from third party suppliers, our Directors believe that we can accommodate different needs of our customers in their building and construction activities effectively and efficiently. We have established a comprehensive quality assurance system Our Directors believe that the quality of our products is essential in maintaining our reputation. We are committed to ensuring that our steel bar products and steel wire products comply with the industry standard specifications and requirements, including but not limited to MS145:2014 for steel fabric for the reinforcement of concrete and the requirements of SIRIM for our SIRIM-certified products in Malaysia. Our products are also required to pass our internal control quality tests before reaching our customers. On the other hand, we have established a comprehensive quality management system that has been accredited to ISO9001:2008 for fabrication and manufacturing of wire meshes since 2012 to demonstrate our ability to consistently provide products that meet customer and applicable statutory and regulatory requirements. For quality control over our raw materials, we maintain a list of approved suppliers who have a good track record. All potential new suppliers must undergo our internal selection procedures to become our approved suppliers. We require the suppliers to supply raw materials to us to be accompanied with certification such as the Standard Compliance Certificate from CIDB Malaysia and the JISG3505:2004 or MSISO :2008 certificate mark for low carbon wire rods to ensure that all incoming raw materials conform to the required industry standard. As a result of our stringent quality control management system, we did not have any material product return from customers during the Track Record Period. We have also accumulated a group of recurring customers for our steel bar products and steel wire products. Our Directors consider that our stringent quality control management system and low product return rate are the key contributing factors for us to receive recurring purchase orders from our existing customers and maintain long-term business relationship with our customers. We have an experienced management team Our Board is comprised of knowledgeable personnel with proven track record in the steel bar product and steel wire product industry, which is invaluable to the development of our business in the industry. They have developed extensive experience in raw material procurement, quality assurance and quality control, which have all contributed to better operations and cost management in our business. As at the Latest Practicable Date, Mr. Ng, our executive Director and founder, has over 10 years of experience in the said industry. Mr. Ng s experience in the industry has enabled us to gain a better understanding and insight of the steel bar product and steel wire product industry. His experience and leadership will continue to play a key role in the future growth of our Group. 86

94 BUSINESS Brother of Mr. Ng, Mr. Ng Heng Oon, who is our head of production, has more than 15 years of experience in the same industry. With the experience of Mr. Ng Heng Oon, we are able to implement our production schedule on a timely basis and ensure that the quality of our products is up to industry standard and customers requirements. Our sales and marketing team is led by Mr. Yat Chun Kiat ( Mr. Yat ), Mr. Yap Wing Sang ( Mr. Yap ) and Mr. Kong Fook Kit ( Mr. Kong ). While Mr. Yat is responsible for overseeing the sales and marketing team of our Group, Mr. Yap and Mr. Kong are responsible for formulating the sales and marketing strategies in the Central Region and the East Coast Region, respectively. Our management team s dedication and execution capabilities are crucial to our business operations and implementation of our future growth plans. Moreover, their extensive experience in and in-depth knowledge of the steel bar product and steel wire product industry in Malaysia has played a pivotal role in the development of our business, which, we believe would differentiate us from our competitors and contributes to our rapid growth. For biographical details of our executive Directors and senior management, please refer to section headed Directors, Senior management and Employees in this document. We believe that our management team will continue to be a key factor in the future development of our business. By virtue of the experience and technical knowledge of our executive Directors and senior management team, our Directors believe that we are able to remain competitive and well-positioned in the industry. We have established sales network across Malaysia During the Track Record Period, we established sales network reaching over 1,600 customers across Malaysia, among which over 630 customers were based in the Central Region, over 940 customers were based in the East Coast Region, over 60 customers were based in the Southern Region and approximately 20 customers were based in the Northern Region. Our Kuantan Plant is located in the East Coast Region and we have a branch office in the Central Region. During the Track Record Period, the Central Region and East Coast Region were our two largest markets. For further details on our subsidiaries different target regions and target customer types and the breakdown of our revenue by geographical locations, please refer to the paragraph headed Sales network in this section. By establishing sales network across Malaysia, our Directors believe that we could (i) diversify our sources of income without over-reliance on the construction industry in any single region; (ii) customise our sales and marketing strategies in respect of different customer types in different regions; and (iii) strengthen our presence in the market which allows our steel bar products and steel wire products to penetrate the market more quickly and effectively. During the Track Record Period and up to the Latest Practicable Date, we maintained our sales network across different regions of Malaysia with our own logistics team, which is supplemented by external logistics service providers. As at the Latest Practicable Date, our logistics team owns eight delivery trucks with 15 truck drivers. The loading capacity of our delivery trucks ranged from approximately 9.7 MT to approximately 30.9 MT. 87

95 BUSINESS Stable business relationship with our suppliers and customers Capitalising on our management team s valuable experience and know-how in the steel bar product and steel wire product industry, our Group has established and maintained stable business relationship with our major customers and suppliers. Our customers mainly include building material trading companies, construction contractors, property developers and hardware shops across different regions in Malaysia. During the Track Record Period, we supplied products to over 1,600 customers, of which over 900 customers were recurring customers, being the customers who had placed order(s) for our products more than one period during the Track Record Period. Our Directors and management have frequent interactions with our customers regarding their feedback on the quality of our products and services. Through this solid communication channel together with our experienced management team, our Directors believe that we are able to better understand our customers needs as well as the market trend on the steel bar product and steel wire product industry. Our Directors believe that our stable and long-term working relationship with our customers is an invaluable asset to our business which ensures us a source of recurring revenue, and plays an important role for us to promote and develop our business and enhance our profile in the market. In addition, our business relationship with our five largest suppliers ranged from approximately less than one year to six years as at the Latest Practicable Date. We tend to maintain stable relationships with our suppliers to ensure that no disruption is caused to our operation as a result of any change in supplier and at the same, look for new suppliers who are able to supply quality materials to us at a competitive price. Our suppliers are mainly situated in Malaysia, allowing us to reduce the procurement lead time, minimise the level of inventory required to be maintained by us and increase our flexibility in adjusting productions scale in response to moving market conditions. BUSINESS STRATEGIES Our principal business objectives are to achieve sustainable growth, further strengthen our position in the steel bar product and steel wire product industry in Malaysia, and create long-term value for our Shareholders by executing the following key strategies: I. Establish the New Kelantan Plant During the Track Record Period, we had approximately 180, 180, 270 and 200 customers located in the Northeastern States respectively. Revenue generated by these customers during the Track Record Period amounted to approximately RM21.6 million, RM20.5 million, RM49.3 million and RM21.7 million, respectively, representing a CAGR of approximately 31.7% from FY2015 to FY2017. Our Kuantan Plant is currently our only production plant. Owing to the long distance between our Kuantan Plant in Pahang State to the Northeastern States, the delivery of our products to customers may be disrupted by unforeseen events such as bad weather or traffic congestion. Further, the transportation cost (or freight charges) of our products from our existing Kuantan Plant to the Northeastern States is relatively high, resulting in an increase in the cost of our products and delivery time of our products to our customers in Northeastern States. Based on the latest quotations obtained by us, the average freight charges for the delivery of the steel bar products and steel wire products from the Kuantan Plant to customers in the Northeastern States is approximately RM37.9 per MT, while the average freight charges for delivery within the Northeastern States is approximately RM25.0 per MT. Therefore, our Directors estimate that we can save approximately 34.0% in freight charges in connection with the deliveries made within the Northeastern States instead of from Kuantan to the Northeastern States. Hence, we intend to establish the New Kelantan Plant. 88

96 BUSINESS We have identified a parcel of land with an area of approximately 36,150 m 2 in Tanah Merah of Kelantan, which is in proximity to Terengganu to set up the New Kelantan Plant. Owing to the strategic location of the New Kelantan Plant, it will enable us to expand our operations and facilitate us to better serve our customers in the Northeastern States. According to the SMITH ZANDER Report, there will be key developments in the state of Kelantan such as (i) the Cross Border Development which will stretch from the coastal areas of Besut in Terengganu to the Kelantan-Thai border at Tumpai; and (ii) key initiatives such as the construction of Pasir Mas Halal Park and Tok Bali Fisheries Park. Furthermore, it is forecasted that construction activities in Kelantan will grow from approximately RM1.8 billion in 2017 to approximately RM2.6 billion in 2021, registering a CAGR of approximately 9.6% during the period. These will be the future drivers for the growth in demand for steel bar products and steel wire products. Moreover, according to the SMITH ZANDER Report, having offices with in-house logistics team in closer proximity to customers is one of the key factors of competition in the steel bar product and steel wire product industry as it enables industry players, like our Group, to save transportation costs. As such, our Directors reasonably believe that having a production plant located there with our own logistics team would not only save our transportation cost (freight charges), but also put us in an advantageous position to serve our customers including construction contractors and property developers in these states and build up close relationships with them. Our Directors believe that we would also be able to respond faster to our customers requests if we have a production plant in Kelantan. The estimated timetable for the construction of our New Kelantan Plant, which has already included factors such as weather and availability of workers and construction materials is as follows: Implementation Quarter 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th Acquisition of land Construction Acquisition and installation of machines Recruitment and training of staff Acquisition of trucks and forklifts Commencement of production by phase 89

97 BUSINESS The estimated total investment costs for establishment of the New Kelantan Plant is approximately RM[32.2] million (equivalent to approximately HK$[64.4] million), of which RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be paid by the proceeds from the [REDACTED] and the remaining approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be financed by bank loan or our internal resources. A detailed breakdown of the investment costs of the New Kelantan Plant with the amount of proceeds from the [REDACTED] to be used in the investment of the New Kelantan Plant is as follows: Implementation activities From the [REDACTED] to 31 December 2018 From 1 January 2019 to 30 June 2019 From 1 July 2019 to 31 December 2019 From 1 January 2020 to 30 June 2020 From 1 July 2020 to 31 December 2020 Total amount of proceeds from the [REDACTED] to be used HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Land costs [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Set up costs for the new production plant [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Set up costs for a new office tower [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Set up costs for a new warehouse [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Purchase of trucks, trailers, forklifts and machines [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Recruitment of new staff [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Total [REDACTED] Our Directors consider that the estimated investment payback period for the New Kelantan Plant, being the time (in terms of number of months) it would take to earn the estimated accumulated net profit (after taxation) generated from the New Kelantan Plant from the commencement of its operation to cover the total investment costs of the New Kelantan Plant, is approximately 35 months. Acquisition of the parcel of land in Tanah Merah, Kelantan on which our New Kelantan Plant will be built. To align with our plan to establish the New Kelantan Plant, we entered into a sale and purchase agreement on 16 March 2018 for the acquisition of the parcel of land held under HS(M) 8432 and HS(M) 8406, P.T and P.T of Mukim Pasir Genda, Jijahan Tanah Merah, Kelantan, Malaysia, on which our New Kelantan Plant will be situated (the Sale and Purchase Agreement ). The parcel of land has a total gross area of approximately 36,150 m 2, of which approximately 9,000 m 2 will be used for manufacturing or processing of our steel bar products and steel wire products, approximately 12,000 m 2 will be used for open storage area which can be reserved for future expansion, and the remaining area will be used for storage, parking and as an ancillary office. Under the Sale and Purchase Agreement, the acquisition cost for the parcel of land will be RM1.1 million, of which RM110,000 was settled by our internal resources in February 2018 as an initial deposit, RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be financed by the net proceeds from the [REDACTED] and the remaining 90

98 BUSINESS RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be financed by bank loans or our internal resources. To the best knowledge and belief of our Directors, we expect the completion of the acquisition is expected to take place in the last quarter of Acquisition of machinery, equipment, trucks, trailers and forklifts. We will acquire additional machinery, equipment, trucks, trailers and forklifts for the New Kelantan Plant. We estimate the capital expenditure to be approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]), which is based on the latest quotations obtained by us and of which approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be financed by bank loan and approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) will be financed by the net proceeds of the [REDACTED]. Machinery and equipment Quantity Estimated capital expenditure (RM 000) Welding machine for production of wire meshes 3 [REDACTED] Wire straightening and cutting machine for production of cold-rolled steel bars, wire meshes and fencing products 5 [REDACTED] Welding machine for production of fencing products 1 [REDACTED] Coiling machine for production of cold-rolled steel bars, wire meshes 4 [REDACTED] Crane machine for production of steel bar products, wire meshes and fencing products 2 [REDACTED] Bar bender for processing of hot-rolled steel bars 2 [REDACTED] Weight machine for all our products 1 [REDACTED] Total [REDACTED] Trucks, trailers and forklifts Quantity Estimated capital expenditure (RM 000) Truck (10 MT) 2 [REDACTED] Truck (14 MT) 5 [REDACTED] Trailer (32 MT) 3 [REDACTED] Forklift (5 MT) 5 [REDACTED] Total [REDACTED] 91

99 BUSINESS We expect the machinery, equipment, trucks, trailers and forklifts for our New Kelantan Plant to be delivered and installed by phases from the second quarter of 2019 to the fourth quarter of It is expected to commence operation in the third quarter of Recruitment of staff. We plan to recruit new staff members including one engineer, two assistant engineers, one production manager, six salesmen, two supervisors, 40 production workers and drivers in order to align with our enlarged production capacity. Production capacity. It is noted that given the machinery and equipment in our New Kelantan Plant will commence operation by phases from the first quarter of 2019, the expected production capacity which will increase progressively, in alignment with their phases of operation. The table below sets out the detailed breakdown of the expected annual production capacity of the New Kelantan Plant for FY2019 and FY2020: Expected annual production capacity (MT) For the year ending 31 December Steel bar products Hot-rolled steel bars (Note 1) 71, ,853 Cold-rolled steel bars (Note 2) 3,656 8,489 Subtotal 74, ,342 Steel wire products Wire meshes (Note 3) 2,266 12,328 Fencing products (Note 4) 1,080 Subtotal 2,266 13,408 Total 76, ,750 Notes: 1. The expected annual production capacity of hot-rolled steel bars is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2019 and FY2020 being 331 days and 332 days respectively; and (iii) total time required for processing one bundle of hot-rolled steel bars being approximately 145 seconds for FY2019 and FY The expected annual production capacity of cold-rolled steel bars is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2019 and FY2020 being 331 days and 332 days respectively; and (iii) total time required for the manufacturing of a standard cold-rolled steel bar being approximately two seconds for FY2019 and FY The expected annual production capacity of wire meshes is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2019 and FY2020 being 331 days and 332 days respectively; and (iii) total time required for the manufacturing of a piece of standard wire meshes being approximately seconds and seconds for FY2019 and FY2020 respectively. 4. The expected annual production capacity of fencing products is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2019 and FY2020 being 331 days and 332 days respectively; and (iii) total time required for the manufacturing of a piece of standard fencing being nil and approximately seconds for FY2019 and FY

100 BUSINESS We expect that after completion of our New Kelantan Plant and upon the full ramp-up of the machinery and equipment, the New Kelantan Plant will have an annual production capacity of approximately 172,820 MT of steel bar products and approximately 16,916 MT of steel wire products in FY2021. Our Directors consider that our New Kelantan Plant will therefore expedite our business expansion by allowing us to capture the business opportunities arising in the Northeastern States. As at the Latest Practicable Date, we were at the preliminary stage of carrying out the plan of establishing the New Kelantan Plant and had obtained quotations from the potential suppliers of the machinery, equipment, trucks, trailers and forklifts. We expect to complete the above plan by the end of 2020 and in accordance with the schedule as set out in the section headed Future plans and use of proceeds in this document. II. Set up the New Selangor Production Facility We intend to establish a new production facility in Bukit Beruntung, Selangor, the Central Region of Malaysia, which will (i) increase our production capacity; and (ii) expand our storage area. Our Directors believe that it will strengthen our market presence in the Central Region and facilitate our business growth for the following reasons: (i) (ii) Central Region was our largest market in FY2015, FY2016, FY2017 and our second largest market for the four months ended 30 April Owing to the long distance between our Kuantan Plant and the Central Region, the transportation cost (or freight charges) of our products from our existing Kuantan Plant to the Central Region is relatively high, resulting in an increase in the cost of our products and delivery time of our products to our customers in Central Region. As an example, it generally takes more than eight hours per round trip between our Kuantan Plant and the Central Region. If we charge customers located in the Central Region the same rate per unit of our steel bar products or steel wire products as that we charge customers in Kuantan, we will have a lower profit margin due to the higher freight charges incurred. Based on the latest quotation obtained by us, the average freight charges for the delivery of the steel bar products and steel wire products from the Kuantan Plant to customers in the Central Region is approximately RM40.0 per MT while the average freight charges for delivery within the Central Region is approximately RM25.1 per MT. Therefore, our Directors estimate that we can save approximately 37.3% in freight charges in connection with the deliveries made within the Central Region instead of from Kuantan to the Central Region; For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, revenue derived from the Central Region amounted to approximately RM103.3 million, RM118.0 million, RM153.8 million and RM56.2 million. Revenue contributed by the building material trading companies and construction contractors in the Central Region in aggregate accounted for approximately 96.1%, 94.3%, 89.4% and 89.4% of our revenue generated from the Central Region, respectively. Our Directors believe setting up the New Selangor Production Facility will allow us to maintain our relationship with these customers and respond faster to their requests; 93

101 BUSINESS (iii) (iv) (v) On the other hand, revenue contributed by the hardware shops in the Central Region only accounted for approximately 1.7%, 3.4%, 6.9% and 6.5% of our revenue generated from the Central Region for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. These hardware shop customers generally place smaller orders with us. Considering the freight charges for delivery of steel bar products and steel wire products from our Kuantan Plant to the Central Region, during the Track Record Period we could only take up these smaller orders from these hardware shop customers in the Central Region if income generated by these orders could cover the corresponding freight charges and we only managed to maintain a reasonable profit margin by requiring truck delivery to the Central Region to be full-truckloaded. As a result of the need to consolidate the smaller orders from the said region, it generally takes around five to seven days from the date of purchase order for our products to reach our hardware shop customers in this region, which may discourage them from placing orders with us. If we have our own production facility in Bukit Beruntung, Selangor, which will save transportation cost and significantly shorten the delivery time, our Directors believe that we will be able to capture the demand from hardware shop customers for our products in the Central Region; We plan to purchase new machines for our New Selangor Production Facility. Apart from that, the New Selangor Production Facility is expected to house a semi-automated wire mesh production line (consisting of a drawing machine, a mesh welding machine and a wire straightening and cutting machine) to be transferred from our Kuantan Plant. Given that the fully-automated mesh welding machine (i.e. MG800 series) has already significantly increased the wire mesh production capacity of the Kuantan Plant, our Directors believe the transfer of the wire mesh production line with the fully-automated MG800 series remains at the Kuantan Plant will allow the Group to (i) optimise the utilisation of the fully-automated mesh welding machine as well as the traditional wire mesh production lines; and (ii) capture the business opportunities in the Central Region. Our Directors estimate that the time needed for relocation and installation of the said wire mesh production line will be approximately one month; According to the SMITH ZANDER Report, the Central Region s real GDP increased from approximately RM310.3 billion in 2011 to approximately RM421.6 billion in 2016, registering a year-on-year average of approximately 6.3%. It is forecast that the GDP growth between 2017 and 2021 will be between approximately 5% and 8%. Furthermore, from 2011 to 2016, construction activities in the Central Region, as measured by the value of projects awarded, grew from approximately RM35.5 billion in 2011 to approximately RM134.7 billion in 2016 at a CAGR of approximately 30.6%. According to the SMITH ZANDER Report, it is estimated that construction activities in the Central Region will grow from approximately RM155.9 billion in 2017 to approximately RM301.3 billion in 2021, registering a CAGR of approximately 17.9% during the period. As it is anticipated that our New Selangor Production Facility will have an annual production capacity of approximately 153,035 MT of steel bar products and 8,367 MT of steel wire products in FY2020 our Directors believe setting up our New Selangor Production Facility will allow us to capture the business opportunities arising from the estimated growth of construction activities in the Central Region. 94

102 BUSINESS The estimated timetable for the construction of the New Selangor Production Facility is as follows: Implementation Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th Acquisition of land Construction Acquisition and installation of machines (including relocation and installation of a wire mesh production line from the Kuantan Plant) Recruitment and training of staff Commencement of operation The estimated total investment costs for establishment of the New Selangor Production Facility is approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]), all of which will be paid by the proceeds from the [REDACTED]. A detailed breakdown of investment costs of our New Selangor Production Facility with the amounts to be incurred is as follows: Implementation activities From 1 July 2019 to 31 December 2019 From 1 January 2020 to 30 June 2020 From 1 July 2020 to 31 December 2020 Total amount of proceeds from the [REDACTED] to be used HK$ 000 HK$ 000 HK$ 000 HK$ 000 Acquisition of land [REDACTED] [REDACTED] [REDACTED] [REDACTED] Set up costs for our New Selangor Production Facility [REDACTED] [REDACTED] [REDACTED] [REDACTED] Purchase of machines, trucks, trailers and forklifts and relocation and installation of a wire mesh production line from the Kuantan Plant [REDACTED] [REDACTED] [REDACTED] Recruitment of new staff [REDACTED] [REDACTED] [REDACTED] Total [REDACTED] Our Directors consider that the estimated investment payback period for the New Selangor Production Facility being the time (in terms of number of months) it would take to earn the estimated accumulated net profit (after taxation) generated from our New Selangor Production Facility from the commencement of its operation is approximately 24 months. 95

103 BUSINESS Acquisition of land. Based on our operational needs, we intend to operate our New Selangor Production Facility on a parcel of land measuring approximately 6,500 m 2 to 7,000 m 2 and a factory building with a height of approximately 14 m in the rural or outskirt areas of Bukit Beruntung, Selangor (the Required Land Size and Location ). Apart from the Required Land Size and Location, our Directors have also been advised by an external civil engineer that the building structure of our New Selangor Production Facility should satisfy certain specific requirements, including requirements on (i) steel column, rafter and runway beam size; (ii) ground slab thickness; and (iii) ground beam size (the Required Specifications ). Our Directors, after making enquiries with a land valuer, who is an Independent Third Party, note that (i) it was not feasible to locate any land with an existing building structure that satisfies the Required Specifications; (ii) leasing a parcel of vacant land with the Required Land Size and Location costs approximately RM13,000 to RM20,000 (equivalent to approximately HK$26,000 to HK$40,000) per month; and (iii) acquiring a parcel of vacant land with the Required Land Size and Location costs approximately RM5.9 million to 7.8 million (equivalent to approximately HK$11.8 million to HK$15.6 million). As acquiring/leasing a parcel of land with an existing building structure that satisfies the Required Specifications is not an available option, to ensure our New Selangor Production Facility will satisfy our operational needs, our Directors considered the options of (i) acquiring; or (ii) leasing a parcel of vacant land that satisfies the Required Land Size and Location to construct thereon a production facility that satisfies the Required Specifications. Our Directors considered that following factors: (i) (ii) After making enquiries with the land valuer, the usual length of leases of land with the Required Land Size and Location is a fixed term of three years and an option to renew for a further two years. Given that constructing and setting up the New Selangor Production Facility is estimated to cost approximately RM[REDACTED] (equivalent to approximately HK[REDACTED]), our Directors believe that the construction costs cannot be recovered within the short leasing period; There is a possibility that the landlord would, pursuant to the standard terms of the lease, require us to restore the land to its original condition when the lease expires. Such restoration would involve substantial cost; (iii) If we cannot renew the lease of the new production facility in Selangor (if it is leased instead of self-owned), we would have to relocate our production facility to a new area, carry out all necessary preparatory works and apply for all requisite licences again, which as expected by our Directors, will take at least six months (including the time for land levelling and applying the requisite approvals and as licences) and would cause material disruption to our production process; and (iv) For the general comparison of the lease model and the own model, please refer to the paragraph headed Comparison between the lease model and the own model in this section. 96

104 BUSINESS In light of the aforesaid reasons, our Directors believe acquisition of a parcel of vacant land to the construction of the New Selangor Production Facility is the most feasible option. The acquisition cost for the parcel of land is expected to be financed by the net proceeds of the [REDACTED]. As at the Latest Practicable Date, we have not identified any particular parcel of land to be acquired and no agreement has been entered into in this regard. Acquisition of machinery, trucks, trailers and forklifts and relocation of a wire mesh production lines for the New Selangor Production Facility. We plan to (i) acquire two bar benders, one crane machine, one weight machine and relocate a wire mesh production line from the Kuantan Plant for manufacturing wire meshes, which are estimated to cost approximately RM[REDACTED] (equivalent to approximately HK[REDACTED]); and (ii) acquire trucks, trailers and forklifts, which are estimated to cost approximately RM[REDACTED] (equivalent to approximately HK[REDACTED]). The total capital expenditure in this regard is therefore estimated at approximately RM[REDACTED] million (equivalent to approximately HK[REDACTED]). Particulars of machinery, trucks, trailers and forklifts to be acquired for the New Selangor Production Facility are as follows: Machinery Quantity Estimated capital expenditure (RM 000) Bar bender for processing of hot-rolled steel bars 2 [REDACTED] Crane Machine 1 [REDACTED] Weight Machine 1 [REDACTED] [REDACTED] Trucks, trailers and forklifts Number Estimated capital expenditure (RM 000) Truck (10 MT) 4 [REDACTED] Truck (14 MT) 3 [REDACTED] Trailer (32 MT) 1 [REDACTED] Forklift (5 MT) 3 [REDACTED] Total [REDACTED] From the second quarter of 2020 to the fourth quarter of 2020, we expect the machinery, trucks, trailers, forklifts and the wire mesh production line from our Kuantan Plant for our New Selangor Production Facility to be delivered and installed by phases. Our New Selangor Production Facility is expected to commence operation in the fourth quarter of

105 BUSINESS Recruitment of staff. We plan to recruit new staff members including four supervisors and 13 production workers and drivers in order to align with our enlarged production capacity. Production capacity. The table below sets out the detailed breakdown of the expected annual production capacity of the New Selangor Production Facility for FY2020: Expected annual production capacity (MT) for the year ending 31 December 2020 Steel bar products Hot-rolled steel bars (Note 1) 150,453 Cold-rolled steel bars (Note 2) 2,582 Subtotal 153,035 Steel wire products Wire meshes (Note 3) 8,367 Fencing products Subtotal 8,367 Total 161,402 Notes: 1. The expected annual production capacity of hot-rolled steel bars is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY 2020 being 332 days; and (iii) total time required for processing one bundle of hot-rolled steel bars being approximately 145 seconds. 2. The expected annual production capacity of cold-rolled steel bars is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY 2020 being 332 days; and (iii) total time required for the manufacturing of a piece of standard cold-rolled steel bar being approximately two seconds. 3. The expected annual production capacity of wire meshes is calculated based on the assumptions that there will be (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY 2020 being 332 days; and (iii) total time required for the manufacturing of a piece of standard wire meshes being approximately seconds. We expect that after completion of our New Selangor Production Facility and upon the full ramp-up of the machinery and equipment, our New Selangor Production Facility will have an annual production capacity of approximately 167,178 MT of steel bar products and approximately 9,141 MT of steel wire products in FY2021. Our Directors consider that our New Selangor Production Facility would expedite our business expansion by allowing us to capture the business opportunities arising in the Central Region. 98

106 BUSINESS Owing to the relocation of a wire mesh production line (consisting of a drawing machine, a mesh welding machine and a wire straightening and cutting machine) from our Kuantan Plant to our New Selangor Production Facility as aforesaid, it is expected that the production capacity for cold-rolled steel bars and wire meshes of our Kuantan Plant will be reduced by approximately 2,902 MT per annum and 9,772 MT per annum from FY2018 to FY2021, respectively. As at the Latest Practicable Date, we were at the preliminary stage of carrying out the above plan and had obtained quotations from the potential suppliers of the machinery, trucks, trailers and forklifts. We expect to complete the above plan by the end of 2020 and in accordance with the schedule as set out in the section headed Future Plan and Use of Proceeds in this document. Comparison between the lease model and the own model If our New Kelantan Plant or our New Selangor Production Facility is to be established on a leased property, it will be subject to the risks associated with a leased property, such as early termination or non-renewal of the tenancy agreement by the landlord and the possible increase of rental expenses, which will cause material interruption to our business operation and our expansion plan. As compared to leasing a property for setting up our New Kelantan Plant or our New Selangor Production Facility, having a self-owned production plant/facility will have the following advantages: (i) Minimise disruption and additional costs to our business caused by relocation or lease renewal Having a self-owned production plant/facility would allow us to (a) minimise the likelihood of any material disruption to our business due to the relocation caused by the termination or non-renewal of the lease; (b) avoid incurring additional costs for relocation in the event that the lease renewal is declined; and (c) protect us from any abrupt increase in rentals upon renewal of leases in the future. (ii) Improve our operating cash flow Having our self-owned production plant/facility would help improve the operating cash flow of our Group in the long run by eliminating our Group s rental expenses for a leased production plant/facility. (iii) Enhance our Group s ability to secure bank borrowing Most banks require collaterals, such as cash deposits or properties, and/or guarantees from our Controlling Shareholders in order to secure bank borrowings for our Group. As such, our Directors are of the view that owning a property will strengthen our bargaining power to negotiate more favourable terms for future bank borrowings. (iv) Benefit from any appreciation in the value of the property By having a self-owned production plant/facility, we can benefit from any appreciation in its value. On the other hand, lease of a production plant/facility would remain a burden on our business as the term of the lease and the rental expenses are fixed for several years. 99

107 BUSINESS Taking the above into account, our Directors are of the view that having our self-owned production plant would be more beneficial to our Group in the long run. III. Purchase of new trucks and forklifts and build an office premises at our Kuantan Plant Most of our trucks and forklifts used at our Kuantan Plant have been operated for over half of their expected life span. The repair and maintenance cost of our trucks and forklifts used at our Kuantan Plant amounted to approximately RM97,000, RM147,000, RM128,000 and RM25,000 for FY2015, FY2016, FY2017 and the four months ended 30 April Taking into account the periodic repairs of these trucks and forklifts and replacements of parts thereof due to normal wear and tear, our Directors have decided to replace our existing trucks and forklifts by phases. Hence, we intend to purchase new trucks and forklifts and we estimate the capital expenditure to be approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]), which is based on the latest quotations obtained by us and will be financed by the net proceeds of the [REDACTED]. Trucks and forklifts Number Estimated capital Expenditure (RM 000) Truck (10 MT) 3 [REDACTED] Truck (14 MT) 3 [REDACTED] Forklift (5 MT) 3 [REDACTED] TOTAL [REDACTED] Furthermore, given our anticipated future growth, we plan to set up a new office premises, at the existing Kuantan Plant at a cost of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]), inclusive of renovation, fitting-out of the new premises, erection of new office premises and equipment installation; and recruit new staff members including additional workers and drivers. IV. Upgrade our ERP system and enhance our capabilities in information technology We believe that an advanced enterprise resource system ( ERP ) is essential for us to enhance the efficiency of our operation. With an advanced ERP system, we can collect, store, manage and interpret data from our business activities as it provides an integrated and continuously updated view of our core business processes using common databases maintained by our database management system. An upgraded ERP system can track our business resources, including cash, raw materials, production capacity and the status of business commitments, for instance, our sales orders, purchase orders and payrolls in a timely manner. The applications make up the upgraded ERP system share data across various departments (production, purchasing and marketing, sales, etc.) that provide the data. As such, this is useful for us to plan and iron out our business expansion plan. In light of the above, we intend to upgrade our existing ERP system which runs on a variety of computer hardware and network configurations using database, which is anticipated to commence in or around the first half of

108 BUSINESS We expect to utilise a sum of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) from the net proceeds of the [REDACTED] for this purpose. OUR BUSINESS MODEL We principally manufacture and sell cold-rolled steel bars and steel wire products; and process and sell hot-rolled steel bars. To complement our business, we also engage in trading of building materials and accessories. The following table sets forth the breakdown of our revenue by business categories and product type during the Track Record Period: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products Hot-rolled steel bars 77, , , , , Cold-rolled steel bars 15, , , , , Subtotal 92, , , , , Manufacturing and sale of steel wire products Standard wire meshes 35, , , , , Cut-to-size wire meshes 4, , , , , Fencing products 3, , , Subtotal 44, , , , , Trading of building materials and accessories 23, , , , , Total 160, , , , , Our steel bar products and steel wire products are generally used and applied in construction and infrastructure projects. They can be classified into (i) standard steel bar products and steel wire products; (ii) customised steel bar products and steel wire products with various specifications; and (iii) cut-to-size wire meshes with different physical properties. Regarding our cut-to-size wire meshes which are generally provided to property developers and construction contractors, our in-house technical team comes up with a proposed plan of cost-saving combinations of wire meshes to implement the architectural plans of these customers. We are able to make appropriate adjustments of our products to suit our customers varying requirements. 101

109 BUSINESS Products sourced from third parties for trading mainly comprise unprocessed hot-rolled steel bars, prestressed concrete steel strand and cement which can be sold to our customers on a standalone basis or together with our steel bar products and steel wire products to allow our customers to complete their purchase in one go. The following diagram illustrates the supply chain of our products: Construction contractors Property developers Our Suppliers Supply of raw materials, mainly include low carbon wire rods, galvanized iron wires and hot-rolled steel bars Our Group Building material trading companies Hardware Shops Property developers/ Construction contractors Note: one-way customer-supplier relationship where suppliers supply products to customers. two-way customer-supplier relationship where suppliers and customers purchase and supply different products from/to each other. According to the SMITH ZANDER Report, the nature of the steel bar product and steel wire product industry is fragmented with many companies in Malaysia to the extent that industry players who manufacture and/or trade steel bar products and/or steel wire products may also supply an extensive range of other products, including building materials other than steel bar products and steel wire products, to their customers when requested. Steel bar product and steel wire product manufacturers may also purchase raw materials and/or trading products, including building materials other than steel bar products and steel wire products, from their suppliers and may also sell finished products (e.g. cold-rolled steel bars and wire meshes) to the same companies when requested. For further details, please refer to the paragraph headed Entities that are both our customers and suppliers during the Track Record Period in this section. 102

110 BUSINESS INTRA-GROUP TRANSACTION BETWEEN OUR SUBSIDIARIES During the Track Record Period, our manufacturing processes were undertaken by the Kuantan Plant held by EC Excel Wire, our wholly-owned subsidiary incorporated in Malaysia. When UVM Excel, our wholly-owned subsidiary and Arena Metal Resources, Klang Valley Wire and Klaas Metal, our non-wholly-owned subsidiaries incorporated in Malaysia, received purchase orders from our customers of steel bar products and steel wire products, our staff at UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal would place the corresponding purchase orders to EC Excel Wire for production and sale. Finished goods sold by EC Excel Wire to UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal were priced on a cost-plus basis. EC Excel Wire also purchase building materials and accessories from UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal. The intra-group transactions between EC Excel Wire and UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal are subject to transfer pricing related laws and guidelines in Malaysia. According to the Income Tax Act 1967, a person who enters into a transaction with an associated person for the acquisition or supply of property or services during the year of assessment shall determine and apply the arm s length price for such acquisition or supply. Our Malaysia Legal Advisers advised that the transfer pricing laws and guidelines are not applicable to the transactions between persons who are both assessable and chargeable with tax in Malaysia and where it can be demonstrated that any adjustments made under the applicable transfer pricing laws and guidelines will not alter the total tax payable or suffered by both persons (i.e. between EC Excel Wire and UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal who are both assessable and chargeable to tax and subject to the same tax rate in Malaysia). We have adopted policies and procedures to monitor our intra-group transaction arrangement. During the Track Record Period, we reviewed our transfer pricing policies and the relevant intra Group transactions periodically and had prepared the transfer pricing documentation in accordance with the transfer pricing guidelines of the relevant jurisdiction to record and substantiate that the applicable intra- Group transactions were conducted in compliance with the relevant transfer pricing laws and guidelines and were consistent with the arms length principle as set out therein. In July 2018, we also engaged a tax consultant to conduct a review on the relevant intra-group transactions between FY2015 and FY2017 so as to evaluate specifically our compliance with the relevant transfer pricing guidelines and the potential tax implications on our Group. After seeking the views of the tax consultant and our Malaysia Legal Advisers, our Directors confirm that (i) our transfer pricing policies and transfer pricing documentation are in accordance with the relevant transfer pricing guidelines of Malaysia; and (ii) the intra-group transactions between EC Excel Wire and each of UVM Excel, Arena Metal Resources, Klang Valley Wire and Klaas Metal are considered as compliant with the arm s length principle under the relevant transfer pricing laws and guidelines of Malaysia. As at the Latest Practicable Date, as confirmed by our Malaysia Legal Advisers, our Directors were not aware of any inquiry, audit or investigation by any tax authority in Malaysia nor had we received any notice from any competent tax authority for tax adjustment due to transfer pricing issues with respect to our intra-group transactions. Based on the above, the Directors are of the view that we complied with the applicable laws and regulations in Malaysia in relation to the transfer pricing in material aspects during the Track Record Period. 103

111 BUSINESS OPERATIONAL FLOWS Key operational procedures in relation to our manufacturing or processing and sale of steel bar products and steel wire products are outlined in the following flow chart for illustration purpose: Production planning Manufacturing or processing of standard steel bar product and steel wire products If there is insufficient inventory, production team will arrange manufacturing or processing to make up the short fall Standard products Manufacturing or processing and sale of steel bar product and steel wire products Warehousing of finished standard steel bar product and steel wire products Checking inventory of our standard steel bar product and steel wire products Production team and logistics team will arrange delivery if there is enough inventory to satisfy customers orders Customer enquiries and (if necessary) preparation of quotation Production planning Manufacturing of customised steel bar product and steel wire products (including cut-to-size wire meshes) Quality control before delivery Delivery either by our own logistics team or third party logistics service providers Customised/ cut-to-size products Trading of building materials and accessories Checking inventory of our building materials and accessories (if inventory has been maintained) Procurement (if there is insufficient inventory or if inventory has not been maintained) Contracting stage Manufacturing or processing stage Delivery stage I. Contracting stage Our customers mainly comprise of building material trading companies, construction contractors, property developers and hardware shops. Generally, enquiries from potential customers are either for a combination of steel bar products, steel wire products and/or building materials and accessories; or for a single type of product. Enquiries and requests for quotations are handled by our sales team, who then prepares the quotation and relevant information with regard to the product type, product price, delivery charge and delivery schedule. Subject to request from individual customers, we also provide our customers with the necessary certification and other key information on the raw materials we used in manufacturing or processing our steel bar products and steel wire products. 104

112 BUSINESS In the cases where enquiries are related to customised steel bar products and/or steel wire products (including cut-to-size wire meshes), our sales team and technical team will work together to come up with our quotation and, if necessary, engage in negotiations with the potential customers to work out the product specifications that would need for implementation of their architectural plans. Once we have prepared the quotation, our sales team will send it to the potential customer who will then confirm the order with us either via acknowledgement and/or through the issuance of the customer s purchase order. Our production team will then plan and schedule for the manufacturing of the customised products. 105

113 BUSINESS II. Manufacturing or processing stage Manufacturing or processing of steel bar products and steel wire products We manufacture (i) cold-rolled steel bars; and (ii) steel wire products, which included wire meshes and fencing products. We also process unprocessed hot-rolled steel bars procured from our suppliers. For illustration purposes the major steps of the production process of major types of our steel bar products and steel wire products are outlined below: Steel bar products Steel wire products A. Hot-rolled steel bars B. Cold-rolled steel bars C. Wire meshes D. Fencing products Production planning (continuous planning and prioritisation of customer orders for standard products and approximately 3 weeks for customised/cut-to-size products) Procurement of hot-rolled steel bars (approximately 7 days) Procurement of low carbon wire rods (if necessary) (approximately 7 days) Procurement of galvanised iron wires and PVC beads (if necessary) (approximately 3 days) Bending, cutting and packaging of hot-rolled steel bars (approximately 290 seconds per bundle) Cold rolling process (approximately 1.8 metres per second) Cold rolling process (approximately 1.8 metres per second) PVC coating for chain-link fences and barbed wires (if requested) (approximately 1 metre per second) Wire straightening and cutting (approximately 1.8 metres per second) Wire straightening and cutting (Note) (approximately 1.8 metres per second) Chain-link fences: Spinning, winding and twisting (approximately 20 minutes per roll) Welding (Note) (approximately 0.5 pieces per minute) Shearing (approximately 20 seconds per piece) Barbed wires: Spinning and crafting (approximately 6 minutes per roll) Welded fences: wire straightening, cutting, welding, trimming and bending (approximately 4 minutes per piece) Bending (approximately 20 seconds per piece) Note: By using our fully-automated mesh welding machine (i.e. MG800 series), the wire straightening, cutting and welding process can be combined to produce approximately 1.5 pieces wire meshes per minute. 106

114 BUSINESS Production planning We maintain an optimal inventory level for standard steel bar products and steel wire products based on our weekly production plan. In the cases where the purchase orders are for our standard steel bar products and/or steel wire products, if there is enough inventory to satisfy the order, we will arrange delivery of our products to our customers designated site in accordance with delivery schedule. On the other hand, if we have insufficient inventory to satisfy the purchase orders, our production team will commence manufacturing or processing of the requested standard steel bar products or steel wire products to make up for the shortfall. Calibration of machinery and equipment is generally not required as we already have the specifications of the standard steel bar products and steel wire products. We do not keep customised steel bar products and steel wire products (including cut-to-size wire meshes) as inventory as the product specifications and the requirements under each order are different. Planning for manufacturing customised products is generally more detailed, which involves adjusting and calibrating our machinery and equipment or, for cut-to-size wire meshes, formulating a proposed plan of cost-saving combinations of wire meshes to implement customers architectural plans. Our production team will commence the manufacturing or processing process only when the production plan for each order for customised products is finalised. Procurement of raw materials We maintain sufficient inventory level of certain major raw materials such as unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires for our manufacturing and processing of steel bar products and steel wire products. Upon receiving confirmation from our customers purchase orders, we will check the inventory level of these raw materials and if necessary, we will place orders with our suppliers who are on our list of approved suppliers. During the Track Record Period, the cost of unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires for manufacturing or processing of steel bar products and manufacturing of steel wire products amounted to approximately RM108.6 million, RM127.7 million, RM207.7 million and RM94.1 million, respectively, representing approximately 83.6%, 82.2%, 78.5% and 80.4% of our total cost of raw materials during the same period, respectively. It generally takes around three to seven days to deliver the raw materials from our suppliers to our Kuantan Plant. For details of our supplier selection criteria and quality control on our raw materials, please refer to the paragraph headed Suppliers Selection of suppliers in this section and the paragraph headed Quality control on raw material in this section, respectively. A. Processing of hot-rolled steel bars We purchase unprocessed hot-rolled steel bars from our suppliers. The unprocessed hot-rolled steel bars are either traded and directly delivered to our customers without further processing, or to our Kuantan Plant where further processing (including cutting, bending and packing, depending on our customers requirements) is to be carried out by our production team. 107

115 BUSINESS B. Manufacturing of cold-rolled steel bars (i) Cold-rolling process Rolling is a steel forming process in which low carbon wire rods are passed through a drawing machine to reduce and uniform their thickness. The manufacturing of cold-rolled steel bars and wire meshes begin with the cold rolling process where low carbon wire rod undergoes the aforesaid rolling process at below its recrystallisation temperature (generally at room temperature). This process mainly determines the diameter of our cold-rolled steel bars or steel wire (to be welded into wire meshes). Low carbon wire rods are used as major raw materials. For illustration purposes the major steps of the cold rolling process are outlined below: Low carbon wire rods Descaling Lubricating Gripping Rollers Hard-drawn wires Uncoiling Descaling, lubricating and drawing Recoiling Low carbon wire rods are purchased from suppliers in coiled form. Therefore, they must be uncoiled first for further processing. Low carbon wire rods are further pulled and stretched so that they can be shaped into different shapes and diameters easier in later stage. The outer layer of low carbon wire rods is removed through the descaling process in order to soften the surface of the low carbon wire rods. During the cold-rolling process, lubricant powder is used to reduce friction. A drawing machine then pulls and draws the low carbon wire rods through a gripping device, which reduces their diameter and cross section and shapes the profile of the wires. After the repeated rolling process, the descaled and lubricated low carbon wire rods are known as hard-drawn wires and their physical properties will be changed. The hard-drawn wires are drummed, recoiled and transferred to the next machine by our workers for uncoiling. 108

116 BUSINESS (ii) Wire straightening and cutting Hard-drawn wires are transferred to the straightening and cutting machine where they are straightened by various adjustable rollers. The straightened wire rod is then cut to the length required in accordance with customers specifications. For illustration purposes the major steps of this process are outlined below: Hard-drawn wires Feeders Multiple rollers Cutting Cold-rolled steel bars Uncoiling Feeding, straightening and cutting Cold-rolled steel bars The hard-drawn wires are uncoiled for further processing. The hard-drawn wires are further pulled and stretched using a straightening and cutting machine. The hard-drawn wires first enter the feeders of the machine where they are pulled or pushed through the machine by feeding rolls for straightening and cutting to the length required. The wires are pressed beyond their elastic limit a number of times by multiple rollers. Cold-rolled steel bars with required length and diameter can be delivered to customers after this step without further processing. Alternatively, they can be further processed into wire meshes. C. Manufacturing of wire meshes (i) Cold rolling process and wire straightening and cutting process The manufacturing of wire meshes also begins with the cold rolling process and the wire straightening and cutting process. For details of these processes, please refer to the paragraphs headed Cold-rolling process and Wire straightening and cutting in this section. (ii) Welding After the wire straightening and cutting process, the straightened and cut hard-drawn wires produced are ready for welding and transferred to a welding machine where one alignment of parallel wires is fed into the welding machine and then another set of parallel wires (which are perpendicular to the previous one) is fed. The points of intersection of the two wires at 90 degrees are welded together by the welding machine. After the welding is done, another length of the parallel wires is forwarded into the machine and the same process of welding continues. When the desirable length of welded wire mesh is produced, 109

117 BUSINESS the process is stopped and the wire mesh is cut into the demanded dimensions to be used towards the particular purpose. For illustration purposes the major steps of this process are outlined below: Feeders Line wires are fed Cross wires are fed Welding Wire feeding Welding Finished wire meshes The straightened and cut hard-drawn wires are transferred to the feeder of a welding machine. The spacing between each wire can be adjusted depending on customers specifications. Finished wire meshes with required specifications are ready for further bending and cutting. (iii) Shearing and bending The finished wire meshes may be further sheared and bent by our shearing machines and benders depending on our customers needs. Wire meshes are fed into a shearing machine or bender manually and then cut to the desired length or bent at the desired width. Fully-automated mesh welding machine MG800 series As at the Latest Practicable Date, we operated a fully-automated mesh welding machine that can manufacture wire meshes at a high speed with minimal reliance on labour. This machine can further streamline our production by combining certain production steps such as wire straightening, cutting and welding together, thus reducing production lag time and use of labour. D. Manufacturing of fencing products For our fencing products such as chain-link fences, barbed wires and welded fences, galvanised iron wires are used as major raw materials. (i) PVC coating Depending on customers requirement, our chain-link fences and barbed wires may be coated with PVC. PVC beads are first melted at high temperature into liquid form. Thereafter, galvanised iron wires are coated with a coloured PVC layer (such as green, blue or orange) to increase the durability and corrosion resistance of the fencing products. 110

118 BUSINESS (ii) Further processing by different types of machines For chain-link fences, the galvanised iron wires (which may be PVC coated upon customers request) are then transferred to a chain-link machine where the wires through spinning, winding and twisting form a zig-zag pattern such that each wire hooks with another wire on one side to form a typical diamond pattern. For barbed wires, the galvanised iron wires (which may be PVC coated upon customers request) are fed to a barbed wire machine, where the wires undergo a spinning and crafting process to form sharp points arranged at intervals along the wires. Galvanished iron wires first undergo the wire straightening and cutting and welding process, followed by trimming and bending to become welded fences. III. Delivery stage After the production stage, depending on the location of individual customers, we either deliver our products to our customers designated sites with our own logistics team or by third party logistics service providers engaged by us. Delivery to rural or outskirt areas. Deliveries to rural or outskirt areas are mostly handled by our own logistics team as based on our Directors experience, third party logistics service providers are not willing to take up these orders. Delivery to multiple locations. Similar to deliveries to rural or outskirt areas, based on our Directors experience, third party logistics service providers are generally not willing to handle multiple-location deliveries. These orders therefore are mostly handled by our own logistics team during the Track Record Period. Multiple-location deliveries allow us to deliver to several customers in the same region in one single road trip and are essential to our cost management, especially when we are selling to customers located outside Kuantan. Given the higher freight cost of delivery to regions outside Kuantan, during the Track Record Period, we required truck delivery to these regions to be full-truckloaded in order to maintain our profit margin. While multiple-location deliveries to customers within Kuantan could generally be satisfied within one to two days from the date of purchase order, during the Track Record Period, it generally took us around five to seven days (from the date of purchase order) to consolidate small orders from customers in other regions for a full-truckload delivery. Our Directors believe such delay discouraged customers with smaller orders (mostly hardware shop customers in other regions) to purchase from us during the Track Record Period. Full-truckload deliveries. Although third party logistics service providers can be engaged for full-truckload deliveries to customers who are not in rural or outskirt areas, we prefer using our own logistics team to handle the delivery for better control over the management and quality of our delivery services. Generally, we consider engaging third party logistics service providers only when our trucks are all engaged. 111

119 BUSINESS In general, we select third party logistics service providers based on their price, reputation, transportation efficiency, transportation capability and track record. We also require our logistics service providers to possess valid transportation permits and other relevant qualifications to conduct their business, and appropriate insurance coverage. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, the delivery cost incurred by engaging third party logistics service providers for the delivery of our products amounted to approximately RM2.7 million, RM2.9 million, RM3.1 million and RM1.6 million, respectively. As at the Latest Practicable Date, our vehicle fleet consisted of eight delivery vehicles with loading capacity ranged from 9.7 MT to 30.9 MT and 15 truck drivers. We do not carry out installation work for our steel bar products or steel wire products. After sales service In general, we do not offer any product return, replacement or warranties to our customers. Complaints about product quality from our customers, if any, will be referred to our sales team and production team who will then present the complaint to our management team. Upon the instruction of our management team, our production team may arrange for new products to be delivered to our customers as replacement. Our Directors take the view that our Group received no material complaints during the Track Record Period and up to the Latest Practicable Date. Trading of building materials and accessories Key operational procedures in relation to our trading of building materials and accessories are outlined below for illustration purpose: Suppliers Direct delivery of products to customers in some occasions Delivery of products to us for repackaging Our Group Place orders Delivery of products to customers Place orders Customers 112

120 BUSINESS Except for a small quantity of prestressed concrete steel strand and cement, we generally do not maintain building materials and accessories as inventory for trading purpose. Upon confirming the purchase orders from our customers, we will place back-to-back purchase order with our suppliers. Our sales and marketing team will then arrange delivery from our suppliers to our Kuantan Plant or to our customers directly by either our logistics team or our external logistics service providers. In some occasions, we may require our suppliers to deliver the building materials and accessories directly to our customers designated locations. Our sales and marketing team handles the enquiries or requests from customers on product specifications, product prices, delivery date and location. Once our customers agree with the terms and prices quoted, and confirm the order via telephone, written acceptance or through issuance of purchase order, delivery will be arranged. OUR PRODUCTS Manufacturing or processing and sale of steel bar products and steel wire products Our steel bar products We mainly manufacture or process and sell two types of steel bar products, namely (i) cold-rolled steel bars; and (ii) hot-rolled steel bars. Cold-rolled steel bars are manufactured from low carbon wire rods in our Kuantan Plant. As heating is not required, they can be manufactured and processed at room temperature. For hot-rolled steel bars, we purchase ready-made unprocessed hot-rolled steel bars from our suppliers, which are further processed (i.e. cut, bent and/or packed, depending on our customers requirements) in our Kuantan Plant, if required. Both cold-rolled steel bars and hot-rolled steel bars are commonly used in the construction industry. Upon customers requests, we can customise our cold-rolled steel bars based on customers specifications. As at the Latest Practicable Date, we mainly offered five types of cold-rolled steel bars and five types of standard hot-rolled steel bars. The followings are our major types of steel bar products: (a) Cold-rolled steel bars 113

121 BUSINESS Use: Generally used for construction. Diameter Bundle Weight Length Price range (mm) (pieces) (MT) (m) (RM/MT) ,071-2, ,750-2, ,500-2, ,070-2, ,070-2,270 (b) Hot-rolled steel bars Use: Generally used for construction. Diameter Bundle Weight Length Price range (mm) (pieces) (MT) (m) (RM/MT) , ,430-3, ,280-2, ,380-2, ,380-2,

122 BUSINESS Our steel wire products We mainly manufacture and sell two types of steel wire products, namely, (i) wire meshes; and (ii) fencing products. (i) Wire meshes Wire meshes are generally manufactured through the welding of a series of parallel longitudinal wires to parallel cross wires with the required spacing between each wire. Depending on the production process, certain types of wire meshes such as reinforced concrete wire meshes can be used as concrete reinforcement and to replace the traditional steel bars in concrete slab and wall structures. Our standard wire meshes are classified in terms of wire diameters spacing between each wire and sizes of the wire meshes. As at the Latest Practicable Date, we offered more than 30 types of standard wire meshes. The followings are our major types of standard wire meshes: (a) Reinforced concrete wire meshes/welded steel wire meshes Use: Concrete reinforcement The following table sets forth the major types of standard wire meshes sold by our Group: Product types Product code Longitudinal wire Cross wire Steel area Nominal mass per Diameter Spacing Diameter Spacing Line Cross square Price range (mm) (mm) (mm) (mm) (mm) (mm) (kg/m 2 ) (RM/MT) Square mesh A6-A ,588-3,348 B6-B ,445-3,625 Apart from standard wire meshes, we also sell cut-to-size wire meshes to cater for our customers need for customised products. 115

123 BUSINESS (ii) Fencing products As at the Latest Practicable Date, we offered three major types of fencing products with various sizes including chain-link fences, barbed wires and welded fences. Our chain-link fences are manufactured by spinning, winding and twisting galvanised iron wires into a whole. The galvanised iron wires run vertically and are bent into a zig-zag pattern which each other forming the characteristic of diamond pattern. Our barbed wires are manufactured by feeding galvanised iron wires into our barbed wire machines where the wires undergo a spinning and crafting process to form sharp points arranged at intervals along the wires. For our welded fences, they are manufactured from galvanised iron wires that are welded together. Depending on customer s specifications, our chain-link fences and barbed wires can be coated with PVC to prevent rusting. The following are our major fencing products: (a) Chain-link fences Use: Generally used at residential houses, sports field and river banks Wire size Wire diameter Height Price range (mm) (m) (RM/MT) 6-14 ± to ± Depends on customers specifications 4,000-6,

124 BUSINESS (b) Barbed wires Use: Generally used atop walls surrounding secured property Length/weight Price range (RM/MT) Depends on customers specifications 3,300-5,500 (c) Welded fences Use: Generally used for security purpose Fence model Wire diameter Spacing Vertical Horizontal Vertical Horizontal Price range (mm) (mm) (RM/MT) EC5 EC ,500-7,

125 BUSINESS Trading of building materials and accessories To complement our business, we also engage in trading of building materials and accessories on a standalone basis or together with our steel bar products and/or steel wire products. These items are generally used by our customers in infrastructure and construction projects. During the Track Record Period, the major types of building materials traded by our Group included but not limited to unprocessed hot-rolled steel bars, prestressed concrete steel strand and cement. The following table sets forth the price range of our major types of building materials and accessories traded by our Group during the Track Record Period: Price range (RM) Unprocessed hot-rolled steel bars Prestressed concrete steel strand Cement 1,420-2,830/MT 2,740-4,050/piece 15-19/piece (Note) Note: one piece of cement represented 50kg. PRODUCTION FACILITIES Our Kuantan Plant During the Track Record Period and up to the Latest Practicable Date, we operated our Kuantan Plant in Kuantan Pahang, Malaysia with a total gross factory built-up area of approximately 19,663 m 2 for manufacturing activities, storage, parking and ancillary office, of which an area of approximately 8,450 m 2 has been designated for the manufacturing or processing and approximately 11,213 m 2 has been designated for storage of our steel bar products and steel wire products. Our Kuantan Plant is located on two pieces of adjacent owned land known as Lot 77A, Lorong Gebeng 1/7, Gebeng Industrial Estate, Kuantan, Pahang Darul Makmur ( Lot 77A ) and Lot 77B, Off Jalan Gebeng 1/6, Kawasan Industrial Gebeng, Kuantan, Pahang Darul Makmur ( Lot 77B ). In December 2017, we commenced the preparatory works for expanding our warehouse at Lot 77B. As at the Latest Practicable Date, we had completed all the civil construction works. We expect to complete the construction of our warehouse in the fourth quarter of Our Directors expect that the new warehouse will have a total gross factory built-up area of approximately 3,457 m 2. The expansion of our warehouse will allow us to expand our current operations. Our Directors consider that it is imperative for us to expand our warehouse in order to align with our enlarged production capacity following the acquisition of the fully-automated mesh welding machine (i.e. MG 800 series) and facilitate our business growth in the long run. Our Directors confirm, upon seeking legal advice from our Malaysia Legal Advisers, that we have obtained all the relevant licences and permits. 118

126 BUSINESS Production capacity The table below sets out our total production capacities and utilisation rates of our Kuantan Plant by product categories during the Track Record Period: Our Kuantan Plant Production capacity For the four months ended For the year ended 31 December 30 April Actual production volume Actual production volume Actual production volume Actual production volume Utilisation rate Production capacity Utilisation rate Production capacity Utilisation rate Production capacity Utilisation rate (MT) (MT) (%) (MT) (MT) (%) (MT) (MT) (%) (MT) (MT) (%) (Note 1) (Note 1) (Note 1) (Note 1) Steel bar products: Hot-rolled steel bars (Note 2) 82, , , , , , , , Cold-rolled steel bars (Note 3) 10, , , , , , , , Steel wire products: Wire meshes (Note 4) 23, , , , , , , , Fencing products (Note 5) Note: 1. Utilisation rate is calculated by dividing the actual production volume by the production capacity for the relevant period. 2. The production capacity of hot-rolled steel bars is calculated based on (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, being 331 days, 332 days, 331 days and 106 days, respectively; (iii) the number of machines during the Track Record Period; and (iv) total time required for processing one bundle of hot-rolled steel bars being approximately 290 seconds during the Track Record Period. 3. The production capacity of cold-rolled steel bars is calculated based on (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, being 331 days, 332 days, 331 days and 106 days, respectively; (iii) the number of machines during the Track Record Period; and (iv) total time required for the manufacturing of a standard cold-rolled steel bar being approximately 1.7 seconds during the Track Record Period. The decrease in utilisation rate from approximately 83.9% in FY2015 to approximately 61.4% in FY2016 was due to the drop in sales volume of our cold-rolled steel bar products from approximately 8,418 MT in FY2015 to approximately 6,488 MT in FY2016. For further details, please refer to the paragraph headed Financial Information Revenue by product type Steel bar products in this document. 4. The production capacity of wire meshes is calculated based on (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, being 331 days, 332 days, 331 days and 106 days, respectively; (iii) the number of machines during the Track record Period; and (iv) total time required for the manufacturing of a piece of standard wire meshes being approximately 54.1 seconds, 47.1 seconds, 47.1 seconds, and 26.9 seconds, for FY2015, FY2016, FY2017 and the four months ended 30 April 2018 respectively. The high utilisation rate of approximately 99.0% in FY2016 was mainly due to the high production volume to cater for increasing demand for our wire meshes. The decrease in utilisation rate from approximately 99.0% in FY2016 to approximately 78.1% in FY2017 and further to approximately 67.3% for the four months ended 30 April 2018 was mainly due to the acquisition of a fully-automated mesh welding machine manufactured in Switzerland (i.e. MG800 series) and three new drawing machines which increased our production capacity. 5. The production capacity of fencing products is calculated based on (i) two shifts per day and 10 hours per shift; (ii) the actual working days for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, being 331 days, 332 days, 331 days and 106 days, respectively; (iii) the number of machines during the Track Record Period; and (iv) total time required for the manufacturing of a piece of standard fencing product being approximately seconds during the Track Record Period. 119

127 BUSINESS Machinery As at 30 April 2018, the aggregate net carrying value of our machinery amounted to approximately RM18.3 million. During the Track Record Period, our capital expenditure in acquiring machinery was approximately RM1.5 million, RM0.6 million, RM12.8 million and RM0.2 million, respectively. The following table sets forth the major machinery as at 30 April 2018: Name of machinery Quantity Principle function of the machine Average age (approximately) (years) Remaining useful life (approximately) (years) (Note 1) (Notes 2 and 3) Drawing machine 8 To calibrate the wire up to the required diameter Welding machine 6 To weld between horizontal and vertical wires Fully-automated mesh welding machine (MG 800 series) 1 To manufacture wire meshes at high speed 1 9 Wire straightening and cutting machine 11 To straighten the coiled low carbon wire rods and to cut the low carbon wire rods to the required length before welding 5 5 Bender 6 To bend unprocessed hot-rolled steel bars 9 1 Notes: 1. The average age of the machinery is calculated based on the aggregate age of the machinery divided by the number of units of the machinery. 2. The remaining useful life of the machinery is calculated based on the estimated useful life deducted by the average age of the machinery. 3. As per the accounting policies adopted by our Group, depreciation of our machineries is calculated using straight-line method. 120

128 BUSINESS As at 30 April 2018, 23 units of machinery operated by us were financed by the hire purchase agreements between our Group and the financial institutions whereby the ownership of the machines remain with such financial institutions until the last instalment of the respective hire purchase agreement has been paid up in full. Although the terms and conditions of the hire purchase agreements entered into between our Group and the financial institutions are different, the salient terms thereof are now generalised and set out below: Parties Ownership Period Instalments The financial institution as the owner and our Group as the hirer. The item is and will continue to be in the ownership of the financial institution until our Group has paid up the entire lease purchase price and interests whereby, the ownership of the item will vest in our Group after the last instalment is paid to the financial institution. Our Group has no right, benefit, title or interest otherwise than as a bailee until the last instalment is paid by our Group months Being the monthly rental payable by our Group to the financial institution. Term charges 3.2% to 3.5% Insurance Indemnity Termination We shall be responsible for procuring insurance coverage for the equipment and assets, or the financial institution will, at the expense of our Group and for the duration of the hire purchase agreement, cause the machinery or equipment to be insured in our Group s name. We may not use the equipment or asset if it is not covered by insurance. We shall hold harmless and indemnify the financial institution from and against any losses, damages, claims or proceedings arising out of the use of the machinery or assets by our Group. We may at any time terminate the hire purchase agreement by referring the machinery or assets to the financial institution in accordance with the terms and conditions in the agreement by paying to the financial institution the balance outstanding under the agreement. As at 31 December 2015, 31 December 2016, 31 December 2017 and 30 April 2018, the carrying value of our machinery held under the finance lease agreement amounted to approximately RM3.9 million, RM3.7 million, RM14.5 million and RM13.6 million, respectively. 121

129 BUSINESS Repair and maintenance Standard maintenance procedures including checking for normal wear and tear, adjustments on the machinery, oiling and dusting the machines are performed by our production team after every shift. Besides, our Group also engages a team of two technicians who takes turns to stand by for our machinery and equipment throughout the day. During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant interruptions in our business and operations or any prolonged suspension of manufacturing operations arising from failure or breakdowns of machineries or equipment, which may significantly affect our financial position. SALES AND MARKETING Our Directors believe that our continuous efforts to maintain high quality products, competitive prices and timely delivery are the key to strengthening our customer base. As at the Latest Practicable Date, we have 22 personnel in our sales and marketing team. Our sales and marketing strategies are developed by our executive Director, Mr. Ng. Our sales and marketing team also assists Mr. Ng in formulating marketing strategies by analysing market information regarding the steel bar product and steel wire product industry, our customers and their product requirements and the pricing and production mix of our competitors. Our sales and marketing strategies include the following: Customer loyalty and retention Our Group values the long and well-established working relationships that we have established with our customers, which are attributed to our continuous efforts in the steel bar product and steel wire product industry. Keeping frequent contact with our existing customers gives us the opportunity to continue to serve them whenever our products are needed. Our sales and marketing team also frequently communicates with our customers to collect and understand their feedback on the quality, preferences, improvements and market demands of our products. Our sales and marketing team shares this information with our production team in order to improve our products. Creating strong presence Our sales and marketing team is responsible for exploring new business opportunities in different regions of Malaysia. For details on our sales network across different regions of Malaysia, please refer to the paragraph headed Sales network in this section. We also participate in industry exhibitions organised by government authorities to increase our Group s presence, brand awareness and the publicity of our products and at the same time, understand the latest market trend. 122

130 BUSINESS Proactive approach Our sales and marketing team also actively approaches new customers directly in an effort to expand our customer base. To achieve this end, our sales personnel regularly (i) visit project sites to approach the construction contractors and developers who have purchased or may purchase our products; and (ii) visit trading companies and hardware shops to meet up with potential customers. We also have a dedicated technical team headed by our technical manager who works together with some of our customers including construction contractors and their project managers for provision of technical support to our customers, on a need basis. Our sales and marketing team as well as technical team will look out for project information in major newspapers as well as websites of relevant government authorities or agencies. When they identify suitable projects, they will proactively approach the potential customers. First contact point to our customers When our customers make purchase enquiries with us, they will contact our sales and marketing team in the first instance. Our sales and marketing team, together with our production team, will consider the feasibility of customers requirements and provide price quotations on a cost-plus basis, comprising the price of the raw materials, the manufacturing or processing costs (including labour costs and utilities costs) and our envisaged gross profit amount with reference to the then prevailing market demand, anticipated market trends, historical sales data and prices of our competitors products. 123

131 BUSINESS SALES NETWORK We have established sales network reaching over 1,600 customers in Malaysia during the Track Record Period. The diagram below illustrates the coverage of our sales network by our respective subsidiaries: East Coast Region Pulau Langkawi PERLIS KEDAH X Central Region Southern Region Northern Region Northeastern States PENANG STRAITS OF MALACCA PERAK Our New Selangor Production Facility in Bukit Beruntung* X SELANGOR KELANTAN PAHANG NEGERI SEMBILAN TERENGGANU X Our New Kelantan Plant in Tanah Merah* SOUTH CHINA SEA Our existing Kuantan Plant N 0 80 KM MELAKA JOHOR * The new production plant or production facility to be set up by us as part of our business strategies. 124

132 BUSINESS During the Track Record Period, our subsidiaries mainly target the following regions and customer types, respectively: Name of subsidiaries Main target regions Target customer types Major products supplied Arena Metal Resources East Coast Region East Pahang such as Kuantan Construction contractors Steel bar products Klang Valley Wire East Coast Region East Pahang such as Kuantan Central Region Building material trading companies Wire meshes Klaas Metal East Coast Region West Pahang Hardware shops Steel bar products and steel wire products UVM Excel Central Region Construction contractors Steel bar products, steel wire products, building materials and accessories EC Excel Wire All regions Building material trading companies, construction contractors, property developers and hardware shops Steel bar products, steel wire products, building materials and accessories By establishing sales network across Malaysia, our Directors believe that we could (i) diversify our sources of income without over-reliance on the construction industry in any region; (ii) customise our sales and marketing strategies in respect of different customer types in different regions; and (iii) strengthen our presence in the market which allows our products to penetrate the market more quickly and effectively. Despite the overlapping of certain target regions of our subsidiaries, our Directors consider that there was no competition among our subsidiaries during the Track Record Period for the following reasons: (i) (ii) our subsidiaries have different target customer types and supply different types of products; and our management formulates sales and marketing strategies, including the allocation of customers to different subsidiaries to avoid competition among the subsidiaries. 125

133 BUSINESS The table below sets out a breakdown of our revenue by geographical location of our customers for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Central Region 103, , , , , East Coast Region 43, , , , , Southern Region 11, , , , , Northern Region 2, , , , , Total 160, , , , , Central Region was our largest market in FY2015, FY2016 and FY2017 and our second largest market for the four months ended 30 April 2018, which contributed approximately 64.4%, 63.1%, 50.1% and 42.5% of our total revenue during the Track Record Period, respectively. East Coast Region was our second largest market in FY2015, FY2016 and FY2017 and our largest market for the four months ended 30 April 2018, which contributed approximately 26.9%, 26.4%, 42.5% and 49.2% of our total revenue during the Track Record Period, respectively. The remaining portion of our sales was generated from our customers located in Southern Region and Northern Region, which in aggregate contributed approximately 8.7%, 10.5%, 7.4% and 8.3% of our total revenue during the Track Record Period, respectively. For further details, please refer to the paragraph headed Financial Information Revenue by geographical location in this document. 126

134 BUSINESS CUSTOMERS During the Track Record Period, we served approximately 650 to 1,000 customers per year. Our customers include construction contractors and property developers which purchase our steel bar products and steel wire products for infrastructure and construction projects. Our customers also include building material trading companies and hardware shops which on-sell our products to their own customers in infrastructure and construction industries similar. Hence, we have a broad and diversified customer base and we are not dependent on any single customer, or group of customers. The following tables set forth the breakdown of our revenue from our five largest customers and our business relationship with them during the Track Record Period: FY2015: Customer Revenue Approximate percentage to the total revenue of our Group Principal business of the customer Major products supplied by our Group to the customer Approximate year of business of relationship with our Group up to the Latest Practicable Date Credit terms Payment method (RM 000) (%) (years) (days) Customer A (Note 1) 6, Construction contractor civil contractor Hot-rolled steel bars and cut-to-size wire meshes 4 14 to 60 days Cheque Seremban Perfect Hardware Sdn. Bhd. (Note 2) 6, Building material trading company wholesale and retail of building materials and other related products Hot-rolled steel bars and standard wire meshes 4 60 days Cheque Majuvera Sdn. Bhd. (Note 3) 5, Construction contractor dealing and trading of building materials and engaged as general contractors for construction works Hot-rolled steel bars 5 14 to 60 days Cheque Aqua Construction Sdn. Bhd. (Note 4) 5, Construction contractor Hot-rolled steel bars 3 30 days Cheque Customer B (Note 5) 4, Building material trading company merchant and trading of building materials and hardware Hot-rolled steel bars and standard wire meshes 5 14 to 60 days Cheque Total revenue from the five largest customers for the year 27,

135 BUSINESS FY2016: Customer Revenue Approximate percentage to the total revenue of our Group Principal business of the customer Major products supplied by our Group to the customer Approximate year of business of relationship with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment method Customer A (Note 1) 4, Construction contractor civil contractor Customer C (Note 6) 4, Building material trading company trading of metal related products Hot-rolled steel bars and cut-to-size wire meshes Standard wire meshes 4 14 to 60 days Cheque 5 14 to 30 days Cheque Chun Hoe Trading Sdn. Bhd. (Note 7) 4, Building material trading company dealing of building requisites, hardware etc. and engaged as transport agent by lorries to carry products Cold-rolled steel bars 3 14 days Cheque and bank transfer Customer D (Note 8) 3, Construction contractor civil engineering Hot-rolled steel bars 2 60 days Cheque PP Chin Hin Sdn. Bhd. (Note 9) 3, Building material trading company dealing in cement, hardware and general trading, hire purchase financing and property development Hot-rolled steel bars, cold-rolled steel bars and standard wire meshes 9 14 to 60 days Cheque Total revenue from the five largest customers for the year 20,

136 BUSINESS FY2017: Customer Revenue Approximate percentage to the total revenue of our Group Principal business of the customer Major products supplied by our Group to the customer Approximate year of business of relationship with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment method Customer C (Note 6) 34, Building material trading company trading of metal related products Hot-rolled steel bars 5 14 to 30 days Cheque PP Chin Hin Sdn. Bhd. (Note 9) 13, Building material trading company dealing in cement, hardware and general trading, hire purchase financing and property development Hot-rolled steel bars, cold-rolled steel bars and standard wire meshes 9 14 to 60 days Cheque Customer A (Note 1) 9, Construction contractor civil contractor Customer E (Note 10) 5, Construction contractor mechanical and electrical contractor Customer F (Note 11) 5, Building material trading company general trading Hot-rolled steel bars 4 14 to 60 days Cheque Hot-rolled steel bars 1 30 days Cheque and bank transfer Hot-rolled steel bars 1 14 to 60 days Cheque Total revenue from the five largest customers for the year 68,

137 BUSINESS For the four months ended 30 April 2018 Customer Revenue Approximate percentage to the total revenue of our Group Principal business of the customer Major products supplied by our Group to the customer Approximate year of business of relationship with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment method Customer C (Note 6) 23, Building material trading company trading of metal related products Hot-rolled steel bars 5 14 to 30 days Cheque PP Chin Hin Sdn. Bhd. (Note 9) 4, Building material trading company dealing in cement, hardware and general trading, hire purchase financing and property development Hot-rolled steel bars, cold-rolled steel bars and standard wire meshes 9 14 to 60 days Cheque Customer G (Note 12) 3, Building material trading company trading of hardware and building materials Hot-rolled steel bars 1 14 days Cheque After Image Sdn. Bhd. (Note 13) 2, Construction contractor general contractor Hot-rolled steel bars, and standard wire meshes 2 14 to 60 days Cheque Customer F (Note 11) 2, Building material trading company general trading Hot-rolled steel bars 1 14 to 60 days Cheque Total revenue from the five largest customers for the period 36, Notes: 1. Customer A is a private limited company incorporated in Malaysia on 16 September To the best knowledge and belief of our Directors after making all reasonable enquires, as at the Latest Practicable Date, Customer A was wholly owned by a company listed on the main market of Bursa Malaysia. 2. Seremban Perfect Hardware Sdn. Bhd. is a private limited company incorporated in Malaysia on 4 July Majuvera Sdn. Bhd. is a private limited company incorporated in Malaysia on 27 August Aqua Construction Sdn. Bhd. is a private limited company incorporated in Malaysia on 28 March Customer B is comprised of two private limited companies incorporated in Malaysia on 18 May 2012 and 10 April 2014, respectively. To the best knowledge and belief of our Directors after making all reasonable enquires, as at the Latest Practicable Date, both companies had a common shareholder. 6. Customer C is comprised of (i) four private limited companies incorporated in Malaysia and (ii) a company listed on the main market of Bursa Malaysia. To the best knowledge and belief of our Directors after making all reasonable enquires, as at the Latest Practicable Date, these five companies share common shareholders. 130

138 BUSINESS 7. Chun Hoe Trading Sdn. Bhd. is a private limited company incorporated in Malaysia on 8 December To the best knowledge and belief of our Directors after making all reasonable enquires, as at the Latest Practicable Date, 65.64% of the shareholding of Chun Hoe Trading Sdn. Bhd. was owned by Mr. Tee Choon Meng. Mr. Tee Choon Meng was a director of EC Excel Wire from 25 July 2008 to 28 October Mr. Tee Choon Meng was also a shareholder of EC Excel Wire before he transferred all his shares in EC Excel Wire to each of Mr. Ng and Mr. Ng Heng Oon at par on 28 October 2011, respectively. For details of Mr. Tee Choon Meng s shareholding in EC Excel Wire, please refer to the paragraph headed History, Reorganisation and Corporate Structure EC Excel Wire in this document. 8. Customer D is a private limited company incorporated in Malaysia on 25 March To the best knowledge and belief of our Directors, as at the Latest Practicable Date, Customer D was wholly owned by a company listed on the Main Board of the Stock Exchange. 9. PP Chin Hin Sdn. Bhd. is a private limited company incorporated in Malaysia on 25 February To the best knowledge and belief of our Directors after making all reasonable enquires, as at the Latest Practicable Date, PP Chin Hin Sdn. Bhd. was wholly owned by Chin Hin Group Berhad, a company listed on the main market of Bursa Malaysia Securities Berhad. 10. Customer E is comprised of two private limited companies incorporated in Malaysia on 17 October 2012 and 7 May Customer F is a private limited company incorporated in Malaysia on 4 March Customer G is a private limited company incorporated in Malaysia on 5 February After Image Sdn. Bhd. is a private limited company incorporated in Malaysia on 6 July Payment terms We generally accept payment from customers by cheque, bank acceptance notes or bank transfer. All of our five largest customers have a principal place of business in Malaysia. During the Track Record Period, the revenue generated by our five largest customers amounted to approximately RM27.0 million, RM20.5 million, RM68.2 million and RM36.4 million, respectively, representing approximately 16.9%, 11.0%, 22.2% and 27.6% of our total revenue, respectively. The revenue generated from our largest customer amounted to approximately RM6.0 million, RM4.6 million, RM34.7 million and RM23.1 million, respectively, representing approximately 3.8%, 2.4%, 11.3% and 17.5% of our total revenue during the Track Record Period, respectively. During the Track Record Period, our Group had over 900 recurring customers, being the customers who had placed a purchase order for our products more than one period during the Track Record Period. During the Track Record Period, revenue contribution from these recurring customers was approximately RM143.3 million, RM173.7 million, RM275.0 million and RM125.1 million, respectively, representing approximately 89.3%, 92.8%, 89.6% and 94.7% of our total revenue during the corresponding year. Out of the aforesaid recurring customers, there were over 870 continuous customers which refer to customers who had placed a purchase order for our products and placed purchase order(s) for our products again in consecutive year(s), during the Track Record Period. 131

139 BUSINESS None of our Directors, their respective close associates, or any Shareholders who or which, own more than 5% of the issued share capital of our Company as at the Latest Practicable Date, had any interest in any of the five largest customers of our Group during the Track Record Period and up to the Latest Practicable Date. All of our five largest customers are Independent Third Parties. During the Track Record Period, our Group did not experience any major disruption in business due to material delays or defaulting payments by our customers due to their financial difficulties. Our Directors further confirm that they are not aware of any of our major customers having experienced material financial difficulties that may adversely affect our Group s businesses. Key contract terms with our customers Our Group does not enter into any master framework agreement, long-term agreement or sales contract with our customers. The terms and conditions are set out in our quotation or purchase orders placed by our customers with us. For quotation, once the customers have accepted our quotation, the terms and conditions on the quotation will become binding contracts. On the other hand, some customers place separate purchase orders with us, the terms and conditions in which form binding contracts. Our contracts with customers or purchase orders from different customers have different terms and conditions. Set out below is a summary of the typical key terms and conditions of our contracts with our customers: Product type Quantity Contract price Payment terms Delivery address and date The type of products to be purchased by our customers. The quantity of the products to be purchased under the contract or purchase order. The pricing of the products days The delivery address of our customers and the date stated in the contract of purchase order. 132

140 BUSINESS There is generally no provision for warranties, product return or product replacement in the invoice. Pricing Policy Our pricing policy aims to facilitate a profitable and sustainable growth of our business. We generally determine the prices of our steel bar products and steel wire products on a cost-plus basis. Since each product has its own specifications or requirements, the pricing of each product is negotiated and determined on a case by case basis with individual customers in order to balance the profitability between our customers and our Group. In general, the price of our products is determined on a cost-plus basis comprising the following factors (i) the price of the raw materials; (ii) in respect of customised products (including cut-to-size wire meshes), the product specifications, functional and quality requirements, complexity of the production process and costs, sales volume, lead time and delivery schedules required by our customers; (iii) the competitive landscape of the products; (iv) prices of our competitors products; and (v) payment terms. Despite cost-plus pricing strategy, during the Track Record Period, the risk of fluctuation in the costs of raw materials could not be satisfactorily transferred to our customers. As a result of the increasing costs of our raw materials, in particular unprocessed hot-rolled steel bars and low carbon wire rods, our overall gross profit margin dropped from approximately 14.7% in FY2015 to approximately 10.9% in FY2017 and further decreased to approximately 10.4% for the four months ended 30 April For further details, please refer to the sections headed Financial information Decreasing trend in gross profit margin during the Track Record Period, Financial Information Discussion of selected consolidated statements of profit or loss and other comprehensive income items Gross profit and gross profit margin Gross profit margin and Risk Factors Risk relating to our business Fluctuation in the prices of our major raw materials may have adverse impacts on our financial results in this document. Despite our decreasing gross profit margin from FY2015 to FY2017, given that (i) the price of our raw materials has been relatively stable for the five months ended 31 May 2018; (ii) with our fully-automated mesh welding machine (i.e. MG800 series), we anticipate to focus our sales more on wire meshes, which yield a higher gross profit margin, in the coming years, our Directors believe that the historical price fluctuation of our raw materials does not cause any material concerns on the sustainability of our business. In order to minimise the risk associated with the price fluctuation of raw materials, we will continuously keep ourselves abreast of changes in the market price, conduct regular reviews on our pricing policy and pay close attention to our customers responses. Our Group may adjust its pricing policy to ensure our Group is responsive to market price changes and customers responses in a timely manner to avoid any material adverse impact on our market position, competitiveness, performance and financial conditions. Credit policy Our credit period generally ranges from 14 to 90 days. However, variation from this period may occur due to the following reasons: (i) individual customer s scale of operation, reputation and credibility; and (ii) individual customer s payment history. New customers who need a credit period are required to fill in our Group s standard form and disclose information such as their incorporation details, credit granted by their other suppliers, and details of their bank accounts with principal financial institutions. We will also conduct company search against 133

141 BUSINESS our customers. Depending on our search results, we will assess the credit ranking of individual new customers and may grant credit facility, which serves as a credit limit granted to individual customers. To protect the interest of our Group, we may also require customers to provide a personal guarantee for such credit limit. Further, in the event of non-payment within the credit terms, there is a term in the credit facility letter which requires the customer to pay late payment charges on overdue amounts. Our customers usually settle payments by way of cheque, bank acceptance notes or bank transfer. During the Track Record Period, our Group did not experience material difficulty in collecting payments which caused a significant adverse impact on our business operation. Furthermore, our Group has purchased a trade credit insurance from an insurance company to cover up to 90% of our credit sales to selected customers to mitigate defaulting customers and bad debts which would arise during our course of business. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our Group claimed nil, nil, approximately RM0.4 million and nil by virtue of the trade credit insurance policy, respectively. RAW MATERIALS Major raw materials used by us for manufacturing or processing steel bar products and steel wire products include unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires, which are mainly sourced in Malaysia. We select suppliers from our approved list of suppliers in Malaysia. Raw materials prices from different suppliers are compared in order to optimise our margins while maintaining the quality of our products. We did not face any shortages in raw materials during the Track Record Period and up to the Latest Practicable Date. Unprocessed hot-rolled steel bars and galvanised iron wires are the raw materials that are readily available in the market. Further, since galvanised iron wires are not subject to safeguard duties under the Safeguards Act 2006 in Malaysia, if necessary, we may also import from other countries such as the PRC. As to low carbon wire rods, according to the SMITH ZANDER Report, there are three major local manufacturers in Malaysia, namely Amsteel Mills Sdn. Bhd., Ann Joo Steel Berhad and Southern Steel Berhad. These three major local manufacturers, or the companies controlled by them, are our approved suppliers. Our total cost of raw materials (inclusive of raw materials for trading of building materials and accessories) was approximately RM130.0 million, RM155.4 million, RM264.7 million and RM117.0 million for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively, representing approximately 95.1%, 97.3%, 96.8% and 98.8% of our total cost of sales, respectively. The purchase price of raw materials for manufacturing or processing steel bar products and steel wire products and in particular unprocessed hot-rolled steel bars and low carbon wire rods is crucial in formulating the prices of our products. In such connection, our procurement team maintains close collaboration with our production team in the formulation of the procurement plan of these raw materials on a regular basis. Our standard steel bar products and steel wire products are manufactured or processed according to a weekly production schedule formulated based on our experience in the industry and historical sales of our product during the relevant period, whereas our customised products (including cut-to-size wire meshes) are manufactured based on individual orders according to their required delivery schedule. Hence, there is no significant risk of obsolescence in respect of our raw materials in our operation. Furthermore, such close collaboration between our procurement team and our production team helps ensure that the sales price of our products can cover the costs in purchasing raw materials from our suppliers. 134

142 BUSINESS Once our weekly production schedule is confirmed, with the assistance from our production team, our procurement staff will check the availability of our existing inventory and will then proceed to order the raw materials from suppliers as chosen from our approved list of suppliers. After our quality control team has completed the inspection of the incoming raw materials, they will be stored at our Kuantan Plant, in which we will perform categorisation and inventory tracking. Please see the paragraph headed Quality assurance Quality control on raw materials in this section for details of our quality control of our raw materials. The table below sets forth a breakdown of our cost of raw materials (inclusive of raw materials for trading of building materials and accessories) during the Track Record Period: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products and steel wire products Unprocessed hot-rolled steel bars 65, , , , , Low carbon wire rods 40, , , , , Galvanised iron wires 2, , , Other raw materials Trading of building materials and accessories 20, , , , , Total 129, , , , , According to the SMITH ZANDER Report, the market prices of these raw materials may be affected by the global steel prices, which is subject to (i) the demand and supply conditions of steel in the global market; (ii) prices of raw materials for the production of steel such as coal and iron; and (iii) prevailing energy costs. Any changes in the steel prices may lead to rise in the cost of production for manufacturers of steel bar products and steel wire products as the cost of raw materials also increases. Between 2015 and 2017, the average prices of steel bars generally increased, from approximately RM1,995 to RM2,057 per MT to RM2,457 to RM2,577 per MT. For the same period, the average prices of wire rods increased from approximately RM1,739 per MT to RM2,291 per MT. 135

143 BUSINESS Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we had not encountered any quality issues, significant delays or shortages of the raw materials we use for production, which would otherwise adversely affect our manufacturing process. SUPPLIERS During the Track Record Period, we had approximately 120 to 170 suppliers per year. During the Track Record Period, we did not enter into any long-term contract with any of our suppliers and had not experienced any significant shortage of raw materials causing material disruption to our operations. Our Directors believe that, despite the general increase of the prices of our raw materials, the supply of raw materials that we usually use in manufacturing and processing are generally stable and sufficient in the market and hence we are able to maintain our Group s independence which ultimately benefits our Group with better cost controls. Our Group generally purchases raw materials based on (i) confirmed purchase orders from customers and their scheduled delivery; (ii) our projected production schedule for standard steel bar products and steel wire products in the coming two weeks; (iii) the prevailing price of our major raw materials; and (iv) our inventory levels. We generally seek price quotations from major local suppliers for low carbon wire rods. For other raw materials, we will seek quotations from suppliers who are on our list of approved suppliers and we choose one of them to place our purchase order after comparing their terms and offers. Such practice allows us to enhance our bargaining power on price and to avoid over-reliance on a single supplier. Our procurement team will closely monitor the price of the raw materials. When our Group anticipates there will be any increase in the price of raw materials or shortage of supply thereof, our Group will adjust our procurement plan accordingly in order to minimise the exposure to fluctuations in prices and supply. Selection of suppliers Our Group selects suppliers based on a number of criteria including but not limited to their product quality, pricing, scale of operation, delivery time and reputation in the industry of each potential supplier before they are put on our list of approved suppliers. It is our procurement policy that we only purchase raw materials from our approved suppliers to ensure the quality of our raw materials. Our Group regularly communicates with our suppliers, and reviews their performance and background information, including their business licence(s) and requisite certifications. The performance of suppliers is evaluated based on criteria such as quality of goods, response to enquiries and complaints, and reputation of company. These suppliers or any one of them would be removed from the list should they fail to satisfy our quality and service requirements upon our periodic review. 136

144 BUSINESS We tend to maintain stable relationships with our suppliers to ensure that no disruption is caused to our operation as a result of any change in supplier. Our business relationship with our five largest suppliers ranged from approximately less than one year to six years as at the Latest Practicable Date. Salient terms of our purchase orders and payment methods Standard terms of our purchase orders Our Directors do not consider it necessary to enter into any long-term procurement agreements with suppliers, which is in line with industry practice. Instead, our Group would issue a standard purchase order to suppliers in an ordinary purchase transaction. A standard purchase order contains specifications and quantity of raw materials to be procured by us, their unit prices and the total transaction amount, payment date, delivery method and delivery date. Suppliers are usually required to deliver the raw materials to our warehouse at their own costs on or before a specified date. Credit period and Payment methods Our suppliers in general grant us a credit period of 14 to 60 days. Payment of purchase price for the raw materials is generally made by cheques, bank acceptance and bank transfers by us and settled in RM. During the Track Record Period, personal guarantees were occasionally provided by Mr. Ng, our executive Director, in favour of our suppliers upon their request. As at the Latest Practicable Date, Mr. Ng had started negotiation with the relevant suppliers that the requirement for personal guarantee from Mr. Ng be uplifted and replaced by a corporate guarantee from our Company upon the [REDACTED]. 137

145 BUSINESS The following tables set forth certain information relating to our five largest suppliers during the Track Record Period: FY2015: Supplier Approximate year of business relationship Total purchase Approximate percentage to the total purchases of our Group for that year Principal business of the supplier Principal raw materials purchased with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment method Established Metal Industries Sdn. Bhd. (Note 1) Amsteel Mills Marketing Sdn. Bhd. (Note 2) Easteel Services (Malaysia) Sdn. Bhd. (Note 3) 43, Manufacturing of steel bar and metal fabrication 19, Sale and distribution of steel products 12, Trading in construction related products and manufacturing of Unprocessed hot-rolled steel bars Low carbon wire rods and unprocessed hot-rolled steel bars Low carbon wire rods wire welded mesh Supplier A (Note 4) 12, Manufacturing and Low carbon wire sale of wire rods, rods deformed bar in coils and other related products Supplier B (Note 5) 10, Steel service centre and trading of steel related products and building materials Low carbon wire rods and unprocessed hot-rolled steel bars 4 14 days Bank transfer and bank acceptance 4 14 days Bank transfer and bank acceptance 3 30 days Bank transfer and bank acceptance 6 14 to 30 days Bank transfer and bank acceptance 4 14 days Bank transfer and bank acceptance Total purchase from the five largest suppliers for the year 98,

146 BUSINESS FY2016: Supplier Approximate year of business relationship Total purchase Approximate percentage to the total purchases of our Group for that year Principal business of the supplier Principal raw materials purchased with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment Method Established Metal Industries Sdn. Bhd. (Note 1) Amsteel Mills Marketing Sdn. Bhd. (Note 2) Easteel Service (Malaysia) Sdn. Bhd. (Note 3) 39, Manufacturing of steel bar and metal fabrication 22, Sale and distribution of steel products 20, Trading in construction related products and manufacturing of Unprocessed hot-rolled steel bars Low carbon wire rods and unprocessed hot-rolled steel bars Low carbon wire rods wire welded mesh Supplier A (Note 4) 15, Manufacturing and Low carbon wire sale of wire rods, rods and other deformed bar in coils trading products and other related products Supplier C (Note 6) 7, Manufacturing of iron and steel Unprocessed hot-rolled steel bars 4 14 days Bank transfer and bank acceptance 4 14 days Bank transfer and bank acceptance 3 30 days Bank transfer and bank acceptance 6 14 to 30 days Bank transfer and bank acceptance 2 14 days Bank transfer Total purchase from the five largest suppliers for the year 105,

147 BUSINESS FY2017: Supplier Approximate year of business relationship Total purchase Approximate percentage to the total purchases of our Group for that year Principal business of the supplier Principal raw materials purchased with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (days) Payment Method Established Metal Industries Sdn. Bhd. (Note 1) Amsteel Mills Marketing Sdn. Bhd. (Note 2) 70, Manufacturing of steel bar and metal fabrication 64, Sale and distribution of steel products Supplier C (Note 6) 30, Manufacturing of iron and steel Unprocessed hot-rolled steel bars Low carbon wire rods and unprocessed hot-rolled steel bars Unprocessed hot-rolled steel bars Supplier A (Note 4) 24, Manufacturing and sale of wire rods, Low carbon wire rods and other deformed bar in coils trading products and other related products Easteel Service (Malaysia) Sdn. Bhd. (Note 3) 21, Trading in construction related products and manufacturing of wire welded mesh Unprocessed hot-rolled steel bars 4 14 days Bank transfer and bank acceptance 4 14 days Bank transfer and bank acceptance 2 14 days Bank transfer 6 14 to 30 days Bank transfer and bank acceptance 3 30 days Bank transfer and bank acceptance Total purchase from the five largest suppliers for the year 211,

148 BUSINESS For the four months ended 30 April 2018 Supplier Approximate year of business relationship Total purchase Approximate percentage to the total purchases of our Group for that year Principal business of the supplier Principal raw materials purchased with our Group up to the Latest Practicable Date Credit terms (RM 000) (%) (years) (years) Payment method Established Metal Industries Sdn. Bhd. (Note 1) Amsteel Mills Marketing Sdn. Bhd. (Note 2) 43, Manufacturing of steel bar and metal fabrication 22, Sale and distribution of steel products Unprocessed hot-rolled steel bars Low carbon wire rods and unprocessed hot-rolled steel bars Supplier A (Note 4) 13, Manufacturing and Low carbon wire sale of wire rods rods and other deformed bar in coils trading products and other related products Supplier C (Note 6) 7, Manufacturing of Unprocessed iron and steel hot-rolled steel bars Supplier D (Note 7) 6, Manufacturing of steel and other related products Low carbon wire rods and unprocessed hot-rolled steel bars 4 14 days Bank transfer and bank acceptance 4 14 days Bank transfer and bank acceptance 6 14 to 30 days Bank transfer and bank acceptance 2 14 days Bank transfer less than 1 14 days Bank transfer Total purchase from the five largest suppliers for the period 93,

149 BUSINESS Notes: 1. Established Metal Industries Sdn. Bhd. is a private limited company incorporated in Malaysia on 26 June Amsteel Mills Marketing Sdn. Bhd. is a private limited company incorporated in Malaysia on 5 July To the best knowledge and belief of our Directors, as at the Latest Practicable Date, Amsteel Mills Marketing Sdn. Bhd., was a wholly owned subsidiary of Amsteel Mills Sdn. Bhd.. 3. Easteel Services (Malaysia) Sdn. Bhd. is a private limited company incorporated in Malaysia on 5 June Supplier A is comprised of two private limited companies incorporated in Malaysia on 9 April 1987 and 27 February 1980, respectively. To the best knowledge and belief of our Directors, as at the Latest Practicable Date, both companies were controlled by a company listed on the main market of Bursa Malaysia Securities Berhad. 5. Supplier B is a private limited company incorporated in Malaysia on 20 April Supplier C is a private limited company incorporated in Malaysia on 2 August Supplier D is a private limited company incorporated in Malaysia on 9 April Relationship with our five largest suppliers during the Track Record Period During the Track Record Period, our purchases from our five largest suppliers amounted to approximately RM98.5 million, RM105.3 million, RM211.2 million and RM93.2 million, respectively, representing approximately 74.5%, 67.0%, 80.1% and 78.6% of our total purchases, respectively, while our purchases from our largest supplier amounted to approximately RM43.8 million, RM39.6 million, RM71.0 million and RM43.2 million, respectively, representing approximately 33.1%, 25.2%, 26.9% and 36.5% of our total purchases, respectively. Our Group regards the suppliers that have a common controlling shareholder or are within the same group of companies as a single supplier group. None of our Directors, their respective close associates or any Shareholder (who, to the best knowledge of our Directors, owns more than 5% of the issued share capital of our Company as at the Latest Practicable Date) had any interest in any of our five largest suppliers during the Track Record Period. All of our five largest suppliers are Independent Third Parties. 142

150 BUSINESS Entities that are both our customers and our suppliers during the Track Record Period During the Track Record Period, there were 54 entities that are both our customers and our suppliers ( Customers-Suppliers ) consisting of (i) 35 building material trading companies; (ii) 13 construction contractors; and (iii) six hardware shops. The following table sets out the total revenue and total purchases attributable to our 54 Customers-Suppliers for the periods indicated: For the four For the year ended 31 December months ended April 2018 (RM 000) (RM 000) (RM 000) (RM 000) Revenue 23,725 29,247 43,950 21,156 Percentage of our Group s total revenue 14.8% 15.6% 14.3% 16.0% Purchases 77,482 87, ,445 68,972 Percentage of our Group s total purchases 58.6% 55.5% 56.6% 58.2% Out of the 54 Customers-Suppliers, there were four groups of our top five customers, namely (i) Chun Hoe Trading Sdn. Bhd.; (ii) PP Chin Hin Sdn. Bhd.; (iii) Customer C and (iv) Customer G which were also our suppliers. There were two groups of our top five suppliers namely (i) Established Metal Industries Sdn. Bhd.; and (ii) Amsteel Mills Marketing Sdn. Bhd. which were also our customers. According to SMITH ZANDER Report, it is not uncommon for steel trading companies to engage in both the sale of steel raw materials to steel bar product processors like our Group and the purchase of processed steel products from steel bar product processors like our Group. As confirmed by our Directors, (i) negotiations of the terms of our sales to and purchases from these entities were conducted on individual basis and the sales and purchases were neither interconnected nor inter-conditional with each other; (ii) during the Track Record Period, the products we purchased from these entities were not sold back to them; and (iii) the terms of transactions with these entities are similar to those transactions with our other customers and suppliers. Top five customers that were also our suppliers during Track Record Period (i) Chun Hoe Trading Sdn. Bhd. Chun Hoe Trading Sdn. Bhd. is a private limited company incorporated in Malaysia on 8 December 1993 which is mainly engaged in sales of building requisites, hardware and provision of transportation services. To the best knowledge and belief of our Directors after making reasonable enquiries, as at the Latest Practicable Date, Chun Hoe Trading Sdn. Bhd. was owned as to approximately 65.64% by Mr. Tee Choon Meng, 17.18% by Mr. Tee Choon Huat and 17.18% by Mr Tee Chun Chong respectively. 143

151 BUSINESS During the Track Record Period, we manufactured and sold cold-rolled steel bars and standard wire meshes and building materials to Chun Hoe Trading Sdn. Bhd.. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from Chun Hoe Trading Sdn. Bhd. amounted to approximately RM1.7 million, RM4.1 million, RM2.8 million and RM0.7 million, respectively, representing approximately 1.0%, 2.2%, 0.9% and 0.5% of our total revenue, respectively. During the Track Record Period, we sourced low carbon wire rods and galvanised iron wires from Chun Hoe Trading Sdn. Bhd.. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchases from Chun Hoe Trading Sdn. Bhd. amounted to approximately RM1.1 million, RM4.7 million, RM4.1 million and RM0.6 million, respectively, representing approximately 0.8%, 3.0%, 1.5% and 0.5% of our total purchases, respectively. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with Chun Hoe Trading Sdn. Bhd.. (ii) PP Chin Hin Sdn. Bhd. PP Chin Hin Sdn. Bhd. is a private limited company incorporated in Malaysia on 25 February 1995 which is mainly engaged in trading of building materials and property development. To the best knowledge and belief of our Directors after making reasonable enquiries, as at the Latest Practicable Date, PP Chin Hin Sdn. Bhd. was a wholly owned subsidiary of Chin Hin Group Berhad. During the Track Record Period, we sold processed hot-rolled steel bars, cold-rolled steel bars and standard wire meshes to PP Chin Hin Sdn. Bhd.. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from PP Chin Hin Sdn. Bhd. amounted to approximately RM1.2 million, RM3.6 million, RM13.8 million and RM4.2 million, respectively, representing approximately 0.7%, 1.9%, 4.5% and 3.2% of our total revenue, respectively. During the Track Record Period, we sourced trading products from PP Chin Hin Sdn. Bhd.. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchases from PP Chin Hin Sdn. Bhd. amounted to approximately RM40,000, nil, nil, and nil, respectively, representing less than 0.1%, nil, nil and nil of our total purchases, respectively. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with PP Chin Hin Sdn. Bhd.. (iii) Customer C Customer C consists of (i) four private limited companies; and (ii) one company listed on the main market of Bursa Malaysia. To the best knowledge and belief of our Directors after making reasonable enquiries, as at the Latest Practicable Date, these five companies share common shareholders. During the Track Record Period, we mainly sold hot-rolled steel bars to Customer C. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from Customer C amounted to approximately RM1.7 million, RM4.4 million, RM34.7 million and RM23.1 million, respectively, representing approximately 1.1%, 2.4%, 11.3% and 17.5% of our total revenue, respectively. 144

152 BUSINESS During the Track Record Period, we sourced trading products from Customer C. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchases from Customer C amounted to approximately RM1.1 million, RM1.0 million, RM1.3 million and nil, respectively, representing approximately 0.8%, 0.6%, 0.5% and nil of our total purchases, respectively. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with Customer C. (iv) Customer G Customer G is a private limited company incorporated in Malaysia on 5 February 2004 which is mainly engaged in trading of hardware and building materials. To the best knowledge and belief of our Directors after making reasonable enquiries, as at the Latest Practicable Date, Customer G was owned as to 70% and 30% by two Independent Third Parties, respectively. During the Track Record Period, we processed and sold hot-rolled steel bars to Customer G. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from Customer G amounted to nil, nil, approximately RM0.6 million and RM3.4 million, respectively, representing nil, nil, approximately 0.2% and 2.6% of our total revenue, respectively. During the Track Record Period, we sourced trading products from Customer G. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchases from Customer G amounted to approximately RM54,000, RM45,000, RM14,000 and RM57,000, respectively, representing less than 0.1% of our total purchases for the corresponding period. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with Customer G. Top five suppliers that were also our customers during the Track Record Period (i) Established Metal (Industries) Sdn. Bhd. Established Metal Industries Sdn. Bhd. is a private limited company incorporated in Malaysia on 26 June 1991 which is mainly engaged in manufacturing of steel bar and metal fabrication. To the best knowledge and belief of our Directors, as at the Latest Practicable Date, Established Metal Industries Sdn. Bhd. was owned by Mr. Lim Chai Chang and Mr. Wong Kit Fun in equal shares. During the Track Record Period, we sold building materials to Established Metal Industries Sdn. Bhd. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from Established Metal Industries Sdn. Bhd. amounted to approximately RM60,000, RM450, RM9,000 and RM24,000, respectively, representing less than 0.1% of our total revenue for the corresponding year/period. 145

153 BUSINESS During the Track Record Period, we purchased unprocessed hot-rolled steel bars from Established Metal Industries Sdn. Bhd.. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchases from Established Metal Industries Sdn. Bhd. amounted to approximately RM43.8 million, RM39.6 million, RM71.0 million, and RM43.2 million, respectively, representing approximately 33.1%, 25.2%, 26.9%, and 36.5% of our total purchase, respectively. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with Established Metal Industries Sdn. Bhd.. (ii) Amsteel Mills Marketing Sdn. Bhd. Amsteel Mills Marketing Sdn. Bhd. is a private limited company incorporated in Malaysia on 5 July 1990 which is mainly engaged in sale and distribution of steel products. To the best knowledge and belief of our Directors, as at the Latest Practicable Date, Amsteel Mills Marketing Sdn. Bhd. was a wholly-owned subsidiary of Amsteel Mills Sdn. Bhd.. During the Track Record Period, we sold building materials to Amsteel Mills Marketing Sdn. Bhd.. FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total revenue generated from Amsteel Mills Marketing Sdn. Bhd. amounted to nil, nil, approximately RM2,000 and RM3,000 respectively, representing nil, nil, less than 0.1% of our total revenue for the corresponding period. During the Track Record Period, we purchased low carbon wire rods and unprocessed hot-rolled steel bars from Amsteel Mills Marketing Sdn. Bhd.. FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our total purchase from Amsteel Mills Marketing Sdn. Bhd. amounted to approximately RM19.0 million, RM22.7 million, RM64.2 million and RM22.5 million, respectively, representing approximately 14.4%, 14.4%, 24.3%, and 19.0% of our total purchase respectively. Our Directors confirm that the terms we entered into with our suppliers were similar to those we entered with Amsteel Mills Marketing Sdn. Bhd.. INVENTORY MANAGEMENT Our inventory is comprised mainly of raw materials, trading goods and finished products. Ms. See Yee Siu, our inventory and production manager, is responsible for monitoring the inventory level to meet the production requirements and minimise any waste on inventory or obsolete inventory. As at 31 December 2015, 2016, 2017 and 30 April 2018, our inventories amounted to approximately RM7.7 million, RM11.8 million, RM9.4 million and RM12.1 million, respectively, representing approximately 12.3%, 14.6%, 7.9% and 9.7% of our total current assets, respectively. Raw materials In order to meet our continuous production needs and avoid accumulation of excessive inventories, we formulate our procurement plan and budget for purchases of the raw materials that we frequently use in manufacturing and processing steel bar products and steel wire products, based on our (i) confirmed purchase orders from customers and their scheduled delivery; (ii) our projected production schedule for standard steel bar product and steel wire products in the coming two weeks; (iii) the prevailing price of our major raw materials; and (iv) our inventory levels. 146

154 BUSINESS Finished products Our Group closely monitors the inventory level of certain standard steel bar products and steel wire products to minimise the inventory level. Our head of production will determine the minimum stock level of these products based on customers past orders. We maintain a full stock report on finished goods at our office upon completion of the half year stock check and the verification of our head of production. We update the data entry on the daily production schedule on a day-to-day basis into our stock control system. Internal policy is in place to ensure that our stock-in and stock-out record is updated daily. Besides, we also perform a full stock take on a half year basis to ensure the accuracy of such information on record. Throughout the year, our Group reviews the stocktaking records and performs inventory ageing analysis to ensure that inventories are properly used and that there is no unnecessary accumulation of aged inventories. We normally accumulate finished products that are in high demand for a period of around one week. QUALITY ASSURANCE We believe that a stringent quality control over our products and services is crucial to our continued success. We place strong emphasis on product quality and consistency in product performance, which are the major factors for our customers in choosing our products. Our quality control team consists of two employees who report to Mr. Ng Heng Oon, our head of production. Our quality control team is responsible for overseeing the quality control on our raw materials, our products and the processing or manufacturing process. Quality control on our products Our Directors believe that product quality as well as customer satisfaction are of utmost importance and as such, our Group places strong emphasis on the quality control of our products to ensure that our products are manufactured or processed according to the required specifications and up to our customers required standards. Our products are randomly checked and tested by a tensile strength testing machine which involves placing a test specimen such as a cold-rolled steel bar and slowly extending it until it fractures and breaks. During this process, the elongation of the gauge section is recorded against the applied force. The recorded results can then be checked against the required industry standards. Quality control on raw materials Our raw materials which mainly include unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires are subject to examination by random sampling by our procurement team upon delivery. We require our suppliers to produce the relevant certificates. These raw materials must have the necessary SIRIM certification and test reports on tensile strength issued by the manufacturers attached for our record. If requested by our customers, test certificates on the tensile strength issued by the manufacturers of these raw materials should also be produced by our suppliers. 147

155 BUSINESS Quality control throughout the manufacturing and processing process Our Group has established and maintained a documented quality management system accredited with the quality management certificate ISO 9001:2008. Our Directors believe that this system creates a framework that clearly defines the control of raw materials, processes, and verification activities, thus providing our customers with confidence that the operational aspects of our Group are performed in a well-defined and controlled environment. Our manufacturing and processing process control consists of a multi-point check system from the beginning to the end of our manufacturing and processing process. Our quality control personnel sample-test our work-in-progress and in the major steps of the manufacturing and processing process. At the end of the process, we test our products on a sampling basis to verify their tensile strength and AGT Ratio to ensure that they can meet our customers requirements. Further, our Group is licensed to use a certification mark on welded steel fabric for the reinforcement of concrete as we have been licensed with MS 145:2006 and MS 145:2014 by the SIRIM QAS International Sdn. Bhd. since 2013 and 2018, respectively. Our Group is also certified by CIDB Malaysia for the production of products that fulfill the standard quality of construction materials used in the construction industry. Our Directors believe our certification mark on our products and certification by CIDB Malaysia will provide our customers with confidence of the quality of our products. Our Directors believe that our Group s ability to (i) consistently provide products that meet customers specifications and applicable certifications; and (ii) enhance customer satisfaction through effective application of the system, enables us to retain existing customers as well as to attract new customers. Monitoring customer satisfaction Our Group also works closely with customers to determine the customers perception on whether our Group has met the customers requirements and specifications. During the Track Record Period and up to the Latest Practicable Date, we did not receive any material claims or complaints by our customers in respect of the quality of our products and there was no incident of failure of our quality control systems which had a material and adverse impact on our business operations. OCCUPATIONAL HEALTH AND SAFETY Pursuant to OSHA 1994, an employer has a duty to ensure, so far as practicable, the safety, health and welfare of its employees at work. It is the duty of an employer to provide its employees with the relevant training, knowledge, information and supervision in order to maintain a safe working environment without causing any risks to their health, safety and welfare. Furthermore, every employer shall establish a safety and health committee at the place of work if there are 40 or more persons employed at the place of work. Accordingly, our Group has established a committee to review our safety and health measures and investigate any safety and health matters at the place of work of our employees. The committee consists of the representatives from the employers and employees. 148

156 BUSINESS Our safety plan adopted and used during the Track Record Period sets out the work safety measures for the purpose of preventing any possible accidents which could happen at our production plant. We set forth below some summary of the details therein: Safety training Safety and health inspection To minimise job hazard, our Group organises an induction programme on safety and health to new employees, including our production workers. Each employee will be given training before using any equipment and machinery to ensure that the machine and equipment standard operating procedures communicated to them. Our Group also provides ongoing internal safety trainings to our employees and encourages employees to attend external occupational, health and safety trainings. A briefing on operational safety is also conducted before every shift. We provide regular body checks to our foreign production workers in accordance with the Workmen s Compensation Act Our safety manager is responsible for (i) overseeing our production activities at our Kuantan Plant; (ii) promoting good housekeeping and good work practices; and (iii) ensuring that our safety and health measures are duly implemented. Job hazard analysis Personal protection equipment Safety reporting system We identify and assess the hazards and inherent risks to the safety and health of our production workers on an ongoing basis. The aim of job hazard analysis is to identify the hazard severity, likelihood of harm and the degree of risk involved for all critical work activities for implementing adequate risk control. Potential hazards and consequences of each workplace are set out in our occupational health and safety management policy where we will provide preventive measures to our employees to follow. Our Group provides protection equipment as a means of preventing the risk of accidents based on the OSHA We require our workers to wear personal protection equipment provided by us on a mandatory basis. This equipment includes but not limited to hand gloves, face shields, safety shoes and safety goggles. Employees are required to report any accident or unsafe condition to their supervisors immediately. During the Track Record Period and up to the Latest Practicable Date, our Group was not involved in any significant incidents or accidents in relation to workers health and work safety or litigation proceedings or any non-compliance with the applicable laws and regulations relevant to worker s health and work safety where our Group operates. We had not received any significant claims for damages or compensation in relation to any material industrial accident of our employees, and we did not experience any material disputes with our employees that had a material adverse effect on our operation. 149

157 BUSINESS ENVIRONMENTAL COMPLIANCE Our production process generates industrial wastes including but not limited to spent lubricating oil, disposed containers, bags or equipment contaminated with chemicals, pesticides, mineral oil or scheduled waste, rags, plastics, papers or filters contaminated with wastes named in the first schedule of the Environmental Quality (Schedule Waste) Regulations 2005 (the Scheduled Wastes ). Steel bar product and steel wire product manufacturers operating production plants in Malaysia are subject to a number of environmental laws and regulations in Malaysia including the Environmental Quality Act 1974 and the Environmental Quality (Schedule Waste) Regulations For further details, please refer to Regulatory Overview Environment protection in this document. We have devised a series of procedures in relation to handling waste materials to ensure that our operation will not cause any material damage to the environment. We have established and implemented various internal control rules and guidelines regarding environmental compliance and pollution controls to ensure that: (i) (ii) (iii) the Scheduled Wastes generated by our Group are properly stored, treated on-site, recovered on-site for material or product from such Scheduled Wastes or delivered to and received at prescribed premises for treatment, disposal or recovery of material or product from Scheduled Waste; Scheduled Wastes are 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 Schedule Wastes into the environment; and all the containers that are used to store the Scheduled Wastes are clearly labelled. During the Track Record Period, our Group engaged the service from a licensee registered under Section 18(1) of the Environmental Quality Act 1974 which is an Independent Third Party to dispose all the Scheduled Wastes generated in the ordinary course of business. For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our Group generated approximately RM137,000, RM146,000, RM208,000 and RM60,000 from sales of the Scheduled Wastes and did not incur any costs for complying with the applicable environmental laws and regulations in Malaysia. Our Directors confirmed that our Group has complied in all material respects with the relevant environmental laws, regulations and administrative rules during the Track Record Period. As confirmed by our Directors, our Group has not been prosecuted by any Malaysian governmental authority for breaching any applicable environmental laws and regulations in Malaysia relating to environmental protection during the Track Record Period. INSURANCE During the Track Record Period, we maintained insurance policies set out in the following paragraphs. 150

158 BUSINESS Employees compensation Pursuant to the Workmen s Compensation Act 1952 of Malaysia, every employer shall insure and keep himself insured with an insurer within the meaning of the Insurance Act 1996 in respect of every liability which he may incur to any workman employed by him. Further, under the Workmen s Compensation Act 1952, it is mandatory for every employer to insure all foreign workers employed by him under an approved insurance scheme in respect of any liability that he may incur. In this connection, we have taken out insurance policies in accordance with such requirements. Other insurance coverage We currently maintain fire insurance policies for our office and production facilities, which cover all office equipment, furniture, fixtures, fittings, servers and other goods related to our Group s business. Further, we have maintained insurance coverage against, among other matters, (i) the loss, destruction or damage to our owned machineries and equipment; and (ii) loss or damage to our trucks and other motor vehicles. Certain types of risks, such as the risks in relation to the collectability of our trade and retention money receivables and liabilities arising from events such as epidemics, natural disasters, adverse weather conditions, political unrest and terrorist attacks, are generally not covered by insurance because they are either uninsurable or it is not cost justifiable to insure against such risks. During the Track Record Period, our total insurance expenses amounted to approximately RM226,000, RM131,000, RM294,000 and RM92,000, respectively. Our Directors consider that our insurance coverage is adequate and consistent with the industry norm regarding our current scope of operations. During the Track Record Period and up to the Latest Practicable Date, we had not made, and had not been the subject of, any material insurance claim. MARKET AND COMPETITION According to the SMITH ZANDER Report, steel bar product and steel wire product industry is fragmented in nature as there are many companies in Malaysia involved in the manufacturing and/or trading of steel bar products and steel wire products. According to the SMITH ZANDER Report, our Group captured 1.3% and 1.7% within the steel bar product and steel wire product industry respectively with sales of approximately 45,618 MT of steel bar products and 25,589 MT steel wire products respectively in Key factors of competition in the steel bar product and steel wire product industry include: (i) the availability of machinery and equipment to increase production efficiency; (ii) the ability to offer products with quality certification; (iii) the ability to mobilise a fleet of in-house logistics team to better manage delivery schedules and transportation costs; and (iv) economies of scale. There are high barriers of entry in respect of the steel wire product and steel bar product industry due to the (i) high capital investment for new entrants; and (ii) advantages of economies of scale of established players. For details, please refer to the paragraph headed Industry Overview Entry barriers in this document. 151

159 BUSINESS In view of the competition in the steel bar product and steel wire product industry, we believe that our competitive strengths have contributed to the success of our Group and under the management of our experienced Directors and senior management, our Group is well positioned to capture the growing demand for the steel bar product and steel wire product industry in Malaysia. For further details of our competitive strengths, please refer to the paragraphs headed Competitive strengths in this section. For further details, please refer to the paragraph headed Industry Overview Competitive landscape in this document. SEASONALITY Our Directors believe that the industry in which we operate does not exhibit any significant seasonality. As such, our business is not tied to any seasonal factors. LICENCES, PERMITS AND APPROVAL After seeking legal advice from our Malaysia Legal Advisers, our Directors confirmed that during the Track Record Period and up to the Latest Practicable Date, our Group had obtained all necessary permits, licences and registrations required under the applicable laws and regulations in connection with its business activities and all of them are in full force and effect. As at the Latest Practicable Date, our Group had the following registrations and licences that are material to the business operations of our Group in Malaysia: Registration/Licenses Granted by Granted to Date of current registration Expiry date Approval for Iron and Steel Products: Welded Steel Fabric for the Reinforcement Concrete CIDB Malaysia EC Excel Wire 8 March March 2019 Business premises licence Majlis Perbandaran Kuantan EC Excel Wire 1 January December 2018 Manufacturing licence for concrete reinforcing meshes, barbed wires, chain-link fences and welded wire fences the Ministry of International Trade and Industry of Malaysia EC Excel Wire 26 July 2017 N/A Manufacturing licence for galvanised wire meshes, welded wire mesh rolls, PVC wires, hard-drawn wires and cold-rolled bars the Ministry of International Trade and Industry of Malaysia EC Excel Wire 10 November 2017 N/A 152

160 BUSINESS LITIGATION AND POTENTIAL CLAIMS During the Track Record Period and up to the Latest Practicable Date, our Group was not subject to any claim or prosecution in any litigation proceedings or subject to any material potential claims that might have a material adverse effect on our business, financial condition and/or results of operations. REGULATORY COMPLIANCE As all our operations take place in Malaysia, we shall comply with the relevant laws and regulations in Malaysia. A summary of the relevant Malaysian laws and regulations applicable to our operations in Malaysia are set out in the section headed Malaysian Regulatory Overview in this document. During the Track Record Period and up to the Latest Practicable Date, we did not have any non-compliance incident which is either a material impact non-compliance or systemic non-compliance in accordance with the interpretation of the Stock Exchange s guidance letter HKEx-GL as considered by the Directors. MAJOR CERTIFICATIONS In recognition of our efforts, outstanding performance and quality of work, our Group has received the following certificates from professional accreditation organisations: Nature Certification Scope Holder Date of first grant Awarding organization or authority Expiry date Quality System Registration ISO 9001:2008 Quality Management System for manufacture of steel wire mesh (BRC) EC Excel Wire 4 June 2012 The International Certification Network (IQ Net) and SIRIM QAS International Sdn. Bhd. 14 September 2018 SIRIM certification Licence to use the SIRIM certification mark Welded steel fabric for the reinforcement of concrete complying with MS 145:2014 EC Excel Wire 9 March 2018 SIRIM QAS International Sdn. Bhd. 11 January

161 BUSINESS EMPLOYEES As at 31 December 2015, 31 December 2016, 31 December 2017, 30 April 2018 and the Latest Practicable Date, we had 82, 110, 112, 131 and 144 employees, respectively. A breakdown of our employees by functions is set forth below: Number of employees As at 30 As at 31 December April As at the Latest Practicable Date Directors (of the Group) Finance department Purchasing department Production department Human resource department Administration and logistic department Sales and marketing department Total A breakdown of our employees by nationalities during the Track Record Period is as follows: Number of employees As at 30 As at 31 December April As at the Latest Practicable Date Local workers Foreign workers Total We have complied with all statutory requirements that are currently applicable for hiring foreign workers. After seeking the advice from our Malaysia Legal Advisers, our Directors confirm that all the passports and work permits of our current foreign employees are valid and have not expired as at the Latest Practicable Date. We believe our success depends heavily on our employees commitment and ability to manufacture consistent and quality steel bar products and steel wire products. 154

162 BUSINESS Relationship with staff Our Directors consider that we have maintained good relationships with our employees. We have not experienced any significant problems with our employees or any disruptions to our operations due to labour disputes nor have we experienced any difficulties in the recruitment or retention of experienced staff or skilled personnel during the Track Record Period and up to the Latest Practicable Date. Training and recruitment policies We generally recruit our Malaysian employees from the open market by placing recruitment advertisements. As to our foreign workers, we mostly recruit them through recruitment agency who would provide their résumés upon our request. We believe that the quality of our employees, existing or future, is of essence to our business and operation and hence, a crucial asset of our Group. Therefore, we place great emphasis on staff retention by cultivating a safe, healthy and conducive working environment within our organisation. Further, we place great emphasis on providing a pleasant working environment for our employees; and identifying employee performance improvement opportunities for career advancement. Moreover, we are committed to encouraging our staff to enhance their skills and knowledge. Training programmes covering occupational health and safety will be conducted through external training. Furthermore, we also provide ongoing training and development programmes which cover technical and functional courses to our employees. Remuneration policy We entered into individual labour contracts with each of our employees in accordance with the applicable labour laws of Malaysia, which cover matters such as wages, employee benefits and grounds for termination. The remuneration package our Group offers to our employees includes salary, bonuses, allowances and medical benefits. In general, we determine an employee s salary based on each employee s qualifications, experience and capability and the prevailing market remuneration rate. Our Group has designed a review system to assess the performance of our employees once a year, which forms the basis of our decisions with respect to salary adjustments, bonuses and promotions. Our employee remuneration expenses and Directors emolument (including salaries, other benefits and retirement benefit costs) amounted to approximately RM5.0 million, RM6.8 million, RM7.6 million and RM3.1 million for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. After seeking legal advice from our Malaysia Legal Advisers, our Directors confirmed that during the Track Record Period and up to the Latest Practicable Date, we have complied with all employee benefits fund obligations applicable to us under Malaysian laws and regulations in all material aspects. 155

163 BUSINESS INTERNAL CONTROL To assess and identify weakness in our internal procedures, systems and controls, we engaged SHINEWING Risk Services Limited, an Independent Third Party, as our Internal Control Consultant in March 2018 to review the adequacy and effectiveness of our internal control procedures, systems and controls. Through an initial review conducted in March 2018 and a follow-up review in June 2018, our Internal Control Consultant identified some weaknesses and deficiencies in our internal control system and recommended certain measures to be implemented. Following this review, we have taken some remedial measures to improve our internal control system. The Internal Control Consultant identified the following key findings and our Group has taken the following remedial actions based upon the recommendations from the Internal Control Consultant: Key findings Remedial actions taken Employee handbook and declaration of conflict of interest Our Group has no employee handbook to govern staff benefits, staff development, disciplinary action and code of conduct etc. In addition, there are no mechanisms in place to govern staffs declaration on potential conflict of interests on an annual basis, or as and when required. Our Group has established an internal control manual which includes the code of conduct and conflict of interest checks so as to enhance our corporate governance. Succession plan Our Group has no formalised succession plan for key management functions to make sure the objectives of our Group can still be achieved, even in the absence of the individual filling the role. In addition, there is no formalised mechanisms in place to ascertain the management continually identifies and assesses those key management functions that are deemed essential to achieve our Group s objectives. Succession plan has been established which indicates different successors for key management positions as well as learning and development plans to reduce the gap between expected competencies and current knowledge, skills and abilities of successors. 156

164 BUSINESS Key findings Remedial actions taken Policies and procedures Our Group did not have written policies and procedures to govern the following processes, namely (i) financial close reporting process; (ii) revenue and accounts receivable management; (iii) cost of services and other operating expenses; (iv) inventory management; (v) bank and cash management; (vi) licensing; (vii) fixed assets management; (viii) human resources and payroll process; (ix) taxation; (x) environmental and safety; (xi) insurance; and (xii) information technology general control. Our executive Directors have reviewed and approved our internal control manual and environmental policy. Periodic review of the policies and procedures will be performed to ensure that the written policies and procedures match with our current practice. Internal control measures to improve corporate governance In order to continuously improve our Group s corporate governance in the future, our Group has adopted or will adopt the following measures recommended by the Internal Control Consultant: 1. On 25 June 2018, our Directors attended training sessions conducted by our Company s legal adviser as to Hong Kong laws on the ongoing obligations and duties of a director of a company whose shares are listed on the Stock Exchange. 2. We have engaged Dakin Capital as our compliance adviser upon the [REDACTED] to advise us on regulatory compliance with the Listing Rules. 3. Our Group has appointed Mr. Chan Hin Yeung, as our company secretary, to handle the secretarial matters and day-to-day compliance matters of our Group. He is also responsible for the timing and procedures for convening annual general meetings, including the time for sending notice of meeting and laying the respective financial statements. 4. When necessary, we will engage external professions, including auditors, internal control consultant, external legal adviser(s) and other advisers to render professional advice as to compliance with statutory and regulatory requirements, as applicable to our Group from time to time. 5. On [ ], we established an Audit Committee which will implement formal and transparent arrangements to apply financial reporting and internal control principles in accounting and financial matters to ensure compliance with the Listing Rules and all relevant laws and regulations, including timely preparation and laying of accounts. It will also periodically review our compliance status with the Hong Kong laws after the [REDACTED]. The Audit Committee will exercise its oversight by: (i) reviewing our internal control and legal compliance; 157

165 BUSINESS (ii) (iii) discussing the internal control systems with the management of our Group to ensure that the management has performed its duty to have an effective internal control system; and considering the major investigation findings on internal control matters as delegated by the Board or on its own initiative and the management s response to these findings. 6. Our Group will seek professional advice and assistance from independent internal control consultants, external legal advisers and/or other appropriate independent professional advisors with respect to matters related to our internal controls and compliance when necessary and appropriate. View of our Directors Based on the Internal Control Consultant s review and recommendations, our Group has duly adopted the measures and policies in order to improve our internal control systems and to ensure our compliance with the Listing Rules and the relevant Hong Kong laws. Furthermore, after the Internal Control Consultant had performed his follow-up interview in June 2018, he did not identify any further issues and made no further recommendations in the respective areas covered in his review. Based on the results of the internal control reviews, our Directors are of the view that adequate and effective internal control procedures and policies have been put in place by our Group. RISK MANAGEMENT Our management has designed and implemented a risk management policy to address various potential risks identified in relation to the operation of our businesses, including strategic, operational, financial and legal risks. Our risk management policy sets forth procedures to identify, analyse, categorise, mitigate and monitor various risks. Our Board is responsible for overseeing the overall risk management system and assessing and updating our risk management policy on a quarterly basis. Our risk management policy also sets forth the reporting hierarchy of risks identified in our operations. Our Group is mainly exposed to the risks related to timely delivery of raw materials and price fluctuation of raw materials. We have set up the following measures to mitigate the risks relating to price fluctuation of raw materials for our Group s business: (i) our production team would monitor the movement of raw materials as well as the projected production plan regularly, and estimate the production schedule in the next seven working days; and 158

166 BUSINESS (ii) our management team would assess if there is any material and adverse impact on our financial performance due to the price fluctuation of raw materials and will consider the factors such as the movement of raw materials, the then prevailing prices of raw materials and market condition. In respect of the credit risk on our accounts receivables, we have implemented the following measures to manage the risks: (i) (ii) (iii) (iv) (v) our accounts department would closely monitor the ageing and settlement of the accounts receivable; we regularly assess the credit rating of our customers and where necessary make amendments to their credit period in accordance with our assessment to minimise the risk of customer default; settlement is monitored by our accounts department. For overdue balances, our management team and sales and marketing team will be alerted to take appropriate follow-up action; our executive Directors would review the recoverable amount of each individual trade debts at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts; and we purchased a trade credit insurance from an insurance company to cover up to 90% of our credit sales to selected customers to mitigate defaulting customers and bad debts which would arise during our course of business. For details regarding the risks involved in our operations, please refer to the section headed Risk Factors in this document. CURRENCY RISK MANAGEMENT Our fully-automated mesh welding machine (i.e. MG800 series) was purchased in April The purchase price was denominated in euro at EUR2.2 million, which exposed our Group to foreign currency risk. After paying the deposit (representing 15% of the purchase price) for our fully-automated mesh welding machine (i.e. MG800 series) out of our internal resources in May and June 2016, we entered into a hire purchase agreement with a bank in May 2017 whereby the ownership of the said machine (i.e. MG800 series) remained with this bank until the last installment of the hire purchase agreement was paid up in full. On 5 July 2017, pursuant to the said hire purchase agreement, we settled 55% of the purchase price of the said machine (i.e. approximately EUR1.2 million). Our foreign currency forward contract In view of the general trend of euro appreciation in FY2017, we entered into a foreign currency forward contract on 6 December 2017 (the maturity date of which was initially extended from 13 December 2017 to 13 February 2018 and further to 13 April 2018 and 13 June 2018) (the Foreign Currency Forward Contract ) with the same bank to secure desirable exchange rates for the settlement of the outstanding installments under our hire purchase agreement. At the time of entering into the 159

167 BUSINESS Foreign Currency Forward Contract, our outstanding installments amounted to 30% of the purchase price of the said machine (i.e. EUR660,000). On 13 April 2018, pursuant to the Foreign Currency Forward Contract we settled 20% of the purchase price of the said machine (i.e. EUR440,000) with the seller. On 13 June 2018, pursuant to the Foreign Currency Forward Contract, we settled the remaining 10% of the purchase price of the said machine (i.e. EUR220,000) with the seller. Our Directors confirm that the Foreign Currency Forward Contract is a one-off contract entered by our Group. Our Directors believed our entry into the Foreign Currency Forward Contract could mitigate our foreign exchange risk exposure and was not speculative. RESEARCH AND DEVELOPMENT During the Track Record Period, our Group did not engage in any research and development activities nor did it incur any research and development expenses. INTELLECTUAL PROPERTY Trade mark As at the Latest Practicable Date, our Group has applied for registration of the following trademarks in Malaysia, which we believe are material to our business: Trademark Trademark applicant Application number Class Status (Note) EC Excel Wire Application received EC Excel Wire Application received Note: Class 6 Common metals and their alloys, ores; metal materials for building and construction; transportable buildings of metal; non-electric cables and wires of common metal; small items of metal hardware; metal containers for storage or transport; safes. Domain name As at the Latest Practicable Date, our Group is the owner of the following domain name which is considered by our Directors as material to the business of our Group: Registered owner Domain name Registration date Expiry date EC Excel Wire ecexcel.com.my 14 January January 2019 Save as the above, as at the Latest Practicable Date, we did not have any material intellectual property rights (whether registered or pending registrations) that are significant to our business operations or financial positions. As at the Latest Practicable Date, we had not engaged in, and were not aware of, any litigation or legal proceedings for the violation of intellectual property rights or any material violation. 160

168 BUSINESS PROPERTIES Owned properties The following table summarises the information regarding our owned properties in Malaysia as at the Latest Practicable Date: No. Location Land area/built-up area (approximately) Usage 1 Lot 77A, Lorong Gebeng 1/7, Gebeng Industrial Estate, Kuantan, Pahang Darul Makmur, Malaysia 2 Lot 77B, Off Jalan Gebeng 1/6, Kawasan Industrial Gebeng, Kuantan, Pahang Darul Makmur, Malaysia 17,700 m 2 (land)/ 9,429 m 2 (built-up) 20,200 m 2 (land)/ 10,234 m 2 (built-up) Production plant Production plant 3 No. 28A, 1 st & 2 nd Floors, China Town, Putra Square, Kuantan, Pahang Darul Makmur Malaysia 4 Lot B-7-3A, Type B, Building No. Block B, Storey No 4 th Floor, Seri Gembira Avenue, Happy Gardens, Kuala Lumpur 229 m 2 (built-up) Vacant 133 m 2 (built-up) Office 5 No. B-8, Lorong 1M 2168, 1M Avenue, Kuantan, Pahang Darul Makmur, Malaysia 6 Sublot 16 (Avenue 35), Kuantan, Pahang Darul Makmur, Malaysia 7 HS(D) , PT308, Seksyen 99 Bandar Kuala Lumpur, District of Kuala Lumpur, State of Wilayah Persekutuan Kuala Lumpur 478 m 2 (land)/ approximately 714 m 2 (built-up) approximately 130 m 2 (land)/390 m 2 (built-up) approximately 327 m 2 (land) Vacant Vacant Under construction 161

169 BUSINESS All our owned properties are held for our own use and investment purpose. These properties are used for non-property activities as defined under Rule 5.01(2) of the Listing Rules. As at 30 April 2018, no single property interest that forms part of non-property activities has a carrying amount of 15.0% or more of our total assets. Accordingly, this document is exempt from compliance with the requirements under the Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance to include a property valuation report. Pursuant to Rule 5.01A of the Listing Rules, a document is exempt from the requirement if the carrying amount of a listing applicant s non-properties are below 15.0% of its total assets. A similar exemption applies under section 6 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, with respect of the requirement under section 342(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance and paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance. Leased properties The following table summarises the information regarding our leased properties in Malaysia as at the Latest Practicable Date: No. Location Term Lessor Key terms of the tenancy Usage 1 First floor of 3-storey Shoplot no. B-98, Jalan Tun Ismail, Kuantan, Pahang, Malaysia 1 July 2017 to 30 June 2020 Mr. Ng Heng Oon Monthly rental of RM1,600 Office 2 No. A 23, Second Floor, Jalan Seri Kuantan 80, Kuantan Star City II, Kuantan, Pahang Malaysia 1 July 2017 to 30 June 2018 Mr. Chu Gee Chun Monthly rental of RM600 Office 3 Block C-15-3A, the Loft ZetaPark, Jalan Danau Kota, Setapak 1 March 2016 to 28 February 2019 Mr. Lim Chong Seng Monthly rental of RM1,600 Staff accommodation 4 Pt 165, Taman Prima Jaya, Jalan Merbau, Kota Bahru, Kelantan 3 January 2018 to 2 January 2019 Mr. Tan Kee Swee Monthly rental of RM1,700 Staff accommodation During the Track Record Period, our Group had not experienced any difficulty in renewing the leases. 162

170 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS CONTROLLING SHAREHOLDERS OF OUR COMPANY Immediately following completion of the Capitalisation Issue and the [REDACTED] (without taking into account Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon the exercise of option granted under the Share Option Scheme), Decade Lion, which is wholly-owned by Mr. Ng, will be interested in approximately [REDACTED]% of the issued share capital of our Company. Accordingly, Decade Lion and Mr. Ng will be our Controlling Shareholders. Save as disclosed above, there is no other person who will, immediately following completion of the Capitalisation Issue and the [REDACTED] (without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), be directly or indirectly interested in 30% or more of the Shares then in issue or have a direct or indirect equity interest in any member of our Group representing 30% or more of the equity in such entity. INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS Our Directors believe that our Group is capable of carrying on our business independently from our Controlling Shareholders and their respective close associates after the [REDACTED] after taking into consideration of the following factors: Management independence The day-to-day management and operations of our Group will be the responsibility of all our executive Directors and senior management of our Company. The Board consists of [five] Directors, comprised of two executive Directors and [three] independent non-executive Directors. Although Mr. Ng, being the ultimate Controlling Shareholder, also holds directorship in our Company, we consider that our Board and senior management will function independently from our Controlling Shareholders because: (a) (b) each Director is aware of his/her fiduciary duties as a Director which require, among other things, that he acts for the benefit and in the best interest of our Company and does not allow any conflict between his duties as a Director and his personal interests; and in the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors or their respective close associates, the interested Director(s) shall abstain from voting at the relevant Board meetings in respect of such transactions, and shall not be counted in forming quorum. Operational independence Our Group has established our own organisational structure comprising of individual departments, each with specific areas of responsibilities. Our Group has not shared our operational resources and general administration resources with the Controlling Shareholders and/or their respective close associates. Our Group has also established a set of internal controls to facilitate the effective operation of our business. 163

171 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Financial independence Our Group has our own financial management and accounting systems and functions and makes financial decisions according to our own business needs. Our Group has the ability to operate independently from the Controlling Shareholders from a financial perspective. During the Track Record Period and up to the Latest Practicable Date, Mr. Ng provided personal guarantees for (i) source of our suppliers; and (ii) certain banks for obtaining bank borrowings. As at the Latest Practicable Date, Mr. Ng had started negotiation with the relevant suppliers that the requirement for personal guarantee from Mr. Ng be uplifted and replaced by a corporate guarantee for our Company upon [REDACTED]. The Bank have agreed in principle that the above personal guarantees will be released and replaced by the corporate guarantees executed by our Company upon the [REDACTED]. Save as disclosed above, our Directors are of the view that our Group is not financially dependent on the Controlling Shareholders or their respective close associates in our Group s business operations and our Group is able to obtain external financing on market terms and conditions for its business operations as and when required without reliance on the Controlling Shareholders after [REDACTED]. Having considered the above factors, our Directors consider that our Group is able to maintain financial independence from the Controlling Shareholders and their respective close associates after [REDACTED]. NON-COMPETITION UNDERTAKINGS The Controlling Shareholders as covenantors (each of them, a Covenantor and collectively, the Covenantors ) executed the Deed of Non-competition in favour of our Company (for itself and as trustee for and on behalf of its subsidiaries). In accordance with the Deed of Non-competition, each Covenantor undertakes that, from the [REDACTED] and ending on the occurrence of the earliest of (i) the date on which the Shares cease to be [REDACTED] on the Stock Exchange; or (ii) the date on which that Covenantor ceases to be a Controlling Shareholder: 1. Non-competition Each Covenantor jointly and severally and irrevocably undertakes and covenants to our Company that each of them will not, and will procure that its/his close associates (except any member of our Group) will not, either on his/its own account or in conjunction with or on behalf of any person, firm or company, directly or indirectly, among other things, carry on, participate or be interested or engaged in or acquire or hold any right or interest (in each case whether as an investor, a shareholder, principal, partner, director, employee, consultant, agent or otherwise and whether for profit, reward, interest or otherwise), or otherwise be involved in any business which is or may be in competition, whether directly or indirectly, with the business carried on (including but not limited to manufacture and sell cold-rolled steel bars and steel wire products and process and sell hot-rolled steel bars in Malaysia) or contemplated to be carried on by any member of our Group in anywhere or place where our Group has conducted business as at the date of the Deed of Non-competition or may conduct business from time to time in the future (the Restricted Business ). 164

172 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS 2. New business opportunity Each of the Covenantors hereby represents and warrants that neither it/he nor any of its/his close associates currently carries out, participates in or is interested or engaging in, invests in, acquires or holds, directly or indirectly (in each case whether as a shareholder, director, partner, agent or otherwise and whether for profit, reward, interest or otherwise) or otherwise is involved in the Restricted Business other than through our Group. Each of the Covenantors further undertakes to refer to our Company within 10 days any and all new opportunities in connection with the Restricted Business (the New Business Opportunity ) which are identified by or made available to any of them. Notwithstanding the aforesaid, the Deed of Non-competition does not apply where: 1. any opportunity to invest, participate, be engaged in and/or operate with a third party any Restricted Business has first been offered or made available to our Group, and that the offer should contain all information reasonably necessary for our Group to consider whether (i) such opportunity would constitute competition with any Restricted Business and (ii) it is in the interest of our Group and the shareholders of our Company as a whole to pursue such opportunity, and our Company has, after review by the independent non-executive Directors, declined such opportunity to invest, participate, be engaged in or operate the Restricted Business with such third party or together with the Covenantor and/or its/his close associate(s), provided that the principal terms by which that Covenantor (or its/his close associate(s)) subsequently invests, participates, engages in or operates the Restricted Business are not more favourable than those disclosed to our Company. A Covenantor may only engage in the New Business Opportunity if (i) a notice is received by the Covenantor from our Company confirming that the New Business Opportunity is not accepted and/or does not constitute competition with the Restricted Business (the Non-acceptance Notice ); or (ii) the Non-acceptance Notice is not received by the Covenantor within 30 days after the proposal of the New Business Opportunity is received by our Company; 2. each Covenantor having interests in the shares or other securities in a company whose shares are listed on a recognised stock exchange provided that: (a) any Restricted Business conducted or engaged in by such company (and assets relating thereto) accounts for less than 10% of the relevant company s consolidated turnover or consolidated assets, as shown in that company s latest audited accounts; or 165

173 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS (b) the total number of the shares held by the Covenantors and/or their respective close associates or in which they are together interested does not exceed 5% of the issued shares of that class of the company in question (the Relevant Company ), provided that (i) the total number of the relevant Covenantors representatives on the board of directors of the Relevant Company is not significantly disproportionate with respect to his shareholdings in the Relevant Company; and (ii) at all times there is a holder of such shareholding (together, where appropriate, with its close associates) a larger percentage of the shares in question than the Covenantors and their respective close associates together hold. 3. Corporate governance measures In order to ensure the performance of the above non-competition undertakings, the Covenantors will: (a) (b) (c) (d) (e) as required by our Company, provide all information which is necessary for our independent non-executive Directors to conduct annual examination with regard to the compliance of the terms of the Deed of Non-competition and the enforcement of it; our Controlling Shareholders undertake to provide all information requested by our Company which is necessary for the annual examination by the independent non-executive Directors and the enforcement of the Deed of Non-competition; procure our Company to disclose to the public either in the annual report of our Company or issue a public announcement in relation to any decisions made by our independent non-executive Directors with regard to the compliance of the terms of the Deed of Non-competition and the enforcement of it; where our independent non-executive Directors shall deem fit, make a declaration in relation to the compliance of the terms of the Deed of Non-competition in the annual report of our Company, and ensure that the disclosure of information relating to compliance with the terms of the Deed of Non-competition and the enforcement of it are in accordance with the requirements of the Listing Rules; and that during the period when the Deed of Non-competition is in force, fully and effectually indemnify our Company against any losses, liabilities, damages, costs, fees and expenses as a result of any breach on the part of such Covenantor of any statement, warrant or undertaking made under the Deed of Non-competition. 166

174 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS The Deed of Non-competition and the rights and obligations thereunder are conditional upon (a) the Listing Committee granting the [REDACTED] of, and the permission to deal in, the Shares, as described in this document, and (b) the [REDACTED] and dealings in the Shares on the Stock Exchange taking place. As the Covenantors have given non-competition undertakings in favour of our Company, and none of them have interests in other businesses that compete or are likely to compete with the business of our Group, our Directors are of the view that they are capable of carrying on our Group s business independently of the Covenantors following the [REDACTED]. RULE 8.10 OF THE LISTING RULES Save as disclosed in this document, our Controlling Shareholders, our Directors and their respective close associates do not have any interest in a business apart from our Group s business which competes and is likely to compete, directly or indirectly, with our Group s business and would require disclosure under Rule 8.10 of the Listing Rules. 167

175 CONNECTED TRANSACTIONS OVERVIEW During the Track Record Period, our Group had entered into two transactions with connected persons of our Company. These transactions will continue and constitute continuing connected transactions (as defined under Chapter 14A of the Listing Rules) of our Company upon the [REDACTED]. Set out below is a summary of the continuing connected transactions: Item Connected person Relationship with our Group Connected transaction historical amounts Four months ended Nature of 30 April transactions Type FY2015 FY2016 FY RM 000 RM 000 RM 000 RM Ng Heng Oon Mr. Ng Heng Oon is the brother of Mr. Ng. Mr. Ng Heng Oon is an associate of Mr. Ng and is therefore a connected person of our Company under Chapter 14A of the Listing Rules. Lease of office to EC Excel Wire Continuing connected transaction Maran Ng Trading Maran Ng Trading is a partnership registered on 14 February 2013 which principally engaged in sales of construction materials, fertilisers, poisons, electronic items, hardware items and plumbing items. It is co-owned by Ms. Ng Bee Yong who is Mr. Ng s sister and Mr. Ng Eng Yat who is Mr. Ng s father and is an associate of Mr. Ng and is therefore a connected person of our Company under Chapter 14A of the Listing Rules. Sales of steel bar products, steel wire products and other building materials to Maran Ng Trading Continuing connected transaction

176 CONNECTED TRANSACTIONS EXEMPT CONTINUING CONNECTED TRANSACTIONS 1. Lease of office to EC Excel Wire On 20 June 2017, EC Excel Wire as the lessee and Mr. Ng Heng Oon as the lessor entered into a lease agreement pursuant to which EC Excel Wire shall lease an office located at No. B-98 (1st Floor), Jalan Tun Ismail, Kuantan, Pahang Darul Makmur from Mr. Ng Heng Oon for a term of three years commencing from 1 July 2017 to 30 June 2020 (with an option to renew for a further one year) at a monthly rental of RM1,600 (the Lease Agreement ). The relevant historical transaction amounts paid by EC Excel Wire to Mr. Ng Heng Oon for rental of the office for FY2015, FY2016, FY2017 and the four months ended 30 April 2018 were nil, nil, approximately RM10,000 and RM6,000, respectively. The Lease Agreement will be renewed on the same terms and conditions upon the expiry of the current term. The monthly rental was determined after arm s length negotiations between the parties by making reference to the prevailing market rates of similar properties in the vicinity. The Lease Agreement will continue after [REDACTED]. It is proposed that the annual caps for the rental payable by our Group under the Lease Agreement with Mr. Ng Heng Oon will be RM19,200 for each of the three financial years ending 31 December Since the applicable percentage ratios (as defined in Rule of the Listing Rules) (other than the profit ratio) for the transactions with Mr. Ng Heng Oon for each of FY2018, FY2019 and FY2020 will be less than 5% on an annual basis and the annual consideration is less than HK$3 million, the transaction is fully exempt from the reporting, annual review, announcement, circular and independent shareholders approval requirement under Chapter 14A of the Listing Rules. Should the annual transaction exceed the relevant threshold, our Company will comply with the Listing Rules where applicable. 2. Sales of our products to Maran Ng Trading During the Track Record Period, we sold steel bar products, steel wire products and other building materials to Maran Ng Trading. There was no long-term agreement between our Group and Maran Ng Trading. Maran Ng Trading placed purchase orders with EC Excel Wire on separate occasions with relevant purchase price agreed between the parties after arm s length negotiations from time to time. The relevant historical transaction amounts paid to our Group by Maran Ng Trading for the sales of steel bar products, steel wire products and other building materials for FY2015, FY2016, FY2017 and the four months ended 30 April 2018 were approximately RM628,000, RM334,000, RM578,000 and RM346,000, respectively. On [ ], our Company (for itself and on behalf of other Group companies) entered into a master supply agreement with Maran Ng Trading, pursuant to which our Company (for itself and on behalf of other group companies) agreed to sell steel bar products, steel wire products and other building materials and accessories on a non-exclusive basis to Maran Ng Trading (the Master Supply Agreement ). 169

177 CONNECTED TRANSACTIONS Under the Master Supply Agreement, Maran Ng Trading shall from time to time place purchase orders, which shall set out, inter alia, the quantities, specifications and the purchase price of our products to be supplied. Such price shall be determined after arm s length negotiations between Maran Ng Trading and our Group from time to time with reference to the prevailing market price of similar products, and in any event the price charged by our Group shall not be less than those charged to Independent Third Parties for similar products. The terms of the Master Supply Agreement with Maran Ng Trading shall commence on the [REDACTED] and will expire on 31 December Either party may terminate the Master Supply Agreement by serving a notice of not less than three months to the other. After considering (i) the relevant historical transaction amount paid by Maran Ng Trading; and (ii) the anticipated price trend of our steel bar products, steel wire products and other buildings material and accessories in the forthcoming years, our Directors expect that the transaction amounts with respect to the sale of steel bar products, steel wire products and other building materials payable will not exceed HK$2 million for each of the three financial years ending 31 December Since the applicable percentage ratios (as defined in Rule of the Listing Rules) (other than the profit ratio) for the transactions with Maran Ng Trading for each of FY2018, FY2019 and FY2020 will be less than 5% on an annual basis and the annual consideration is less than HK$3 million, the transaction is fully exempt from the reporting, annual review, announcement, circular and independent shareholders approval requirement under Chapter 14A of the Listing Rules. Should the annual transaction exceed the relevant threshold, our Company will comply with the Listing Rules where applicable. CONFIRMATION FROM OUR DIRECTORS Our Directors (including our independent non-executive Directors) confirmed that the continuing connected transactions under the Lease Agreement and the Master Supply Agreement as described above have been entered into in the ordinary and usual course of business of our Group and have been based on arm s length negotiations and on normal commercial terms that are fair and reasonable, the respective terms of the Lease Agreement and the Master Supply Agreement as mentioned above are fair and reasonable and in the interests of our Shareholders as a whole. CONFIRMATION FROM THE SOLE SPONSOR The Sole Sponsor has reviewed the relevant documents, information and historical figures provided by our Company and has participated in due diligence and discussions with our Company and its legal advisers. Based on the above, the Sole Sponsor is of the view that the continuing connected transactions under the Lease Agreement and the Master Supply Agreement (i) have been entered into in the ordinary and usual course of business of our Group; and (ii) are on normal commercial terms and are fair and reasonable and in the interests of our Company and our Shareholders as a whole. 170

178 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES DIRECTORS Our Board of Directors consists of [five] Directors, comprising two executive Directors, and [three] independent non-executive Directors. Our Board of Directors is responsible for and has general powers for the management and conduct of our business. Our senior management is responsible for the day-to-day management of our business. The following table sets out certain information concerning our Directors: Name Age Position Date of appointment as Director of our Company Date of joining our Group Role and Responsibilities Relationships amongst Directors and senior management Mr. Ng Heng Hong [39] Executive Director, chief executive officer and chairman of our Board Ms. Sin Fun Chu [39] Executive Director 27 March March 2007 Responsible for the overall strategic business planning and development and overseeing our Group s operations as well as sales and marketing activities 25 June March 2007 Responsible for overseeing the human resources and administration department of our Group Spouse of Ms. Sin and brother of Mr. Ng Heng Oon Spouse of Mr. Ng [Mr. Chow Shiu Wing Joseph ( )] [46] Independent Non-executive Director [ ] [ ] Providing independent advice to the Board, advising on corporate governance matters and serving as [the member of the Audit Committee, Remuneration Committee and Nomination Committee] N/A [Mr. Choy Hiu Fai Eric ( )] [41] Independent Non-executive Director [ ] [ ] Providing independent advice to the Board, advising on corporate governance matters and serving as [the chairman of the Audit Committee and member of the Remuneration Committee and Nomination Committee] N/A 171

179 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Name Age Position Date of appointment as Director of our Company Date of joining our Group Role and Responsibilities Relationships amongst Directors and senior management [Mr. Wu Tsz Chung Thomas ( )] [40] Independent Non-executive Director [ ] [ ] Providing independent advice to the Board, advising on corporate governance matters and serving as [the chairman of the Remuneration Committee and member of the Audit Committee] N/A Executive Directors Mr. Ng Heng Hong, aged [39], was appointed as the executive Director, chief-executive officer and chairman of the Board on 25 June He is responsible for our Group s overall strategic business planning and development and overseeing our Group s operations as well as sales and marketing activities. Mr. Ng graduated with a Bachelor of Science in Human Resource Development from Universiti Teknologi Malaysia in July He has more than 10 years of experience in the steel bar product and steel wire product industry. Before establishing our Group, Mr. Ng worked in Maran Hardware, a partnership owned by Mr. Ng s father Mr. Ng Eng Yat, Mr. Ng s brother Mr. Ng Heng Oon and Mr. Loo Eng Hwa which operated as a hardware shop, as a sales executive, where he was mainly responsible for sale of steel products and building materials. Through his exposure in this field, he gained experience in the trading of building materials industry. In February 2005, he established East Coast Wire & Hardware Supplies, a partnership engaged in the supply of building items. Thereafter he co-founded EC Excel Wire in March Mr. Ng has also gained experience in different areas through working in the following companies: Name of company Position Principal business activities Period Role Sierra Metal Sdn. Bhd. Director Trading of construction materials 26 August 2010 to 21 September 2012 Responsible for providing strategic advice and overseeing the overall management and operations of the company 172

180 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Name of company Position Principal business activities Period Role Dfcel Development Sdn. Bhd. Director Building construction and development 23 August 2013 until present Responsible for providing strategic advice and overseeing the overall management and operations of the company Inova Development Sdn. Bhd. (formerly known as Kuasa Jutamas Sdn. Bhd.) Director Property development, building contractor and general trading 5 July 2017 until present Responsible for providing strategic advice and overseeing the overall management and operations of the company Klaas Design & Build Sdn. Bhd. Director Design and building construction 16 January 2018 until present Responsible for providing strategic advice and overseeing the overall management and operations of the company Mr. Ng was a director of the following companies which were incorporated in Malaysia immediately before their respective dissolution: Name of Company Nature of Business Means of Dissolution Date of Dissolution Innovation Wire Sdn. Bhd. Dormant Dissolved by striking off under Section 551 of Companies Act 2016 (Note) Perfect Metal Sdn. Bhd. Dormant Dissolved by striking off under Section 308 of Companies Act 1965 (Note) 19 January March 2017 Sameco Hardware & Supplies Sdn. Bhd. Hardware supply Dissolved by striking off under Section 308 of Companies Act 1965 (Note) 8 November

181 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Note: Pursuant to Section 551 of the Companies Act 2016 of Malaysia (pari materia to Section 308 of the Companies Act 1965 of Malaysia which was repealed on 31 January 2017), where the Registrar of Companies in Malaysia has reasonable cause to believe that a company is not carrying on business or is not in operation, the Registrar of Companies in Malaysia may strike the name of the company off the register after the expiration of a prescribed period. Mr. Ng confirmed that there was no wrongful act on his part leading to the dissolutions of Innovation Wire Sdn. Bhd., Perfect Metal Sdn. Bhd. and Sameco Hardware & Supplies Sdn. Bhd., which were solvent immediately prior to their dissolutions, and he is not aware of any actual or potential claim that has been or will be made against him as a result of the dissolutions of these companies. Ms. Sin Fun Chu, aged [39], was appointed as the executive Director of our Group on 25 June She is responsible for overseeing the human resource and administration department of our Group. Ms. Sin completed her secondary education at Sekolah Menengah Tengku Aris Bendahara Kluang, Johor in In May 2005, Ms. Sin joined East Coast Wire & Hardware Supplies as an administrative manager where she was responsible for administration work. In April 2007, Ms. Sin joined EC Excel Wire as the human resources and administration manager and subsequently in July 2015, she was promoted to head of human resources and administration. Independent Non-executive Directors Mr. Chow Shiu Wing Joseph ( ), aged [46], was appointed as our independent non-executive Director on [ ]. Mr. Chow graduated with a Bachelor of Laws degree from City University Hong Kong in November He was admitted as a solicitor in Hong Kong in October He is currently practising as a lawyer in Hong Kong and has experience in general commercial transactions, securities law, regulatory matters, and protection and enforcement of intellectual property rights. Mr. Chow has been an independent non-executive director of Integrated Waste Solutions Group Holdings Limited, a company which is listed on the Main Board (stock code: 923) which principally engages in the sales of recovered paper and waste materials since October He has also been a partner and co-founder of Wellington Legal, a full-service Hong Kong law firm since February

182 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Mr. Chow was a director of the following companies which were incorporated in Hong Kong before their respective dissolution/deregistration: Name of company Nature of business immediately prior to dissolution/ deregistration Means of dissolution/ deregistration Date of dissolution/ deregistration Donjo Company Limited (Note 1) Investment Deregistration under section 291AA of the Predecessor Companies Ordinance 5 February 2010 F&B Model Management Limited (Note 2) Entertainment Agency Struck off and dissolved pursuant to section 746 of the Companies Ordinance 9 September 2016 Grandpa Investments Limited ( ) (Note 1) Investment Deregistration under section 291AA of the Predecessor Companies Ordinance 20 March 2009 HJC Company Limited (Note 2) Never commenced business Struck off and dissolved pursuant to section 746 of the Companies Ordinance 11 September 2015 Income Way Limited ( ) (Note 1) Investment Deregistration under section 291AA of the Predecessor Companies Ordinance 17 January 2003 Jacksons & Brothers Premium Bags Limited (Note 1) Trading Deregistration under section 291AA of the Predecessor Companies Ordinance 29 August 2008 J&P Investments Limited (Note 2) Investment Struck off and dissolved pursuant to section 746 of the Companies Ordinance 19 June 2015 Korise Technology Development Limited ( ) (Note 1) Investment Deregistration under section 291AA of the Predecessor Companies Ordinance 13 June 2008 Ridley College (Hong Kong) Association Limited (Note 3) Alumni association Deregistration under section 751 of the Companies Ordinance 13 April 2017 Win Sky Investment Limited ( ) (Note 1) Investment Deregistration under section 291AA of the Predecessor Companies Ordinance 28 October

183 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Notes: 1. Under section 291AA of the Predecessor Companies Ordinance, an application for deregistration can only be made if: (a) all members of the company agree to such deregistration; (b) the company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than three months immediately before the application; and (c) such company has no outstanding liabilities. 2. Under section 746 of the Companies Ordinance, (1) after publishing a notice under section 744(3) or 745(2)(b), the Registrar of Companies may, unless cause is shown to the contrary, strike the company s name off the Companies Register at the end of three months after the date of the notice; (2) the Registrar of Companies must publish in the Gazette a notice indicating that the company s name has been struck off the Companies Register; and (3) on publication of the notice under subsection (2), the company is dissolved. 3. Under section 750 of the Companies Ordinance, an application for deregistration can only be made if: (a) all members of the company agree to such deregistration; (b) the company has not commenced business or operation, or has not been in operation or carried on business during the three months immediately before the application; (c) such company has no outstanding liabilities; (d) such company is not a party to any legal proceedings; (e) such company s assets do not consist of any immovable property situate in Hong Kong; and (f) if such company is a holding company, none of its subsidiary s assets consist of any immovable property situate in Hong Kong. Mr. Chow confirmed that there was no wrongful act on his part leading to the above dissolutions/ deregistrations of Donjo Company Limited, F&B Model Management Limited, Grandpa Investments Limited ( ), HJC Company Limited, Income Way Limited ( ), Jacksons & Brothers Premium Bags Limited, J&P Investments Limited, Korise Technology Development Limited ( ), Ridley College (Hong Kong) Association Limited and Win Sky Investment Limited ( ), which were solvent immediately prior to their dissolutions/deregistrations, and he is not aware of any actual or potential claim that has been or will be made against him as a result of the dissolutions/deregistrations of these companies. Mr. Choy Hiu Fai Eric ( ), aged [41], was appointed as our independent non-executive Director on [ ]. Mr. Choy graduated with a Bachelor of Business Administration in Accounting and Finance at the University of Hong Kong in November Mr. Choy is currently a Certified Public Accountant and a Certified Tax Adviser in Hong Kong and a member of the American Institute of Certified Public Accountants in US. Mr. Choy has been involved in the accounting industry for over 17 years. He started his career at Arthur Andersen & Co. in September 2000 and left as a staff accountant in the assurance and business advisory solution segment. In July 2002, he joined PricewaterhouseCoopers as a senior associate. Subsequently in December 2005, Mr. Choy co-founded Procon CPA Limited, a certified public accountants firm in Hong Kong and has been working there as a managing director and head of operations in Hong Kong and Shenzhen regions since then. Mr. Choy is currently an independent non-executive director of (i) The Hong Kong Building and Loan Agency Limited, a company listed on the Main Board (stock code: 145) which principally engages in loan financing; and (ii) Wing Fung Group Asia Limited, a company listed on GEM (stock code: 8526) which principally engages in the provision of supply, installation and fitting-out services of mechanical ventilation and air-conditioning system for buildings in Hong Kong and Macau. 176

184 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Mr. Choy was a director of the following company which was incorporated in Hong Kong before its deregistration: Name of company Nature of business immediately prior to deregistration Means of deregistration Date of deregistration Maurice Siu Foundation Limited ( ) Holding of a private fund of an individual to settle disbursement of his family Deregistration under section 291AA of the Predecessor Companies Ordinance (Note) 8 November 2013 Note: Under section 291AA of the Predecessor Companies Ordinance, an application for deregistration can only be made if: (a) all members of the company agree to such deregistration; (b) the company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than three months immediately before the application; and (c) such company has no outstanding liabilities. Mr. Choy confirmed that there was no wrongful act on his part leading to the above deregistration of Maurice Siu Foundation Limited ( ) which was solvent immediately prior to its deregistration, and he is not aware of any actual or potential claim that has been or will be made against him as a result of the deregistration of this company. Mr. Wu Tsz Chung Thomas ( ), aged [40], was appointed as our independent non-executive Director on [ ]. Mr. Wu graduated with a Master degree in Engineering and Computer Science from the University of Oxford in July 2000 and graduated with a Master in Business Administration from Institut Européen d Administration des Affaires ( INSEAD ) in July In March 2007, he joined OC&C Strategy Consultants (HK) Ltd. as a consultant where he was mainly responsible for providing business strategies to customers. From June 2012 to December 2014, he joined Value Partners Management Consulting as a partner where his duties included providing method, problem solving and accelerating decision-making and the implementation of strategies to leading international companies. From January 2015 to October 2017, he was a partner in Roland Berger Strategy Consultants, a strategy consultancy firm where he was responsible for proposing strategic options to clients. Mr. Wu is currently (i) an independent director at Shenzhen Sundan Chain Store Co., Ltd. ( ), a company listed on the National Equities Exchange and Quotations System which operates retail chain stores in China offering electrical appliances; and (ii) a senior strategy director at Beijing DiDi Infinity Technology Development Co., Ltd, a Chinese ride-sharing, artificial intelligence and automotive technology company headquartered in Beijing, China. 177

185 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES SENIOR MANAGEMENT The following table sets out certain information concerning our senior management: Name Age Position Date of joining our Group Role and Responsibilities Relationships amongst Directors and senior management Mr. Hiew Yong Nin Mr. Ng Heng Oon [65] Chief financial officer February 2017 Responsible for overall financial and accounting affairs [42] Head of production June 2012 Responsible for overseeing our Group s manufacturing and materials department N/A Brother of Mr. Ng Mr. Yat Chun Kiat [36] Sales manager March 2014 Reponsible for overseeing our Group s sales and marketing department N/A Mr. Yap Wing Sang Mr. Kong Fook Kit [40] Sales manager March 2015 Reponsible for handling our Group s sales and marketing activities in Central Region [40] Sales manager July 2010 Reponsible for handling our Group s sales and marketing activities in East Coast Region N/A N/A Ms. See Yee Siu [30] Inventory and production manager June 2012 Reponsible for overseeing our Group s inventory and manufacturing activities N/A 178

186 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Mr. Hiew Yong Nin, aged [65], is the chief financial officer of our Group and is responsible for our Group s overall financial and accounting affairs by overseeing our Group s budgetary control and forecasting as well as managing the working capital and cash flow of our Group. In 1978, he obtained his New Zealand Certificate in Commerce from New Zealand Technicians Certification Authority and became an Associate Member of the New Zealand Institute of Management (Inc.) in December In July 1983, he was admitted as an Associate of The Institute of Chartered Secretaries and Administrators (London) by the Royal Charter of the Institute. He was also registered as a member of The Malaysian Association of The Institute of Chartered Secretaries and Administrators in November In April 1994, he was admitted to associate of The Australian Society of Certified Practising Accountants. He obtained his certification of Certified Practising Accountant from The Australian Society of Certified Practising Accountants in August 1997 and was classified as a Chartered Accountant from the Malaysian Institute of Accountants in December In September 2003, he obtained his certification as a Certified Financial Planner from Financial Planning Association of Malaysia. Mr. Hiew has over 35 years of experience in the accounting and finance industry. Mr. Hiew began his career as an assistant accountant with Syarikat Lee Engineering Sdn. Bhd., in April 1980 and was promoted to financial accountant in November 1983, where he was responsible for the finance and accounting operations of the company. In April 1988, he left Syarikat Lee Engineering Sdn. Bhd. and joined Mas Mining Ltd in Jakarta, Indonesia as a finance and administrative manager until Thereafter in 1991, he returned to Malaysia and joined Franky Construction Sdn. Bhd. as a financial controller and company secretary where he stayed with the company until January He was responsible for the company s financial operations, financial planning, funding, accounting and internal control system, administration and secretarial functions. While he was working with Franky Construction Sdn. Bhd., he took up a distance-learning course and graduated with a Bachelor of Business from University of Southern Queensland, Australia in July Mr. Ng Heng Oon, aged [42], is the head of production and is responsible for overseeing our Group s manufacturing and materials department. He completed his secondary education at Sekolah Menengah Kebangsaan Alor Akar, Kuantan in Mr. Ng Heng Oon has over 15 years of experience in the steel bar product and steel wire product industry. Mr. Ng Heng Oon joined Maran Hardware, a partnership owned by him, Mr. Ng s father Mr. Ng Eng Yat and Mr. Loo Eng Hwa which engaged in the sale of steel products and building materials, as a manager in October He was subsequently promoted to managing director where he was mainly responsible for managing the overall business operations, sales and marketing and administrative functions of the business. In June 2012, he joined EC Excel Wire as a factory manager and was responsible for formulating the business plan, reviewing and updating the policies, procedures and systems of the Group. In March 2017, he was promoted to the head of production of our Group. As at the Latest Practicable Date, Mr. Ng Heng Oon is also a director of Inova Development Sdn. Bhd., a company engaged in property development and general trading since June Mr. Yat Chun Kiat, aged [36], is the sales manager of our Group. He oversees the overall sales and marketing activities of our Group. Mr. Yat completed his secondary education at Sekolah Menengah Kebangsaan Mantin N Sembilan in

187 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES In March 2002, he joined Tilija Auto Parts (Malaysia) Sdn. Bhd. as a sales executive in selling the company s products. Subsequently in July 2006, he joined Mr. Mark Tools (Malaysia) Sdn. Bhd. as a sales executive to sell the company s products. From August 2009 to April 2013, he joined PP Chin Hin Sdn. Bhd. as a sales executive to promote and sell the company s products which are steel-related products and other building and construction materials. He joined Hap Seng Trading (BM) Sdn. Bhd. from May 2013 to March 2014 and assumed similar responsibilities. In March 2014, he joined EC Excel Wire as a sales manager for the Kuala Lumpur branch office where he was responsible for the overall operations of the Kuala Lumpur office, marketing and sales, meeting collections target and leading the Kuala Lumpur sales team. He was also involved in expanding EC Excel Wire s venture into the Central Region. In September 2015, he was promoted to Central and Southern Regional sales manager of EC Excel Wire. Mr. Yap Wing Sang, aged [40], is the sales manager of our Group and is responsible for our Group s sales and marketing activities in the Central Region. Mr. Yap completed his secondary education at Sekolah Menengah Laki Laki Methodist Kuala Lumpur W P in In January 2002, Mr. Yap worked as a marketing representative in Antah Melco Sales & Services Sdn. Bhd., where he was responsible for the company s marketing matters. In March 2007, he worked as a sales executive in Jurihan Sdn. Bhd., where he was responsible for promoting and selling the company s products. In March 2009, he worked as a sales executive in PP Chin Hin Sdn. Bhd., where he was responsible for the promotion and sale of the company s products. He was subsequently promoted to assistant sales manager of the Kuala Lumpur branch of the company in August 2010 and branch manager of the Kuala Lumpur branch in August 2011, where he was responsible for supervising the sales and purchasing and order processing team and achieving sales target. In May 2013, he joined Hap Seng Trading (BM) Sdn. Bhd as a deputy sales manager. In May 2014, he was appointed as a director of United Vision Marketing Sdn. Bhd., a company engaged in trading of building materials. On 1 July 2018, Mr. Yap tendered his resignation as a director of the said company. It is anticipated all legal procedures pertaining to resignation will be completed upon [REDACTED]. Mr. Kong Fook Kit, aged [40], is our sales manager and is responsible for handling our Group s sales and marketing activities in the East Coast Region. Mr. Kong completed his secondary education at Sekolah Menengah Ahmad Pekan Pahang in In April 2001, Mr. Kong worked as a sales executive in N.C.H. Lime Trading Sdn. Bhd., where he was responsible for promoting and sale of the company s products. Mr. Kong then joined CHRB Timuran Sdn. Bhd. in October 2003 as a branch executive where he was responsible for handling the sales and marketing activities of the branch office of the company. He then left the company and joined East Coast Metals Sdn. Bhd. in July 2005 as a sales manager where he was responsible for leading the sales team of the company and coordinating the overall operation of the sales office. In July 2010, Mr. Kong joined Arena Metal Resources as a director. 180

188 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Ms. See Yee Siu, aged [30], is the inventory and production manager of our Group and is responsible for overseeing our Group s inventory management and manufacturing activities. Ms. See completed her secondary education in 2004 at Sekolah Menengah Kebangsaan Cenderawasih Kuantan Pahang. Ms. See joined our Group in June 2012 and has been working for our Group for over five years. Before joining our Group, Ms. See joined Sam s Metal Trading (Kuantan) in October 2006 as an administrative clerk, where she was responsible for administrative and clerical work including but not limited to handling invoices and delivery orders of the company. She then joined CG Tradeware (KTN) Sdn. Bhd. in July 2010 as an administrative clerk where she was responsible for handling similar administrative work of the company. She then joined our Group in June 2012 and has been working in our Group since then. COMPANY SECRETARY Mr. Chan Hin Yeung ( ), aged [31], joined our Group and was appointed as the company secretary of our Group on 25 June He graduated with a Bachelor s degree of Business Administration from Lingnan University in October He has been a member of Hong Kong Institute of Certified Public Accountants since September Mr. Chan joined Sinomix & Co., CPA in June 2009 as an audit trainee where he was responsible for audit matters. He then worked as a staff accountant in SHINEWING (HK) CPA Limited from January 2011 to June 2012 where he was responsible for preforming audit matters. Subsequently from November 2013 to April 2015, he joined Kaisa Group Holdings Limited, a company listed on the Main Board (stock code: 1638), as an accountant responsible for handling and preparing the company s accounting matters. Mr. Chan then joined China South City Management Company Limited from May 2015 to February 2016 as an accountant where he was responsible for the company s accounting matters. Since March 2016, Mr. Chan has been working at Peterson Group Management Limited as an accountant where he is responsible for the accounting and financial matters of the company. COMPLIANCE ADVISER We have appointed Dakin Capital as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules. The compliance adviser will advise us in the following circumstances: (i) (ii) before the publication of any regulatory announcement, circular or financial report; where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases; (iii) where our Company proposes to use the proceeds of the [REDACTED] in a manner different from that detailed in this document or if the business activities, developments or results of our Group deviate from any forecast, estimate or other information in this document; and (iv) where the Stock Exchange makes an inquiry of our Group under the Listing Rules regarding unusual movements in the price or trading volume of the Shares. 181

189 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES The term of appointment of the compliance adviser shall commence on the [REDACTED] and end on the date on which we comply with Rule of the Listing Rules in respect of our financial results for the first full financial year commencing after the [REDACTED] and such appointment may be subject to extension by mutual agreement. BOARD COMMITTEES Audit Committee Our Company has established the Audit Committee on [ ] with written terms of reference in compliance with paragraphs C.3.3 and C.3.7 of the Corporate Governance Code. The primary duties of the Audit Committee are, among other things, to review and supervise the financial reporting process and internal control system of our Group. The Audit Committee comprises [three] members, namely [Mr. Choy Hiu Fai Eric, Mr. Chow Shiu Wing Joseph and Mr. Wu Tsz Chung Thomas]. [Mr. Choy Hiu Fai Eric] is the chairman of the Audit Committee. Remuneration Committee Our Company has established the Remuneration Committee on [ ] with written terms of reference in compliance with paragraph B.1.2 of the Corporate Governance Code. The Remuneration Committee comprises [three] members, namely [Mr. Wu Tsz Chung Thomas, Mr. Choy Hiu Fai Eric, Mr. Chow Shiu Wing Joseph] and [Mr. Wu Tsz Chung Thomas] is the chairman of the Remuneration Committee. The primary duties of the Remuneration Committee are, amongst other things, to make recommendations to our Board on the terms of remuneration packages, bonuses and other compensation payable to our Directors and senior management and on our Group s policy and structure for all remuneration of our Directors and senior management. Nomination Committee Our Company has established the Nomination Committee on [ ] with written terms of reference in compliance with paragraph A.5.2 of the Corporate Governance Code. The Nomination Committee comprises [three] members, namely [Mr. Ng, Mr. Chow Shiu Wing Joseph, Mr. Choy Hiu Fai Eric] and [Mr. Ng], is the chairman of the Nomination Committee. The Nomination Committee is mainly responsible for making recommendations to our Board on appointment of Directors and succession planning for our Directors. COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE Our Company s corporate governance practices are based on principles and code provisions as set out in the Corporate Governance Code in Appendix 14 to the Listing Rules. Except for the deviation from code provision A.2.1 of the Corporate Governance Code, our Company s corporate governance practices have complied with the code on corporate governance practices. 182

190 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Pursuant to code provision A.2.1 of the Corporate Governance Code, the roles of chairman and chief executive should be separate and should not be performed by the same individual. Mr. Ng is the chairman of our Board and the chief executive officer of our Company. In view that Mr. Ng is the founder of our Group and has been operating and managing our Group since the establishment of our Group, our Board believes that it is in the best interest of our Group to have Mr. Ng taking up both roles for effective management and business development. Therefore, our Directors consider that the deviation from the code provision A.2.1 of the Corporate Governance Code is appropriate in such circumstance. REMUNERATION POLICY The aggregate amounts of compensation (including fees, salaries, allowances and benefits in kind, discretionary bonus and contributions to defined contribution plans) which are paid to our Directors for each of FY2015, FY2016, FY2017 and the four months ended 30 April 2018 were approximately RM702,000, RM1.1 million, RM1.1 million and RM259,000, respectively. Our Company s policy concerning the remuneration of Directors is that the amount of remuneration is determined by reference to the relevant Director s experience, responsibilities, workload, performance and the time devoted to our Group. Further details of the remuneration of the Directors are set out in the paragraph headed Statutory and General Information C. Further information about directors, management and staff Directors remuneration in Appendix IV to this document. The aggregate remuneration including salaries, allowances and benefits in kind and contributions to defined contribution plans paid to our Group s five highest paid individuals (excluding our Directors) for each of FY2015, FY2016, FY2017 and the four months ended 30 April 2018 were approximately RM715,000, RM880,000, RM1.1 million and RM310,000 respectively. During the Track Record Period, no emolument was paid by our Group to any of the Directors or the five highest paid individuals (including Directors and employees) as an inducement to join or upon joining our Group or as compensation for loss of office. None of our Directors has waived any emoluments during the Track Record Period. Except as disclosed above, no other payments of remuneration have been made, or are payable, in respect of the Track Record Period, by our Group to or on behalf of any of the Directors. For additional information on Directors remuneration during the Track Record Period as well as information on the highest paid individuals, please refer to note 12 in the Accountants Report set out in Appendix I to this document. STAFF RELATIONS Our Group recognises the importance of a good relationship with the employees. The remuneration payable to the employees includes basic salaries, allowances and bonus. The ability to recruit and retain experienced and skilled labour is crucial to the growth and development of our Group. In addition to providing the staff the opportunities to receive regular on-the-job trainings, our Group strives to create a harmonious and caring working environment for its staff. 183

191 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Our Group has not experienced any significant problems with its employees save as those arising from ordinary course of business, nor has our Group experienced any difficulties in the recruitment and retention of staff. DIRECTORS COMPETING INTERESTS None of our Directors and their respective close associates are interested in any business which competes or is likely to compete with that of our Group. 184

192 SHARE CAPITAL SHARE CAPITAL The following is a description of the share capital of our Company in issue and to be issued as fully paid or credited as fully paid immediately following the Capitalisation Issue and the [REDACTED], without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued pursuant to the exercise of any options that may be granted under the Share Option Scheme: Authorised share capital [15,000,000,000] Shares of HK$0.01 each [150,000,000.00] HK$ Issued and to be issued, fully paid or credited as fully paid 1,000 Shares in issue as at the date of this document 10 [REDACTED] Shares to be issued pursuant to the Capitalisation Issue [REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED] [REDACTED] Total: [REDACTED] Shares [REDACTED] ASSUMPTIONS The above table assumes that the Capitalisation Issue and the [REDACTED] become unconditional and the issue of Shares pursuant thereto is made as described herein. It takes no account of Shares which may be allotted and issued upon the exercise of any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by our Company pursuant to the general mandates for the allotment and issue or repurchase of Shares granted to our Directors as referred to below or otherwise. MINIMUM PUBLIC FLOAT The minimum level of public float to be maintained by our Company at all times after [REDACTED] under the Listing Rules is 25% of its share capital in issue from time to time. The [REDACTED] represent not less than 25% of the issued share capital of our Company upon the [REDACTED]. RANKING The Shares are ordinary shares in the share capital of our Company and rank equally in all respects with all other Shares currently in issue or to be issued as mentioned in this document and, in particular, will rank in full for all dividends or other distributions thereafter declared, made or paid on the Shares in respect of a record date which falls after the date of this document save for any entitlement under the Capitalisation Issue. 185

193 SHARE CAPITAL SHARE OPTION SCHEME Our Company has conditionally adopted the Share Option Scheme on [ ], the principal terms of which are summarised in the paragraph headed Statutory and General Information D. Share Option Scheme in Appendix IV to this document. As at the Latest Practicable Date, no option had been granted under the Share Option Scheme. CAPITALISATION ISSUE Pursuant to the written resolutions of the Shareholders passed on [ ], subject to the share premium account of our Company being credited as a result of the issue [REDACTED] pursuant to the [REDACTED], our Directors were authorised to allot and issue a total of [REDACTED] Shares credited as fully paid to the holders of shares on the register of members of our Company at the close of business on [ ] (or as they may direct) in proportion to their respective shareholdings (save that no Shareholder shall be entitled to be allotted or issued any fraction of a Share) by way of Capitalisation of the sum of HK$[REDACTED] standing to the credit of the share premium account of our Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the existing issued Shares (other than the right to participate in the Capitalisation Issue). GENERAL MANDATE TO ISSUE SHARES Subject to the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to allot, issue and deal with unissued Shares with an aggregate nominal value of not exceeding 20% of the aggregate nominal amount of the share capital of our Company in issue as enlarged by the Capitalisation Issue and the [REDACTED] (without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon the exercise of any option which may be granted under the Share Option Scheme) and the aggregate nominal value of the share capital of our Company repurchased by our Company (if any) pursuant to the general mandate to repurchase Shares as described below. Our Directors may, in addition to the Shares which they are authorised to issue under the mandate, allot, issue and deal in the Shares pursuant to a rights issue, an issue of Shares pursuant to the exercise of subscription rights attaching to any warrants or convertible securities of our Company, scrip dividends or similar arrangements or the exercise of options granted under the Share Option Schemes or any other option scheme or similar arrangement for the time being adopted. This mandate shall remain in effect until whichever is the earliest of: (i) (ii) the conclusion of the next annual general meeting of our Company; the expiration of the period within which the next annual general meeting of our Company is required to be held by the Articles of Association or any other applicable laws of the Cayman Islands; or (iii) the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing such mandate. 186

194 SHARE CAPITAL For further details of the general mandate for the allotment and issue of Shares, please refer to Statutory and General Information A. Further information about our Company 3. Written resolutions of our Shareholders in Appendix IV to this document. GENERAL MANDATE TO REPURCHASE SHARES Subject to the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with an aggregate nominal value of not more than 10% of the aggregate nominal amount of the share capital of our Company in issue, as enlarged by the [REDACTED] and the Capitalisation Issue (without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon the exercise of any options that may be granted under the Share Option Scheme). This mandate relates only to repurchases made on the Stock Exchange or on any other stock exchange on which the Shares are [REDACTED] (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are made in accordance with all applicable laws and the Listing Rules. A summary of the relevant Listing Rules is set out in Statutory and General Information A. Further information about our Company 6. Repurchase by our Company of its own securities in Appendix IV to this document. This mandate shall remain in effect until whichever is the earliest of: (i) (ii) the conclusion of the next annual general meeting of our Company; the expiration of the period within which the next annual general meeting of our Company is required to be held by the Articles of Association or any other applicable laws of the Cayman Islands; or (iii) the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing such mandate. For further details of the general mandate for the repurchase of Shares, see Statutory and General Information A. Further information about our Company 3. Written resolutions of our Shareholders in Appendix IV to this document. SHAREHOLDERS GENERAL MEETING Please refer to Appendix III to this document in respect of circumstances under which general meeting is required. 187

195 WAIVER FROM STRICT COMPLIANCE WITH THE REQUIREMENTS UNDER THE LISTING RULES In preparation for the [REDACTED], our Company has sought the following waiver from strict compliance with the relevant provisions of the Listing Rules: MANAGEMENT PRESENCE Pursuant to Rule 8.12 of the Listing Rules, we must have a sufficient management presence in Hong Kong. This normally means that at least two of our executive Directors must be ordinarily resident in Hong Kong. The principal business operations, offices and factories of our Group are primarily located, managed and conducted in the Malaysia, and our senior management members are and will therefore continue to be based in the Malaysia. For the purpose of the proposed [REDACTED], our Company will establish a principal place of business in Hong Kong and register as a non-hong Kong company under Part 16 of the Companies Ordinance before the [REDACTED]. However, all our executive Directors are not ordinarily residents in Hong Kong. Our Company does not and will not in the foreseeable future have two executive Directors residing in Hong Kong for the purposes of satisfying the requirement under Rule 8.12 of the Listing Rules. As a result, we have applied to the Stock Exchange for, and the Stock Exchange [has granted], a waiver from strict compliance with Rule 8.12 of the Listing Rules, on the following conditions to ensure that regular and effective communication is maintained between the Stock Exchange and our Company: 1. our Company will appoint two authorised representatives pursuant to Rule 3.05 of the Listing Rules, who will act as our Company s principal channel of communication with the Stock Exchange. Our Company will appoint Mr. Chan Hin Yeung, the company secretary of our Company, who is ordinarily resident in Hong Kong, and Mr. Ng, as the two authorised representatives of our Company (the Authorised Representatives ). Each of the Authorised Representatives will be available to meet with the Stock Exchange in Hong Kong within a reasonable period of time upon request and will be readily contactable by their respective mobile phone number, office phone number, address and facsimile number. Each of the two Authorised Representatives has been duly authorised to communicate on our behalf with the Stock Exchange. Our Company will keep the Stock Exchange up to date in respect of any change to such details; 2. both of the Authorised Representatives of our Company will have means to contact all members of the Board (including the independent non-executive Directors) and of the senior management team promptly at all times as and when the Stock Exchange wishes to contact our Directors and senior management team for any matters; 3. to enhance the communication between the Stock Exchange, the Authorised Representatives and our Directors, our Company will implement a policy whereby (a) each Director will have to provide his/her respective mobile phone numbers, office phone numbers, fax numbers and addresses to the authorised representatives; (b) each Director will endeavour to provide valid phone number or means of communication to the authorised representatives when he/she is traveling; and (c) each Director will provide his/her mobile phone numbers, office phone numbers, fax numbers and addresses to the Stock Exchange; 188

196 WAIVER FROM STRICT COMPLIANCE WITH THE REQUIREMENTS UNDER THE LISTING RULES 4. our Company shall promptly inform the Stock Exchange of any changes on the Authorised Representatives and/or the compliance advisor in accordance with the requirements of the Listing Rules; 5. if circumstances require, meetings of the Board can be summoned and held in such manner as permitted under the Articles of Association at short notice to discuss and address any issue which the Stock Exchange is concerned in a timely manner; 6. our Company will appoint a compliance adviser pursuant to Rule 3A.19 of the Listing Rules who will have access at all times to our Authorised Representatives, Directors and senior management to ensure that they are in a position to provide prompt responses to any query or request from the Stock Exchange in respect of our Company and will act as an additional channel of communication with the Stock Exchange for a period commencing on the [REDACTED] and ending on the date on which our Company distributes the annual report for the first full financial year after the [REDACTED] (the Engagement Period ) in accordance with Rule of the Listing Rules; 7. our Company will ensure that during the Engagement Period, the Compliance Adviser has access at all times promptly to the Authorized Representatives, Directors and other senior officers who will provide to the Compliance Adviser such information and assistance as the Compliance Adviser may reasonably require in connection with the performance of the Compliance Adviser s duties; 8. our Company will also appoint other professional advisers (including its legal advisers in Hong Kong), if necessary, after the [REDACTED] to assist our Company in addressing any enquiries which may be raised by the Stock Exchange and to ensure that there will be prompt and effective communication with the Stock Exchange; and 9. each of our Directors (including the independent non-executive Directors) who is not ordinarily resident in Hong Kong possesses or is able to apply for valid travel documents to visit Hong Kong and will be able to meet with the relevant members of the Stock Exchange within a reasonable period of time, when required. 189

197 SUBSTANTIAL SHAREHOLDERS SUBSTANTIAL SHAREHOLDERS So far as our Directors are aware, immediately following the completion of the Capitalisation Issue and the [REDACTED] (without taking into account the Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued upon to the exercise of any options that may be granted under the Share Option Scheme), each of the following persons will have an interest or short position in the Shares or underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who are, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group: Name Capacity/Nature of Interest Number of Shares held immediately after completion of the [REDACTED] and the Capitalisation Issue (Note 1) Approximate percentage of interests in our Company immediately after completion of the [REDACTED] and the Capitalisation Issue Decade Lion Beneficial owner [REDACTED] Ordinary Shares (L) Mr. Ng (Note 2) Interest in a controlled corporation [REDACTED] Ordinary Shares (L) Ms. Sin (Note 3) Interest of spouse [REDACTED] Ordinary Shares (L) [REDACTED]% [REDACTED]% [REDACTED]% Notes: 1. The letter (L) denotes the person s long interest in our Shares. 2. Decade Lion is a company incorporated in the BVI and is wholly-owned by Mr. Ng. Mr. Ng is deemed to be interested in all the Shares held by Decade Lion for the purpose of the SFO. 3. Ms. Sin is the spouse of Mr. Ng and is deemed, or taken to be interested in all Shares in which Mr. Ng has interest under the SFO. 190

198 SUBSTANTIAL SHAREHOLDERS Save as disclosed herein, our Directors are not aware of any person who will, immediately following the completion of the Capitalisation Issue and the [REDACTED] (without taking account of the Shares which may be issued pursuant to the exercise of the [REDACTED] or any Shares which may be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme), have an interest or short position in the Shares or underlying Shares which fail to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of our Group. 191

199 FINANCIAL INFORMATION The following discussion and analysis should be read in conjunction with our audited combined financial information for the Track Record Period and the accompanying notes ( Financial Information ), included in the Accountants Report in Appendix I to this document. Our Financial Information and combined financial statements have been prepared in accordance with IFRS, which may differ in certain respects from generally accepted accounting principles in other countries. Potential investors should also read the entire Accountants Report in Appendix I to this document and should not rely merely on the information contained in this section. The discussion and analysis in this section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those projected. Factors that might cause our future results to differ significantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this document, particularly in Risk Factors of this document. Discrepancies between totals and sums of amounts listed herein in any table or elsewhere in this document may be due to rounding. Our financial year begins on 1 January and ends on 31 December. All references to FY2015, FY2016 and FY2017 mean the financial years ended 31 December 2015, 2016 and 2017, respectively. OVERVIEW Our Group mainly (i) manufacture and sell cold-rolled steel bars and steel wire products; and (ii) process and sell hot-rolled steel bars in Malaysia. To complement our core business, we also engage in trading of building materials and accessories. During the Track Record Period, our total revenue was approximately RM160.4 million, RM187.1 million, RM306.8 million and RM132.1 million, respectively. Our adjusted net profit (excluding the [REDACTED] expenses) for the same period was approximately RM9.4 million, RM10.3 million, RM13.3 million and RM5.2 million, respectively. BASIS OF PREPARATION The Financial Information is presented in RM, which is also the functional currency of companies comprising our Group and was prepared and presented in accordance with IFRS. Prior to the Reorganisation, EC Excel Wire, Arena Metal Resources, UVM Excel, Klang Valley Wire and Klaas Metal (the Operating Subsidiaries ) were controlled by Mr. Ng. As part of the Reorganisation, Decade Lion, Precise One, Good Favour, EC Excel Wire Holdings and our Company, were incorporated and interspersed between the Operating Subsidiaries and Mr. Ng. Since then, our Company became the holding company of our Group on 18 May Our Group comprising the Company, Good Favour, Precise One, EC Excel Wire Holdings and the Operating Subsidiaries, resulting from the Reorganisation, has always been under the common control of Mr. Ng during the Track Record Period and before and after the Reorganisation. Therefore, it is regarded as a continuing entity and the Financial Information has been prepared as if our Company had always been the holding company of our Group. 192

200 FINANCIAL INFORMATION Our combined statements of profit or loss and other comprehensive income, combined statements of changes in equity and combined statements of cash flows as set out in the Accountants Report in Appendix I to this document include the combined results of the Operating Subsidiaries now comprising our Group for the Track Record Period (or where the companies were incorporated at a date later than 1 January 2015, for the period from the date of incorporation to 30 April 2018) as if the current group structure had been in existence throughout the Track Record Period. Our combined statements of financial position as at 31 December 2015, 2016, 2017 and 30 April 2018 as set out in the Accountants Report in Appendix I to this document have been prepared to present the financial position of our Group as at the respective dates as if the current group structure had occurred at the beginning of the Track Record Period. Please refer to note 1 to the Accountants Report in Appendix I to this document for further details of our basis of preparation and the paragraph headed History, Reorganisation and Corporate Structure Reorganisation in this document for further details of our Reorganisation. KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION Our financial condition, results of operations and the period to period comparability of our financial results are principally affected by the following factors: Market demand The demand for steel bar products and steel wire products is driven by the extent of property development and construction projects. As all our revenue from sales of steel bar products and steel wire products is derived from Malaysia, our profitability is dependent on the extent of property development and construction projects in Malaysia. The timing, size and nature of these projects will, on the other hand, be determined by a number of factors such as the Malaysian government s spending budget on construction projects, the investment of property developers and the general conditions and prospects of the local economy. According to the SMITH ZANDER Report, the value of projects awarded in Malaysia grew from approximately RM99.5 billion in 2011 to approximately RM229.0 billion in 2016 at a CAGR of approximately 18.1%. SMITH ZANDER also forecasts the value of projects awarded to grow from approximately RM249.0 billion in 2017 to approximately RM375.5 billion in 2021 at a CAGR of approximately 10.8%. Our Directors believe that our Group will benefit from the continuous growth in the demand for our products. 193

201 FINANCIAL INFORMATION Production capacity and utilisation rate For FY2015, FY2016, FY2017 and the four months ended 30 April 2018, the average utilisation rate of steel bar products was approximately 57.2%, 49.0%, 80.1%, and 95.3% respectively, while the average utilisation rate of steel wire products was approximately 68.5%, 98.7%, 76.9% and 67.4%, respectively. It is our strategic plan to set up the New Kelantan Plant and the New Selangor Production Facility for the production of steel bar products and steel wire products in order to meet the increasing demand for steel bar products and steel wire products from domestic Malaysian market and to capture future growth opportunities in the construction industry in Malaysia. Upon completion of the New Kelantan Plant and the New Selangor Production Facility and upon the full ramp-up of the machinery and equipment, our estimated annual production capacity of steel bar products and steel wire products will increase by approximately 339,998 MT per year and 26,057 MT per year, respectively. Accordingly, we expect to (i) benefit from economies of scale; (ii) increase our customer base; and (iii) gain market share with the increase in our production capacity. However, we cannot assure our profit will increase solely because of the expected increase in our production capacity as it will also be subject to other factors. For further details of our expansion plan, please refer to the paragraph headed Business Business Strategies in this document. Pricing Our product pricing strategy and product mix impacted our results of operations historically and are expected to directly affect our revenue, financial performance in the future. We generally price our products on a cost-plus basis and different products are priced at different unit prices based on various factors, including (i) the prices of the raw materials; (ii) in respect of customised products (including cut-to-size wire meshes), the product specifications, functional and quality requirements and complexity of the production process and costs, sales volume, lead time and delivery schedules required by our customers; (iii) the competitive landscape of the products; (iv) prices of our competitors products; and (v) payment terms. It is important for us to adjust our product mix based on changing market trends. We may not be able to optimise our product mix and set the selling prices at desired levels for some of all of our products in response to the changes in market trends. If there is any significant change in our product mix and selling prices, our overall gross profit margin and profit margin will be affected by both any change in revenue attributable to each product, and any change in the gross profit margin of each product. As a result, our financial condition and results of operations may be materially and adversely affected. Please refer to the paragraph headed Discussion of selected combined statements of profit or loss and other comprehensive income items Sensitivity analysis of average selling price in this section for further details of our sensitivity analysis of the average selling prices of our products. 194

202 FINANCIAL INFORMATION Cost of raw materials Our cost of sales primarily comprised our cost of raw materials which mainly consisted of unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires during the Track Record Period. Our cost of raw materials amounted to approximately RM130.0 million, RM155.4 million, RM264.7 million and RM117.0 million for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively (representing approximately 95.1%, 97.3%, 96.8% and 98.8% of our total cost of sales, respectively). The prices of the raw materials that we use to produce our steel bar products and steel wire products are largely dependent on market forces, such as fluctuations in commodity price, market supply and demand, and logistics and transport costs, which are beyond our control, as well as our bargaining power over suppliers. Please refer to the paragraph headed Business Inventory management Raw materials in this document for our further details of our raw materials. It is important for us to obtain sufficient supply of raw materials from our suppliers at all times and at competitive prices for our production. Since the selling prices of our products are determined on a cost-plus basis, the revenue as well as the gross profit from the sale of our products will also be affected by the fluctuations in the purchase prices of our raw materials. However, if there is a substantial increase in the purchase prices of our raw materials, we may not be able to pass all of the increment in our cost of raw materials to the selling prices of our products and our gross profit margin may decrease accordingly. As a result, our business and results of operations may be materially and adversely affected. Please refer to the paragraph headed Discussion of selected combined statements of profit or loss and other comprehensive income items Cost of sales Sensitivity analysis of cost of raw materials in this section for further details of our sensitivity analysis of our cost of raw materials. Reliance on key suppliers We depend on a limited number of suppliers for the supply of major raw materials for our products. Thus, our ability to keep long-term and stable business relationships with our key suppliers to maintain sufficient supply of our raw materials is crucial for our business development and results of operations. During the Track Record Period, our five largest suppliers supplied us approximately 74.5%, 67.0%, 80.1% and 78.6% of our total purchases, respectively. Please refer to the paragraph headed Business Suppliers in this document for further details of our five largest suppliers. If we cannot keep good business relationships with our key suppliers in the future or the supply from these key suppliers is interrupted due to any circumstances, it may be difficult for us to secure alternative suppliers with similar or favourable terms in a timely manner, which may cause the interruption of the production or the sale of our products. As a result, our business, financial condition and results of operations may be materially and adversely affected. 195

203 FINANCIAL INFORMATION CRITICAL ACCOUNTING POLICIES AND ESTIMATES We have identified various accounting policies that are significant to the preparation of our Financial Information. These significant accounting policies are essential for understanding our financial condition and results of operations which are disclosed in note 3 to the Accountants Report in Appendix I to this document. In the application of our accounting policies, our Directors are required to make judgements, estimates and assumptions that affect our revenues, expenses, assets and liabilities, and their accompanying disclosures. Uncertainty about these assumptions and estimates can result in outcomes that require a material adjustment to our revenues, expenses, assets or liabilities in the future. The estimates and underlying assumptions are reviewed by our management on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The key assumptions concerning the future and other key sources to estimate uncertainty as at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of our assets and liabilities within the next financial year, are set out in note 4 to the Accountants Report in Appendix I to this document. The following paragraphs discuss, among others, our critical accounting policies, estimates and judgements applied in the preparation of our Financial Information: Revenue recognition Revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Specifically, the Group uses a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to customers. 196

204 FINANCIAL INFORMATION Control of the asset may be transferred over time or at a point in time. Control of the asset is transferred over time if: the customer simultaneously receives and consumes the benefits provided by the Group s performance as the Group performs; or the Group s performance creates and enhances an asset that the customer controls as the Group performs; or the Group s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. If the control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the asset. For sales of goods to which the control of goods is transferred at a point in time, revenue is recognised when the customer obtains the control of the goods and the Group has present right to payment and the collection of the consideration is probable. Inventories Our inventories are stated at the lower of cost and net realisable value. Our cost of inventories are determined on a weighted average method. Net realisable value is the estimated selling price for our inventories less all estimated costs of completion and costs necessary to make the sale. Our inventories are reviewed periodically to assess whether any write-down or reversal of write-down of our inventories is required. The estimate is based on estimation for the net realisable value of our inventories. Financial instruments Financial assets IAS 39 Accounting policy applicable before 1 January 2018 Financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount due from a director, amount due from a related company, pledged bank deposits and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment. 197

205 FINANCIAL INFORMATION Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. Objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation. Objective evidence of impairment for a portfolio of receivables could include our Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognised is the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. IFRS 9 Accounting policy applicable after 1 January 2018 In the four months ended 30 April 2018, our Group has applied IFRS 9 and the related consequential amendments to other IFRSs. IFRS 9 introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities, 2) expected credit losses ( ECL ) for financial assets and 3) general hedge accounting. 198

206 FINANCIAL INFORMATION Our Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9, i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1 January The difference between carrying amounts as at 31 December 2017 and the carrying amounts as at 1 January 2018 are recognised in the opening retained profits and other components of equity, without restating comparative information. Classification and measurement of financial assets All financial assets and financial liabilities continue to be measured on the same bases as were previously measured under IAS 39. Impairment of financial assets As at 1 January 2018, the Directors reviewed and assessed our Group s existing financial assets for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of IFRS 9. Our Group applies the IFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables. To measure the ECL, trade receivables have been grouped based on shared credit risk characteristics. Please refer to note 3 and 4 to the Accountants Report in Appendix I to this document for further details of IFRS

207 FINANCIAL INFORMATION OUR RESULTS OF OPERATIONS The following table includes items from our combined statements of profit or loss and other comprehensive income for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, which has been extracted from, and should be read in conjunction with the Accountants Report in Appendix I to this document. For the four months For the year ended 31 December ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Revenue 160, , ,813 90, ,139 Cost of sales (136,719) (159,758) (273,490) (79,592) (118,414) Gross profit 23,648 27,380 33,323 11,233 13,725 Other income and expenses Other gains and losses (161) (46) 60 Impairment loss on trade receivables, net of reversal (178) (490) (85) (26) Selling and distribution expenses (5,460) (6,045) (6,937) (2,351) (3,156) Administrative expenses (3,804) (5,426) (5,750) (2,152) (2,488) [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Finance costs (2,228) (2,513) (3,693) (951) (1,488) Profit before tax 12,251 13,548 17,522 5,949 5,053 Income tax expense (2,893) (3,266) (4,243) (1,190) (1,946) Profit and total comprehensive income for the year/period 9,358 10,282 13,279 4,759 3,107 Profit and total comprehensive income for the year/period attributable to: Owners of the Company 8,444 9,586 12,657 4,642 3,009 Non-controlling interests ,358 10,282 13,279 4,759 3,

208 FINANCIAL INFORMATION DECREASING TREND IN GROSS PROFIT MARGIN DURING THE TRACK RECORD PERIOD During the Track Record Period, we recorded the gross profit margin of approximately 14.7%, 14.6%, 10.9% and 10.4%, respectively, mainly attributable to the following reasons: Increase in our cost of raw material In FY2015, FY2016, FY2017 and the four months ended 30 April 2018, our Group s average purchase prices of unprocessed hot-rolled steel bars and low carbon wire rods were approximately RM1,515.4 per MT and RM1,549.2 per MT, RM1,671.3 per MT and RM1,730.8 per MT, RM2,087.5 per MT and RM2,306.3 per MT and RM2,378.7 per MT and RM2,596.3 per MT, respectively. Also, the monthly average prices of unprocessed hot-rolled steel bars and low carbon wire rods fluctuated significantly between FY2015 and FY2017, of which the monthly average prices of unprocessed hot-rolled steel bars fluctuated between approximately RM1,287.8 per MT and RM2,351.7 per MT, and the monthly average prices of low carbon wire rods fluctuated between approximately RM1,520 per MT and RM2,625 per MT. Subject to the continuous increase and fluctuation in the prices of raw materials during the Track Record Period, our pricing strategy and policy may not be effective to ensure our timely response to market price changes. Particularly, for our hot-rolled steel bars which have a standardized processing procedure, our customers are very price-sensitive and we were unable to fix a selling price with high gross profit margin. Expansion in our sales network in Central Region and East Coast Region by offering more attractive price to customers with shorter credit terms Our Group strategically expanded our sales network in Central Region and East Coast Region by establishing or acquiring Klang Valley Wire, Klaas Metal and UVM Excel in 2015 and Our number of customer in Central Region and East Coast Region increase from 663 in FY2015, to 805 in FY2016 and further to 977 in FY2017. Meanwhile, in order to boost our revenue and better utilise our production capacity, we offered more attractive prices to customers who order in bulk with credit terms of 14 days after considering such customers financial and liquidity performance. Despite the above, our Directors believe that our Group s gross profit margin will remain stable in the coming years for the reasons set out below. (i) In 2018, our Group s monthly average purchase prices of unprocessed hot-rolled steel bars and low carbon wire rods were approximately RM2,401.4 per MT and RM2,615.0 per MT in January 2018, RM2,405.2 per MT and RM2,610.0 per MT in February 2018, RM2,360.3 per MT and RM2,610.0 per MT in March 2018, RM2,359.6 per MT and RM2,550.0 per MT in April 2018 and RM2,291.9 per MT and RM2,536.1 per MT in May 2018, respectively, which reflected that the raw material price has become stabilized since 2018 and our exposure to impact on the price fluctuation of the cost of raw materials can be reduced; and 201

209 FINANCIAL INFORMATION (ii) Since the end of 2017, our fully-automated wire mesh machine has started its operation by phase. As the machine will focus on manufacturing the wire meshes in a more efficient way and thus enhance the productivity, it will enable us to (i) handle more orders from existing customers as well as to approach new customers with orders for wire meshes; and (ii) reduce the production cost and time once the machine reached the optimised production level. Our Directors believe that if our product mix changes and wire meshes with higher gross profit margin gain a larger proportion in our total revenue, our overall gross profit margin will increase. Based on the above and the fact that our Group has (i) a proven track record that we were able to maintain an overall positive gross profit margin; (ii) an upward trend in revenue during the Track Record Period; and (iii) over 900 recurring customers which contributed approximately RM143.3 million, RM173.7 million, RM275.0 million and RM125.1 million of our revenue, respectively, during the Track Record Period, our Directors believe that our Group s business is able to sustain in the coming years. DISCUSSION OF SELECTED COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ITEMS Revenue We generate revenue primarily from the sales of various types of steel bar products and steel wire products manufactured or processed by us. Our steel bar products mainly consist of (i) hot-rolled steel bars and (ii) cold-rolled steel bars. Our steel wire products mainly consist of (i) wire meshes, which include reinforced standard and cut-to-size concrete wire meshes and (ii) fencing products, which include barbed wires, chain-link fences and welded fences. To complement our core business, we also engage in the trading of building materials and accessories such as unprocessed hot-rolled bars, prestressed concrete steel strand and cement to our customers. Please refer to the section Business Our products in this document for further details of our products. Our total revenue increased from approximately RM160.4 million in FY2015 to approximately RM187.1 million in FY2016, primarily driven by (i) the increase in our revenue derived from the sale of our wire meshes which include standard wire meshes and cut-to-size wire meshes; and (ii) the increase in our sales in Central Region. Our total revenue further increased to approximately RM306.8 million in FY2017, which was mainly attributable to (i) the significant increase in our revenue derived from the sale of our steel bar products; (ii) the increase in our revenue derived from the trading of building materials and accessories; and (iii) the rapid growth of our sales in East Coast Region. Our total revenue increased from approximately RM90.8 million for the four months ended 30 April 2017 to approximately RM132.1 million for the four months ended 30 April 2018 primarily due to (i) the increase in sales volume of our hot-rolled steel bars and cold-rolled steel bars, resulting from the increase in quantity of products purchased by our existing customers; and (ii) the increase in sales volume of our standard wire meshes and cut-to-size wire meshes, resulting from our increase in efficiency and productivity after the fully-automated wire mesh machine has commenced its operation by phase since the end of FY

210 FINANCIAL INFORMATION Revenue by product type The following tables set out the breakdowns of our revenue by (i) product type and (ii) sales volume and average selling prices of our major products for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products Hot-rolled steel bars 77, , , , , Cold-rolled steel bars 15, , , , , Subtotal 92, , , , , Manufacturing and sale of steel wire products Standard wire meshes 35, , , , , Cut-to-size wire meshes 4, , , , , Fencing products 3, , , Subtotal 44, , , , , Trading of building materials and accessories 23, , , , , Total 160, , , , , For the year ended 31 December For the four months ended 30 April Average Average Average Average selling Sales selling Sales selling Sales selling Sales price volume price volume price volume price volume Average selling price Sales volume MT/piece RM MT/piece RM MT/piece RM MT/piece RM MT/piece RM (Note) (Note) (Note) (Note) (Note) Steel bar products Hot-rolled steel bars 44,277 1,742 39,130 1,860 64,537 2,282 20,270 2,246 25,103 2,576 Cold-rolled steel bars 8,418 1,818 6,488 1,940 9,589 2,352 3,396 2,295 2,940 2,651 Steel wire products Standard wire meshes 14,428 2,460 20,171 2,728 18,718 3,303 6,290 3,228 7,596 3,598 Cut-to-size wire meshes 1,760 2,696 4,799 2,917 3,073 3, ,335 2,001 3,910 Fencing products 830 4, , , , ,650 Trading products Unprocessed hot-rolled steel bars 5,435 1,739 4,577 1,859 13,115 2,093 2,646 1,949 5,892 2,318 Other building materials and accessories 702, , ,229, , , Note: The units of our products are measured in MT, except for the units of other building materials and accessories are measured in piece. 203

211 FINANCIAL INFORMATION Steel bar products Steel bar products is our major product during the Track Record Period. A majority of our revenue, which accounted for approximately 57.6%, 45.6%, 55.4% and 54.8% of our total revenue during the Track Record Period, respectively, was derived from the sale of our steel bar products. Our revenue from the sale of steel bar products decreased by approximately RM7.1 million, or approximately 7.7%, from approximately RM92.5 million in FY2015 to approximately RM85.4 million in FY2016, primarily attributable to the decrease in sales volume of both hot-rolled steel bars and cold-rolled steel bars. The sales volume of our hot-rolled steel bars and cold-rolled steel bars decreased from approximately 44,277 MT and 8,418 MT in FY2015 to approximately 39,130 MT and 6,488 MT in FY2016 respectively, mainly due to the Group s shift of focus to the manufacturing of steel wire products which require more complex manufacturing procedures, in order to capture the growth of demand for wire meshes. Our revenue from the sale of steel bar products increased by approximately RM84.4 million, or approximately 98.9%, from approximately RM85.4 million in FY2016 to approximately RM169.8 million in FY2017, primarily attributable to the increase in sales of both hot-rolled steel bars and cold-rolled steel bars. Such increase was mainly due to (i) the increase in average selling prices of our hot-rolled steel bars and cold-rolls steel bars from approximately RM1,860 per MT and RM1,940 per MT in FY2016 to approximately RM2,282 per MT and RM2,352 per MT in FY2017, resulting from the increased raw material prices in FY2017; and (ii) the increase in sales volume of our hot-rolled steel bars and cold-rolled steel bars from approximately 39,130 MT and 6,488 MT in FY2016 to approximately 64,537 MT and 9,589 MT in FY2017 respectively, resulting from the increase in the quantity of steel bar products ordered by our existing customers and the increased number of new customers, particular in Central Region and East Coast Region. Our revenue from the sale of steel bar products increased by approximately RM19.2 million, or approximately 35.9%, from approximately RM53.3 million for the four months ended 30 April 2017 to approximately RM72.5 million for the four months ended 30 April 2018, primarily attributable to the increase in sales volume of our hot-rolled steel bars, resulting from the increase in quantity ordered by our existing customers. We have strategically offered more attractive prices to customers who order in bulk with shorter credit periods, in order to expand our sales network in Central Region and East Coast Region in the four months ended 30 April Steel wire products Wire meshes During the Track Record Period, the revenue contribution from the sale of our wire meshes represented approximately 25.1%, 36.9%, 23.8% and 26.6% of our total revenue, respectively. 204

212 FINANCIAL INFORMATION Our revenue from the sale of wire meshes increased by approximately RM28.8 million, or approximately 71.5%, from approximately RM40.2 million in FY2015 to approximately RM69.0 million in FY2016, primarily attributable to (i) the increase in sales volume of our standard wire meshes and cut-to-size wire meshes from approximately 14,428 MT and 1,760 MT in FY2015 to approximately 20,171 MT and 4,799 MT in FY2016 respectively, resulting from the growth of sales demand of the standard wire meshes and cut-to-size wire meshes used in construction sites; (ii) the increase in average selling prices of our standard wire meshes and cut-to-size wire meshes from approximately RM2,460 per MT and RM2,696 per MT in FY2015 to approximately RM2,728 per MT and RM2,917 per MT in FY2016, resulting from the increased raw material prices in FY2016. Our revenue from the sale of wire meshes increased by approximately RM3.9 million, or approximately 5.6%, from approximately RM69.0 million in FY2016 to approximately RM72.9 million in FY2017, primarily attributable to the increase in sales of standard wire meshes by approximately RM6.8 million, partially offset by the decrease in sales of cut-to-size wire meshes by approximately RM2.9 million. The increase in sales of standard wire meshes was mainly due to the increase in the average selling price of our standard wire meshes from approximately RM2,728 per MT in FY2016 to approximately RM3,303 per MT in FY2017, resulting from the increased raw material prices in FY2017. Our revenue from the sale of wire meshes increased by approximately RM12.1 million, or approximately 52.5%, from approximately RM23.1 million in the four months ended 30 April 2017 to approximately RM35.2 million in the four months ended 30 April 2018, primarily attributable to (i) the increase in sales volume of our standard wire meshes, resulting from the stable growth of demand from our customers; and (ii) the increase in sales volume of our cut-to-size wire meshes, resulting from our increase in efficiency and productivity after the fully-automated wire mesh machine has commenced its operation by phase since the end of FY2017. Fencing products During the Track Record Period, the revenue contribution from the sale of our fencing products represented approximately 2.4%, 1.5%, 1.0% and 0.7% of our total revenue, respectively. The revenue from the sale of fencing products remained relatively stable during the Track Record Period. Trading of building materials and accessories During the Track Record Period, the revenue contribution from the trading of building materials and accessories represented approximately 14.9%, 16.0%, 19.8% and 17.9% of our total revenue, respectively. Our revenue from the trading of building materials and accessories increased by approximately RM6.0 million, or approximately 25.2%, from approximately RM23.9 million in FY2015 to approximately RM29.9 million in FY2016, primarily attributable to (i) the increase in revenue from the trading of cement by approximately RM2.0 million from FY2015 to FY2016; and (ii) we commenced the trading of prestressed concrete steel strand in FY2016, with the revenue amounted to approximately RM1.0 million. 205

213 FINANCIAL INFORMATION Our revenue from the trading of building materials and accessories further increased by approximately RM31.1 million, or approximately 103.9%, from approximately RM29.9 million in FY2016 to approximately RM61.0 million in FY2017, primarily attributable to (i) the significant increase in revenue from the trading of unprocessed hot-rolled steel bars by approximately RM18.9 million, resulting from (a) the increase in sales volume due to the increase in quantity of unprocessed hot-rolled steel bars purchased by our existing customers and the increased number of new customers; and (b) the increase in average selling price of our unprocessed hot-rolled steel bars in FY2017 due to the increased purchase prices from suppliers; and (ii) the increase in revenue from the trading of cement and prestressed concrete steel strand resulting from the continuous growth in demand. Our revenue from the trading of building materials and accessories increased from approximately RM13.5 million for the four months ended 30 April 2017 to approximately RM23.6 million for the four months ended 30 April 2018, primarily attributable to the increase in revenue from the trading of unprocessed hot-rolled steel bars by approximately RM8.5 million, resulting from the increase in both sales volume and average selling price of our unprocessed hot-rolled steel bars. Revenue by customer type The following table sets out a breakdown of our revenue by customer type for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Building material trading companies 62, , , , , Construction contractors 76, , , , , Hardware shops , , , , Property developers 3, , , , , Total 160, , , , , Building material trading companies were our second largest customer type in FY2015 and FY2016 and were our largest customer type in FY2017 and the four months ended 30 April 2018, which contributed approximately 38.8%, 43.2%, 44.3% and 51.6% of our total revenue during the Track Record Period, respectively. Construction contractors were our largest customer type in FY2015 and FY2016 and our second largest customer type in FY2017 and the four months ended 30 April 2018, which contributed approximately 47.8%, 44.3%, 40.8% and 34.3% of our total revenue during the Track Record Period, respectively. The remaining portion of our sales was generated from our hardware shops and property developers customers, which in aggregate contributed approximately 13.4%, 12.5%, 14.9% and 14.1% of our total revenue during the Track Record Period, respectively. 206

214 FINANCIAL INFORMATION Our revenue from building material trading companies increased from approximately RM62.2 million in FY2015, to approximately RM80.9 million in FY2016, and further to approximately RM135.9 million in FY2017, which was mainly due to (i) the continuous growth in sales volume from Customer C, our largest customer in FY2017 and the four months ended 30 April 2018, in respect of our established business relationship; and (ii) the increase in our selling prices resulting from the increased raw material prices from FY2015 to FY2017. Our revenue from construction contractors increased from approximately RM76.7 million in FY2015, to approximately RM83.0 million in FY2016, and further to approximately RM125.2 million in FY2017, which was mainly due to (i) the increase in quantity of steel bar products purchased by our construction contractors customers, resulting from the satisfaction from existing customers with our Group s product quality and delivery time and these customers eventually commenced bulk purchases; and (ii) the increase in sales volume of unprocessed hot-rolled steel bars purchased by our existing customers and the increased number of new customers. Our revenue from building material trading companies and construction contractors increased from approximately RM35.4 million and RM43.4 million respectively for the four months ended 30 April 2017, to approximately RM68.2 million and RM45.3 million respectively for the four months ended 30 April 2018, mainly due to our strategy to expand the sales network in Central Region and East Coast Region by offering more attractive selling price to customers who order in bulk with shorter credit periods. Revenue by geographical location The following table sets out a breakdown of our revenue by geographical location of our customers for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Central Region 103, , , , , East Coast Region 43, , , , , Southern Region 11, , , , , Northern Region 2, , , , , Total 160, , , , , Central Region was our largest market in FY2015, FY2016 and FY2017 and our second largest market for the four months ended 30 April 2018, which contributed approximately 64.4%, 63.1%, 50.1% and 42.5% of our total revenue during the Track Record Period, respectively. East Coast Region was our second largest market in FY2015, FY2016 and FY2017 and our largest market for the four months ended 30 April 2018, which contributed approximately 26.9%, 26.4%, 42.5% and 49.2% of our total revenue during the Track Record Period, respectively. The remaining portion of our sales was generated from our customers located in Southern Region and Northern Region, which in aggregate contributed approximately 8.7%, 10.5%, 7.4% and 8.3% of our total revenue during the Track Record Period, respectively. 207

215 FINANCIAL INFORMATION Our revenue from Central Region increased from approximately RM103.3 million in FY2015, to approximately RM118.0 million in FY2016, and further to approximately RM153.8 million in FY2017, mainly due to the increase in the quantity of products purchased by our construction contractor customers who undertook infrastructure construction projects in this region. Our revenue from East Coast Region increased from approximately RM43.1 million in FY2015, to approximately RM49.4 million in FY2016, and further to approximately RM130.0 million in FY2017, which was mainly due to (i) the increase in quantity of products purchased by our customers including construction contractors and building material trading companies, resulting from the satisfaction from existing customers with our Group s product quality and delivery time and these customers eventually commenced bulk purchases; and (ii) our established business relationship with our largest customer in FY2017 and the four months ended 30 April 2018, Customer C mainly located in Pahang Darul Makmur, with the continuous growth in sales from approximately RM1.7 million in FY2015 to approximately RM4.4 million in FY2016 and further to approximately RM34.7 million in FY2017. Our revenue from Central Region and East Coast Region increased from approximately RM52.5 million and RM32.7 million respectively for the four months ended 30 April 2017, to approximately RM56.2 million and RM65.1 million respectively for the four months ended 30 April 2018, mainly due to the continuous increase in sales to our customers including construction contractors and building material trading companies in these regions, resulting from (i) the stable growth in demand for steel bar products and steel wire products; (ii) the development of business relationship with our customers; and (iii) our strategy to expand the sales network in Central Region and East Coast Region by offering more attractive selling price to customers who order in bulk with shorter credit periods. Sensitivity analysis of average selling price The following sensitivity analysis illustrates the impact of hypothetical fluctuations of 5%, 10%, 15%, 20% and 25% in our average selling prices of our products, with other variables remaining constant, on our profit before tax for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 +/-5% +/-8,018 +/-9,357 +/-15,341 +/-4,541 +/-6,607 +/-10% +/-16,037 +/-18,714 +/-30,681 +/-9,083 +/-13,214 +/-15% +/-24,055 +/-28,071 +/-46,022 +/-13,624 +/-19,821 +/-20% +/-32,073 +/-37,428 +/-61,363 +/-18,165 +/-26,428 +/-25% +/-40,092 +/-46,785 +/-76,703 +/-22,706 +/-33,035 The maximum fluctuation in the average selling prices of our major products on a year-on-year basis during the Track Record Period was approximately 23% (in relation to the increase in the average selling price of our cut-to-size wire meshes from FY2016 to FY2017). Given that the maximum fluctuation is around 23%, our Directors are of the view that it is reasonable to use 5%, 10%, 15%, 20% and 25% in the above sensitivity analysis. 208

216 FINANCIAL INFORMATION Cost of sales The following table sets out a breakdown of our cost of sales by expense nature for the periods indicated: For the four months For the year ended 31 December ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Cost of raw materials 129, , , , , Labour costs 1, , , Manufacturing overhead 4, , , , , Total cost of manufacturing 136, , , , , Inventory movement (Note) (2,282) (1.5) 1, (1,222) (1.0) Total 136, , , , , Note: Inventory movement represents finished goods as at the beginning of the year/period less finished goods as at the end of the year/period. Our cost of raw materials, which formed our largest cost component and primarily comprised unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires, weighted approximately 95.1%, 97.3%, 96.8% and 98.8% of our total cost of sales during the Track Record Period, respectively. Our labour costs primarily represented our salaries and other staff benefits of manufacturing and warehousing staff. Our manufacturing overhead primarily represented (i) depreciation charged for our property, plant and machinery; (ii) utilities expenses such as the water and electricity charges of our factory; and (iii) repair and maintenance expenses in relation with our plant and machinery. Our cost of sales increased by approximately RM23.1 million, or approximately 16.9% from approximately RM136.7 million in FY2015 to approximately RM159.8 million in FY2016, which was primarily driven by (i) the increase in our cost of raw materials incurred for our production mainly as a result of the increase in sales volume of our steel wire products from FY2015 to FY2016 and (ii) the increase in purchase prices of our major raw materials, particularly unprocessed hot-rolled steel bars and low carbon wire rods in FY

217 FINANCIAL INFORMATION Our cost of sales increased by approximately RM113.7 million, or approximately 71.2% from approximately RM159.8 million in FY2016 to approximately RM273.5 million in FY2017, which was primarily driven by (i) the increase in our purchase volume of unprocessed hot-rolled steel bars as a result of our increased sales volume in FY2017; and (ii) the increase in our purchase prices of major raw materials, particularly unprocessed hot-rolled steel bars and low carbon wire rods in FY2017. Our cost of sales increased by approximately RM38.8 million, or approximately 48.8% from approximately RM79.6 million for the four months ended 30 April 2017 to approximately RM118.4 million for the four months ended 30 April 2018, which was primarily driven by (i) the increase in our cost of raw materials, which is in line with our revenue growth during the four months ended 30 April 2018 as compared with same period in 2017; (ii) the increase in our manufacturing overhead, resulting from the increase in depreciation expenses in relation to the fully-automated wire mesh machine during the four months ended 30 April Sensitivity analysis of cost of raw materials The table below sets forth a breakdown of our cost of raw materials during the Track Record Period: For the year ended 31 December For the four months ended 30 April RM 000 % RM 000 % RM 000 % RM 000 % RM 000 % (unaudited) Manufacturing or processing and sale of steel bar products and steel wire products Unprocessed hot-rolled steel bars 65, , , , , Low carbon wire rods 40, , , , , Galvanised iron wires 2, , , Other raw materials Trading of building materials and accessories 20, , , , , Total 129, , , , , We currently source our unprocessed hot-rolled steel bars as the principal raw material for our production and trading activities. We also purchase other raw materials including low carbon wire rods and galvanised iron wires from suppliers for our production. Our results of operations are also affected by the prices and availability of these raw materials. 210

218 FINANCIAL INFORMATION The following sensitivity analysis illustrates the impact of hypothetical fluctuations of 5%, 10% 15%, 20% and 25% in our cost of raw materials, with other variables remaining constant and taking into account the effect of movement in inventory, on our profit before tax for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 -/+5% +/-6,498 +/-7,769 +/-13,233 +/-80,861 +/-122,866 -/+10% +/-12,996 +/-15,538 +/-26,467 +/-84,711 +/-128,717 -/+15% +/-19,494 +/-23,307 +/-39,700 +/-88,562 +/-134,567 -/+20% +/-25,992 +/-31,076 +/-52,934 +/-92,412 +/-140,418 -/+25% +/-32,490 +/-38,845 +/-66,167 +/-96,263 +/-146,269 According to the SMITH ZANDER Report, the prices of steel bars and low carbon wire rods increased from approximately RM1,995 to RM2,057 per MT and RM1,739 per MT in FY2015 to approximately RM2,457 to RM2,577 per MT and RM2,291 per MT in FY2017, respectively. The maximum fluctuation in the prices of the major raw materials on a year-on-year basis during the Track Record Period was approximately 20.3% (representing the increase in the price of low carbon wire rods from FY2016 to FY2017). Given that the maximum fluctuation is around 20%, our Directors are of the view that it is reasonable to use 5%, 10%, 15%, 20% and 25% in the following sensitivity analysis. Gross profit and gross profit margin During the Track Record Period, we recorded gross profit of approximately RM23.6 million, RM27.4 million, RM33.3 million and RM13.7 million, respectively, and gross profit margin of approximately 14.7%, 14.6%, 10.9% and 10.4%, respectively. The following table sets out a breakdown of our gross profit and gross profit margin by product category for the periods indicated: For the year ended 31 December For the four months ended 30 April Gross Gross Gross Gross profit Gross profit Gross profit Gross profit Gross margin profit margin profit margin profit margin profit Gross profit margin Gross profit RM 000 % RM 000 % RM 000 % RM 000 (unaudited) % RM 000 % Steel bar products Hot-rolled steel bars Cold-rolled steel bars 8,705 3, ,152 2, ,323 4, ,718 1, ,068 1, Subtotal 12, , , , , Steel wire products Standard wire meshes 7, , , , , Cut-to-size wire meshes 1, , , , Fencing products 1, Subtotal 10, , , , , Trading of building materials and accessories 1, , , Total 23, , , , ,

219 FINANCIAL INFORMATION Gross profit Our gross profit increased by approximately RM3.8 million, or approximately 15.8% from approximately RM23.6 million in FY2015 to approximately RM27.4 million in FY2016, primarily due to the increase in sales volume of our standard wire meshes and cut-to-size wire meshes, resulting from the growth of sales demand for standard wire meshes and cut-to-size wire meshes used in construction sites, partially offset by the decrease in gross profit in our steel bar products resulting from the decrease in sales volume of our steel bar products in FY2016. Our gross profit further increased by approximately RM5.9 million, or approximately 21.7% to approximately RM33.3 million in FY2017 primarily due to the increase in our revenue from the sale of our steel bar products, resulting from the increase in quantity of steel bar products purchased by our existing customers and the increased number of new customers, particularly in Central Region and East Coast Region. Our gross profit further increased by approximately RM2.5 million, or approximately 22.2% from approximately RM11.2 million for the four months ended 30 April 2017 to approximately RM13.7 million for the four months ended 30 April 2018, primarily due to the increase in sales volume of our steel bar products and steel wire products, resulting from the stable growth in demand from our customers. Gross profit margin Our overall gross profit margin remained stable at approximately 14.7% and 14.6% in FY2015 and FY2016 respectively. Our overall gross profit margin decreased from approximately 14.6% in FY2016 to approximately 10.9% in FY2017 primarily attributable to the general decrease of gross profit margin of our steel bar products, steel wire products and trading of building materials and accessories, resulting from (i) the change in product mix as a result of increased proportion in the sale of steel bar products, which had lower gross profit margin in general as compared with that of steel wire products; (ii) the increase in the procurement costs of our major raw materials, as a result of the increase in average purchase prices of unprocessed hot-rolled steel bars and low carbon wire rods; and (iii) the increase in average selling prices of our products is less than the increase in average purchase prices of raw materials. Our overall gross profit margin decreased from approximately 12.4% for the four months ended 30 April 2017 to approximately 10.4% for the four months ended 30 April 2018 primarily attributable to the general decrease of gross profit margin of our steel bar products, steel wire products and trading of building materials and accessories, resulting from (i) the increase in the procurement costs of our raw materials, in particular the increase in average purchase prices of unprocessed hot-rolled steel bars and low carbon wire rods; (ii) the increase in average selling prices of our products is less than the increase in average purchase prices of raw materials; and (iii) our strategy to expand the sales network in Central Region and East Coast Region by offering more attractive selling price to customers who order in bulk with shorter credit periods. 212

220 FINANCIAL INFORMATION Other income and expenses The following table sets out a breakdown of our other income for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Interest income from: Bank deposits Trade receivables Legal and professional fee (664) Others (Note) Note: Others mainly include certain claims of insurances. Our interest income primarily represented our interest received from the bank deposits and trade receivables. Our legal and professional fee primarily represented our professional fees in connection with the Proposed Malaysia Listing which had been discontinued. Our other income increased by approximately RM0.2 million, or approximately 32.3% from approximately RM0.4 million in FY2015 to approximately RM0.6 million in FY2016 primarily attributable to the increase in the interest income from our bank deposits and trade receivables. Our other income decreased by approximately RM0.2 million, or approximately 36.1% to approximately RM0.4 million in FY2017 primarily attributable to our legal and professional fee of approximately RM0.7 million, partially offset by the increase in the interest income from our trade receivables charged by us to customers with overdue balances. Our other income increased by approximately RM0.4 million, or approximately 160.2% from approximately RM0.2 million for the four months ended 30 April 2017 to approximately RM0.6 million for the four months ended 30 April 2018 primarily attributable to the increase in the interest income from our trade receivables charged by us to customers with overdue balances. 213

221 FINANCIAL INFORMATION Other gains and losses The following table sets out a breakdown of our other gains and losses for the periods indicated: For the four months For the year ended 31 December ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (Loss)/gain on disposal/written off of property, plant and equipment (4) 3 (34) 6 Written off of bad debts (18) (79) Fair value change of derivative financial instruments (44) 53 Net exchange (loss)/gain (161) (12) 1 (161) (46) 60 Our (loss)/gain on disposal/written off of property, plant and equipment represented our (loss)/gain arising from the sale of our motor vehicles, plant and machinery, and furniture, fitting and equipment. Our written off of bad debts primarily represented the written off of our irrecoverable trade receivables due from our customers. Our fair value change of derivative financial instruments represented fair value change of the foreign currency forward contracts in relation to purchase of an imported machinery denominated in Euro. Please refer to the paragraph headed Derivative Financial Instruments in this section for further details and analysis of our derivative financial instruments. Our net exchange (loss) gain derived from the appreciation or depreciation of RM against foreign currencies arising from the purchase of our imported machineries denominated in Euro and US$. Our other gains and losses increased by approximately RM0.2 million from other losses of approximately RM0.2 million in FY2015 to other gains of approximately RM68,000 in FY2016 primarily attributable to our reversal from net exchange loss to net exchange gain. Our other gains for FY2017 was approximately RM0.3 million, primarily attributable to the increase in our net exchange gain. Our other gains and losses increased by approximately RM0.1 million from other losses of approximately RM46,000 for the four months ended 30 April 2017 to other gains of approximately RM60,000 for the four months ended 30 April 2018 primarily attributable to the fair value change in relation to the foreign currency forward contract. 214

222 FINANCIAL INFORMATION Selling and distribution expenses The following table sets out a breakdown of our selling and distribution expenses for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Transportation costs 4,277 4,339 4,565 1,546 2,202 Salaries and benefits 1,019 1,461 2, Travel and accommodation expenses Business development expenses ,460 6,045 6,937 2,351 3,156 As a percentage of total revenue, our selling and distribution expenses accounted for approximately 3.4%, 3.2%, 2.3%, 2.6% and 2.4% during the respective periods. Our transportation costs primarily represented the expenses incurred for delivery of products to customers by our own trucks or external logistics service providers engaged by our Group. Our salaries and benefits primarily represented our sales and marketing staff s salaries and wages, sales commission, contributions to employees provident fund and other staff benefits. Our travel and accommodation expenses primarily represented the travelling and hotel expenses incurred by our sales and marketing staff and our management for business trips. Our business development expenses primarily represented the advertisement and entertainment expenses incurred by us. Our selling and distribution expenses amounted to approximately RM5.5 million for FY2015, and increased by approximately RM0.5 million, or 10.7% to approximately RM6.0 million for FY2016, and further increased by approximately RM0.9 million, or 14.8% to approximately RM6.9 million for FY2017. Our selling and distribution expenses further increased by approximately RM0.8 million, or 34.2% from approximately RM2.4 million for the four months ended 30 April 2017 to approximately RM3.2 million for the four months ended 30 April The continuous increase in our selling and distribution expenses during the Track Record Period was mainly attributable to (i) the increase in transportation costs resulting from the increased number of customers and revenue growth during the Track Record Period; and (ii) the increase in salaries and benefits resulting from (a) the increase in our headcount of sales and marketing staff; and (b) the salary increment of our sales and marketing staff, which is in line with our revenue growth. 215

223 FINANCIAL INFORMATION Administrative expenses The following table sets out a breakdown of our administrative expenses for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Salaries and benefits 2,115 3,296 3,402 1,287 1,621 Professional fee Vehicle expenses Depreciation Rental fee Repair and maintenance fee Insurance expenses Others (Note) ,804 5,426 5,750 2,152 2,488 Note: Others primarily comprised our office expenses, postage and printing expense, licence and permit expenses, donation and telephone charges. For FY2017, it also included the tax penalty of approximately RM0.1 million primarily represented the fine in relation with the re-submission of the tax return. Please refer to the paragraph headed Tax payable Re-submission of tax return in EC Excel Wire, Arena Metal Resources and UVM Excel in this section for more details. As a percentage of total revenue, our administrative expenses accounted for approximately 2.4%, 2.9%, 1.9%, 2.4% and 1.9% during the respective periods. Our salaries and benefits primarily represented our administrative and management staff s and Directors salaries and wages, bonuses, contributions to employees provident fund and other staff benefits. Our professional fee primarily represented our (i) audit fee and (ii) legal fee. Our vehicle expenses primarily represented the petrol and parking expenses incurred by our staff. Our depreciation primarily represented the depreciation charged for our furniture, fitting and equipment, and our office buildings. Our rental fee primarily represented rental expense for our staff accommodation and our office in Kuantan. Our repair and maintenance fee primarily represented the expenses to repair and maintain our furniture, fitting and equipment and our vehicles. Our insurance expenses primarily represented the insurance premium paid for the insurance policies to cover our properties and assets. 216

224 FINANCIAL INFORMATION Our administrative expenses amounted to approximately RM3.8 million for FY2015, and increased by approximately RM1.6 million, or 42.6% to approximately RM5.4 million for FY2016 mainly attributable to (i) the increase in the salaries and benefits of approximately RM1.2 million as a result of the increase in our headcount of administrative and management staff from 27 as at 31 December 2015 to 38 as at 31 December 2016 and the salary increment to our employees and Directors; and (ii) the increase in our audit fee included in the professional fee. Our administrative expenses slightly increased by approximately RM0.4 million, or 6.0% from approximately RM5.4 million for FY2016 to approximately RM5.8 million for FY2017 mainly attributable to (i) the increase in our insurance expenses of approximately RM0.2 million; and (ii) the increase in the salaries and benefits as a result of the increase in our headcount of administrative and management staff from 38 as at 31 December 2016 to 43 as at 31 December 2017 and the salary increment to our employees and Directors. Our administrative expenses further increased by approximately RM0.3 million, or 15.6% from approximately RM2.2 million for the four months ended 30 April 2017 to approximately RM2.5 million for the four months ended 30 April 2018 mainly attributable to the increase in the salaries and benefits as a result of the increase in our headcount of administrative and management staff and the salary increment to our employees and Directors. Finance costs The following table sets out a breakdown of our finance costs for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Interest on: Secured bank borrowings 2,029 2,319 3, ,204 Obligations under finance leases ,228 2,513 3, ,488 As a percentage of total revenue, our finance costs accounted for approximately 1.4%, 1.3%, 1.2%, 1.0% and 1.1% during the respective periods. 217

225 FINANCIAL INFORMATION Our finance costs represented the interest expenses incurred on our secured bank borrowings and finance leases on our certain motor vehicles and plant and machinery. Our finance costs increased by approximately RM0.3 million, or approximately 12.8% from approximately RM2.2 million in FY2015 to approximately RM2.5 million in FY2016 and further increased by approximately RM1.2 million, or approximately 47.0% to approximately RM3.7 million in FY2017, which is in line with the increase in our bank borrowings and obligations under finance leases. Our finance costs increased by approximately RM0.5 million, or approximately 56.5% from approximately RM1.0 million for the four months ended 30 April 2017 to approximately RM1.5 million for the four months ended 30 April 2018 primarily attributable to the increase in our bank borrowings and obligations under finance leases. Please refer to note 31(b) to the Accountants Report in Appendix I to this document for the sensitivity analysis of the change on the interest rate. Income tax expense During the Track Record Period, our income tax expense comprised our current tax and deferred tax recognised for the year. The following table sets out a breakdown of our income tax expense and effective tax rate for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Current tax: Malaysia corporate income tax 2,849 3,280 3,547 1,190 1,420 Deferred tax: Current year 124 (14) Attributable to a change in tax rate (80) 44 (14) Total 2,893 3,266 4,243 1,190 1,946 Effective tax rate 23.6% 24.1% 24.2% 20.0% 38.5% 218

226 FINANCIAL INFORMATION Our income tax expense increased by approximately RM0.4 million, or approximately 12.9% from approximately RM2.9 million in FY2015 to approximately RM3.3 million in FY2016, and further increased by approximately RM0.9 million, or approximately 29.9% to approximately RM4.2 million in FY2017, and increased by approximately RM0.7 million, or approximately 63.5%, from approximately RM1.2 million for the four months ended 30 April 2017 to approximately RM1.9 million for the four months ended 30 April 2018, which was primarily in line with the increase in our profit before tax, leading to the increase in our taxable profit. Our effective tax rate was approximately 23.6%, 24.1%, 24.2%, and 38.5% in FY2015, FY2016, FY2017 and the four months ended 30 April 2018 respectively. Our effective tax rate for FY2015 was slightly lower than the statutory income tax rate of 25% in Malaysia, primarily due to the tax effect of income not taxable for tax purpose including reinvestment allowance arising from the purchase of our property, plant and equipment. Our effective tax rate for FY2016 and FY2017 remained stable at approximately 24.1% and 24.2% respectively, which was close to the statutory income tax rate of 24%. For the four months ended 30 April 2018, we incurred [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) which was non-deductible expenses in Malaysia for tax purpose and resulted in higher effective tax rate of approximately 38.5% for the four months ended 30 April 2018 as compared to that in FY2015, FY2016 and FY2017. Current tax We are subject to income tax calculated at the applicable tax rates in accordance with the relevant laws and regulations in each tax jurisdiction we operate or domicile. Under the current laws and regulations of the Cayman Islands and the BVI, we are not subject to any income tax or capital gains tax in the Cayman Islands and the BVI. Additionally, dividend payments made by us are not subject to withholding tax in the Cayman Islands and the BVI. Malaysian Income Tax has been provided at the statutory tax rate of 25%, 24%, 24% and 24% on the estimated taxable income arising in Malaysia in FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. Hong Kong profits tax was calculated at the rate of 16.5% based on the estimated assessable profits arising in Hong Kong during the Track Record Period. During the Track Record Period, no provision for Hong Kong profits tax was charged as there was no assessable profits arising in Hong Kong. Deferred tax Our deferred tax primarily represented the movement of our deferred tax assets and liabilities during the year which was primarily attributable to the deferred tax effect of (i) accelerated tax depreciation; and (ii) revaluation of properties. 219

227 FINANCIAL INFORMATION Profit for the year and net profit margin Our profit for the year increased by approximately RM0.9 million, or approximately 9.9% from approximately RM9.4 million in FY2015 to approximately RM10.3 million in FY2016, and further increased by approximately RM3.0 million, or approximately 29.1% to approximately RM13.3 million in FY2017, mainly due to the foregoing reasons as discussed above. Our profit decreased by approximately RM1.7 million, or approximately 34.7% from approximately RM4.8 million for the four months ended 30 April 2017 to approximately RM3.1 million for the four months ended 30 April 2018, mainly due to (i) the foregoing reasons as discussed above and (ii) the [REDACTED] expense of approximately RM[REDACTED] recognised for the four months ended 30 April Our net profit margin was approximately 5.8%, 5.5%, 4.3% and 2.4% during the Track Record Period, mainly due to (i) the decrease in gross profit margin in the paragraph headed Decreasing trend in gross profit margin during the Track Record Period in this section; and (ii) the [REDACTED] expenses of approximately RM[REDACTED] recognised for the four months ended 30 April

228 FINANCIAL INFORMATION DISCUSSION OF SELECTED ITEMS OF COMBINED STATEMENTS OF FINANCIAL POSITION Inventories Our inventories comprised our raw materials and finished goods. The value of our inventories accounted for approximately 12.3%, 14.6% 7.9% and 9.7% of our total current assets as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively. The following tables set out a breakdown of our inventories as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Raw materials 4,456 6,266 5,477 6,875 Finished goods 3,237 5,519 3,965 5,187 7,693 11,785 9,442 12,062 Our raw materials primarily comprised unprocessed hot-rolled steel bars, low carbon wire rods and galvanised iron wires. Finished goods represent products ready to be sold and trading goods. Our inventories increased by approximately RM4.1 million, or approximately 53.2% from approximately RM7.7 million as at 31 December 2015 to approximately RM11.8 million as at 31 December 2016 primarily due to the increase in our raw materials by approximately RM1.8 million and finished goods by approximately RM2.3 million as at 31 December 2016, which is in line with our revenue growth. Our inventories decreased by approximately RM2.4 million, or approximately 19.9% from approximately RM11.8 million as at 31 December 2016 to approximately RM9.4 million as at 31 December 2017 primarily due to the increase in sales of our steel bar products and steel wire products during the last quarter of FY2017 which reduced our finished goods by approximately RM1.6 million as at 31 December Our inventories increased to approximately RM12.1 million as at 30 April 2018 primarily due to the increase in our raw materials by approximately RM1.4 million and finished goods by approximately RM1.2 million as at 30 April 2018 in preparation for the sales demand of our steel bar products and steel wire products in the first quarter of FY

229 FINANCIAL INFORMATION Our inventories are stated at the lower of cost and net realisable value. Our costs of inventories are determined on a weighted average cost method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. During the Track Record Period, we did not record any specific inventory provision due to the falling of net realisable value of our inventories below their corresponding costs, as a result of, among other things, being obsolete. Our head of production is responsible for monitoring the inventory level to meet the production requirements and minimise any waste on inventory or obsolete inventory. Please refer to the paragraph headed Business Inventory management in this document for further details of our inventory control and management policies. Up to the Latest Practicable Date, approximately RM12.1 million, or 100.0% of our inventories as at 30 April 2018 had been subsequently consumed or sold after the Track Record Period. The following tables set out a breakdown of our average inventory turnover days for the periods indicated: For the four months For the year ended 31 December ended 30 April Days Days Days Days Average inventory turnover days (Note) Note: Our average inventory turnover days equal to the average of the opening and closing balances of our inventories divided by our cost of sales and multiplied by 365 days for FY2015, FY2016 and FY2017, or multiplied by 120 days for the four months ended 30 April Our average inventory turnover days were approximately 18 days, 22 days, 14 days and 11 days for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. The increase in our Group s average inventory turnover days from approximately 18 days for FY2015 to approximately 22 days for FY2016 was mainly due to the relatively high level of our inventories as at 31 December The decrease in our Group s average inventories turnover days from approximately 22 days for FY2016 to approximately 14 days for FY2017 and further to approximately 11 days for the four months ended 30 April 2018 was mainly due to the increase in sales of our steel bar products as it requires less time to process steel bar products as compared with steel wire products. 222

230 FINANCIAL INFORMATION Trade and other receivables The value of our trade and other receivables accounted for approximately 63.0%, 67.8% 73.5% and 71.9% of our total current assets as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively. The following tables set out a breakdown of our trade and other receivables as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Trade receivables 38,506 53,212 84,792 86,673 Less: Allowance for doubtful debts (298) (788) (397) (2,298) Subtotal 38,208 52,424 84,395 84,375 Other receivables Prepaid expenses ,251 1,493 Prepayments to suppliers 747 Deposits paid Deferred [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] Prepayments for [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] Other tax recoverable Other receivables 735 1, ,007 Subtotal 1,316 2,181 3,461 4,861 Total trade and other receivables 39,524 54,605 87,856 89,236 Trade receivables Our trade receivables principally represented the outstanding balances to be received from our customers in relation to the sale of our products. Our trade receivables increased from approximately RM38.2 million as at 31 December 2015 to approximately RM52.4 million as at 31 December 2016, further to approximately RM84.4 million as at 31 December 2017, and remained stable at approximately RM84.4 million as at 30 April 2018, primarily in line with the increase in our revenue during the Track Record Period. 223

231 FINANCIAL INFORMATION The following tables set out a breakdown of our average trade receivable turnover days for the periods indicated: For the four months For the year ended 31 December ended 30 April Days Days Days Days Average trade receivable turnover days (Note) Note: Our average trade receivable turnover days equal to the average of the opening and closing balances of our trade receivables divided by our revenue and multiplied by 365 days for FY2015, FY2016 and FY2017, or multiplied by 120 days for the four months ended 30 April During the Track Record Period, we usually allowed credit periods of 14 to 90 days for our customers. Our average trade receivable turnover days of approximately 82 days, 88 days, 81 days and 77 days in FY2015, FY2016 and FY2017 and the four months ended 30 April 2018, respectively, all of which are within the range of our normal credit terms. The decreasing trend in average trade receivable turnover days during the Track Record Period was mainly due to our strategy to offer more attractive selling prices to certain customers with credit terms of 14 days. Our Directors determine specific provision for doubtful debts on a case-by-case basis. During the Track Record Period, we did not experience any difficulty in collecting our trade receivables which caused a significant adverse impact on our business operation. In the event that we notice any events or changes in circumstances which indicate the balances may not be collectible such as the customer has any financial or liquidity problem which may result in difficulty in settling the outstanding payment, relevant provision of impairment of trade receivables would be made. During the Track Record Period, an allowance for doubtful debt, net of reversal of approximately RM0.2 million, RM0.5 million, RM0.1 million and RM26,000 was made respectively. 224

232 FINANCIAL INFORMATION The movement in our allowance for doubtful debts is as follows: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 At beginning of the year/period ,272 (Note) Impairment losses recognised on trade receivables Amounts written off as uncollectible (476) Amounts recovered during the year/ period (11) (5) Balance at end of the year/period ,298 Note: As at 1 January 2018, the Group has used the IRRS9 simplified approach to measure expected audit losses for trade receivables. An additional credit loss allowance of approximately RM1.9 million has been recognised against retained profit of approximately RM1.7 million and non-controlling interest of approximately RM0.2 million. During FY2015, FY2016, FY2017 and the four months ended 30 April 2018, trade receivables of nil, nil, approximately RM0.5 million and nil respectively were found to be uncollectible and had been provided for and written off during the respective year/period. The uncollectible amounts were immaterial as they represented less than approximately 0.2% of our revenue of the respective year/period. The following table sets out an ageing analysis of our trade receivables based on invoice date as at the dates indicated and net of allowance for doubtful debts: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM days 12,738 16,815 28,885 28, days 9,525 12,945 20,189 25, days 7,950 10,484 16,400 10,882 Over 90 days 7,995 12,180 18,921 19,434 38,208 52,424 84,395 84,

233 FINANCIAL INFORMATION The table below sets out the ageing analysis of our trade receivables that were past due but not impaired as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Overdue: 1 30 days 7,282 13,334 20,617 16, days 5,419 4,051 9,443 8, days 1,996 3,440 4,805 5,283 Over 90 days 2,653 3,680 6,772 6,493 17,350 24,505 41,637 36,525 As at 31 December 2015, 2016, 2017 and 30 April 2018, our trade receivables of approximately RM17.4 million, RM24.5 million, RM41.6 million and RM36.5 million were past due but not impaired respectively. In order to keep a long-term business relationship with our customers, we may provide some flexibility for certain of our customers for the settlement of trade receivables after assessing various factors, including the length of business relationship, relevant customer s size and background, credit history, financial condition and past reputation, on a case-by-case basis. Trade receivables that were past due but not impaired relate to a number of our customers who have good payment records with our Group. Based on our past experience, our Directors believe that no allowance for doubtful debts is necessary for these balances as there has not been any sign of significant adverse change in credit strength of our customers. Up to the Latest Practicable Date, approximately RM55.6 million, or 66.0% of our trade receivables as at 30 April 2018 had been subsequently settled after the Track Record Period. Please refer to note 31 to the Accountants Report in Appendix I to this document for further details of the credit risk of our trade receivables. Other receivables During the Track Record Period, our other receivables consisted primarily of (i) our prepaid expenses including prepayments for staff, assets and other insurance premium; (ii) our prepayments to suppliers; (iii) our rental and utility deposits; (iv) our deferred [REDACTED] expenses; (v) our prepayments for [REDACTED] expenses and (vi) our GST recoverable. Our other receivables remained relatively stable at approximately RM1.3 million and RM2.2 million as at 31 December 2015 and 2016 respectively. Our other receivables increased to approximately RM3.5 million as at 31 December 2017, mainly due to the increase in our prepaid expenses including the prepayment of insurance premium of our Director and insurance paid for purchase of one machine. Our other receivables further increased to approximately RM4.9 million as at 30 April 2018, mainly due to (i) our prepayments to suppliers; and (ii) our deferred [REDACTED] expenses, partially offset by the decrease in our GST recoverable. 226

234 FINANCIAL INFORMATION Amounts due from (to) a Director/a related company The following table sets out a breakdown of our amounts due from (to) a Director/a related company as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Director: Mr. Ng 387 (603) Related companies: Wishland Development Sdn. Bhd. (Note) 18 Decade Lion 11 Note: Mr. Ng and Ms. Sin, Directors of the Company, have beneficial interests in this company. As at 31 December 2015, the amounts due from Mr. Ng amounted to approximately RM0.4 million represented advance to Mr. Ng for his personal use. As at 31 December 2016, the amounts due to Mr. Ng amounted to approximately RM0.6 million represented net balances from Mr. Ng to our Group for operation. As at 31 December 2015 and 30 April 2018, the amounts due from related companies, arose from miscellaneous payments made on behalf. All these amounts were non-trade nature, unsecured, interest-free and repayable on demand. Our amounts due to a Director were fully settled in FY2017. Our Directors confirmed that our amounts due from the related companies will be settled before [REDACTED]. Derivative Financial Instruments We have held financial assets that are classified as financial assets at fair value through profit or loss, all are foreign currency forward contracts entered into with banks in Malaysia in order to mitigate our foreign exchange risk expenses related to the purchase of machines from foreign countries. The following tables set out the balance of our balances of financial derivative assets at the end of each reporting period: As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Derivatives financial (liabilities) assets not designated under hedge accounting: Foreign currency forward contracts (44) 9 227

235 FINANCIAL INFORMATION Major terms of the outstanding foreign forward contracts at the end of the reporting period are as follows: Notional amount Forward contract rate Maturity As at 31 December 2017: One contract to buy EUR660,000 in total EUR1 to RM February 2018 As at 30 April 2018: One contract to buy EUR220,000 in total EUR1 to RM June 2018 As at the Latest Practicable Date, all of the foreign forward contracts have already expired. Pledged bank deposits and bank balances and cash Pledged bank deposits carry interest at fixed rates of 2.40% to 3.45%, 2.40% to 3.45%, 2.75% to 3.35% and 2.90% to 3.35% per annum as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively. The pledged bank deposits will be released upon the settlement of relevant bank borrowings. Pledged bank deposits represent deposits pledged to banks to secure the banking facilities granted to our Group. All pledged bank deposits have been pledged to secure short-term bank borrowings and are classified as current assets. Bank balances carry interest at market rates which range from 0.01% to 3.00%, 0.01% to 2.15%, 0.01% to 2.15% and 0.01% to 2.15% per annum as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively. All pledged bank deposits and bank balances and cash are denominated in RM. 228

236 FINANCIAL INFORMATION Trade and other payables The value of our trade and other payables accounted for approximately 33.2%, 24.8%, 36.8% and 29.6% of our total current liabilities as at 31 December 2015, 2016, 2017 and 30 April The following table sets out a breakdown of our trade and other payables as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Trade payables 14,924 12,543 28,166 19,525 Accrued expenses ,672 Advance from customers Deposit received from the [REDACTED] Investor [REDACTED] [REDACTED] [REDACTED] [REDACTED] Payables for property, plant and equipment ,926 1,953 Freight charges payable Dividends payable 518 Other payables Subtotal 1,474 2,554 6,928 9,668 Total 16,398 15,097 35,094 29,193 Trade payables Our trade payables principally represented the payables to our suppliers for the purchases of our raw materials. Our trade payables remained stable at approximately RM14.9 million as at 31 December 2015 and approximately RM12.5 million as at 31 December Our trade payables increased by approximately RM15.7 million, or approximately 124.6% from approximately RM12.5 million as at 31 December 2016 to approximately RM28.2 million as at 31 December 2017, primarily in line with the increase in our purchase mainly as a result of the increase in our sales. Our trade payables decreased to approximately RM19.5 million as at 30 April 2018, primarily due to our reduction in payment cycle in order to get timely and sufficient supply of raw materials and keep a good relationship with our suppliers. 229

237 FINANCIAL INFORMATION The following table sets out a breakdown of our average trade payable turnover days for the periods indicated: For the four months For the year ended 31 December ended 30 April Days Days Days Days Average trade payable turnover days (Note) Note: Our average trade payable turnover day equals to the average of the opening and closing balances of our trade payables divided by our cost of sales and multiplied by 365 days for FY2015, FY2016 and FY2017, or multiplied by 120 days for the four months ended 30 April During the Track Record Period, our suppliers generally granted us credit periods of 14 to 60 days. We maintained stable average trade payable turnover days of approximately 30 days, 31 days, 27 days and 24 days in FY2015, FY2016 and FY2017 and the four months ended 30 April 2018, respectively, all of which are within the range of the normal credit terms granted to us. The decreasing trend in our trade payable turnover days during the Track Record Period was mainly due to our reduction in payment cycle in order to get timely and sufficient supply of raw materials. The following table sets out an ageing analysis of our trade payables based on invoice date as at the dates indicated: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM days 9,817 9,127 21,029 15, days 3,953 1,762 4,257 2, days 1,080 1,568 2,479 1,346 Over 90 days ,924 12,543 28,166 19,525 Our Directors confirm that there had been no material defaults in payment of our trade payables during the Track Record Period. Up to the Latest Practicable Date, approximately RM19.1 million, or 97.8% of our trade payables as at 30 April 2018 had been subsequently paid after the Track Record Period. 230

238 FINANCIAL INFORMATION Other payables During the Track Record Period, our other payables consisted primarily of (i) accruals of our staff costs; (ii) accruals of our employment provident fund; (iii) accruals of our other expenses including [REDACTED] expenses; (iv) advance from customers; (v) deposit received from the [REDACTED] Investor; (vi) payables for property, plant and equipment; (vii) freight charges payable; and (viii) dividends payable. Our other payables increased by approximately RM1.1 million, or approximately 73.3% from approximately RM1.5 million as at 31 December 2015 to approximately RM2.6 million as at 31 December 2016 primarily due to (i) the increase in our accrued expenses of approximately RM0.6 million mainly resulting from the increase in accruals of our staff costs; and (ii) the increase in our freight charges payable of approximately RM0.2 million, partially offset by the decrease in our payables for property, plant and equipment. Our other payables increased by approximately RM4.3 million, or approximately 171.3% from approximately RM2.6 million as at 31 December 2016 to approximately RM6.9 million as at 31 December 2017 primarily due to the increase in our (i) payables for property, plant and equipment of approximately RM3.8 million and (ii) dividends payable of approximately RM0.5 million. Our other payables further increased to approximately RM9.7 million as at 30 April 2018 primarily due to the deposit received from [REDACTED] Investor of approximately RM4.5 million in March 2018, partially offset by the decrease in our payables for property, plant and equipment. Tax payable During the Track Record Period, our Group s tax payables remained stable at approximately RM1.4 million, RM2.0 million, RM1.7 million and RM2.0 million, respectively. Re-submission of tax return in EC Excel Wire, Arena Metal Resources and UVM Excel When our present reporting accountants ( Present Auditors ) were preparing the combined financial statements of our Group for FY2015, FY2016 and FY2017 and four months ended 30 April 2018, the Present Auditors made certain adjustments and reclassifications in the financial statements of each of EC Excel Wire, Arena Metal Resources and UVM Excel for FY2015 and FY2016. Particularly, these adjustments are mainly due to change in the purchase recognition policy of EC Excel Wire. It was noted that for FY2015 and FY2016, EC Excel Wire recognized purchases in the financial statements when the suppliers invoices were issued to the company before the goods arrived at the warehouse, but the goods were not correspondingly included as part of closing stock. As a result, certain purchases recorded for FY2015 should belong to the purchase for FY2016, and certain purchases recorded FY2016 should belong to the purchase for FY2017, if the time at which the purchases were recognised aligned with the time when the goods arrived at our warehouse and be included as part of our closing stock. Effective from FY2017, EC Excel Wire recognized purchase of goods only when the goods arrived at the warehouse and closing stock was simultaneously taken into account such purchases if they were not utilized. There is no statutory requirement for a taxpayer to revise its tax return. However, there may be a risk that the Malaysian Inland Revenue Board ( MIRB ) may, in the event of a tax audit, challenge that there was an overstatement/understatement of the profit before of EC Excel Wire, Arena Metal Resources and UVM Excel for a particular year. As such, in July 2018, we resubmitted and reported the revised tax computation and tax return of (i) EC Excel Wire for each of the year ended 31 December 2014, 2015 and 2016, (ii) Arena Metal Resources for each of the year ended 31 December 2014 and 2015; and (iii) UVM Excel for the year ended 31 December 2016, to MIRB to reflect those adjustments and reclassification appropriately (collectively, the Re-submission ). It is noteworthy that no prosecution against EC Excel Wire, Arena Metal Resources nor UVM Excel by the MIRB before and after the date of the Re-submission. 231

239 FINANCIAL INFORMATION As a result of the Re-submission in July 2018, MIRB issued the revised notice of payment of EC Excel Wire for the year respectively ended 31 December 2014, FY2015 and FY 2016 which imposed (i) an additional aggregate tax amount of approximately RM731,000, which represented tax undercharged of approximately RM65,000 for FY2014, RM736,000 for FY2015 and tax overcharge of approximately RM70,000 for FY2016; and (ii) a 10% tax penalty of approximately RM7,000 and RM74,000 which is based on the underpay tax amount for the year ended 31 December 2014 and FY2015 respectively regarding the Re-submission. EC Excel Wire had fully and duly settled such amount in accordance with the payment schedule required by MIRB. Pursuant to section 113 of ITA 1967, the lower penalty rate had been applied in computation of the penalty as MIRB encourages taxpayers to voluntarily disclose errors made in the tax returns and make good the shortfall in the tax to be paid. The aggregate additional income tax arising from the Re-submission amounted to approximately RM761,000 (the Additional Income Tax ), which has been recorded in the combined financial statements of our Group for FY2015, FY2016 and FY2017 and the four months ended 30 April Also, our Group has provided for a tax penalty of approximately RM0.1 million (the Tax Penalty ) for FY2017 regarding the tax penalty arising from the Re-submission, of which approximately RM81,000 represented the tax penalty of EC Excel Wire based on the revised notice of payment issued by MIRB and approximately RM11,000 represented the tax penalty of Arena Metal Resources based on the maximum penalty of 35% imposed on the tax undercharged pursuant to the Tax Audit Framework Apart from seeking the views of our Malaysia Legal Advisers, we have also engaged a tax consultant, who is an Independent Third Party, and sought his views on our tax liability in connection with the Re-submission. Our Malaysia Legal Advisers, taking all matters and circumstances into account, particularly, the fact that the Re-submission was made on a voluntary basis and the views of the tax consultant, opine, inter alia, that (i) the voluntary disclosure to the MIRB and the payment of penalty will bring finality to the matter and will not give rise to any other enforcement action, be it criminal in nature or otherwise; and (ii) EC Ecel Wire, Arena Metal Resources and UVM Excel, being taxpayers, shall not be liable to be charged with an offence under the relevant laws in Malaysia upon the payment of additional income tax and penalty. Our Malaysia Legal Advisers further noted that after making all reasonable enquires, they are not aware of any investigation or allegations initiated by MIRB against us nor in their opinion, would there be any matters that would reasonably or possibly give rise to such investigation. Therefore, our Directors are of the view that the Additional Income Tax and Tax Penalty imposed on EC Excel Wire, Arena Metal Resources and UVM Excel as a result of the Re-submission do not and are not expected to have a material adverse impact on our business and financial position. To avoid similar incidents happening, we have adopted the following measures: adopted written policies detailing the relevant accounting standards and procedures in respect the purchase recognition policy; employed Mr. Hiew Yong Nin ( Mr. Hiew ), a certified public accountant, as our chief financial officer in February 2017, and is responsible for our Group s overall financial and accounting affairs by overseeing our Group s budgetary control and forecasting as well as managing the working capital and cash flow of our Group. Please refer to the paragraph headed Directors, Senior Management and Employees Senior management in this document for the biography of Mr. Hiew; Mr. Hiew shall review the monthly management accounts prepared by the accounting team and involved in preparation of financial statements of the Group to ensure that they are prepared in accordance with the IFRSs, which will then be reviewed and approved by the Board of Directors; regularly arrange its accounting team to attend training courses organised by accounting professional to enhance their accounting knowledge and to ensure compliance with accounting standards; and 232

240 FINANCIAL INFORMATION we will engage professional tax advisers or consultants to review our tax filings and related matters, and negotiate with MIRB and advise us accordingly should any dispute or issue arise in the future on tax issues involving our Group where necessary. LIQUIDITY AND CAPITAL RESOURCES We financed our operations primarily through the following means, including (i) capital contribution from our Shareholders; (ii) net cash inflow from our operating activities; and (iii) proceeds from loans and borrowings. Our working capital requirements mainly comprised payments for (i) our cost of raw materials; (ii) staff costs; (iii) other operating and administrative expenses; and (iv) finance costs. During the Track Record Period, we did not experience any liquidity shortage and were able to repay our bank loans when they became due. We managed our liquidity risks by maintaining adequate reserves, banking facilities, continuously monitoring our forecasted and actual cash flows and matching the maturity profiles of our assets and liabilities. In the future, we may need additional cash resources in the future as a result of changing business conditions or other developments. We expect that our working capital and other liquidity requirements will primarily be satisfied through a combination of (i) net cash inflow from our operating activities; (ii) banking facilities made available to us; and (iii) proceeds from [REDACTED]. However, our ability to fund our working capital needs, repay our indebtedness and finance other obligations depends on our future operating performance and cash flow, which are in turn subject to the prevailing economic conditions, the level of spending by our customers and other factors, many of which are beyond our control. If our existing cash resources are insufficient to meet our requirements, we may seek to obtain extra credit facilities, or sell or issue equity securities, which might result in dilution to our Shareholders. Cash flows Our cash and cash equivalents (including our pledged bank deposits and bank balances and cash) amounted to approximately RM15.1 million, RM14.1 million, RM22.3 million and RM22.8 million as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively. The following table sets out a summary of our cash flows for the periods indicated: For the year ended 31 December For the four months ended 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Net cash from (used in) operating activities 14,005 (5,084) 3,738 (4,409) (7,295) Net cash used in investing activities (6,458) (13,477) (4,867) (925) (1,006) Net cash (used in) from financing activities (1,507) 13,478 6,044 6,026 8,492 Net increase (decrease) in cash and cash equivalents 6,040 (5,083) 4,

241 FINANCIAL INFORMATION Net cash from (used in) operating activities During the Track Record Period, our cash from operating activities mainly consisted of the income received from the sale of our steel bar products and steel wire products, while our cash used in operating activities mainly consisted of the payments for the purchases of our raw materials, expenses relating to operating activities and income tax. Net cash from operating activities reflects our profit before tax adjusted for: (i) non-cash items, which primarily comprised depreciation of our property, plant and equipment, impairment loss on trade receivables, net of reversal and written off of bad debts; (ii) the effects of changes in our working capital, which mainly comprised our inventories, trade and other receivables, and trade and other payables; and (iii) items not related to operating activities, principally including our finance costs and interest income. In FY2015, our net cash from operating activities was approximately RM14.0 million, comprising cash generated from operations of approximately RM15.9 million, subtracted by income tax paid of approximately RM1.9 million. Our cash generated from operations comprised operating profit before changes in working capital of approximately RM16.4 million and net negative adjustments for changes in working capital of approximately RM0.5 million. Net negative adjustments for changes in working capital primarily reflected by (i) the increase in inventories of approximately RM2.2 million and (ii) the increase in trade and other receivables of approximately RM5.1 million, partially offset by the increase in trade and other payables of approximately RM6.8 million. In FY2016, our net cash used in operating activities was approximately RM5.1 million, comprising cash used in operations of approximately RM2.3 million, subtracted by income tax paid of approximately RM2.8 million. Our cash used in operations comprised operating profit before changes in working capital of approximately RM18.5 million and net negative adjustments for changes in working capital of approximately RM20.8 million. Net negative adjustments for changes in working capital were primarily reflected by (i) the increase in inventories of approximately RM4.1 million; and (ii) the increase in trade and other receivables of approximately RM15.6 million; and (iii) the decrease in trade and other payables of approximately RM1.1 million. In FY2017, our net cash generated from operating activities was approximately RM3.7 million, comprising cash generated from operations of approximately RM7.5 million, subtracted by income tax paid of approximately RM3.8 million. Our cash generated from operations comprised operating profit before changes in working capital of approximately RM23.0 million and net negative adjustments for changes in working capital of approximately RM15.5 million. Net negative adjustments for changes in working capital primarily reflected by the increase in trade and other receivables of approximately RM33.4 million and partly offset by (i) the decrease in inventories of approximately RM2.3 million; and (ii) the increase in trade and other payables of approximately RM15.6 million. In the four months ended 30 April 2018, our net cash flow used in operating activities was approximately RM7.3 million, comprising cash used in operations of approximately RM6.2 million, subtracted by income tax paid of approximately RM1.1 million. Our cash used in operations comprised operating profit before changes in working capital of approximately RM7.1 million and net negative adjustments for changes in working capital of approximately RM13.3 million. Net negative adjustments for changes in working capital primarily reflected by (i) the increase in inventories of approximately RM2.6 million; (ii) the increase in trade and other receivables of approximately RM2.6 million; and (iii) the decrease in trade and other payables of approximately RM8.1 million. 234

242 FINANCIAL INFORMATION Please refer to the paragraph headed Discussion of selected items of consolidated statements of financial position in this section for further details and analysis of our working capital. Net cash used in investing activities During the Track Record Period, our cash used in investing activities mainly consisted of (i) deposits paid for acquisition of property, plant and equipment; (ii) purchases of our property, plant and equipment; (iii) advance to a Director and (iv) placement of pledged bank deposits, while our cash from investing activities mainly represented repayment from a Director and interest received. In FY2015, our net cash used in investing activities was approximately RM6.5 million, which was mainly contributed by our (i) deposits paid for acquisition of property, plant and equipment of approximately RM2.5 million; (ii) purchases of property, plant and equipment of approximately RM2.6 million; (iii) advance to a Director of approximately RM2.4 million; and (iv) placement of pledged bank deposits of approximately RM1.3 million, partially offset by repayment from a Director of approximately RM2.0 million. In FY2016, our net cash used in investing activities was approximately RM13.5 million, which was mainly contributed by our (i) deposits paid for acquisition of property, plant and equipment of approximately RM1.8 million; (ii) purchases of property, plant and equipment of approximately RM6.4 million; (iii) advance to a Director of approximately RM3.5 million; (iv) placement of pledged bank deposits of approximately RM3.7 million; and (v) deposits paid for acquisition of investment properties of approximately RM2.0 million, partially offset by repayment from a Director of approximately RM3.8 million. In FY2017, our net cash used in investing activities was approximately RM4.9 million, which was mainly contributed by our (i) purchases of property, plant and equipment of approximately RM1.4 million; and (ii) placement of pledged bank deposits of approximately RM3.4 million, partially offset by interest received of approximately RM1.0 million. In the four months ended 30 April 2018, our net cash used in investing activities was approximately RM1.0 million, which was mainly contributed by our purchases of property, plant and equipment of approximately RM2.2 million, partially offset by our (i) withdrawal of pledged bank deposits of approximately RM0.6 million and (ii) interest received of approximately RM0.5 million. Net cash (used in)/from financing activities During the Track Record Period, our cash generated from financing activities mainly consisted of drawdown of new secured bank borrowings, while our cash used in financing activities mainly consisted of repayment of secured bank borrowings, repayment of obligations under finance leases, interest expenses and dividend. In FY2015, our net cash used in financing activities was approximately RM1.5 million, which was mainly contributed by our (i) repayment of secured bank borrowings of approximately RM101.6 million; and (ii) repayment of interest expenses of approximately RM2.2 million, partially offset by our drawdown of new secured bank borrowings of approximately RM103.0 million. 235

243 FINANCIAL INFORMATION In FY2016, our net cash generated from financing activities was approximately RM13.5 million, which was mainly contributed by our drawdown of new secured bank borrowings of approximately RM137.6 million, partially offset by our (i) repayment of secured bank borrowings of approximately RM119.6 million; (ii) repayment of interest expenses of approximately RM2.5 million and (iii) payments of dividends of approximately RM2.0 million. In FY2017, our net cash generated from financing activities was approximately RM6.0 million, which was mainly contributed by our drawdown of new secured bank borrowings of approximately RM200.3 million, partially offset by (i) repayment of secured bank borrowings of approximately RM186.7 million; (ii) repayment of interest expenses of approximately RM3.7 million; and (iii) repayment of obligations under finance leases of approximately RM3.6 million. In the four months ended 30 April 2018, our net cash generated from financing activities was approximately RM8.5 million, which was mainly contributed by our (i) drawdown of new secured bank borrowings of approximately RM75.0 million and (ii) deposits received from [REDACTED] Investor of approximately RM4.5 million, partially offset by (a) repayment of secured bank borrowings of approximately RM67.6 million and (b) repayment of interest expenses of approximately RM1.5 million. Sufficiency of working capital Taking into account the financial resources available to us, including our available banking facilities, cash and cash equivalents on hand, cash flows generated from our operations and the estimated proceeds from the [REDACTED], and in the absence of unforeseen circumstances, our Directors are of the opinion that we have sufficient working capital for our present requirements and for at least 12 months from the date of this document. 236

244 FINANCIAL INFORMATION Net current assets The following table sets out a breakdown of our current assets and current liabilities as at the dates indicated: As at 31 December As at 30 April As at 31 May RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Current assets Inventories 7,693 11,785 9,442 12,062 10,540 Trade and other receivables 39,524 54,605 87,856 89,236 95,332 Amount due from a Director 387 Amount due from a related company Derivative financial instruments 9 Pledged bank deposits 8,375 12,119 15,518 14,884 15,315 Bank balances and cash 6,766 1,978 6,785 7,925 8,948 62,763 80, , , ,146 Current liabilities Trade and other payables 16,398 15,097 35,094 29,193 32,566 Amount due to a Director 603 Derivative financial instruments 44 Secured bank borrowings 30,430 42,193 56,016 64,711 65,769 Tax payable 1,437 1,981 1,707 1, Obligations under finance leases 1, ,450 2,579 2,576 49,407 60,868 95,311 98, ,185 Net current assets 13,356 19,619 24,290 25,666 28,961 Our net current assets increased from approximately RM13.4 million as at 31 December 2015 to approximately RM19.6 million as at 31 December 2016, which was primarily attributable to (i) the increase in our trade and other receivables and (ii) the decrease in our trade and other payables, partially offset by the increase in our secured bank borrowings as at 31 December Our net current assets increased to approximately RM24.3 million as at 31 December 2017, which was primarily attributable to the increase in our trade and other receivables from approximately RM54.6 million in FY2016 to approximately RM87.9 million in FY2017, partially offset by the increase in our (i) trade and other payables and (ii) secured bank borrowings as at 31 December

245 FINANCIAL INFORMATION Our net current assets increased to approximately RM25.7 million as at 30 April The increase in our net current assets could be reflected by (i) the increase in our inventories; (ii) the increase in our trade and other receivables; and (iii) the decrease in our trade and other payables, partially offset by the increase in our (a) secured bank borrowings and (b) tax payable. Our net current assets increased to approximately RM29.0 million as at 31 May The increase in our net current assets could be reflected by the increase in our trade and other receivables, partially offset by the increase in our trade and other payables. Please refer to the paragraph headed Discussion of selected items of consolidated statements of financial position in this section for further details and analysis of the movements of the significant items of our current assets and current liabilities during the Track Record Period. INDEBTEDNESS Bank borrowings and obligations under finance leases The following table sets out a breakdown of our bank borrowings (including overdrafts and loans) and obligations under finance leases and range of their interest rates as at the dates indicated: As at 31 December As at 30 April As at 31 May RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Current Secured and guaranteed bank borrowings 30,430 42,193 56,016 64,711 65,769 Unguaranteed obligations under finance leases 1, ,450 2,579 2,576 31,572 43,187 58,466 67,290 68,345 Non-current Secured and guaranteed bank borrowings 4,676 11,247 10,969 10,651 10,576 Unguaranteed obligations under finance leases 1,613 1,946 8,288 8,015 7,799 6,289 13,193 19,257 18,666 18,375 Total 37,861 56,380 77,723 85,956 86,720 Interest rates per annum: Fixed-rate borrowings N/A 7.07% 7.00% 8.29% 8.29% Variable-rate borrowings 4.60% % 4.20% % 4.30% % 4.49% % 4.49% % Unguaranteed obligations under finance leases (fixed-rate) 2.41% % 2.38% % 2.38% % 2.34% % 2.34% % 238

246 FINANCIAL INFORMATION The following tables set out the maturity profile of our bank loans and overdrafts, and finance lease liabilities as at the dates indicated: As at 31 December As at 30 April As at 31 May RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Bank loans and overdrafts: On demand or within one year 30,430 42,193 56,016 64,711 65,769 More than one year but not exceeding two years 877 1,263 1,477 1,485 1,487 More than two years but not exceeding five years 2,710 3,436 2,705 2,648 2,632 More than five years 1,089 6,548 6,787 6,518 6,457 Total 35,106 53,440 66,985 75,362 76,346 Obligations under finance leases: Within one year 1, ,450 2,579 2,576 More than one year but not more than two years ,523 2,549 2,501 More than two years but not more than five years 886 1,039 5,765 5,466 5,298 More than five years 1 Total 2,755 2,940 10,738 10,594 10,375 Our finance lease liabilities represented our obligations in relation to hire purchase agreements of our certain plant and machinery and motor vehicles. Our bank borrowings are secured by (i) property, plant and equipment with a carrying value of approximately RM10.8 million, RM17.2 million, RM17.8 million and RM17.8 million as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively; (ii) investment properties with a carrying value of approximately RM2.4 million and RM2.4 million as at 31 December 2017 and 30 April 2018, respectively; (iii) bank deposits with a carrying amount of approximately RM8.4 million, RM12.1 million, RM15.5 million and RM14.9 million as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively; and (iv) personal guarantees from Mr. Ng and Ms. Sin. Our Directors confirm that the guarantees provided by our Directors will be released upon [REDACTED]. 239

247 FINANCIAL INFORMATION During the Track Record Period and up to the Latest Practicable Date, we have not experienced any difficulty in obtaining credit facilities or withdrawal of facilities, request for early repayment, default in payments or breach of financial covenants of our loans and borrowings. We have been able to repay our loans and borrowings when they became due and payable. Our Directors confirm that, during the Track Record Period and up to the Latest Practicable Date, we had no material default with regard to covenants and/or breaches of covenants under our loans and borrowings. In addition, our Directors confirm that there are no material covenants in our existing loans and borrowings that impose a substantial limitation on our ability to obtain further financing. Contingent liabilities As at 31 December 2015, 2016, 2017, 30 April 2018 and 31 May 2018, we did not have any significant contingent liabilities. We are currently not a party to any litigation that is likely to have a material adverse effect on our business, results of operations or financial condition. Our Directors confirm that, as at the Latest Practicable Date, there was no material change in our Group s contingent liabilities since 31 May Save as disclosed the paragraph headed in Indebtedness in this section, we did not have other outstanding mortgages, charges, debentures, loan capital, bank overdrafts, loans, loans from government, debt securities or other similar indebtedness, finance lease on hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantees on other material contingent liabilities outstanding as at 31 May 2018 (being the latest practicable date for the purpose of this indebtedness statement). Material indebtedness change Our Directors confirm that, as at the Latest Practicable Date, there was no material change in our Group s indebtedness since 31 May Our Directors have further confirmed that, as at the Latest Practicable Date, we did not have any plans to raise any material debt financing shortly after the [REDACTED]. OFF-BALANCE SHEET TRANSACTIONS We have not entered into any material off-balance sheet transactions or arrangements during the Track Record Period and up to the Latest Practicable Date. CAPITAL EXPENDITURES In FY2015, FY2016, FY2017 and the four months ended 30 April 2018, we paid an aggregate amount of approximately RM2.9 million, RM8.5 million, RM17.2 million and RM2.9 million, respectively, for capital expenditures in respect of the acquisition of property, plant and equipment. We expect that our capital expenditure in FY2018 and FY2019 will be approximately RM[REDACTED], and RM[REDACTED], respectively, which are mainly related to the acquisition of property, plant and equipment. The related additional depreciation in FY2018 and FY2019 will be approximately [REDACTED] and RM[REDACTED], respectively. 240

248 FINANCIAL INFORMATION COMMITMENTS Capital commitments At the end of the reporting period, the Group has capital commitments as follows: As at 31 December As at 30 April As at 30 May RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Capital expenditure in respect of the acquisition of property, plant and equipment contracted for but not provided in the Historical Financial Information 13,371 11,627 4,587 5,131 5,131 Operating lease commitments The Group as lessee At the end of the reporting period, the Group has commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: As at 31 December As at 30 April As at 31 May RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Within one year third parties related party (note) In the second to fifth years inclusive third parties related party (note) Note: Mr. Ng Heng Oon, brother of Mr. Ng, is the lessor of certain office premises leased by the Group. 241

249 FINANCIAL INFORMATION Operating lease payments represent rentals payable by the Group for certain of its office premises and office equipment. Leases are negotiated and rentals are fixed for terms ranging from one to five years. PROPERTY INTERESTS Please refer to the paragraph headed Business Properties Owned properties in this document for the further details of our property interests. RELATED PARTY TRANSACTIONS With respect to the related party transactions set out in this document, our Directors are of the opinion that these related party transactions were conducted on normal commercial terms. Please refer to note 34 to the Accountants Report in Appendix I to this document for further details of our related party transactions. [REDACTED] EXPENSES For the FY2015, FY2016 and FY2017, we did not incur any [REDACTED] expenses. For the four months ended 30 April 2018, we incurred [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]). We expect to incur total [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]), of which our Group (i) has recognised approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) in the profit or loss for the four months ended 30 April 2018; (ii) expects to recognise approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) in the profit or loss for the eight months ending 31 December 2018; and (iii) expects to recognise approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) as a deduction in equity directly for the year ending 31 December Expenses in relation to the [REDACTED] are non-recurring in nature. Our Group s financial performance and result of operations for the four months ended 30 April 2018 and the year ending 31 December 2018 will be, significantly and adversely affected by the expenses in relation to the [REDACTED]. 242

250 FINANCIAL INFORMATION KEY FINANCIAL RATIOS The table below sets out our certain key financial ratios as at the dates/for the periods indicated: As at/ For the four months ended As at/for the year ended 31 December 30 April Notes Return on equity % 27.6% 26.4% N/A Return on assets % 9.1% 7.9% N/A Current ratio Quick ratio Gearing ratio % 151.4% 154.6% 166.9% Debt-to-equity ratio % 113.5% 110.3% 122.6% Interest coverage ratio Notes: 1. Return on equity equals to our profit for the year divided by the closing balance of our total equity, multiplied by 100%. 2. Return on assets equals to our profit for the year divided by the closing balance of our total assets, multiplied by 100%. 3. Current ratio equals to our total current assets divided by our total current liabilities as at the year end date. 4. Quick ratio equals to our total current assets less our inventories divided by our total current liabilities as at the year end date. 5. Gearing ratio equals to our total loans and borrowings divided by our total equity as at the year end date, multiplied by 100%. 6. Debt-to-equity ratio equals to our net debts (being our total loans and borrowings net of our cash and cash equivalents) divided by our total equity as at the year end date, multiplied by 100%. 7. Interest coverage ratio equals to our profit for the year netting off our finance costs and income tax expense divided by our finance costs. Return on equity Our return on equity decreased from approximately 32.8% in FY2015 to approximately 27.6% in FY2016, and further decreased to approximately 26.4% in FY2017, primarily attributable to the increase in equity base as a result of reinvestment of our retained earnings of FY2016 and FY

251 FINANCIAL INFORMATION Return on assets Our return on assets decreased from approximately 10.9% in FY2015 to approximately 9.1% in FY2016, and further decreased to approximately 7.9% in FY2017, primarily attributable to the rate of increase in our total assets exceeding the rate of increase in our net profit. Our total assets recorded a year-over-year increase of approximately RM27.1 million for FY2016 and approximately RM54.2 million for FY2017, while our net profit for the year recorded a year-over-year increase of approximately RM0.9 million for FY2016 and approximately RM3.0 million for FY2017. Current ratio Our current ratio remained stable at approximately 1.3, 1.3, 1.3 and 1.3 as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively. Quick ratio Our quick ratio remained stable at approximately 1.1, 1.1, 1.2 and 1.1 as at 31 December 2015, 2016, 2017 and 30 April 2018, respectively. Gearing ratio Our gearing ratio increased from approximately 132.9% as at 31 December 2015 to approximately 151.4% as at 31 December 2016, to approximately 154.6% as at 31 December 2017, and further to approximately 166.9% as at 30 April 2018, primarily attributable to the continuous increase in our bank borrowings during the Track Record Period. Debt-to-equity ratio Our debt-to-equity ratio increased from approximately 79.7% as at 31 December 2015 to approximately 113.5% as at 31 December 2016, primarily attributable to the increase in our bank borrowings from approximately RM35.1 million as at 31 December 2015 to approximately RM53.4 million as at 31 December Despite the high level of our bank borrowings as at 31 December 2017 and 30 April 2018, our debt-to-equity ratio remained relatively stable at approximately 110.3% as at 31 December 2017 and approximately 122.6% as at 30 April 2018, mainly due to the increase in our cash and cash equivalents from 31 December 2016 to 31 December 2017 and 30 April Interest coverage ratio Our interest coverage ratio remained relatively stable at approximately 6.5, 6.4 and 5.7 in FY2015, FY2016 and FY2017 respectively and decreased to approximately 4.4 for the four months ended 30 April 2018, mainly due to the [REDACTED] expense of approximately RM[REDACTED] recognised during the four months ended 30 April

252 FINANCIAL INFORMATION UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS Please refer to the unaudited pro forma financial information in Appendix II to this document for the details of our unaudited pro forma adjusted consolidated net tangible assets. FINANCIAL RISK MANAGEMENT Our Group is exposed to market risk, credit risk and liquidity risk in the normal course of business. For further details of our financial risk management, please refer to note 31 to the Accountants Report in Appendix I to this document. DIVIDENDS EC Excel Wire declared and paid the dividends of nil, approximately RM2.0 million, RM0.5 million and nil to the then respective shareholders in FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. No dividend has been proposed and declared by the Group after the Track Record Period and subsequent to 30 April Our Company currently does not have any predetermined dividend payout ratio. To the extent profits are distributed as dividends, such profits will not be available to be reinvested in our operations. Our historical dividend distribution record may not be used as a reference or basis to determine the level of dividends that may be declared or paid in the future. We cannot assure that dividends will be paid in the future or as to the timing of any dividends that may be paid in the future. The payment and the amount of any dividends of our Company, if paid, would depend on our results of operations, cash flows, financial position, statutory and regulatory restrictions on the payment of dividends by us, future prospects and other factors that our Directors may consider relevant. Our shareholders will be entitled to receive such dividends pro rata according to the amount paid up or credited as paid up on the Shares. The declaration, payment and amount of dividends will be subject to our Directors discretion. Dividends may be paid only out of our distributable profits as permitted under the relevant laws. DISTRIBUTABLE RESERVES As at 30 April 2018, our Company had no distributable reserve available for distribution. DISCLOSURE REQUIRED UNDER THE LISTING RULES Save as disclosed otherwise in this document, our Directors have confirmed that as at the Latest Practicable Date, they were not aware of any circumstances that would give rise to a disclosure requirement under Rules to of the Listing Rules. 245

253 FINANCIAL INFORMATION NO MATERIAL ADVERSE CHANGE Our Directors confirm that since 30 April 2018 and up to the date of this document, there has been no material adverse change in our financial or trading position or prospects. Our Directors also confirm that there have been no events since 30 April 2018 which would materially affect the information shown in the Accountants Report in Appendix I to this document. 246

254 FUTURE PLANS AND USE OF PROCEEDS BUSINESS OBJECTIVES AND STRATEGIES Please refer to the paragraph headed Business Business strategies in this document for details of our business objectives and strategies. IMPLEMANTATION PLANS In pursuance of the above business objectives, the implementation plans of our Group are set forth below from the [REDACTED] to 31 December 2018 and for each of the six-month periods until 31 December Investors should note that the following implementation plans are formulated on the bases and assumptions referred to in the paragraph headed Bases and assumptions in this section. These bases and assumptions are inherently subject to many uncertainties and unpredictable factors, in particular the risk factors set forth in the section headed Risk Factors in this document. Therefore, there is no assurance that our Group s business plans will materialise in accordance with the estimated time frame and that our future plans will be accomplished at all. Based on the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] to HK$[REDACTED] per [REDACTED], the net proceeds from the [REDACTED] to our Company (after deduction of underwriting fees and estimated expenses payable by us in relation to the [REDACTED]) are estimated to be approximately HK$[REDACTED]. It is estimated that the total [REDACTED] expenses of approximately HK$[REDACTED] will be incurred. Our Directors presently intend to apply such net proceeds as follows: 247

255 FUTURE PLANS AND USE OF PROCEEDS (a) From the [REDACTED] to 31 December 2018 Business strategies Implementation activities Proceeds HK$ 000 Acquisition of a parcel of land Acquisition of a parcel of land in Tanah Merah, Kelantan [REDACTED] Reduction of finance cost Repayment of bank borrowings [REDACTED] Working capital General working capital [REDACTED] [REDACTED] (b) From 1 January 2019 to 30 June 2019 Business strategies Implementation activities Proceeds HK$ 000 Strengthen our logistics capability and expansion of production capacity Establishment of our New Kelantan Plant: Set up costs for the new production [REDACTED] plant Set up cost for a new office tower [REDACTED] Set up costs for a new warehouse [REDACTED] Recruitment of new staff in our New Kelantan Plant: 6 salesmen [REDACTED] [REDACTED] 248

256 FUTURE PLANS AND USE OF PROCEEDS (c) From 1 July 2019 to 31 December 2019 Business strategies Implementation activities Proceeds HK$ 000 Acquisition of a parcel of land Acquisition of a parcel of land in Bukit Beruntung, Selangor [REDACTED] Strengthen our logistics capability and expansion of production capacity Establishment of our New Kelantan Plant: Purchase of trucks, trailers, forklifts and [REDACTED] machineries set up costs for a new warehouse [REDACTED] Establishment of our New Selangor Production Facility Set up costs for our New Selangor Production Facility [REDACTED] Expansion of our Kuantan Plant: Purchase of trucks and forklifts [REDACTED] Recruitment of new staff in our New Kelantan Plant: 1 engineer [REDACTED] 2 assistant engineers [REDACTED] 2 supervisors [REDACTED] 1 production manager [REDACTED] 20 production workers and drivers [REDACTED] 6 salesmen [REDACTED] Recruitment of new staff in our Kuantan Plant: 10 additional production workers and drivers [REDACTED] [REDACTED] 249

257 FUTURE PLANS AND USE OF PROCEEDS (d) From 1 January 2020 to 30 June 2020 Business strategies Implementation activities Proceeds HK$ 000 Strengthen our logistics capability and expansion of production capacity Establishment of our New Kelantan Plant: Purchase of trucks, trailers, forklifts and [REDACTED] machineries Set up cost for a new warehouse [REDACTED] Establishment of our New Selangor Production Facility Purchase of trucks, trailers, forklifts and bending machines [REDACTED] Expansion of our Kuantan Plant: Set up cost for a new office tower [REDACTED] Recruitment of new staff in our New Kelantan Plant 20 Production workers and drivers [REDACTED] Recruitment of new staff in our New Selangor Production Facility 4 supervisors [REDACTED] 13 production workers and drivers [REDACTED] Salaries for the new staff in our New Kelantan Plant: 1 engineer [REDACTED] 2 assistant engineers [REDACTED] 2 supervisors [REDACTED] 1 production manager [REDACTED] 20 production workers and drivers [REDACTED] 6 salesmen [REDACTED] Salaries for the new staff in our Kuantan Plant: 10 production workers and drivers [REDACTED] Upgrading our enterprise resource planning system (the ERP system ) Setting up the ERP system [REDACTED] [REDACTED] 250

258 FUTURE PLANS AND USE OF PROCEEDS (e) From 1 July 2020 to 31 December 2020 Business strategies Implementation activities Proceeds HK$ 000 Strengthen our logistics capability and expansion of production capacity Establishment of our New Kelantan Plant: Purchase of trucks, trailers, forklifts and machineries Establishment of our New Selangor Production Facility Purchase of trucks, trailers, forklifts and bending machines [REDACTED] [REDACTED] Salaries for the new staff in our New Kelantan Plant: 1 engineer [REDACTED] 2 assistant engineers [REDACTED] 2 supervisors [REDACTED] 1 production manager [REDACTED] 40 production workers and drivers [REDACTED] 6 salesmen [REDACTED] Salaries for the new staff in our New Selangor Production Facility 4 supervisors [REDACTED] 13 production workers and drivers [REDACTED] Salaries for the new staff in our Kuantan Plant: 10 production workers and drivers [REDACTED] [REDACTED] BASES AND ASSUMPTIONS Our Directors have adopted the following principal assumptions in the preparation of the implementation plan up to 31 December (a) (b) (c) (d) Our Group will have sufficient financial resources to meet the planned capital expenditure and business development requirements during the period to which our future plans relate; There will be no material changes in the existing political, legal, fiscal, social or economic conditions in Hong Kong or Malaysia or in any other places in which any member of our Group carries on its business or will carry on its business; There will be no material change in the funding requirement for each of our Group s future plans described in this document from the amount as estimated by our Directors; There will be no material change in the existing laws and regulations, or other governmental policies relating to our Group, or in the political, economic or market conditions in which our Group operates; 251

259 FUTURE PLANS AND USE OF PROCEEDS (e) (f) (g) (h) (i) (j) There will be no change in the effectiveness of the licenses, permits and qualifications obtained by our Group; There will be no material changes in the bases or rates of taxation applicable to the activities of our Group; Our Group will be able to retain key staff in the management and the main operational departments; Our Group will be able to retain our customers and suppliers; There will be no disasters, natural, political or otherwise, which would materially disrupt the businesses or operations of our Group; and Our Group will not be materially affected by the risk factors as set out under the section headed Risk Factors in this document. REASONS FOR THE [REDACTED] IN HONG KONG Our Directors believe that [REDACTED] in Hong Kong gives us long-term advantage as it would expand our shareholder and capital base by making our Shares available and accessible to investors in Hong Kong and greater China and thus, the stock market in Hong Kong will attract different geographically based investors. Hong Kong also provides a favourable environment for investors, including its well-established legal system, high level of internationalisation, freedom of flow of capital and information, and its maturity in the global financial market. Our Directors believe that the access to international funding will underpin our Group s future sustainable growth by providing us with diversified means to fund our future expansion plans. On the contrary, the sole reliance on organic growth funding via self-operation will impose constraints on the overall growth of our Group. The [REDACTED] would help raise our publicity, information transparency that builds up trust and confidence for potential and existing customers. Owing to the aforementioned reasons, our Directors are of the view that the [REDACTED] would enable our Group to strengthen our market position in steel bar product and steel wire product industry in Malaysia. Our Directors believe that the [REDACTED] will greatly benefit our Group for the following reasons: (A) Expected growth in the construction industry in Malaysia, which is highly relevant to the growth of our business The construction industry is the end-user industry for steel bar products and steel wire products as reinforcement materials and as such, the steel bar products and steel wire products market grows in tandem with the construction industry. According to the SMITH ZANDER Report, from 2011 to 2016, the construction activities in Malaysia as measured by the value of projects awarded, grew from approximately RM99.5 billion to RM229.0 billion, at a CAGR of approximately 18.1%. Furthermore, according to the SMITH ZANDER Report, the construction industry will also continue to benefit the steel bar product and steel wire product industry. 252

260 FUTURE PLANS AND USE OF PROCEEDS In light of the aforementioned development, it is expected that steel bar product and steel wire product manufacturers will thrive to supply the products required to meet the growing demands from the construction industry in Malaysia. Our Directors envisage that there would be considerable business opportunities and growth drivers which justify our Group s expansion plan. (B) Necessity of implementing our business plans to capture more market share in the industry i. Strengthening our logistics capability and expanding our production capacity by setting up our New Kelantan Plant and our New Selangor Production Facility and enhancing our Kuantan Plant The utilisation rate of our Kuantan Plant reached approximately 95.3% for steel bar products and 67.4% for steel wire products for the four months ended 30 April It is imperative for us to expand the production capacity of our Group to align with our business growth and capture the business opportunities arising from the expected growth in the construction industry in Malaysia. Based on the delivery locations of our products, approximately 13.5%, 11.0%, 16.1% and 16.4% of our revenue was generated from the Northeastern States and approximately 64.4%, 63.1%, 50.1% and 42.5% of our revenue was generated from the Central Region during the Track Record Period. The cost of delivering our products to customers in the Northeastern States and the Central Region is generally higher than delivering to customers in Kuantan as the cost is based on actual distance of the trip. As such, our Directors believe that the establishment of our New Kelantan Plant and our New Selangor Production Facility would not only enable us to capture business opportunities in the Northeastern States and the Central Region, but also put us in an advantageous position to build up a close relationship with our customers and potential customers in these regions. We have earmarked a sum of (i) approximately HK$[REDACTED] for establishing our New Kelantan Plant, which will include acquisition of a parcel of land in Tanah Merah, Kelantan, acquisition of trucks, forklifts, trailers and machines, setting up a new production plant, office tower and warehouse and recruitment of new staff; (ii) approximately HK$[REDACTED] for establishing our New Selangor Production Facility, which will include acquisition of a parcel of land in Bukit Beruntung, Selangor, acquisition of trucks, forklifts, trailers and machines, setting up a new production facility and recruitment of new staff; and (iii) approximately HK$[REDACTED] for enhancing our Kuantan Plant, which will include acquisition of trucks and forklifts, setting up a new office tower and recruitment of new staff. It is expected that approximately HK$[REDACTED] will be incurred in total for the above from the first half of 2019 to the second half of

261 FUTURE PLANS AND USE OF PROCEEDS When our Kuantan Plant, our New Kelantan Plant and our New Selangor Production Facility are operating in full swing, we expect that we will have an annual production capacity of approximately 429,400 MT of steel bar products and approximately 63,475 MT of steel wire products in FY2021, as compared with the production capacity of approximately 73,977.2 MT of steel bar products and 20,942.9 MT of steel wire products in FY2017, representing an increase of approximately 82.7% and 67.0%, respectively. Based on our gross profit margin of approximately 10.4% for the four months ended 30 April 2018 and the expected growth in the construction industry in Malaysia, we are confident that we can fully cover the aforesaid additional cost to be incurred. ii. Acquisition of a parcel of land in Tanah Merah and Bukit Beruntung, respectively Our Directors take the view that there will be business opportunities arising from the construction industry in the Northeastern States for the following reasons: 1. According to the SMITH ZANDER Report, there will be key developments such as (i) the Cross Border Development which will stretch from the coastal areas of Besut in Terengganu to the Kelantan-Thai border at Tumpai; and (ii) key infrastructure projects such as the construction of the Pasir Mas Halal Park and Tok Bali Fisheries Park. These will be the key future drivers for the growth in demand for steel bar products and steel wire products; 2. During the Track Record Period, we had approximately 180, 180, 270 and 200 customers located in the Northeastern States respectively. Revenue generated by these customers amounted to approximately RM21.6 million, RM20.5 million, RM49.3 million and RM21.7 million respectively during the Track Record Period, representing a CAGR of approximately 31.7% from FY2015 to FY2017; and 3. Our Kuantan Plant is currently our only production plant. Owing to the long distance between our Kuantan Plant in Pahang State to the Northeastern States, the transportation cost (or freight charges) of our products from our existing Kuantan Plant to the Northeastern States is relatively high, resulting in an increase in the cost of our products and delivery time of our products to our customers in Northeastern States. Our Directors reasonably believe that having a production plant located there would not only save our transportation cost (freight charges), but also put us in an advantageous position to serve our customers including construction contractors and property developers in these states and build up close relationships with these customers. Our Directors believe that we would also be able to respond faster to our customers requests if we have a production plant in the same region. On the other hand, our Directors take the view that there will be business opportunities arising from the construction industry in the Central Region for the following reasons: 1. Central Region was our largest market in FY2015, FY2016, FY2017 and our 254

262 FUTURE PLANS AND USE OF PROCEEDS second largest market for the four months ended 30 April Owing to the long distance between our Kuantan Plant and the Central Region, the transportation cost (or freight charges) of our products from our existing Kuantan Plant to the Central Region is relatively high, resulting in an increase in the cost of our products and delivery time of our products to our customers in the Central Region. For example, it generally takes more than eight hours per round trip from our Kuantan Plant to the Central Region. If we charge customers located in the Central Region the same rate per unit of our steel bar products or steel wire products as that we charge customers in Kuantan, we will have a lower profit margin due to the higher freight charges incurred. Based on the latest quotation obtained by us, the average freight charges for the delivery of the steel bar products and steel wire products from the Kuantan Plant to customers in the Central Region is approximately RM40.0 per MT while the freight charges for delivery within the Central Region is approximately RM25.1 per MT. Therefore, our Directors estimate that we can save approximately 37.3% in such portion of freight charges in connection with the deliveries made within the Central Region instead of from Kuantan to the Central Region; 2. On the other hand, revenue contributed by the hardware shops in the Central Region only accounted for approximately 1.7%, 3.4%, 6.9% and 6.5% of our revenue generated from the Central Region for FY2015, FY2016, FY2017 and the four months ended 30 April 2018, respectively. These hardware shop customers generally place smaller order with us. Considering the freight charges for delivery of steel bar products and steel wire products from our Kuantan Plant to the Central Region, during the Track Record Period, we could only take up these smaller orders from these hardware shop customers in the Central Region if income generated by these orders could cover the corresponding freight charges. During the Track Record Period, we only managed to maintain a reasonable profit margin by requiring truck delivery to the Central Region to be full-truckloaded. As a result of the need to consolidate the smaller orders from the said region, it generally takes around five to seven days from the date of purchase order for our products to reach our hardware shop customers in this region, which discourages them from placing orders with us. If we have our own production facility in Bukit Beruntung, Selangor, which will save transportation cost and significantly shorten the delivery time, our Directors believe that we will be able to capture the demand from hardware shop customers in the Central Region; 3. We plan to purchase new machines for our New Selangor Production Facility. Apart from that, the New Selangor Production Facility is expected to house a semi-automated wire mesh production line (consisting of a drawing machine, a mesh welding machine and a wire straightening and cutting machine) to be transferred from our Kuantan Plant. Given that the fully-automated mesh welding machine (i.e. MG800 series) has already significantly increased the wire mesh production capacity of the Kuantan Plant, our Directors believe the transfer of the said wire mesh production line with the fully-automated MG800 series remains at the Kuantan Plant will allow the Group to (i) optimise the utilisation of the fully-automated mesh welding machine as well as the traditional wire mesh production lines; and (ii) capture the business opportunities in the Central Region. Our Directors estimate that the time needed for relocation and installation of the said wire mesh production line will be approximately one month; and 255

263 FUTURE PLANS AND USE OF PROCEEDS 4. According to the SMITH ZANDER Report, the Central Region s real GDP increased from approximately RM310.3 billion in 2011 to approximately RM421.6 billion in 2016, registering a year-on-year average of approximately 6.3%. It is forecast that the GDP growth between 2017 and 2021 will be between approximately 5% and 8%. Furthermore, from 2011 to 2016, construction activities in the Central Region, as measured by the value of projects awarded, grew from approximately RM35.5 billion in 2011 to approximately RM134.7 billion in 2016 at a CAGR of approximately 30.6%. According to the SMITH ZANDER Report, it is estimated that construction activities in the Central Region will grow from approximately RM155.9 billion in 2017 to approximately RM301.3 billion in 2021, registering a CAGR of approximately 17.9% during the period. As it is anticipated that our New Selangor Production Facility will have an annual production capacity of approximately 167,178 MT of steel bar products and 9,141 MT of steel wire products in FY2021, our Directors believe setting up our New Selangor Production Facility will allow us to capture the business opportunities arising from the estimated growth of construction activities in the Central Region. Our Directors take the view that it would benefit our Group in the long run if we can acquire a parcel of land in each of Tanah Merah and Bukit Beruntung on which our New Kelantan Plant and our New Selangor Production Facility will be located, as it would reduce the risks associated with the leased property, such as early termination or non-renewal of the lease by the landlord and the possible increase in rental expenses; eliminate the costs, time and efforts associated with the possible relocation; and provide a stable production plant/ production for the growing business of our Group. We have therefore earmarked a sum of approximately HK$[REDACTED] for acquiring a parcel of land in each of Tanah Merah and Bukit Beruntung for setting up a new plant thereon. iii. Upgrade our ERP system and enhance our capabilities in information technology An advanced ERP system enables us to collect, store, manage and interpret data from our business activities. It can also track our business resources, including cash, raw materials, production capacity and the status of business commitment such as our sales orders, purchase orders and payroll in a timely manner. These functions of the upgraded ERP system are particularly useful for us to plan and iron out our expansion plan. For details, please see the section head Business Business strategies Upgrade our ERP system and enhance our capabilities in information technology in this document. iv. Additional capital required to consolidate our Group s market position Our Directors consider that given our established reputation within the steel bar product and steel wire product industry in Malaysia and our long-established business relationship with our customers, our Group is capable of capturing the continuous growth in the steel bar product and steel wire product industry in Malaysia and further increase our market share, which depends on (i) our then available operational resources including manpower resources, machineries and equipment; and (ii) sufficient capital to support the future growth in business. 256

264 FUTURE PLANS AND USE OF PROCEEDS (C) Need for equity financing i. Our Group s significant cash outflow exposure Although our business generated net operating cash inflow before change in working capital, it does not necessarily mean that our Group has no imminent needs to raise funds in order to implement our business strategies. Taking into account the fact that (i) our Group only had a cash balance of approximately RM7.9 million (excluding short term bank deposits pledged with banks) as at 30 April 2018; (ii) our trade and other receivables of approximately RM89.2 million as at 30 April 2018; and (iii) our Group s significant cash outflow exposure including the mismatch in the time between receipt of payments from our customers and payments to our suppliers and staff costs, our Directors believe our Group may not have sufficient internal generated funds to finance our expansion plan while at the same time maintaining sufficient working capital for our Group s operations. (D) Commercial rationale for [REDACTED] i. Strengthening our Group s corporate profile, credibility and competitiveness Our Directors believe that a [REDACTED] status will enhance our credibility with suppliers and customers and other business partners, as well as our ability to recruit, motivate and retain key management personnel. The increased level of information transparency after the [REDACTED] will also give our existing and prospective customers and suppliers the public access to our Group s corporate and financial information, which could generate further confidence in our Group among them. With the status of a [REDACTED] company, our Directors believe that the [REDACTED] will allow us to enhance our competitiveness against our competitors. We will therefore be in a better position to attract more potential customers and solicit more businesses upon the [REDACTED]. ii. The [REDACTED] status provides an equity fund raising platform for our Group Although our Group was able to successfully expand our business using internally generated funds and short-term and long-term bank borrowings during the Track Record Period and has been able to repay bank loans as they fell due in the past, our Group still plans to seek equity fund raising instead of continuing to use the historical capital structure to fund our future growth as the latter will place undue financial burden on our Group in terms of cash flow if we are to apply all our internal capital resources or bank loans for growth purpose. Our Directors anticipated that additional bank borrowings to our Group would be needed for our expansion. The [REDACTED], which allows us to access the capital market for fund raising, will assist our future business development and strengthen our competitiveness. 257

265 FUTURE PLANS AND USE OF PROCEEDS Subsequent to the [REDACTED], we will also have access to secondary market fund raising for our future expansion plans through the issuance of equity and/or debt securities. By strengthening our financial position through fund raising, we will also have more bargaining power when negotiating terms with our suppliers for manufacturing materials, and with other business partners, if any. Our Group will be able to maintain a lower level of gearing ratio as compared to the gearing ratio of approximately 166.9% as at 30 April iii. Diversification of shareholder base and enhance liquidity in trading of Shares Our Directors take the view that the [REDACTED] will enhance the liquidity of the Shares which will be freely traded in the Stock Exchange when compared to the limited liquidity of shares that are privately held before the [REDACTED]. Hence, our Directors consider that the [REDACTED] will enlarge and diversify our shareholder base and potentially lead to a more liquid market in the trading of our Shares. Although the amount of expenses for the [REDACTED] represents a significant proportion of the gross proceeds from the [REDACTED], such expenses are non-recurring by nature for which we would not have to pay following the completion of the [REDACTED]. For the reasons stated above, our Directors believe that the [REDACTED] is beneficial to us in the long run. USE OF PROCEEDS For the period from the [REDACTED] to 31 December 2020, our net proceeds from the [REDACTED] will be used as follows: From the [REDACTED] to 31 December 2018 From 1 January 2019 to 30 June 2019 From 1 July 2019 to 31 December 2019 From 1 January 2020 to 30 June 2020 From 1 July 2020 to 31 December 2020 Total amount of proceeds to be expended HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Acquisition of a parcel of land in Tanah Merah and Bukit Beruntung respectively [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Expansion of our production capacity [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Repayment of bank borrowings [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Setting up an ERP System [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Working capital [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] 258

266 FUTURE PLANS AND USE OF PROCEEDS Based on the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] to HK$[REDACTED] per [REDACTED], we will receive gross proceeds of approximately HK$[REDACTED]. The net proceeds from the [REDACTED] are estimated to be approximately HK$[REDACTED], after deducting the underwriting commission and other estimated expenses payable by our Company in relation to the [REDACTED]. We intend to apply such net proceeds from the [REDACTED] as follows: approximately of [REDACTED]% of the net proceeds, or approximately HK$[REDACTED], will be used to finance the costs of acquisition of parcels of land in Tanah Merah and Bukit Beruntung; approximately of [REDACTED]% of the net proceeds, or approximately HK$[REDACTED], will be used to expand our production capacity, of which (i) approximately HK$[REDACTED] will be used for establishing a new production plant in the state of Kelantan; (ii) approximately HK$[REDACTED] will be used for setting up a new production facility in Selangor; and (iii) approximately HK$[REDACTED] will be used for upgrading our trucks and forklifts and building an office premises at our Kuantan Plant; approximately of [REDACTED]% of the net proceeds, or approximately HK$[REDACTED], will be used for the repayment of bank borrowings; approximately of [REDACTED]% of the net proceeds, or approximately HK$[REDACTED], will be used for setting up an ERP System; and approximately of [REDACTED]% of the net proceeds, or approximately HK$[REDACTED], will be used as working capital. If the [REDACTED] is finally determined to be more than HK$[REDACTED] per [REDACTED], being the mid-point of the indicative range of the [REDACTED], the above proposed allocation of net proceeds will increase on a pro rata basis. If the [REDACTED] is less than the mid-point of the indicative range of the [REDACTED], the above allocation of the net proceeds will decrease on a pro rata basis and we plan to finance such shortfall by internal generated financial resources and/or other financing, as and when appropriate. To the extent that the net proceeds from the [REDACTED] are not immediately required for the above purposes or if we are unable to affect any part of our future development plans as intended, we may hold such funds in short-term deposits with licensed banks or authorised financial institutions for so long as it is in our best interests. Should our Directors decide to re-allocate the intended use of proceeds to other business plans and/ or new project of our Group to a material extent and/or there is to be any material modification to the use of proceeds as described above, our Group will issue an announcement in accordance with the Listing Rules. 259

267 UNDERWRITING [REDACTED] UNDERWRITERS [REDACTED] Underwriters [REDACTED] UNDERWRITING ARRANGEMENTS AND EXPENSES [REDACTED] Underwriting Agreement [REDACTED] 260

268 UNDERWRITING [REDACTED] 261

269 UNDERWRITING [REDACTED] 262

270 UNDERWRITING [REDACTED] Undertakings to the Stock Exchange pursuant to the Listing Rules [REDACTED] 263

271 UNDERWRITING [REDACTED] Undertakings pursuant to the [REDACTED] Underwriting Agreement By our Company [REDACTED] 264

272 UNDERWRITING [REDACTED] By our Controlling Shareholders [REDACTED] 265

273 UNDERWRITING [REDACTED] 266

274 UNDERWRITING Undertakings to our Group and the Sole Sponsor Undertakings by Strength Reach and Mr. Budihardjo [REDACTED] [REDACTED] Underwriting Agreement [REDACTED] 267

275 UNDERWRITING Commission and expenses The [REDACTED] will receive a gross commission of [REDACTED]% on the aggregate [REDACTED] of all the [REDACTED], out of which will, as the case may be, be applied to any sub-underwriting commissions and selling concession, if any. The underwriting commission, documentation fee, [REDACTED] fees, brokerage, Stock Exchange trading fee, SFC transaction levy, legal and other professional fees together with applicable printing and other expense relating to the [REDACTED] are estimated to be approximately HK$[REDACTED] million in aggregate (based on an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] to HK$[REDACTED] per [REDACTED]) and is paid or payable by our Company. Underwriters interests in our Company Save for its interests and obligations under the Underwriting Agreements and save as disclosed in this document, none of the Underwriters or any of its associates is interested beneficially or non-beneficially in any shares in any member of our Group nor has any right (whether legally enforceable or not) or option to subscribe for or to nominate persons to subscribe for any shares of any member of our Group. Compliance Adviser s agreement Under a compliance adviser s agreement made between Dakin Capital Limited and our Company (the Compliance Adviser s Agreement ), our Company appoints Dakin Capital Limited and Dakin Capital Limited agrees to act as the compliance adviser to our Company for the purpose of the Listing Rules for a fee from the [REDACTED] and ending on the date on which our Company complies with Rule of the Listing Rules in respect of its financial results for the first full financial year commencing after the [REDACTED] or until the agreement is terminated, whichever is earlier. Sole Sponsor s interest in our Company The Sole Sponsor, has declared its independence pursuant to Rule 3A.07 of the Listing Rules. Save for the advisory and documentation fees to be paid to the Sole Sponsor in relation to the [REDACTED], its obligations under the Underwriting Agreements and any interests in securities that may be subscribed by it pursuant to the [REDACTED], neither the Sole Sponsor nor any of its associates has or may, as a result of the [REDACTED], have any interest in any class of securities of our Company or any other company in our Group (including options or rights to subscribe for such securities). No director or employee of the Sole Sponsor who is involved in providing advice to our Company has or may, as a result of the [REDACTED], have any interest in any class of securities of our Company or other company in our Group (including options or rights to subscribe for such securities but, for the avoidance of doubt, excluding interests in securities that may be subscribed for or purchased by any such director or employee pursuant to the [REDACTED]). No director or employee of the Sole Sponsor has a directorship in our Company or any other company in our Group. 268

276 STRUCTURE AND CONDITIONS OF THE [REDACTED] [REDACTED] 269

277 STRUCTURE AND CONDITIONS OF THE [REDACTED] [REDACTED] 270

278 STRUCTURE AND CONDITIONS OF THE [REDACTED] [REDACTED] 271

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282 STRUCTURE AND CONDITIONS OF THE [REDACTED] [REDACTED] 275

283 STRUCTURE AND CONDITIONS OF THE [REDACTED] [REDACTED] 276

284 HOW TO APPLY FOR [REDACTED] [REDACTED] 277

285 HOW TO APPLY FOR [REDACTED] [REDACTED] 278

286 HOW TO APPLY FOR [REDACTED] [REDACTED] 279

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301 HOW TO APPLY FOR [REDACTED] [REDACTED] 294

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303 HOW TO APPLY FOR [REDACTED] [REDACTED] 296

304 HOW TO APPLY FOR [REDACTED] [REDACTED] 297

305 APPENDIX I Accountants Report The following is the text of a report set out on pages I-1 to I-80, received from the Company s reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document. ACCOUNTANTS REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF EC EXCEL HOLDINGS LIMITED AND DAKIN CAPITAL LIMITED Introduction We report on the historical financial information of EC Excel Holdings Limited (the Company ) and its subsidiaries (together, the Group ) set out on pages I-4 to I-80, which comprises the combined statements of financial position as at 31 December 2015, 2016 and 2017 and 30 April 2018, the statement of financial position of the Company as at 30 April 2018, and the combined statements of profit or loss and other comprehensive income, the combined statements of changes in equity and the combined statements of cash flows for each of the years ended 31 December 2015, 2016 and 2017 and for the four months ended 30 April 2018 (the Track Record Period ) and a summary of significant accounting policies and other explanatory information (together, the Historical Financial Information ). The Historical Financial Information set out on pages I-4 to I-80 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [Date] (the document ) in connection with the initial [REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Directors responsibility for the Historical Financial Information The directors of the Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error. Reporting accountants responsibility Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement. I-1

306 APPENDIX I Accountants Report Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Company, as well as evaluating the overall presentation of the Historical Financial Information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion the Historical Financial Information gives, for the purposes of the accountants report, a true and fair view of the Group s financial position as at 31 December 2015, 2016 and 2017 and 30 April 2018, of the Company s financial position as at 30 April 2018 and of the Group s financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information. Review of stub period comparative financial information We have reviewed the stub period comparative financial information of the Group which comprises the combined statement of profit or loss and other comprehensive income, the combined statement of changes in equity and the combined statement of cash flows for the four months ended 30 April 2017 and other explanatory information (the Stub Period Comparative Financial Information ). The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountants report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information. I-2

307 APPENDIX I Accountants Report Report on matters under the Rules Governing the Listing of Securities on the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance Adjustments The Historical Financial Information is stated after making such adjustments to the Underlying Financial Statements as defined on page I-4 as were considered necessary. Dividends We refer to note 14 to the Historical Financial Information which contains information about the dividends declared and paid by the Company s subsidiaries and states that no dividends have been declared by the Company in respect of the Track Record Period. No historical financial statements for the Company No financial statements have been prepared for the Company since its date of incorporation. [Deloitte Touche Tohmatsu] Certified Public Accountants Hong Kong [Date] I-3

308 APPENDIX I Accountants Report HISTORICAL FINANCIAL INFORMATION OF THE GROUP Preparation of Historical Financial Information Set out below is the Historical Financial Information which forms an integral part of this accountants report. The Historical Financial Information in this report was prepared based on the consolidated financial statements of Precise One Limited ( Precise One ) for the Track Record Period prepared in accordance with the accounting policies which conform with International Financial Reporting Standards ( IFRSs ) issued by the International Accounting Standards Board (the IASB ), and the management accounts of the Company for the period from 27 March 2018 (date of incorporation) to 30 April 2018 which conform with IFRSs issued by the IASB (collectively referred to as the Underlying Financial Statements ). The consolidated financial statements of Precise One were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA. The Historical Financial Information is presented in Malaysian Ringgit ( RM ) and all values are rounded to the nearest thousand (RM 000) except when otherwise indicated. COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Four months ended Year ended 31 December 30 April NOTES RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Revenue 6 160, , ,813 90, ,139 Cost of sales (136,719) (159,758) (273,490) (79,592) (118,414) Gross profit 23,648 27,380 33,323 11,233 13,725 Other income and expenses Other gains and losses 8 (161) (46) 60 Impairment loss on trade receivables, net of reversal (178) (490) (85) (26) Selling and distribution expenses (5,460) (6,045) (6,937) (2,351) (3,156) Administrative expenses (3,804) (5,426) (5,750) (2,152) (2,488) [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Finance costs 9 (2,228) (2,513) (3,693) (951) (1,488) Profit before tax 12,251 13,548 17,522 5,949 5,053 Income tax expense 10 (2,893) (3,266) (4,243) (1,190) (1,946) Profit and total comprehensive income for the year/period 11 9,358 10,282 13,279 4,759 3,107 Profit and total comprehensive income for the year/period attributable to: Owners of the Company 8,444 9,586 12,657 4,642 3,009 Non-controlling interests ,358 10,282 13,279 4,759 3,107 I-4

309 APPENDIX I Accountants Report STATEMENTS OF FINANCIAL POSITION The The Group Company As at 31 December As at 30 April As at 30 April NOTES RM 000 RM 000 RM 000 RM 000 RM 000 NON-CURRENT ASSETS Property, plant and equipment 15 20,769 26,836 41,150 42,921 Investment properties ,797 2,778 Deposits paid for acquisition of property, plant and equipment 2,651 3,566 3,957 2,000 Deposits paid for acquisition of investment properties 2,000 23,420 32,794 47,904 47,699 CURRENT ASSETS Inventories 17 7,693 11,785 9,442 12,062 Trade and other receivables 18 39,524 54,605 87,856 89, Amount due from a director Amount due from a related company ,242 Derivative financial instruments 20 9 Pledged bank deposits 21 8,375 12,119 15,518 14,884 Bank balances and cash 21 6,766 1,978 6,785 7,925 62,763 80, , ,127 3,033 CURRENT LIABILITIES Trade and other payables 22 16,398 15,097 35,094 29,193 5,195 Amount due to a director Derivative financial instruments Secured bank borrowings 23 30,430 42,193 56,016 64,711 Tax payable 1,437 1,981 1,707 1,978 Obligations under finance leases 24 1, ,450 2,579 49,407 60,868 95,311 98,461 5,195 Net current assets (liabilities) 13,356 19,619 24,290 25,666 (2,162) Total assets less current Liabilities 36,776 52,413 72,194 73,365 (2,162) NON-CURRENT LIABILITIES Secured bank borrowings 23 4,676 11,247 10,969 10,651 Obligations under finance leases 24 1,613 1,946 8,288 8,015 Deferred tax liabilities 25 1,994 1,980 2,676 3,202 8,283 15,173 21,933 21,868 Net assets (liabilities) 28,493 37,240 50,261 51,497 (2,162) CAPITAL AND RESERVES Share capital 26 2,500 4,830 5,082 4 Reserves 26A 24,790 30,351 43,709 50,693 (2,162) Equity attributable to owners of the Company 27,290 35,181 48,791 50,697 (2,162) Non-controlling interests 1,203 2,059 1, Total equity 28,493 37,240 50,261 51,497 (2,162) I-5

310 APPENDIX I Accountants Report COMBINED STATEMENTS OF CHANGES IN EQUITY Attributable to owners of the Company Non- Share Other Retained controlling capital reserve profits Total interests Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January ,500 16,346 18, ,065 Profit and total comprehensive income for the year 8,444 8, ,358 Issue of shares (note i) Issue of bonus shares (note ii) 90 (90) At 31 December , ,700 27,290 1,203 28,493 Profit and total comprehensive income for the year 9,586 9, ,282 Issue of shares (note iii) Issue of bonus shares (note iv) 2,000 (2,000) Effect of reorganisation (note v) Dividends recognised as distribution (note 14) (2,025) (2,025) (2,025) At 31 December , ,261 35,181 2,059 37,240 Profit and total comprehensive income for the year 12,657 12, ,279 Issue of shares by Klaas Metal (note vi) Acquisition of additional interest in a subsidiary (note vii) (427) Effect of reorganisation (note viii) Partial disposal of a subsidiary without losing control (note ix) (212) (212) Issue of shares by UVM Excel (note x) 200 1,024 1,224 (1,024) 200 Dividends recognised as distribution (note 14) (518) (518) (518) At 31 December 2017 (as originally stated) 5,082 1,309 42,400 48,791 1,470 50,261 Adjustments (see note 3) (1,698) (1,698) (177) (1,875) At 31 December 2017 (restated) 5,082 1,309 40,702 47,093 1,293 48,386 Profit and total comprehensive income for the period 3,009 3, ,107 Acquisition of additional interest in a subsidiary (note xi) (591) Issue of shares (note xii) Effect of the Reorganisation (as defined in note 2) (5,140) 5,140 At 30 April ,982 43,711 50, ,497 For the four months ended 30 April 2017 (unaudited) At 1 January , ,261 35,181 2,059 37,240 Profit and total comprehensive income for the period 4,642 4, ,759 Acquisition of additional interest in a subsidiary (note vii) (427) At 30 April , ,903 40,250 1,749 41,999 I-6

311 APPENDIX I Accountants Report Notes: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) During the year ended 31 December 2015, a subsidiary of the Company, UVM Excel Sdn. Bhd. ( UVM Excel ) issued 30,000 new shares amounting to RM30,000 and 70,000 new shares amounting to RM70,000 to EC Excel Wire Sdn. Bhd. ( EC Excel Wire ) and the non-controlling shareholders, respectively. During the year ended 31 December 2015, 90,000 and 60,000 bonus shares were issued by a subsidiary of the Company, Arena Metal Resources Sdn. Bhd. ( Arena Metal Resources ) to EC Excel Wire by the capitalisation of RM90,000 of retained profits and the non-controlling shareholders by the capitalisation of RM60,000 of non-controlling interests, respectively. During the year ended 31 December 2016, a subsidiary of the Company, Klang Valley Wire Sdn. Bhd. ( Klang Valley Wire ) issued 239,999 new shares amounting to RM240,000 and 159,999 new shares amounting to RM160,000 to Mr. Ng Heng Hong ( Mr. Ng ) and the non-controlling shareholders, respectively. During the year ended 31 December 2016, 2,000,000 bonus shares were issued by a subsidiary of the Company, EC Excel Wire to Mr. Ng by the capitalisation of RM2,000,000 of retained profits. During the year ended 31 December 2016, EC Excel Wire transferred its 60% equity interest in Arena Metal Resources to Mr. Ng at a cash consideration of RM90,000, which is equal to the nominal value of the share capital of Arena Metal Resources transferred. During the year ended 31 December 2017, a subsidiary of the Company, Klaas Metal Sdn. Bhd. ( Klaas Metal ) issued 9,999 new shares amounting to RM10,000 and 19,998 new shares amounting to RM20,000 to Mr. Ng and the non-controlling shareholders, respectively. During the year ended 31 December 2017, Mr. Ng acquired an additional 20% equity interest in a subsidiary, UVM Excel at a consideration of RM20,000 from the non-controlling shareholders. The difference between the amount paid for acquisition of an additional interest in a subsidiary and the carrying value of non-controlling interests being acquired of is recorded as equity movement in other reserve. During the year ended 31 December 2017, EC Excel Wire transferred its 22% equity interest in UVM Excel to Mr. Ng at a cash consideration of RM22,000, which is equal to the nominal value of the share capital of UVM Excel transferred. During the year ended 31 December 2017, EC Excel Wire transferred its 8% equity interest in UVM Excel to the non-controlling shareholders at a cash consideration of RM8,000. The transaction was accounted for as an equity transaction. The Group recognised an increase in non-controlling interests of RM220,000. During the year ended 31 December 2017, UVM Excel issued 200,000 new shares amounting to RM200,000 to Mr. Ng, resulting in an increase of the Group s effective equity interest in UVM Excel by 38.7%. The Group recognised a decrease in non-controlling interests of RM1,024,000 accordingly. During the four months ended 30 April 2018, Mr. Ng acquired an additional 19.3% equity interest in a subsidiary, UVM Excel at a consideration of RM58,000 from the non-controlling shareholders. The difference between the amount paid for acquisition of an additional interest in a subsidiary and the carrying value of non-controlling interests being acquired of is recorded as equity movement in other reserve. During the four months ended 30 April 2018, a subsidiary of the Company, Precise One issued 1,000 new shares amounting to United States dollars ( US$ ) 1,000 (equivalent to RM4,000) to Decade Lion Limited ( Decade Lion ), the immediate and ultimate holding company of the Company. I-7

312 APPENDIX I Accountants Report COMBINED STATEMENTS OF CASH FLOWS Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) OPERATING ACTIVITIES Profit before tax 12,251 13,548 17,522 5,949 5,053 Adjustments for: Finance costs 2,228 2,513 3, ,488 Interest income (430) (554) (978) (209) (524) Depreciation of property, plant and equipment 2,175 2,443 2, ,130 Depreciation of investment properties Loss (gain) on disposal/written off of property, plant and equipment 4 (3) 34 (6) Impairment loss on trade receivables, net of reversal Written off of bad debts Fair value change of derivative financial instruments 44 (53) Operating cash flows before movements in working capital 16,402 18,470 22,981 7,573 7,133 (Increase) decrease in inventories (2,165) (4,092) 2,343 (117) (2,620) Increase in trade and other receivables (5,135) (15,589) (33,415) (18,438) (2,591) Increase (decrease) in trade and other payables 6,821 (1,137) 15,650 7,353 (8,068) Cash generated from (used in) operations 15,923 (2,348) 7,559 (3,629) (6,146) Malaysia corporate income tax paid (1,918) (2,736) (3,821) (780) (1,149) NET CASH FROM (USED IN) OPERATING ACTIVITIES 14,005 (5,084) 3,738 (4,409) (7,295) INVESTING ACTIVITIES Deposits paid for acquisition of property, plant and equipment (2,536) (1,849) (983) Purchases of property, plant and equipment (2,627) (6,443) (1,402) (516) (2,159) Advance to a director (2,380) (3,451) Repayment from a director 1,993 3,838 Placement of pledged bank deposits (1,327) (3,744) (3,399) (618) Withdrawal of pledged bank deposits 634 Advance to a related company (11) (1) (11) Repayment from a related company 19 Deposits paid for acquisition of investment properties (2,000) Purchases of investment properties (400) (413) Interest received Proceeds from disposal of property, plant and equipment NET CASH USED IN INVESTING ACTIVITIES (6,458) (13,477) (4,867) (925) (1,006) I-8

313 APPENDIX I Accountants Report Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) FINANCING ACTIVITIES Repayment of secured bank borrowings (101,564) (119,586) (186,663) (54,275) (67,554) Interest paid (2,228) (2,513) (3,693) (951) (1,488) Repayment of obligations under finance leases (797) (1,116) (3,573) (414) (902) Dividends paid (2,025) (518) Advance from a director Repayment to a director (603) (603) Payment of [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] New secured bank borrowings raised 103, , ,316 62,269 74,982 Proceeds from issue of shares Proceeds from disposal of partial interest in a subsidiary without losing control 8 Deposit received from the [REDACTED] Investor (as defined in note 2) 4,496 NET CASH (USED IN) FROM FINANCING ACTIVITIES (1,507) 13,478 6,044 6,026 8,492 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,040 (5,083) 4, CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD 726 6,766 1,683 1,683 6,598 CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD 6,766 1,683 6,598 2,375 6,789 Represented by: Bank balances and cash 6,766 1,978 6,785 2,375 7,925 Bank overdrafts (295) (187) (1,136) 6,766 1,683 6,598 2,375 6,789 I-9

314 APPENDIX I Accountants Report NOTES TO THE HISTORICAL FINANCIAL INFORMATION 1. GENERAL The Company was incorporated in the Cayman Islands as an exempt company with limited liability on 27 March Its immediate and ultimate holding company is Decade Lion, a private limited company incorporated in the British Virgin Islands (the BVI ). The addresses of the registered office and principal place of business of the Company are disclosed in the section Corporate Information in the document. The Company is an investment holding company. The principal activities of its subsidiaries are manufacturing and sale of cold-rolled steel bars and steel wire products; processing and sale of hot-rolled steel bars; and trading of building materials and accessories. The Historical Financial Information is presented in Malaysian Ringgit ( RM ), which is also the functional currency of the Company. No statutory financial statements of the Company have been prepared since its date of incorporation as it is incorporated in the jurisdiction where there are no statutory audit requirements. 2. BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION The Historical Financial Information has been prepared based on the accounting policies set out in note 4 which conform with IFRSs issued by the IASB and the principle of merger accounting. In preparing for the initial [REDACTED] of the shares of the Company on the Stock Exchange, the companies comprising the Group underwent a group reorganisation as described below (the Reorganisation ). Prior to the Reorganisation, the operating subsidiaries of the Group, EC Excel Wire, Arena Metal Resources, UVM Excel, Klang Valley Wire and Klaas Metal (the Operating Subsidiaries ) were controlled by Mr. Ng. As part of the Reorganisation, investment holding companies, EC Excel Wire Holdings Sdn. Bhd. ( EC Excel Wire Holdings ), Precise One and the Company, were incorporated and interspersed between the Operating Subsidiaries and Mr. Ng. Since then, the Company became the holding company of Group on 18 May The Group comprising the Company, Precise One, EC Excel Wire Holdings and the Operating Subsidiaries, resulting from the Reorganisation has always been under the common control of Mr. Ng during the Track Record Period and before and after the Reorganisation. Therefore, it is regarded as a continuing entity and the Historical Financial Information has been prepared as if the Company had always been the holding company of the Group. The principle steps of the Reorganisation are as follows: (i) Precise One was incorporated in the BVI with limited liability on 11 December On 10 January 2018, 1,000 shares of Precise One were allotted and issued to Decade Lion, a company wholly owned by Mr. Ng. I-10

315 APPENDIX I Accountants Report (ii) (iii) (iv) (v) (vi) Good Favour Limited ( Good Favour ) was incorporated in Hong Kong with limited liability on 2 January On the same date, one share was allotted and issued to the initial subscriber, which was then transferred to Precise One at a nominal consideration of Hong Kong dollar ( HK$ ) 1 on 11 January EC Excel Wire Holdings was incorporated in Malaysia with limited liability on 27 March On the same date, one share was allotted and issued to each of Mr. Ng and Ms. Sin Fun Chu ( Ms. Sin ), spouse of Mr. Ng, respectively. On 5 April 2018, Mr. Ng and Ms. Sin transferred an aggregate of two shares, representing all of their shareholdings in EC Excel Wire Holdings, to Precise One at a nominal consideration of RM2. The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 27 March As at the date of incorporation, the Company had an authorised share capital of HK$380,000 divided into 38,000,000 shares of HK$0.01 each. On the same date, one share was allotted and issued to the initial subscriber, which was then transferred to Decade Lion. On 18 April 2018, EC Excel Wire Holdings acquired 4,500,001 shares of EC Excel Wire from Mr. Ng at a nominal consideration of RM1. On the same date, EC Excel Wire Holdings acquired one share of EC Excel Wire from Ms. Sin at a nominal consideration of RM1. After the said transfers, EC Excel Wire became a wholly owned subsidiary of EC Excel Wire Holdings. On 18 April 2018, EC Excel Wire Holdings acquired 300,003 shares of UVM Excel from Mr. Ng at a nominal consideration of RM1. On the same date, EC Excel Wire Holdings acquired one share of UVM Excel from EC Excel Wire at a nominal consideration of RM1. After the said transfers, UVM Excel became a wholly owned subsidiary of EC Excel Wire Holdings. (vii) On 18 April 2018, EC Excel Wire Holdings acquired 90,060 shares of Arena Metal Resources, representing 60% of the entire issued shares of Arena Metal Resources, from Mr. Ng at a nominal consideration of RM1. After the said transfers, Arena Metal Resources became a non-wholly owned subsidiary with 60% equity interest owned by EC Excel Wire Holdings. (viii) On 18 April 2018, EC Excel Wire Holdings acquired 240,000 shares of Klang Valley Wire, representing 60% of the entire issued shares of Klang Valley Wire, from Mr. Ng at a nominal consideration of RM1. After the said transfers, Klang Valley Wire became a non-wholly owned subsidiary with 60% equity interest owned by EC Excel Wire Holdings. (ix) On 18 April 2018, EC Excel Wire Holdings acquired 10,000 shares of Klaas Metal, representing 33.3% of the entire issued shares of Klaas Metal, from Mr. Ng at a nominal consideration of RM1. After the said transfers, Klaas Metal became a non-wholly owned subsidiary with 33.3% equity interest owned by EC Excel Wire Holdings. Pursuant to the shareholders agreement entered into with other shareholders of Klaas Metal, Mr. Ng was appointed as managing director of Klaas Metal. Mr. Ng had the full executive and decision making power to direct all relevant activities of Klaas Metal, including but not limited to, controlling the voting decisions of other shareholders and directors of Klaas Metal in all the shareholders and board of directors meetings of Klaas Metal, respectively. Taking into the consideration of such arrangement, the directors of the Company concluded that the Group has the contractual right to direct the relevant activities of Klaas Metal unilaterally and therefore the Group has control over Klaas Metal. I-11

316 APPENDIX I Accountants Report (x) (xi) On 18 May 2018, the Company acquired all the issued shares of Precise One from Decade Lion in consideration of which the Company allotted and issued 869 shares to Decade Lion. After the said transfer, Precise One became a wholly owned subsidiary of the Company. On 6 March 2018, a subscription agreement was entered into between Strength Reach Limited (the [REDACTED] Investor ), Precise One, EC Excel Wire and Mr. Ng, pursuant to which the [REDACTED] Investor agreed to subscribe for, and the Company agreed to allot and issue 130 shares, representing 13% of the enlarged issued share capital of the Company, at a cash consideration of HK$18,000,000 (equivalent to RM8,991,000). As at 30 April 2018, a refundable deposit of HK$9,000,000 (equivalent to RM4,496,000) has been received from the [REDACTED] Investor and included in trade and other payables in the combined statements of financial position. The share allotment to the [REDACTED] Investor was completed on 25 May The combined statements of profit or loss and other comprehensive income, combined statements of changes in equity and combined statements of cash flows of the Group for the Track Record Period have been prepared to present the results and cash flows of the companies now comprising the Group, as if the group structure upon the completion of the Reorganisation had been in existence throughout the Track Record Period, or since the respective dates of incorporation of the relevant entities, where there is a shorter period. The combined statements of financial position of the Group as at 31 December 2015, 2016 and 2017 and 30 April 2018 have been prepared to present the assets and liabilities of the companies now comprising the Group as if the group structure upon the completion of the Reorganisation had been in existence at those dates, taking into account the respective dates of incorporation of the relevant entities, where applicable. 3. ADOPTION OF NEW AND REVISED IFRSs For the purpose of preparing and presenting the Historical Financial Information for the Track Record Period, the Group has consistently adopted the IFRSs which are effective for the accounting period beginning on 1 January 2018 throughout the Track Relevant Period, except that the Group adopted IFRS 9 Financial Instruments from 1 January The accounting policies for financial instruments under IFRS 9 are set out in note 4 below. IFRS 9 Financial Instruments and the related amendments In the four months ended 30 April 2018, the Group has applied IFRS 9 and the related consequential amendments to other IFRSs. IFRS 9 introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities, 2) expected credit losses ( ECL ) for financial assets and 3) general hedge accounting. The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9, i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1 January The difference between carrying amounts as at 31 December 2017 and the carrying amounts as at 1 January 2018 are recognised in the opening retained profits and other components of equity, without restating comparative information. I-12

317 APPENDIX I Accountants Report Classification and measurement of financial assets All financial assets and financial liabilities continue to be measured on the same bases as were previously measured under IAS 39. Impairment of financial assets As at 1 January 2018, the directors of the Company reviewed and assessed the Group s existing financial assets for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of IFRS 9. The results of the assessment and the impact thereof are detailed below. Summary of effects arising from initial application of IFRS 9 The table below illustrates the impairment of financial assets under IFRS 9 and IAS 39 at the date of initial application, 1 January Amortised cost (previously classified as loans and receivables) Retained profits Noncontrolling interests RM 000 RM 000 RM 000 Closing balance at 31 December 2017 IAS ,420 42,400 1,470 Effect arising from initial application of IFRS 9: Remeasurement impairment under ECL model (1,875) (1,698) (177) Opening balance at 1 January ,545 40,702 1,293 The Group applies the IFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables. To measure the ECL, trade receivables have been grouped based on shared credit risk characteristics. Loss allowances for other financial assets at amortised cost mainly comprise of other receivables, pledged bank deposits and bank balances, are measured on 12-month ECL ( 12m ECL ) basis and there had been no significant increase in credit risk since initial recognition. For pledged bank deposits and bank balances, the Group only transacts with reputable banks with high credit ratings assigned by international credit-rating agencies. There has been no recent history of default in relation to these banks. The ECL is not material. I-13

318 APPENDIX I Accountants Report For other receivables, the management of the Group makes periodic collective as well as individual assessment on the recoverability of other receivables based on historical settlement records and past experience. Based on assessment by the management of the Group, the ECL for other receivables is not material. Accordingly, no loss allowance has been recognised for other financial assets as at 1 January As at 1 January 2018, the additional credit loss allowance of RM1,875,000 has been recognised against retained profits of RM1,698,000 and non-controlling interests of RM177,000, respectively. The additional loss allowance is charged against the respective asset. All loss allowances for financial assets including trade receivables as at 31 December 2017 reconcile to the opening loss allowance as at 1 January 2018 is as follows: Trade receivables RM 000 At 31 December 2017 IAS Amounts remeasured through opening retained profits/non-controlling interests 1,875 At 1 January ,272 At the date of this report, the Group has not early applied the following new and amendments to IFRSs that have been issued but are not yet effective: IFRS 16 Leases 1 IFRS 17 Insurance Contracts 3 IFRIC 23 Uncertainty over Income Tax Treatments 1 Amendments to IFRS 9 Prepayment Features with Negative Compensation 1 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 2 Amendments to IAS 19 Plan Amendment, Curtailment or Settlement 1 Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures 1 Amendments to IFRSs Annual Improvements to IFRS Standards Cycle 1 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after a date to be determined 3 Effective for annual periods beginning on or after 1 January 2021 Except for the new and amendments to IFRSs mentioned below, the directors of the Company anticipate that the application of all other new and amendments to IFRSs and Interpretations will have no material impact on the Group s financial statements in the foreseeable future. I-14

319 APPENDIX I Accountants Report IFRS 16 Leases IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede IAS 17 Leases and the related interpretations when it becomes effective. IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the classification of cash flows, the Group currently presents upfront prepaid lease payments as investing cash flows in relation to leasehold lands for owned use and those classified as investment properties while other operating lease payments are presented as operating cash flows. Upon application of IFRS 16, lease payments in relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing cash flows by the Group. Under IAS 17, the Group has already recognised an asset and a related finance lease liability for finance lease arrangement and prepaid lease payments for leasehold lands where the Group is a lessee. The application of IFRS 16 may result in potential changes in classification of these assets depending on whether the Group presents right-of-use assets separately or within the same line item at which the corresponding underlying assets would be presented if they were owned. In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by IFRS 16. As at 30 April 2018, the Group has non-cancellable operating lease commitments of RM79,000 as disclosed in note 28. A preliminary assessment indicates that these arrangements will meet the definition of a lease. Upon application of IFRS 16, the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases. I-15

320 APPENDIX I Accountants Report In addition, the Group currently considers refundable rental deposits paid of RM10,000 as rights under leases to which IAS 17 applies. Based on the definition of lease payments under IFRS 16, such deposits are not payments relating to the right to use the underlying assets, accordingly, the carrying amounts of such deposits may be adjusted to amortised cost and such adjustments are considered as additional lease payments. Adjustments to refundable rental deposits paid would be included in the carrying amount of right-of-use assets. Furthermore, the application of new requirements may result in changes in measurement, presentation and disclosure as indicated above. 4. SIGNIFICANT ACCOUNTING POLICIES The Historical Financial Information has been prepared in accordance with IFRSs issued by the IASB. In addition, the Historical Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ) and by the Hong Kong Companies Ordinance. The Historical Financial Information has been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristic of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Historical Financial Information is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. I-16

321 APPENDIX I Accountants Report In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below. Basis of combination The Historical Financial Information incorporates the financial statements of the entities comprising the Group. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group s voting rights in an investee are sufficient to give it power, including: the size of the Group s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Group, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. I-17

322 APPENDIX I Accountants Report Combination of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year/period are included in the combined statements of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on combination. Changes in the Group s ownership interests in existing subsidiaries Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group s and the non-controlling interests proportionate interests. Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. Merger accounting for business combination involving businesses under common control The Historical Financial Information incorporates the financial statements items of the combining businesses in which the common control combination occurs as if they had been combined from the date when the combining businesses first came under the control of the controlling party. The net assets of the combining businesses are consolidated using the existing carrying values from the controlling party s perspective. No amount is recognised in respect of goodwill or bargain purchase gain at the time of common control combination. The combined statements of profit or loss and other comprehensive income include the results of each of the combining businesses from the earliest date presented or since the date when the combining businesses first came under the common control, where there is a shorter period. I-18

323 APPENDIX I Accountants Report Revenue recognition Revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. Specifically, the Group uses a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to customers. Control of the asset may be transferred over time or at a point in time. Control of the asset is transferred over time if: the customer simultaneously receives and consumes the benefits provided by the Group s performance as the group performs; or the Group s performance creates and enhances an asset that the customer controls as the Group performs; or the Group s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. If the control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the asset. For sales of goods for which the control of goods is transferred at a point in time, revenue is recognised when the customer obtains the control of the goods and the Group has present right to payment and the collection of the consideration is probable. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. I-19

324 APPENDIX I Accountants Report Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the combined statements of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss. Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis. Leasehold land and building When the Group makes payments for a property interest which includes both leasehold land and building elements, the Group assesses the classification of each element separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire property is accounted as an operating lease. Specifically, the entire consideration (including any lump-sum upfront payments) are allocated between the leasehold land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element at initial recognition. To the extent the allocation of the relevant payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as prepaid lease payments in the combined statements of financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the leasehold land and building elements, the entire property is generally classified as if the leasehold land is under finance lease. Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting period, I-20

325 APPENDIX I Accountants Report monetary items denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Retirement benefit costs Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Short-term employee benefits Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another IFRS requires or permits the inclusion of the benefit in the cost of an asset. A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leave and sick leave) after deducting any amount already paid. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from profit before tax as reported in the combined statements of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Historical Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those I-21

326 APPENDIX I Accountants Report deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of each reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Property, plant and equipment Property, plant and equipment, including buildings and leasehold land (classified as finance leases) held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress as described below) are stated in the combined statements of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation is recognised so as to write off the cost of assets other than properties under construction less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. I-22

327 APPENDIX I Accountants Report Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment properties over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised. Impairment on tangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an asset individually, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or a cash-generating unit) for which the estimates of future cash flows have not been adjusted. I-23

328 APPENDIX I Accountants Report If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Financial instruments Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Financial assets (accounting policy applicable before 1 January 2018) Financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. I-24

329 APPENDIX I Accountants Report Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount due from a director, amount due from a related company, pledged bank deposits and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. Objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognised is the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the financial asset s original effective interest rate. I-25

330 APPENDIX I Accountants Report The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Financial assets (accounting policy applicable after 1 January 2018) Classification and measurement of financial assets All recognised financial assets that are within the scope of IFRS 9 are subsequently measured at amortised cost or fair value. Debt instruments that meet the following conditions are subsequently measured at amortised cost: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at fair value through profit or loss ( FVTPL ). Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortised cost are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the other gains and losses line item. Impairment under ECL model The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under IFRS 9 (including trade receivables, other receivables, amount due from a I-26

331 APPENDIX I Accountants Report related company, pledged bank deposits and bank balances). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions. The Group always recognises lifetime ECL for trade receivables. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings. For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In particular, the following information is taken into account when assessing whether credit risk has increased significantly: an actual or expected significant deterioration in the financial instrument s external (if available) or internal credit rating; significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor s ability to meet its debt obligations; an actual or expected significant deterioration in the operating results of the debtor; an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor s ability to meet its debt obligations. I-27

332 APPENDIX I Accountants Report Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations. The Group considers a debt instrument to have low credit risk when it has an internal or external credit rating of investment grade as per globally understood definitions. The Group considers that default has occurred when the instrument is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. Measurement and recognition of ECL The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset. The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables where the corresponding adjustment is recognised through a loss allowance account. Credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events: significant financial difficulty of the issuer or the borrower; or I-28

333 APPENDIX I Accountants Report a breach of contract, such as a default or past due event; or the lender(s) of the borrower, for economic or contractual reasons relating to the borrower s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; or it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation. Financial liabilities and equity instruments Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is held for trading. A financial liability is classified as held for trading if it is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. I-29

334 APPENDIX I Accountants Report Financial liabilities at amortised cost Financial liabilities including trade and other payables, amount due to a director and secured bank borrowings are subsequently measured at amortised cost, using the effective interest method. Derivative financial instruments Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. The Group derecognises financial liabilities when, and only when, the Group s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 5. KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in note 4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of each reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve months. I-30

335 APPENDIX I Accountants Report Estimated impairment of trade receivables As at 31 December 2015, 2016 and 2017: When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition, where applicable). Where the future cash flows are less than expected, or being revised downward due to changes in facts and circumstances, a material impairment loss/further impairment loss may arise. As at 31 December 2015, 2016 and 2017, the carrying amount of trade receivables is RM38,208,000, RM52,424,000 and RM84,395,000 respectively (net of loss allowance of RM298,000, RM788,000 and RM397,000 respectively). As at 30 April 2018: The management of the Group estimates the amount of loss allowance for trade receivables based on the credit risk of trade receivables. The loss allowance amount is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows with the consideration of expected future credit losses. The assessment of the credit risk of trade receivables involves high degree of estimation and uncertainty as the management of the Group estimates the loss rates for debtors by using forward-looking information. When the actual future cash flows are less than expected or more than expected, a material impairment loss or a material reversal of impairment loss may arise accordingly. As at 30 April 2018, the carrying amount of trade receivables is RM84,375,000 (net of loss allowance of RM2,298,000). For details of impairment assessment, please refer to note REVENUE AND SEGMENT INFORMATION The Group is principally engaged in manufacturing and sale of cold-rolled steel bars and steel wire products; processing and sale of hot-rolled steel bars; and trading of building materials and accessories. All of the Group s revenue is recognised when the control of goods is transferred, being when the goods are delivered to the customer s specific location. A receivable is recognised by the Group when the goods are delivered to the customer s premises as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due. The customers have neither rights of return nor rights to defer or avoid payment for the goods once they are accepted by the customers. I-31

336 APPENDIX I Accountants Report Disaggregation of revenue The Group derives its revenue from the transfer of goods at a point in time in the following major product lines. This is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8. Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Segment revenue Manufacturing, processing and sale of steel bar products Hot-rolled steel bars 77,144 72, ,258 45,525 64,672 Cold-rolled steel bars 15,307 12,584 22,553 7,794 7,794 92,451 85, ,811 53,319 72,466 Manufacturing, processing and sale of steel wire products Standard wire meshes 35,497 55,029 61,829 20,305 27,333 Cut-to-size wire meshes 4,745 13,999 11,069 2,749 7,825 Fencing products 3,769 2,824 3, ,011 71,852 75,980 23,965 36,093 Trading of building materials and accessories 23,905 29,923 61,022 13,541 23,580 Total 160, , ,813 90, ,139 I-32

337 APPENDIX I Accountants Report Information reported to the executive directors of the Company, being the chief operating decision maker ( CODM ), for the purposes of resource allocation and assessment of segment performance is based on the following reportable segments under IFRS 8 Operating Segments : Manufacturing of steel bar products Manufacturing, processing and sale of steel bar products Manufacturing of steel wire products Manufacturing, processing and sale of steel wire products Trading of building materials Trading of building materials and accessories Segment revenue and results The following is an analysis of the Group s revenue and results by operating and reportable segment: For the year ended 31 December 2015 Manufacturing Manufacturing Trading of of steel bar of steel wire building products products materials Total RM 000 RM 000 RM 000 RM 000 Revenue External sales 92,451 44,011 23, ,367 Segment results 12,015 10,144 1,489 23,648 Other income and expenses 434 Other gains and losses (161) Impairment loss on trade receivables, net of reversal (178) Selling and distribution expenses (5,460) Administrative expenses (3,804) Finance costs (2,228) Profit before tax 12,251 I-33

338 APPENDIX I Accountants Report For the year ended 31 December 2016 Manufacturing Manufacturing Trading of of steel bar of steel wire building products products materials Total RM 000 RM 000 RM 000 RM 000 Revenue External sales 85,363 71,852 29, ,138 Segment results 9,693 15,892 1,795 27,380 Other income and expenses 574 Other gains and losses 68 Impairment loss on trade receivables, net of reversal (490) Selling and distribution expenses (6,045) Administrative expenses (5,426) Finance costs (2,513) Profit before tax 13,548 For the year ended 31 December 2017 Manufacturing Manufacturing Trading of of steel bar of steel wire building products products materials Total RM 000 RM 000 RM 000 RM 000 Revenue External sales 169,811 75,980 61, ,813 Segment results 14,840 15,832 2,651 33,323 Other income and expenses 367 Other gains and losses 297 Impairment loss on trade receivables, net of reversal (85) Selling and distribution expenses (6,937) Administrative expenses (5,750) Finance costs (3,693) Profit before tax 17,522 I-34

339 APPENDIX I Accountants Report For the four months ended 30 April 2017 (unaudited) Manufacturing Manufacturing Trading of of steel bar of steel wire building products products materials Total RM 000 RM 000 RM 000 RM 000 Revenue External sales 53,319 23,965 13,541 90,825 Segment results 5,306 5, ,233 Other income and expenses 216 Other gains and losses (46) Selling and distribution expenses (2,351) Administrative expenses (2,152) Finance costs (951) Profit before tax 5,949 For the four months ended 30 April 2018 Manufacturing Manufacturing Trading of of steel bar of steel wire building products products materials Total RM 000 RM 000 RM 000 RM 000 Revenue External sales 72,466 36,093 23, ,139 Segment results 5,616 7, ,725 Other income and expenses 562 Other gains and losses 60 Impairment loss on trade receivables, net of reversal (26) Selling and distribution expenses (3,156) Administrative expenses (2,488) [REDACTED] expenses [REDACTED] Finance costs (1,488) Profit before tax 5,053 I-35

340 APPENDIX I Accountants Report The accounting policies of the operating segments are the same as the Group s accounting policies described in note 4. Segment results represent the profit earned by each segment without allocation of other income and expenses, other gains and losses, impairment loss on trade receivables, net of reversal, selling and distribution expenses, administrative expenses, [REDACTED] expenses and finance costs. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment. Segment assets and liabilities No analysis of segment assets or segment liabilities is presented as such information is not regularly provided to the CODM. Geographical information No geographical information is presented as the Group s revenue are all derived from customers located in Malaysia based on the location to which the Group delivered the goods, and the Group s non-current assets are all located in Malaysia. Information about major customers Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group are as follows: Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Customer C N/A* N/A* 34,714 N/A* 23,132 * The corresponding revenue did not contribute over 10% of the total revenue of the Group. Customer C contributes revenue to the reportable segments of manufacturing of steel bar products, manufacturing of steel wire products and trading of building materials. I-36

341 APPENDIX I Accountants Report 7. OTHER INCOME AND EXPENSES Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Interest income from: Bank deposits Trade receivables (note) Legal and professional fee (664) Others Note: The amount represents interest at 1.5% per month charged on trade receivables which are past due. 8. OTHER GAINS AND LOSSES Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) (Loss) gain on disposal/written off of property, plant and equipment (4) 3 (34) 6 Written off of bad debts (18) (79) Fair value change of derivative financial instruments (44) 53 Net exchange (loss) gain (161) (12) 1 (161) (46) 60 I-37

342 APPENDIX I Accountants Report 9. FINANCE COSTS Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Interest on: Secured bank borrowings 2,029 2,319 3, ,204 Obligations under finance leases ,228 2,513 3, , INCOME TAX EXPENSE The income tax expense comprises: Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Current tax: Malaysia corporate income tax 2,849 3,280 3,547 1,190 1,420 Deferred tax (note 25): Current year 124 (14) Attributable to a change in tax rate (80) 44 (14) ,893 3,266 4,243 1,190 1,946 The income tax rate applicable in Malaysia is 25% for the year ended 31 December 2015, and 24% for the years ended 31 December 2016 and 2017 and the four months ended 30 April 2017 and The Finance (No. 2) Act 2014 gazetted on 30 December 2014 enacted the reduction of Malaysia corporate income tax rate from 25% to 24% with effect from year of assessment Following this, the applicable tax rate to be used for the measurement of any applicable deferred tax for the year ended 31 December 2015 is the expected rate (i.e. 24%). I-38

343 APPENDIX I Accountants Report The income tax expense for the year/period can be reconciled to the profit before tax per the combined statements of profit or loss and other comprehensive income as follows: Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Profit before tax 12,251 13,548 17,522 5,949 5,053 Malaysia corporate income tax rate 25% 24% 24% 24% 24% Tax at Malaysia corporate income tax rate 3,063 3,252 4,205 1,428 1,213 Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose (387) (210) (440) (238) (36) Tax effect of deductible temporary differences not recognised 5 28 Utilisation of deductible temporary differences previously not recognised (22) Decrease in opening deferred tax liabilities resulting from a decrease in applicable tax rate (80) Income tax expense for the year/period 2,893 3,266 4,243 1,190 1,946 I-39

344 APPENDIX I Accountants Report 11. PROFIT FOR THE YEAR/PERIOD Profit for the year/period has been arrived at after charging (crediting): Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Directors remuneration (note 12): fees salaries, allowances and other benefits performance related incentive payments retirement benefit scheme contributions ,113 1, Other staff costs 4,035 5,216 5,839 2,046 2,612 Retirement benefit scheme contributions, excluding those of directors Total staff costs 5,037 6,799 7,572 2,610 3,064 Capitalised in inventories (1,903) (2,042) (2,147) (605) (614) 3,134 4,757 5,425 2,005 2,450 Auditor s remuneration Depreciation of property, plant and equipment 2,175 2,443 2, ,130 Capitalised in inventories (1,644) (2,040) (2,165) (725) (1,013) Depreciation of investment properties Cost of inventories recognised as an expense 136, , ,490 79, ,414 Minimum lease payments under operating leases I-40

345 APPENDIX I Accountants Report 12. DIRECTORS, CHIEF EXECUTIVE s AND EMPLOYEES EMOLUMENTS Mr. Ng and Ms. Sin were appointed as executive directors of the Company on 27 March 2018 and 25 June 2018, respectively. Mr. Chow Shiu Wing Joseph, Mr. Choy Hiu Fai Eric and Mr. Wu Tsz Chung Thomas were appointed as independent non-executive directors of the Company on [ ]. (a) Directors and chief executive s emoluments During the Track Record Period, the emoluments paid or payable to the directors of the Company (including emoluments for the services as employees of the group entities prior to becoming directors of the Company) are as follows: For the year ended 31 December 2015 Salaries, Performance Retirement allowances related benefit and other incentive scheme Name of director Fees benefits payments contributions Total RM 000 RM 000 RM 000 RM 000 RM 000 (Note) Mr. Ng Ms. Sin For the year ended 31 December 2016 Salaries, Performance Retirement allowances related benefit and other incentive scheme Name of director Fees benefits payments contributions Total RM 000 RM 000 RM 000 RM 000 RM 000 (Note) Mr. Ng ,027 Ms. Sin ,113 I-41

346 APPENDIX I Accountants Report For the year ended 31 December 2017 Salaries, Performance Retirement allowances related benefit and other incentive scheme Name of director Fees benefits payments contributions Total RM 000 RM 000 RM 000 RM 000 RM 000 (Note) Mr. Ng ,035 Ms. Sin ,127 For the four months ended 30 April 2017 (unaudited) Salaries, Performance Retirement allowances related benefit and other incentive scheme Name of director Fees benefits payments contributions Total RM 000 RM 000 RM 000 RM 000 RM 000 (Note) Mr. Ng Ms. Sin For the four months ended 30 April 2018 Salaries, Performance Retirement allowances related benefit and other incentive scheme Name of director Fees benefits payments contributions Total RM 000 RM 000 RM 000 RM 000 RM 000 (Note) Mr. Ng Ms. Sin Note: Performance related incentive payments are recommended by the management of the Group, having regard to the Group s operating result and individual performance. Mr. Ng is the Chief Executive Officer of the Company and his emoluments disclosed above include those for services rendered by him as the Chief Executive Officer. No emoluments were paid to any of the independent non-executive directors during the Track Record Period. I-42

347 APPENDIX I Accountants Report There was no arrangement under which a director or the chief executive waived or agreed to waive any remuneration during the Track Record Period. No emoluments were paid by the Group to any of the directors or the chief executive as an inducement to join or upon joining the Group or as compensation for loss of office. (b) Employees emoluments The five highest paid individuals of the Group during the Track Record Period included one director, details of whose remuneration are set out in note 12(a) above. Details of the remuneration during the Track Record Period of the remaining four highest paid employees who are neither a director nor chief executive of the Company are as follows: Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Salaries, allowances and other benefits Performance related incentive payments (Note) Retirement benefit scheme contributions , Note: Performance related incentive payments ae recommended by the management of the Group, having regard to the Group s operating result and individual performance. The number of the highest paid employees who are not the directors of the Company whose remuneration fell within the following band is as follows: Number of employees Four months ended Year ended 31 December 30 April (unaudited) Nil to RM526,000 (equivalent to nil to HK$1,000,000) EARNINGS PER SHARE No earnings per share information is presented for the purpose of this report as its inclusion is not considered meaningful with regard to the Reorganisation and the results of the Group for the Track Record Period that are prepared on a combined basis as set out in note DIVIDENDS During the years ended 31 December 2016 and 2017, EC Excel Wire declared dividends amounting to RM2,025,000 and RM518,000, respectively to its shareholders. The rate of dividends and number of shares ranking for the dividends are not presented as such information is not considered meaningful having regard to the purpose of this report. No dividend has been proposed by the Company during the Track Record Period and subsequent to 30 April I-43

348 APPENDIX I Accountants Report 15. PROPERTY, PLANT AND EQUIPMENT Leasehold Furniture, land and Plant and fixtures and Leasehold Motor Construction buildings machinery equipment improvements vehicles in progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 COST At 1 January ,908 12, ,620 27,168 Additions 755 1, ,861 At 31 December ,663 13, ,028 30,029 Additions 6, ,110 8,514 Disposals/written off (5) (5) At 31 December ,443 14, ,138 38,538 Additions 1,070 12, ,400 17,194 Disposals/written off (1,411) (1,411) At 31 December ,513 27, ,554 2,400 54,321 Additions ,092 1,482 2,901 Disposals/written off (20) (20) At 30 April ,646 27, ,626 3,882 57,202 DEPRECIATION At 1 January , ,066 7,085 Provided for the year 225 1, ,175 At 31 December , ,584 9,260 Provided for the year 395 1, ,443 Eliminated on disposals/ written off (1) (1) At 31 December ,251 7, ,161 11,702 Provided for the year 414 1, ,531 Eliminated on disposals/ written off (1,062) (1,062) At 31 December ,665 8, ,763 13,171 Provided for the period ,130 Eliminated on disposals/ written off (20) (20) At 30 April ,812 9, ,011 14,281 I-44

349 APPENDIX I Accountants Report Leasehold Furniture, land and Plant and fixtures and Leasehold Motor Construction buildings machinery equipment improvements vehicles in progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 CARRYING VALUES At 31 December ,807 8, ,444 20,769 At 31 December ,192 7, ,977 26,836 At 31 December ,848 18, ,791 2,400 41,150 At 30 April ,834 18, ,615 3,882 42,921 The above items of property, plant and equipment, other than construction in progress, less their residual values are depreciated on a straight-line basis at the following rates per annum: Leasehold land and buildings 2% or over the term of the lease, whichever is shorter Plant and machinery 10% Furniture, fixtures and equipment 10% Leasehold improvements 10% or over the term of the lease, whichever is shorter Motor vehicles 20% The leasehold land and buildings are property interests located in Malaysia. The carrying value of plant and machinery includes an amount of RM3,860,000, RM3,709,000, RM14,547,000 and RM13,606,000 and the carrying value of motor vehicles includes an amount of RM1,120,000, RM1,608,000, RM1,126,000 and RM1,878,000 as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively, in respect of assets held under finance leases. The Group has pledged leasehold land and buildings with a carrying value of RM10,807,000, RM17,192,000, RM17,848,000 and RM17,834,000 as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively, to secure general banking facilities granted to the Group. I-45

350 APPENDIX I Accountants Report 16. INVESTMENT PROPERTIES RM 000 COST At 1 January 2015 and 31 December 2015 Additions 400 At 31 December Additions 2,413 At 31 December 2017 and 30 April ,813 DEPRECIATION At 1 January 2015 and 31 December 2015 Provided for the year 8 At 31 December Provided for the year 8 At 31 December Provided for the period 19 At 30 April CARRYING VALUES At 31 December 2015 At 31 December At 31 December ,797 At 30 April ,778 The above investment properties are depreciated on a straight-line basis at 2% per annum. The investment properties are leasehold land and buildings located in Malaysia. I-46

351 APPENDIX I Accountants Report The fair value of the Group s investment properties as at 31 December 2016 and 2017 and 30 April 2018 is RM582,000, RM2,820,000 and RM2,820,000, respectively. The fair value as at 31 December 2016 was determined by the directors of the Company based on the market approach. The fair value as at 31 December 2017 and 30 April 2018 has been arrived at based on a valuation carried out by Henry Butcher Malaysia (Kuantan) Sdn. Bhd. ( Henry Butcher ), independent qualified professional valuer not connected with the Group. Henry Butcher is a registered valuer in Malaysia with registered address at No. 11a, 1st Floor (China Town), Jalan Putra Square 3, Putra Square, Kuantan, Pahang Darul Makmur, Malaysia, and has recent experience in the valuation of similar properties in the relevant locations. The fair value was determined based on the market approach. The market approach uses prices and other relevant information generated by market transactions involving comparable properties. There has been no change to the valuation technique during the Track Record Period. In estimating the fair value of the properties, the highest and best use of the properties is their current use. One of the key inputs used in valuing the investment properties is the transaction prices per square meter for similar properties, which ranged from RM2,540 to RM3,488, RM1,666 to RM6,692 and RM1,666 to RM6,692 as at 31 December 2016 and 2017 and 30 April 2018, respectively. An increase in the transaction prices per square meter used would result in an increase in fair value measurement of the investment properties, and vice versa. The Group s investment properties are classified as Level 3 in the fair value hierarchy as at 31 December 2016 and 2017 and 30 April There were no transfers into or out of Level 3 during the Track Record Period. The Group has pledged investment properties with a carrying value of nil, RM2,400,000 and RM2,384,000 as at 31 December 2016 and 2017 and 30 April 2018, respectively, to secure general banking facilities granted to the Group. 17. INVENTORIES As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Raw materials 4,456 6,266 5,477 6,875 Finished goods 3,237 5,519 3,965 5,187 7,693 11,785 9,442 12,062 I-47

352 APPENDIX I Accountants Report 18. TRADE AND OTHER RECEIVABLES The Group As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Trade receivables 38,506 53,212 84,792 86,673 Less: Loss allowance (298) (788) (397) (2,298) 38,208 52,424 84,395 84,375 Prepaid expenses ,251 1,493 Prepayments to suppliers 747 Deposits paid Deferred [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] Prepayments for [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] Other tax recoverable Other receivables 735 1, ,007 Total trade and other receivables 39,524 54,605 87,856 89,236 The Group allows a credit period of 14 to 90 days to its trade customers. An interest rate of 1.5% per month is charged on trade receivables which are past due. The following is an aged analysis of trade receivables net of loss allowance, presented based on the invoice dates at the end of each reporting period: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM days 12,738 16,815 28,885 28, days 9,525 12,945 20,189 25, days 7,950 10,484 16,400 10,882 Over 90 days 7,995 12,180 18,921 19,434 38,208 52,424 84,395 84,375 Before accepting any new customer, the Group assesses the potential customer s credit quality and defines credit limits by customer. Credit limits attributed to customers and credit terms granted to customers are reviewed regularly. The majority of the trade receivables that are neither past due nor impaired have no history of defaulting on repayments. I-48

353 APPENDIX I Accountants Report Included in the Group s trade receivable balance are debtors with aggregate carrying amount of RM17,350,000, RM24,505,000 and RM41,637,000 as at 31 December 2015, 2016 and 2017, respectively which are past due at the end of each of the years ended 31 December 2015, 2016 and 2017 for which the Group has not provided for impairment loss as the Group considers such balances could be recovered based on historical experience. The Group does not hold any collateral over these balances. As at 30 April 2018, included in the Group's trade receivable balance are debtors with aggregate carrying amount of RM36,525,000 which are past due as at 30 April 2018 and for which the Group has not provided for impairment loss as the Group considers such balances could be recovered based on historical experience. As there has not been a significant change in credit quality and subsequently, these receivables have been substantially settled, the amounts are still considered recoverable. The Group does not hold any collateral over these balances. Ageing of trade receivables which are past due but not impaired: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Overdue by: 1 30 days 7,282 13,334 20,617 16, days 5,419 4,051 9,443 8, days 1,996 3,440 4,805 5,283 Over 90 days 2,653 3,680 6,772 6,493 17,350 24,505 41,637 36,525 The following table shows the movements in loss allowance that has been recognised for trade receivables during the years ended 31 December 2015, 2016 and 2017: As at 31 December RM 000 RM 000 RM 000 Balance at beginning of the year Impairment losses recognised on trade receivables Amounts written off as uncollectible (476) Amounts recovered during the year (11) Balance at end of the year I-49

354 APPENDIX I Accountants Report The Group writes off a trade receivable when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or when the amounts are over one year past due without subsequent settlement, whichever occurs sooner. Trade receivables written off may still be subject to enforcement activities under the Group s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss. Included in the loss allowance for trade receivables are individually impaired trade receivables with an aggregate balance of RM298,000, RM788,000, RM397,000 and RM392,000 as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively, which are past due at the end of each reporting period. These overdue balances are impaired as a result of significant financial difficulty of the customers noted by the Group. The Group does not hold any collateral over these balances. In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. All trade and other receivables are denominated in the functional currencies of the relevant group entities. Impairment assessment on trade receivables subject to ECL model As part of the Group s credit risk management, the Group applies internal credit rating for its customers. The debtors are grouped under a provision matrix into three internal credit rating buckets (namely: low risk, medium risk and high risk) based on shared credit risk characteristics by reference to past default experience and current past due exposure of the debtor, and an analysis of the debtor s current financial position. The following table provides information about the exposure to credit risk and ECL for trade receivables which are assessed collectively based on provision matrix as at 30 April Internal credit rating Average loss rate Gross carrying amount RM 000 Impairment loss allowance RM 000 Low risk 0.10% 17, Medium risk 2.15% 59,183 1,270 High risk 6.28% 9, ,081 1,906 I-50

355 APPENDIX I Accountants Report The estimated loss rates are estimated based on historical observed default rates over the expected life of the debtors and study of other corporates default and recovery data from international credit-rating agencies including Moody s and Standard and Poor s, and are adjusted for forward-looking information (for example, the current and forecasted economic growth rates in Malaysia, which reflect the general economic conditions of the industry in which the debtors operate) that is available without undue cost or effort. Such forward-looking information is used by the management of the Group to assess both the current as well as the forecast direction of conditions at the reporting date. The grouping is regularly reviewed by the management of the Group to ensure relevant information about specific debtors is updated. There has been no change in the estimation techniques or significant assumptions made during the Track Record Period. During the four months ended 30 April 2018, the Group provided RM31,000 impairment allowance based on the provision matrix. In addition, debtors with gross carrying amount of RM592,000 as at 30 April 2018 were assessed individually and reversal of impairment allowance of RM5,000 was made on these debtors for the four months ended 30 April The movement in the allowance for impairment in respect of trade receivables during the four months ended 30 April 2018 is as follows: Creditimpaired trade receivables Trade receivables not creditimpaired Total RM 000 RM 000 RM 000 Balance at 1 January 2018 (note) 397 1,875 2,272 Impairment losses recognised Amounts recovered during the period (5) (5) Balance at 30 April ,906 2,298 Note: The Group has initially applied IFRS 9 at 1 January 2018 and comparative information is not restated. There is no transfer between the impairment loss allowance made under credit-impaired trade receivables and trade receivables not credit-impaired during the four months ended 30 April The Company As at 30 April 2018 RM 000 Deferred [REDACTED] expenses Prepayments for [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] I-51

356 APPENDIX I Accountants Report 19. Amount due from (to) a director/a related company The Group Details of amounts due from (to) a director and related companies are as follows: Maximum amount outstanding during the As at As at Four months ended 1 January As at 31 December 30 April Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Amounts due from a director: Mr. Ng 387 2,380 3,838 Amounts due from related companies: Wishland Development Sdn. Bhd. (note) Decade Lion Amounts due to a director: Mr. Ng (603) N/A N/A N/A N/A Note: Mr. Ng, a director of the Company, is the controlling shareholder of this company. The amounts are non-trade nature, unsecured, interest-free and repayable on demand. The directors of the Company represent that all the amounts will be fully settled prior to the [REDACTED] of the Company s shares on the Stock Exchange. The Company The amount as at 30 April 2018 represents the amount due from Precise One. The amount is non-trade nature, unsecured, interest-free and repayable on demand. I-52

357 APPENDIX I Accountants Report 20. DERIVATIVE FINANCIAL INSTRUMENTS As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Derivative financial (liabilities) assets not designated under hedge accounting: Foreign currency forward contracts (44) 9 Major terms of outstanding foreign currency forward contracts at the end of each reporting period are as follows: Notional amount Forward contract rate Maturity As at 31 December 2017: One contract to buy EUR660,000 in total EUR1 to RM February 2018 As at 30 April 2018: One contract to buy EUR220,000 in total EUR1 to RM June PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH Pledged bank deposits carry interest at fixed rates of 2.40% to 3.45%, 2.40% to 3.45%, 2.75% to 3.35% and 2.90% to 3.35% per annum as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively. The pledged bank deposits will be released upon the settlement of relevant bank borrowings. Pledged bank deposits represent deposits pledged to banks to secure the banking facilities granted to the Group. All pledged bank deposits have been pledged to secure short-term bank borrowings and are classified as current assets. Bank balances carry interest at market rates which range from 0.01% to 3.00%, 0.01% to 2.15%, 0.01% to 2.15% and 0.01% to 2.15% per annum as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively. All pledged bank deposits and bank balances and cash are denominated in RM. I-53

358 APPENDIX I Accountants Report 22. TRADE AND OTHER PAYABLES The Group As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 Trade payables 14,924 12,543 28,166 19,525 Accrued expenses ,672 Advance from customers Deposit received from the [REDACTED] Investor (see note 2) 4,496 Payables for property, plant and equipment ,926 1,953 Freight charges payable Dividends payable 518 Other payables ,398 15,097 35,094 29,193 The following is an aged analysis of trade payables presented based on the invoice dates/dates of delivery of goods at the end of each reporting period: As at 31 December As at 30 April RM 000 RM 000 RM 000 RM days 9,817 9,127 21,029 15, days 3,953 1,762 4,257 2, days 1,080 1,568 2,479 1,346 Over 90 days ,924 12,543 28,166 19,525 The credit period on purchases of goods is 14 to 60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame. I-54

359 APPENDIX I Accountants Report Trade and other payables that are denominated in currencies other than the functional currencies of the relevant group entities are set out below: As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Euro ( EUR ) 3,197 1,059 US$ The Company As at 30 April 2018 RM 000 Accrued expenses 699 Deposit received from the [REDACTED] Investor (see note 2) 4,496 5,195 I-55

360 APPENDIX I Accountants Report 23. SECURED BANK BORROWINGS As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Bank loans 35,106 53,145 66,798 74,226 Bank overdrafts ,136 35,106 53,440 66,985 75,362 The carrying amounts of the above borrowings are repayable: On demand or within one year 30,430 42,193 56,016 64,711 More than one year but not exceeding two years 877 1,263 1,477 1,485 More than two years but not exceeding five years 2,710 3,436 2,705 2,648 More than five years 1,089 6,548 6,787 6,518 35,106 53,440 66,985 75,362 Less: Amounts due within one year shown under current liabilities (30,430) (42,193) (56,016) (64,711) Amounts shown under non-current liabilities 4,676 11,247 10,969 10,651 Fixed-rate borrowings ,136 Variable-rate borrowings 35,106 53,145 66,798 74,226 35,106 53,440 66,985 75,362 I-56

361 APPENDIX I Accountants Report The Group s variable-rate borrowings carry interest at Malaysia Base Lending Rate plus certain basis points. The range of effective interest rates (which are also equal to contracted interest rates) on the Group s borrowings are as follows: As at 31 December As at 30 April Effective interest rates: Fixed-rate borrowings N/A 7.07% 7.00% 8.29% Variable-rate borrowings 4.60% 6.30% 4.20% 6.30% 4.30% 6.49% 4.49% 6.49% The bank borrowings are secured by (i) property, plant and equipment with a carrying value of RM10,807,000, RM17,192,000, RM17,848,000 and RM17,834,000 as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively; (ii) investment properties with a carrying value of RM2,400,000 and RM2,384,000 as at 31 December 2017 and 30 April 2018, respectively; (iii) bank deposits with a carrying amount of RM8,375,000, RM12,119,000, RM15,518,000 and RM14,884,000 as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively; and (iv) personal guarantees from Mr. Ng and Ms. Sin, directors of the Company. The directors of the Company represent that such guarantees will be released before the [REDACTED] of the Company s shares on the Stock Exchange. All bank borrowings are denominated in the functional currencies of the relevant group entities. I-57

362 APPENDIX I Accountants Report 24. OBLIGATIONS UNDER FINANCE LEASES Obligations under finance leases payable: Minimum lease payments Present value of minimum lease payments As at As at As at 31 December 30 April As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Within one year 1,190 1,173 3,084 3,171 1, ,450 2,579 More than one year but not more than two years 986 1,052 2,994 3, ,523 2,549 More than two years but not more than five years 1,038 1,190 6,219 5, ,039 5,765 5,466 More than five years 1 1 3,215 3,415 12,297 11,980 2,755 2,940 10,738 10,594 Less: Future finance charges (460) (475) (1,559) (1,386) N/A N/A N/A N/A Present value of lease obligations 2,755 2,940 10,738 10,594 2,755 2,940 10,738 10,594 Less: Amount due for settlement within twelve months (shown under current liabilities) (1,142) (994) (2,450) (2,579) Amount due for settlement after twelve months 1,613 1,946 8,288 8,015 It is the Group s policy to lease certain of its plant and machinery and motor vehicles under finance leases. The lease terms are ranging from three to nine years. Interest rates underlying all obligations under finance leases are fixed at the respective contract dates ranging from 2.41% to 4.50%, 2.38% to 4.50%, 2.38% to 4.00% and 2.34% to 4.00% per annum as at 31 December 2015, 2016 and 2017 and 30 April 2018, respectively. The Group s obligations under finance leases are secured by the lessor s charge over the leased assets. All obligations under finance leases are denominated in RM. I-58

363 APPENDIX I Accountants Report 25. DEFERRED TAXATION The following are the major deferred tax liabilities (assets) recognised and movements thereon during the Track Record Period: Accelerated Revaluation tax of depreciation properties Others Total RM 000 RM 000 RM 000 RM 000 At 1 January , ,950 Charge (credit) to profit or loss 194 (18) (52) 124 Effect of change in tax rate (44) (36) (80) At 31 December , (52) 1,994 Charge (credit) to profit or loss 4 (18) (14) At 31 December , (52) 1,980 Charge (credit) to profit or loss 666 (18) At 31 December , (4) 2,676 Charge to profit or loss At 30 April , (4) 3,202 I-59

364 APPENDIX I Accountants Report 26. SHARE CAPITAL The Group The issued capital of the Group as at 31 December 2015, 2016 and 2017 and 30 April 2018 represents the aggregate share capital of the following companies: As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 EC Excel Wire 2,500 4,500 4,500 Arena Metal Resources (note i) UVM Excel (note ii) 242 Klang Valley Wire * Klaas Metal N/A * 10 The Company N/A N/A N/A * Precise One N/A N/A N/A 4 2,500 4,830 5,082 4 * Less than RM1,000. Notes: (i) (ii) As at 31 December 2015, 60% of the issued share capital of Arena Metal Resources amounting to RM90,000 was held by EC Excel Wire, which was transferred by EC Excel Wire to Mr. Ng during the year ended 31 December As at 31 December 2015 and 2016, 30% of the issued share capital of UVM Excel amounting to RM30,000 was held by EC Excel Wire, which was transferred by EC Excel Wire to Mr. Ng and the non-controlling shareholders during the year ended 31 December The issued capital of the Group as at 30 April 2018 represents the aggregate share capital of the Company amounting to HK$0.01 and Precise One amounting to US$1,000 (equivalent to RM4,000). The Company Details of movements of share capital of the Company are as follows: Number of Shares Share capital HK$ 000 Ordinary shares of HK$0.01 each Authorised: At 27 March 2018 (date of incorporation) and 30 April ,000, Issued and fully paid: At 27 March 2018 (date of incorporation) and 30 April I-60

365 APPENDIX I Accountants Report 26A. MOVEMENT IN THE COMPANY S RESERVE Accumulated losses RM 000 At 27 March 2018 (date of incorporation) Loss and total comprehensive expense for the period (2,162) At 30 April 2018 (2,162) 27. RETIREMENT BENEFIT SCHEMES The employees of the Group in Malaysia are required by laws to make contributions to the Employees Provident Fund, a post-employment plan. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the schemes are held separately from those of the Group, in funds under the control of trustees. The Group contributes at the lower of HK$1,500 or 5% of relevant payroll costs per month to the Scheme, which contribution is matched by employees. The total expense recognised in profit or loss of RM375,000, RM560,000, RM695,000, RM221,000 (unaudited) and RM222,000, respectively for the years ended 31 December 2015, 2016 and 2017 and four months ended 30 April 2017 and 2018, respectively, represents contributions payable to this plan by the Group at rates specified in the rules of the plan. I-61

366 APPENDIX I Accountants Report 28. OPERATING LEASES The Group as lessee At the end of each reporting period, the Group has commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Within one year third parties related party (note) In the second to fifth years inclusive third parties related party (note) Note: Mr. Ng Heng Oon, brother of Mr. Ng, is the lessor of certain office premises leased by the Group. Operating lease payments represent rentals payable by the Group for certain of its office premises and office equipment. Leases are negotiated and rentals are fixed for terms ranging from one to five years. 29. CAPITAL COMMITMENTS As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Capital expenditure in respect of the acquisition of property, plant and equipment contracted for but not provided in the Historical Financial Information 13,371 11,627 4,587 5,131 I-62

367 APPENDIX I Accountants Report 30. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group s overall strategy remains unchanged throughout the Track Record Period. The capital structure of the Group consists of net debt, which includes the secured bank borrowings disclosed in note 23, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital, retained profits and other reserve. The management of the Group reviews the capital structure regularly. As part of this review, the management of the Group considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management of the Group, the Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt. 31. FINANCIAL INSTRUMENTS (a) Categories of financial instruments The The Group Company As at 31 December As at 30 April As at 30 April RM 000 RM 000 RM 000 RM 000 RM 000 Financial assets Loans and receivables/ amortised cost (including cash and cash equivalents) 54,489 67, , ,202 2,242 Derivative financial instruments 9 Financial liabilities Amortised cost 51,126 68, , ,731 Derivative financial instruments 44 I-63

368 APPENDIX I Accountants Report (b) Financial risk management objectives and policies The Group s major financial instruments include trade and other receivables, amount due from a director, amount due from a related company, derivative financial instruments, pledged bank deposits, bank balances and cash, trade and other payables, amount due to a director and secured bank borrowings. Details of the financial instruments are disclosed in the respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. Market risk Currency risk The Group has trade and other payables denominated in foreign currencies, which expose the Group to foreign currency risk. The Group currently does not have a foreign exchange hedging policy. However, the management of the Group monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise. The carrying amounts of the Group s foreign currency denominated monetary liabilities as at 31 December 2015, 2016 and 2017 and 30 April 2018 are as follows: Liabilities As at As at 31 December 30 April RM 000 RM 000 RM 000 RM 000 EUR 3,197 1,059 HK$ 4,496 US$ Sensitivity analysis The Group is mainly exposed to the currencies of EUR, HK$ and US$. I-64

369 APPENDIX I Accountants Report The following table details the Group s sensitivity to a 5% increase and decrease in RM against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the management s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of each reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in post-tax profit where RM strengthens 5% against the relevant foreign currencies. For a 5% weakening of RM against the relevant foreign currencies, there would be an equal and opposite impact on the post-tax profit and the balances below would be negative. Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 EUR HK$ 171 US$ In the management s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year/period end exposure does not reflect the exposure during the year/period. Interest rate risk The Group is exposed to fair value interest rate risk in relation to fixed-rate pledged bank deposits (see note 21 for details), fixed-rate bank borrowings (see note 23 for details) and fixed-rate obligations under finance leases (see note 24 for details). The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances (see note 21 for details) and variable-rate bank borrowings (see note 23 for details). The Group s cash flow interest rate risk is mainly concentrated on the fluctuation of interest rates on bank balances and Malaysia Base Lending Rate arising from the Group s RM denominated borrowings. It is the Group s policy to keep its borrowings at floating rate of interests so as to minimise the fair value interest rate risk. The Group currently do not have an interest rate hedging policy to hedge against their exposures. However, the management closely monitors interest rate exposures and will consider entering into interest rate swap transactions to hedge significant interest rate risk should the need arise. I-65

370 APPENDIX I Accountants Report Sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the end of each reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of each reporting period were outstanding for the whole year/period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents the management s assessment of the reasonably possible change in interest rates. Bank balances are excluded from sensitivity analysis as the directors of the Company consider that the exposure of cash flow interest rate risk arising from variable-rate bank balances is insignificant. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group s post-tax profit for the years ended 31 December 2015, 2016 and 2017 and four months ended 30 April 2018 would decrease/increase by RM132,000, RM202,000, RM254,000 and RM94,000, respectively. This is mainly attributable to the Group s exposure to interest rates on its variable-rate bank borrowings. Credit risk Overview of the Group s exposure to credit risk before adoption of IRFS 9 as at 1 January 2018 The Group s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge obligations by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the combined statements of financial position. The Group s credit risk is primarily attributable to its trade receivables. In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group s credit risk is significantly reduced. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration, with exposure spread over a large number of counterparties. I-66

371 APPENDIX I Accountants Report Overview of the Group's exposure to credit risk after adoption of IFRS 9 as at 1 January 2018 Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. At the end of each reporting period, the Group s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arises from the carrying amount of the respective recognised financial assets as stated in the consolidated statements of financial position. The Group s credit risk is primarily attributable to its trade receivables. In order to minimise the credit risk, the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the ECL on these items as disclosed in note 18. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration, with exposure spread over a large number of counterparties. Liquidity risk In management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants. The Group relies on bank borrowings as a significant source of liquidity. As at 31 December 2015, 2016 and 2017 and 30 April 2018, the Group has available unutilised banking facilities of RM26,507,000, RM18,117,000, RM24,575,000 and RM19,505,000, respectively. The following tables detail the Group s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates. I-67

372 APPENDIX I Accountants Report The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of each reporting period. In addition, the following tables detail the Group s liquidity analysis for its derivative financial instruments. The tables have been drawn up based on the undiscounted contractual net cash outflows on derivative instruments that settle on a net basis. When the amount payable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the end of the reporting period. The liquidity analysis for the Group s derivative financial instruments are prepared based on the contractual maturities as the management of the Group considers that the contractual maturities are essential for an understanding of the timing of the cash flows of derivatives. Liquidity tables As at 31 December 2015 Carrying Weighted On demand More Total amount at average or less than 1-5 than 5 undiscounted 31 December interest rate 1 year years years cash flows 2015 % RM 000 RM 000 RM 000 RM 000 RM 000 Non-derivative financial liabilities Trade and other payables 16,020 16,020 16,020 Secured bank borrowings variable rate ,844 4,099 1,680 36,623 35,106 Obligations under finance leases ,190 2, ,215 2,755 48,054 6,123 1,681 55,858 53,881 I-68

373 APPENDIX I Accountants Report As at 31 December 2016 Carrying Weighted On demand More Total amount at average or less than 1 5 than 5 undiscounted 31 December interest rate 1 year years years cash flows 2016 % RM 000 RM 000 RM 000 RM 000 RM 000 Non-derivative financial liabilities Trade and other payables 14,160 14,160 14,160 Amount due to a director Secured bank borrowings fixed rate variable rate ,478 6,121 9,190 57,789 53,145 Obligations under finance leases ,173 2,242 3,415 2,940 58,709 8,363 9,190 76,262 71,143 As at 31 December 2017 Carrying Weighted On demand More Total amount at average or less than 1 5 than 5 undiscounted 31 December interest rate 1 year years years cash flows 2017 % RM 000 RM 000 RM 000 RM 000 RM 000 Non-derivative financial liabilities Trade and other payables 33,953 33,953 33,953 Secured bank borrowings fixed rate variable rate ,343 5,612 9,131 71,086 66,798 Obligations under finance leases ,084 9,213 12,297 10,738 93,567 14,825 9, , ,676 Derivative financial instruments net settlement Foreign currency forward contracts I-69

374 APPENDIX I Accountants Report As at 30 April 2018 Carrying Weighted On demand More Total amount at average or less than 1-5 than 5 undiscounted 30 April interest rate 1 year years years cash flows 2018 % RM 000 RM 000 RM 000 RM 000 RM 000 Non-derivative financial liabilities Trade and other payables 27,369 27,369 27,369 Secured bank borrowings fixed rate ,136 1,136 1,136 variable rate ,079 5,539 8,792 78,410 74,226 Obligations under finance leases ,171 8,809 11,980 10,594 95,755 14,348 8, , ,325 The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of each reporting period. (c) Fair value measurements of financial instruments Fair value of the Group s financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the Group s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique and inputs used). Financial assets/ financial liabilities Fair value as at 31 December Fair value as at 30 April 2018 Fair value hierarchy Valuation technique and key inputs Foreign currency forward contracts Liabilities RM44,000 Assets RM9,000 Level 2 Discounted cash flow. Future cash flows are estimated based on forward exchange rate (from observable forward exchange rates at the end of each reporting period) and contracted forward rates, discounted at a rate that reflects the credit risk of various counterparties. I-70

375 APPENDIX I Accountants Report There were no transfers between Level 1, 2 and 3 during the Track Record Period. Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Historical Financial Information approximate their fair values. The fair values of these financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of counterparties. 32. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES The table below details changes in the Group s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group s combined statements of cash flows as cash flows from financing activities. I-71

376 APPENDIX I Accountants Report Accrued [REDACTED] expenses Deposit received from the [REDACTED] Investor Amount due to a director Secured bank borrowings Obligations under finance leases Dividends payable Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 (note) (note) At 1 January 2015 [REDACTED] 33,658 3,404 37,062 Financing cash flows [REDACTED] (581) (996) (1,577) Non-cash changes finance costs recognised [REDACTED] 2, ,228 inception of finance leases [REDACTED] At 31 December 2015 [REDACTED] 35,106 2,755 37,861 Financing cash flows [REDACTED] (2,025) ,720 (1,310) 13,078 Non-cash changes dividends declared [REDACTED] 2,025 2,025 finance costs recognised [REDACTED] 2, ,513 inception of finance leases [REDACTED] 1,301 1,301 effect of reorganisation [REDACTED] (90) (90) At 31 December 2016 [REDACTED] ,145 2,940 56,688 Financing cash flows [REDACTED] (581) 10,443 (4,056) 5,806 Non-cash changes [REDACTED] dividends declared [REDACTED] finance costs recognised [REDACTED] 3, ,693 inception of finance leases [REDACTED] 11,371 11,371 effect of reorganisation [REDACTED] (22) (22) At 31 December 2017 [REDACTED] ,798 10,738 78,054 Financing cash flows [REDACTED] 4,496 (518) 6,224 (1,186) 8,488 Non-cash changes finance costs recognised [REDACTED] 1, ,488 inception of finance leases [REDACTED] [REDACTED] expenses accrued [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] At 30 April 2018 [REDACTED] 4,496 74,226 10,594 89,478 For the four months ended 30 April 2017 (unaudited) At 1 January 2017 [REDACTED] ,145 2,940 56,688 Financing cash flows [REDACTED] (603) 7,198 (569) 6,026 Non-cash changes finance costs recognised [REDACTED] At 30 April 2017 [REDACTED] 61,139 2,526 63,665 Note: The financing cash flows from amount due to a director and secured bank borrowings make up the net amount of proceeds and repayments in the combined statements of cash flows. I-72

377 APPENDIX I Accountants Report 33. MAJOR NON-CASH TRANSACTION During the years ended 31 December 2015, 2016 and 2017 and four months ended 30 April 2017 and 2018, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the leases of RM148,000, RM1,301,000, RM11,371,000, nil (unaudited) and RM758,000, respectively. 34. RELATED PARTY DISCLOSURES (a) Related party balances Details of the outstanding balances with related parties are set out in the combined statements of financial position and in note 19. (b) Related party transactions During the Track Record Period, the Group entered into the following transactions with related parties: Four months ended Year ended 31 December 30 April Name of related party Nature of transaction RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Maran Ng Trading (note i) Sales of goods Mr. Ng Heng Oon (note ii) Rental expense 10 6 Notes: (i) (ii) Maran Ng Trading is a partnership co-owned by Mr. Ng s sister and father. Mr. Ng Heng Oon is the brother of Mr. Ng. I-73

378 APPENDIX I Accountants Report (c) Compensation of key management personnel The remuneration of directors and other members of key management during the Track Record period is as follows: Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Fees, salaries, allowances and other benefits 1,001 1,383 1, Retirement benefit scheme contributions ,118 1,519 1, The remuneration of directors and key executives is determined having regard to performance of individuals and market trends. (d) Financial guarantees given by related parties As at 31 December 2015, 2016 and 2017 and 30 April 2018, the general banking facilities granted to the Group are secured by personal guarantees from Mr. Ng and Ms. Sin, directors of the Company. I-74

379 APPENDIX I Accountants Report 35. PARTICULARS OF SUBSIDIARIES Details of the Company s subsidiaries as at 31 December 2015, 2016 and 2017, 30 April 2018 and the date of this report are as follows: Name of subsidiary Place and date of incorporation Principal place of operation Paid up issued capital Proportion of ownership interest held by the Company Principal activities Notes As at 31 December As at 30 April As at the date of this report Directly Indirectly Directly Indirectly Directly Indirectly Directly Indirectly Directly Indirectly EC Excel Wire Malaysia 5 March 2007 Malaysia RM4,500, % 100% 100% 100% [ ] [100%] Manufacturing, processing (a) and distributing of wire meshes, barbed wire, wire rods and related products Arena Metal Resources Malaysia 19 July 2010 Malaysia RM150,100 60% 60% 60% 60% [ ] [60%] Trading of wire meshes, metal products, steel, hardware and other building materials (a) UVM Excel Malaysia 20 March 2015 Malaysia RM300, % (note i) 30.0% (note i) 80.7% 100% [ ] [100%] Trading of wire meshes, metal products, steel, hardware and other building materials (b) Klang Valley Wire Malaysia 2 December 2015 Malaysia RM400,000 60% 60% 60% 60% [ ] [60%] Trading of steel and steel products (c) Klaas Metal Malaysia 18 August 2016 Malaysia RM30,000 N/A N/A 33.3% (note ii) 33.3% (note ii) 33.3% (note ii) [ ] [33.3%] (note ii) Trading of wire meshes, metal products, steel, hardware and other building materials (d) Precise One The BVI 11 December 2017 The BVI US$1,000 N/A N/A N/A N/A 100% 100% [100%] [ ] Investment holding (e) EC Excel Wire Holdings Malaysia 27 March 2018 Malaysia RM2 N/A N/A N/A N/A N/A N/A 100% [ ] [100%] Investment holding (f) Good Favour Hong Kong 2 January 2018 Hong Kong HK$1 N/A N/A N/A N/A N/A N/A 100% [ ] [100%] Inactive (f) Notes: (i) Pursuant to the arrangement amongst the shareholders of UVM Excel, Mr. Ng had the full executive and decision making power to direct all relevant activities of UVM Excel, including but not limited to, controlling the voting decisions of other shareholders and directors of UVM Excel in all the shareholders' and board of directors' meetings of UVM Excel, respectively. Taking into the consideration of such arrangement, the directors of the Company concluded that the Group has the contractual right to direct the relevant activities of UVM Excel unilaterally and therefore the Group has control over UVM Excel. I-75

380 APPENDIX I Accountants Report (ii) Pursuant to the shareholders agreement entered into with other shareholders of Klaas Metal, Mr. Ng was appointed as managing director of Klaas Metal. Mr. Ng had the full executive and decision making power to direct all relevant activities of Klaas Metal, including but not limited to, controlling the voting decisions of other shareholders and directors of Klass Metal in all the shareholders' and board of directors' meetings of Klaas Metal, respectively. Taking into the consideration of such arrangement, the directors of the Company concluded that the Group has the contractual right to direct the relevant activities of Klaas Metal unilaterally and therefore the Group has control over Klaas Metal. All subsidiaries now comprising the Group are limited liability companies and have adopted 31 December as their financial year end date. Notes: (a) The statutory financial statements of EC Excel Wire and Arena Metal Resources for the year ended 31 December 2015 were prepared in accordance with Malaysian Private Entities Reporting Standard issued by the Malaysian Accounting Standards Board (the MASB ) and were audited by B. J. Tan & Co., Chartered Accountants in Malaysia. The statutory financial statements of EC Excel Wire and Arena Metal Resources for the years ended 31 December 2016 and 2017 were prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ) issued by the MASB and IFRSs issued by the IASB, and were audited by Deloitte PLT, Chartered Accountants in Malaysia. (b) The statutory financial statements of UVM Excel for the period from 20 March 2015 (date of incorporation) to 30 April 2016 were prepared in accordance with Malaysian Private Entities Reporting Standard issued by the MASB and were audited by B. J. Tan & Co., Chartered Accountants in Malaysia. The statutory financial statements of UVM Excel for the period from 1 May 2016 to 31 December 2016 and the year ended 31 December 2017 were prepared in accordance with MFRSs issued by the MASB and IFRSs issued by the IASB, and were audited by Deloitte PLT, Chartered Accountants in Malaysia. The financial year end date of UVM Excel was changed from 30 April to 31 December during 2016 because the directors of UVM Excel determined to bring its financial year end date in line with that of other group companies. (c) The statutory financial statements of Klang Valley Wire for the period from 2 December 2015 (date of incorporation) to 31 December 2016 and the year ended 31 December 2017 were prepared in accordance with MFRSs issued by the MASB and IFRSs issued by the IASB, and were audited by Deloitte PLT, Chartered Accountants in Malaysia. (d) The statutory financial statements of Klaas Metal for the period from 18 August 2016 (date of incorporation) to 31 December 2016 and the year ended 31 December 2017 were prepared in accordance with MFRSs issued by the MASB and IFRSs issued by the IASB, and were audited by Deloitte PLT, Chartered Accountants in Malaysia. (e) (f) No audited financial statements of Precise One have been prepared since its date of incorporation as it is incorporated in the jurisdiction where there are no statutory audit requirements. No statutory audited financial statements of EC Excel Wire Holdings and Good Favour have been prepared since their respective dates of incorporation as they are newly incorporated and the financial statements have not yet been due to issue. I-76

381 APPENDIX I Accountants Report Details of non-wholly owned subsidiaries that have material non-controlling interests The Group s non-wholly owned subsidiaries that have material non-controlling interests at the end of each reporting period include Arena Metal Resources and UVM Excel. The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests: Name of subsidiary Place of incorporation and principal place of operation Proportion of ownership interest held by non-controlling interests Profit (loss) allocated to non-controlling interests Accumulated non-controlling interests As at 31 December As at 30 April Year ended 31 December Four months ended 30 April As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Arena Metal Resources Malaysia 40% 40% 40% 40% UVM Excel Malaysia 70.0% 70.0% 19.3% , Individually immaterial subsidiaries with non- controlling interests 44 (51) (154) ,203 2,059 1, Summarised financial information in respect of the Group s subsidiaries that have material non-controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations. I-77

382 APPENDIX I Accountants Report (a) Arena Metal Resources As at 30 As at 31 December April RM 000 RM 000 RM 000 RM 000 Current assets 5,068 5,725 6,205 6,944 Non-current assets 30 2,281 2,625 2,590 Current liabilities (4,225) (5,392) (5,421) (6,195) Non-current liabilities (38) (1,494) (1,769) (1,662) 835 1,120 1,640 1,677 Equity attributable to owners of the Company ,006 Non-controlling interests ,120 1,640 1,677 Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Revenue 15,370 17,055 18,856 6,784 5,956 Expenses (15,082) (16,770) (18,337) (6,516) (5,882) Profit and total comprehensive income for the year/period Profit and total comprehensive income for the year/period attributable to: Owners of the Company Non-controlling interests Net cash inflow (outflow) from operating activities (140) Net cash outflow from investing activities (384) (726) (10) (14) (14) Net cash outflow from financing activities (31) (114) (118) (18) (77) Net cash inflow (outflow) 458 (596) (268) I-78

383 APPENDIX I Accountants Report (b) UVM Excel As at 31 December As at 30 April RM 000 RM 000 RM 000 RM 000 Current assets 8,460 9,205 12,511 13,502 Non-current assets Current liabilities (7,240) (7,232) (9,231) (10,265) Non-current liabilities (84) (58) (49) 1,241 2,010 3,317 3,275 Equity attributable to owners of the Company ,676 3,275 Non-controlling interests 869 1, ,241 2,010 3,317 3,275 Four months ended Year ended 31 December 30 April RM 000 RM 000 RM 000 RM 000 RM 000 (unaudited) Revenue 17,942 23,871 27,656 8,870 11,197 Expenses (16,801) (23,102) (26,349) (8,543) (10,924) Profit and total comprehensive income for the year/period 1, , Profit and total comprehensive income for the year/period attributable to: Owners of the Company Non-controlling interests , , Net cash inflow (outflow) from operating activities 694 (673) 1, (192) Net cash (outflow) inflow from investing activities (244) 204 (7) (5) (2) Net cash inflow (outflow) from financing activities 86 (26) 170 (10) 1,511 Net cash inflow (outflow) 536 (495) 1, ,317 I-79

384 APPENDIX I Accountants Report 36. SUBSEQUENT EVENTS Saved as disclosed in the report, subsequent to 30 April 2018, the following events took place: (i) On 18 May 2018, Decade Lion transferred 1,000 shares (representing 100% equity interest) of Precise One to the Company. The consideration was satisfied by the allotment and issue of 869 shares of the Company to Decade Lion. The Company became the holding company of the companies now comprising the Group on the same date. (ii) (iii) On 25 May 2018, 130 new shares of the Company (representing 13% of the enlarged issued share capital of the Company) were allotted and issued to the [REDACTED] Investor at a cash consideration of HK$18,000,000. [ ] 37. SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements of the Group, the Company or any of its subsidiaries have been prepared in respect of any period subsequent to 30 April I-80

385 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION The information set forth in this appendix does not form part of the accountants report on the financial information for each of the three years ended 31 December 2017 and for the four months ended 30 April 2018 of the Group (the Accountants Report on Historical Financial Information ) from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of the Company, as set forth in Appendix I to this document, and is included herein for information only. The unaudited pro forma financial information should be read in conjunction with the section headed Financial Information in this document and the Accountants Report on Historical Financial Information set forth in Appendix I to this document. A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NET TANGIBLE ASSETS OF THE GROUP The following unaudited pro forma statement of adjusted combined net tangible assets of the Group is prepared in accordance with Rule 4.29 of the Listing Rules for illustrative purpose only, and is set out below to illustrate the effect of the [REDACTED] on the audited combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 as if the [REDACTED] had taken place on that date. The unaudited pro forma statement of adjusted combined net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 or at any future dates following the [REDACTED]. It is prepared based on the audited combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 as shown in the Accountants Report on Historical Financial Information as set out in Appendix I to this document and adjusted as described below. Audited combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 Estimated net proceeds from the [REDACTED] Unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 Unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 per Share RM 000 RM 000 RM 000 RM (note 1) (note 2) (note 3) Based on the [REDACTED] of HK$[REDACTED] per [REDACTED] [50,697] [REDACTED] [REDACTED] [REDACTED] Based on the [REDACTED] of HK$[REDACTED] per [REDACTED] [50,697] [REDACTED] [REDACTED] [REDACTED] II-1

386 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION Notes: 1. The audited combined net tangible assets of the Group attributable to the owners of the Company of RM[50,697,000] as at 30 April 2018 is as extracted from the Accountants Report of the Group as set out in Appendix I to this document. 2. The estimated net proceeds from the [REDACTED] are based on [REDACTED] Shares to be issued at the [REDACTED] of HK$[REDACTED] per [REDACTED] and HK$[REDACTED] per [REDACTED], respectively, being the low-end and high-end of the indicative [REDACTED] range, respectively, after deduction of the estimated [REDACTED] expenses (excluding approximately RM[REDACTED] of [REDACTED] expenses recognised in profit or loss up to 30 April 2018). It does not take into account of any shares which may be allotted and issued upon to the exercise of any options that may be granted in the paragraph headed Share Option Scheme under the section headed Share Capital, or any shares which may be issued or repurchased by the Company as referred to in the paragraph headed General Mandate to Issue Shares or General Mandate to Repurchase Shares under the section headed Share Capital in this document, as the case may be. 3. The unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 per Share has been arrived at after making the adjustments referred to in this section and on the basis of a total of [REDACTED] Shares, assuming of (i) 1 Share in issue as at 30 April 2018; (ii) 869 Shares pursuant to the Reorganisation; (iii) [REDACTED] Shares pursuant to the Capitalisation Issue; and (iv) [REDACTED] Shares to be issued pursuant to the [REDACTED] had been completed on 30 April It does not take into account any shares which may be allotted and issued upon the exercise of any option that may be granted in the paragraph headed Share Option Scheme under the section headed Share Capital, or any shares which may be allotted and issued or repurchased by the Company as referred to in the paragraph headed General Mandate to Issue Shares or General Mandate to Repurchase Shares under the section headed Share Capital in this document, as the case may be. 4. No adjustment has been made to the unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company as at 30 April 2018 to reflect any trading results or other transactions of the Group entered into subsequent to 30 April In particular, the unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company as disclosed in the table above have not been adjusted to shown the effect of the share subscription by the [REDACTED] investor on 25 May Subsequent to 30 April 2018, the Company allotted and issued 130 Shares to the [REDACTED] investor at a cash consideration of HK$18,000,000 (equivalent to RM8,991,000) (the Share Subscription ). Had the Share Subscription been taken into account, the unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company and the unaudited pro forma adjusted combined net tangible assets of the Group attributable to the owners of the Company per Share would increase to RM[REDACTED] and decrease to RM[REDACTED] respectively, based on the [REDACTED] of HK$[REDACTED] per [REDACTED] and [REDACTED] Shares or increase to RM[REDACTED] and decrease to RM[REDACTED] respectively, based on the [REDACTED] of HK$[REDACTED] per [REDACTED] and [REDACTED] Shares. 5. Malaysian Ringgit is converted into Hong Kong dollars at an exchange rate of RM1 to HK$2.0020, which was the exchange rate prevailing on 30 April No representation is made that Malaysian Ringgit amounts have been, could have been or could be converted to Hong Kong dollars, or vice versa, at that rate or at all. II-2

387 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION B. INDEPENDENT REPORTING ACCOUNTANTS ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION The following is the text of the independent reporting accountants assurance report received from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of the Company, in respect of the Group s unaudited pro forma financial information prepared for the purpose of incorporation in this document. INDEPENDENT REPORTING ACCOUNTANTS ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-3

388 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-4

389 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-5

390 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman Islands company law. The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 27 March 2018 under the Cayman Companies Law. The Company s constitutional documents consist of its Amended and Restated Memorandum of Association (the Memorandum ) and its Amended and Restated Articles of Association (the Articles ). 1. MEMORANDUM OF ASSOCIATION (a) (b) The Memorandum provides, inter alia, that the liability of members of the Company is limited and that the objects for which the Company is established are unrestricted (and therefore include acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate whether as principal, agent, contractor or otherwise and, since the Company is an exempted company, that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands. By special resolution the Company may alter the Memorandum with respect to any objects, powers or other matters specified in it. 2. ARTICLES OF ASSOCIATION The Articles were adopted on [DATE]. A summary of certain provisions of the Articles is set out below. (a) Shares (i) Classes of shares The share capital of the Company consists of ordinary shares. (ii) Variation of rights of existing shares or classes of shares Subject to the Cayman Companies Law, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders III-1

391 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW of the shares of that class. The provisions of the Articles relating to general meetings shall mutatis mutandis apply to every such separate general meeting, but so that the necessary quorum (other than at an adjourned meeting) shall be not less than two persons together holding (or, in the case of a member being a corporation, by its duly authorized representative) or representing by proxy not less than one-third in nominal value of the issued shares of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll. Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. (iii) Alteration of capital The Company may, by an ordinary resolution of its members: (a) increase its share capital by the creation of new shares of such amount as it thinks expedient; (b) consolidate or divide all or any of its share capital into shares of larger or smaller amount than its existing shares; (c) divide its unissued shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges or conditions; (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum; (e) cancel any shares which, at the date of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; (f) make provision for the allotment and issue of shares which do not carry any voting rights; and (g) change the currency of denomination of its share capital. (iv) Transfer of shares Subject to the Cayman Companies Law and the requirements of The Stock Exchange of Hong Kong Limited (the Stock Exchange ), all transfers of shares shall be effected by an instrument of transfer in the usual or common form or in such other form as the Board may approve and may be under hand or, if the transferor or transferee is a Clearing House or its nominee(s), under hand or by machine imprinted signature, or by such other manner of execution as the Board may approve from time to time. Execution of the instrument of transfer shall be by or on behalf of the transferor and the transferee, provided that the Board may dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers. The transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register of members of the Company in respect of that share. III-2

392 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The Board may, in its absolute discretion, at any time and from time to time remove any share on the principal register to any branch register or any share on any branch register to the principal register or any other branch register. Unless the Board otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration and registered, in the case of shares on any branch register, at the relevant registration office and, in the case of shares on the principal register, at the place at which the principal register is located. The Board may, in its absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or on which the Company has a lien. It may also decline to register a transfer of any share issued under any share option scheme upon which a restriction on transfer subsists or a transfer of any share to more than four joint holders. The Board may decline to recognise any instrument of transfer unless a certain fee, up to such maximum sum as the Stock Exchange may determine to be payable, is paid to the Company, the instrument of transfer is properly stamped (if applicable), is in respect of only one class of share and is lodged at the relevant registration office or the place at which the principal register is located accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require is provided to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do). The register of members may, subject to the Listing Rules, be closed at such time or for such period not exceeding in the whole 30 days in each year as the Board may determine. Fully paid shares shall be free from any restriction on transfer (except when permitted by the Stock Exchange) and shall also be free from all liens. (v) Power of the Company to purchase its own shares The Company may purchase its own shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirement imposed from time to time by the Articles or any, code, rules or regulations issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong. Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price and, if purchases are by tender, tenders shall be available to all members alike. III-3

393 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (vi) Power of any subsidiary of the Company to own shares in the Company There are no provisions in the Articles relating to the ownership of shares in the Company by a subsidiary. (vii) Calls on shares and forfeiture of shares The Board may, from time to time, make such calls as it thinks fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment of such shares made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the day appointed for payment to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per annum as the Board may decide. If a member fails to pay any call or instalment of a call on the day appointed for payment, the Board may, for so long as any part of the call or instalment remains unpaid, serve not less than 14 days notice on the member requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice shall name a further day (not earlier than the expiration of 14 days from the date of the notice) on or before which the payment required by the notice is to be made, and shall also name the place where payment is to be made. The notice shall also state that, in the event of non-payment at or before the appointed time, the shares in respect of which the call was made will be liable to be forfeited. If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20% per annum as the Board may prescribe. III-4

394 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (b) Directors (i) Appointment, retirement and removal At any time or from time to time, the Board shall have the power to appoint any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting. Any Director so appointed to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting. Any Director so appointed as an addition to the existing Board shall hold office only until the first annual general meeting of the Company after his appointment and be eligible for re-election at such meeting. Any Director so appointed by the Board shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at an annual general meeting. At each annual general meeting, one third of the Directors for the time being shall retire from office by rotation. However, if the number of Directors is not a multiple of three, then the number nearest to but not less than one third shall be the number of retiring Directors. The Directors to retire in each year shall be those who have been in office longest since their last re-election or appointment but, as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. No person, other than a retiring Director, shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected has been lodged at the head office or at the registration office of the Company. The period for lodgment of such notices shall commence no earlier than the day after despatch of the notice of the relevant meeting and end no later than seven days before the date of such meeting and the minimum length of the period during which such notices may be lodged must be at least seven days. A Director is not required to hold any shares in the Company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to or retirement from the Board. A Director may be removed by an ordinary resolution of the Company before the expiration of his term of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and the Company may by ordinary resolution appoint another in his place. Any Director so appointed shall be subject to the retirement by rotation provisions. The number of Directors shall not be less than two. III-5

395 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The office of a Director shall be vacated if he: (aa) (bb) (cc) resigns; dies; is declared to be of unsound mind and the Board resolves that his office be vacated; (dd) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally; (ee) (ff) is prohibited from being or ceases to be a director by operation of law; without special leave, is absent from meetings of the Board for six consecutive months, and the Board resolves that his office is vacated; (gg) has been required by the stock exchange of the Relevant Territory (as defined in the Articles) to cease to be a Director; or (hh) is removed from office by the requisite majority of the Directors or otherwise pursuant to the Articles. From time to time the Board may appoint one or more of its body to be managing director, joint managing director or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine, and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting of such Director(s) or other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board. (ii) Power to allot and issue shares and warrants Subject to the provisions of the Cayman Companies Law, the Memorandum and Articles and without prejudice to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached to it such rights, or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Any share may be issued on terms that, upon the happening of a specified event or upon a given date and either at the option of the Company or the holder of the share, it is liable to be redeemed. III-6

396 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The Board may issue warrants to subscribe for any class of shares or other securities of the Company on such terms as it may from time to time determine. Where warrants are issued to bearer, no certificate in respect of such warrants shall be issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt that the original certificate has been destroyed and the Company has received an indemnity in such form as the Board thinks fit with regard to the issue of any such replacement certificate. Subject to the provisions of the Cayman Companies Law, the Articles and, where applicable, the rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount. Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others whose registered addresses are in any particular territory or territories where, in the absence of a registration statement or other special formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever. (iii) Power to dispose of the assets of the Company or any of its subsidiaries While there are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries, the Board may exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Cayman Companies Law to be exercised or done by the Company in general meeting, but if such power or act is regulated by the Company in general meeting, such regulation shall not invalidate any prior act of the Board which would have been valid if such regulation had not been made. (iv) Borrowing powers The Board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of the Company and, subject to the Cayman Companies Law, to issue debentures, debenture stock, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. III-7

397 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (v) Remuneration The Directors shall be entitled to receive, as ordinary remuneration for their services, such sums as shall from time to time be determined by the Board or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided among the Directors in such proportions and in such manner as they may agree or, failing agreement, either equally or, in the case of any Director holding office for only a portion of the period in respect of which the remuneration is payable, pro rata. The Directors shall also be entitled to be repaid all expenses reasonably incurred by them in attending any Board meetings, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office. Any Director who, at the request of the Company, performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such special or extra remuneration as the Board may determine, in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration and such other benefits and allowances as the Board may from time to time decide. Such remuneration shall be in addition to his ordinary remuneration as a Director. The Board may establish, either on its own or jointly in concurrence or agreement with subsidiaries of the Company or companies with which the Company is associated in business, or may make contributions out of the Company s monies to, any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or former Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and former employees of the Company and their dependents or any class or classes of such persons. The Board may also pay, enter into agreements to pay or make grants of revocable or irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to employees and former employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or former employees or their dependents are or may become entitled under any such scheme or fund as mentioned above. Such pension or benefit may, if deemed desirable by the Board, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement. III-8

398 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (vi) Compensation or payments for loss of office Payments to any present Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually or statutorily entitled) must be approved by the Company in general meeting. (vii) Loans and provision of security for loans to Directors The Company shall not directly or indirectly make a loan to a Director or a director of any holding company of the Company or any of their respective close associates, enter into any guarantee or provide any security in connection with a loan made by any person to a Director or a director of any holding company of the Company or any of their respective close associates, or, if any one or more of the Directors hold(s) (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company. (viii) Disclosure of interest in contracts with the Company or any of its subsidiaries With the exception of the office of auditor of the Company, a Director may hold any other office or place of profit with the Company in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration for that other office or place of profit, in whatever form, in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director, officer or member of any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, officer or member of such other company. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company. No Director or intended Director shall be disqualified by his office from contracting with the Company, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship established by it. A Director who is, in any way, materially interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the earliest meeting of the Board at which he may practically do so. III-9

399 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW There is no power to freeze or otherwise impair any of the rights attaching to any share by reason that the person or persons who are interested directly or indirectly in that share have failed to disclose their interests to the Company. A Director shall not vote or be counted in the quorum on any resolution of the Board in respect of any contract or arrangement or proposal in which he or any of his close associate(s) has/have a material interest, and if he shall do so his vote shall not be counted nor shall he be counted in the quorum for that resolution, but this prohibition shall not apply to any of the following matters: (aa) the giving of any security or indemnity to the Director or his close associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries; (bb) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his close associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security; (cc) any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer; (dd) any proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries, including the adoption, modification or operation of either: (i) any employees share scheme or any share incentive or share option scheme under which the Director or his close associate(s) may benefit; or (ii) any of a pension fund or retirement, death or disability benefits scheme which relates to Directors, their close associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or his close associate(s) any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and (ee) any contract or arrangement in which the Director or his close associate(s) is/ are interested in the same manner as other holders of shares, debentures or other securities of the Company by virtue only of his/their interest in those shares, debentures or other securities. III-10

400 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (ix) Proceedings of the Board The Board may meet anywhere in the world for the despatch of business and may adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote. (c) Alterations to the constitutional documents and the Company s name To the extent that the same is permissible under Cayman Islands law and subject to the Articles, the Memorandum and Articles of the Company may only be altered or amended, and the name of the Company may only be changed, with the sanction of a special resolution of the Company. (d) Meetings of member (i) Special and ordinary resolutions A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given. Under Cayman Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed. An ordinary resolution, by contrast, is a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given. A resolution in writing signed by or on behalf of all members shall be treated as an ordinary resolution duly passed at a general meeting of the Company duly convened and held, and where relevant as a special resolution so passed. III-11

401 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (ii) Voting rights and right to demand a poll Subject to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general meeting: (a) on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every share which is fully paid or credited as fully paid registered in his name in the register of members of the Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for this purpose as paid up on the share; and (b) on a show of hands every member who is present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy shall have one vote. Where more than one proxy is appointed by a member which is a Clearing House (as defined in the Articles) or its nominee(s), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he does use in the same way. At any general meeting a resolution put to the vote of the meeting is to be decided by poll save that the chairman of the meeting may, pursuant to the Listing Rules, allow a resolution to be voted on by a show of hands. Where a show of hands is allowed, before or on the declaration of the result of the show of hands, a poll may be demanded by (in each case by members present in person or by proxy or by a duly authorised corporate representative): (A) (B) (C) at least two members; any member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or a member or members holding shares in the Company conferring a right to vote at the meeting on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. Should a Clearing House or its nominee(s) be a member of the Company, such person or persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised in accordance with this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the Clearing House or its nominee(s) as if such person were an individual member including the right to vote individually on a show of hands. III-12

402 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Where the Company has knowledge that any member is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted. (iii) Annual general meetings The Company must hold an annual general meeting each year other than the year of the Company s adoption of the Articles. Such meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, or such longer period as may be authorised by the Stock Exchange at such time and place as may be determined by the Board. (iv) Requisition of general meetings Extraordinary general meetings may be convened on the requisition of one or more members holding, at the date of deposit of the requisition, not less than one tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the Board or the secretary of the Company for the purpose of requiring an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition. Such meeting shall be held within two months after the deposit of such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company. (v) Notices of meetings and business to be conducted An annual general meeting of the Company shall be called by at least 21 days notice in writing, and any other general meeting of the Company shall be called by at least 14 days notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, place and agenda of the meeting and particulars of the resolution(s) to be considered at that meeting and, in the case of special business, the general nature of that business. Except where otherwise expressly stated, any notice or document (including a share certificate) to be given or issued under the Articles shall be in writing, and may be served by the Company on any member personally, by post to such member s registered address or (in the case of a notice) by advertisement in the newspapers. Any member whose registered address is outside Hong Kong may notify the Company in writing of an address in Hong Kong which shall be deemed to be his registered address for this purpose. Subject to the Cayman Companies Law and the Listing Rules, a notice or document may also be served or delivered by the Company to any member by electronic means. III-13

403 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Although a meeting of the Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called if it is so agreed: (i) (ii) in the case of an annual general meeting, by all members of the Company entitled to attend and vote thereat; and in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting holding not less than 95% of the total voting rights in the Company. All business transacted at an extraordinary general meeting shall be deemed special business. All business shall also be deemed special business where it is transacted at an annual general meeting, with the exception of certain routine matters which shall be deemed ordinary business. (vi) Quorum for meetings and separate class meetings No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, and continues to be present until the conclusion of the meeting. The quorum for a general meeting shall be two members present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class. (vii) Proxies Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy. III-14

404 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of a duly authorised officer or attorney. Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such form as the Board may from time to time approve, provided that it shall not preclude the use of the two-way form. Any form issued to a member for appointing a proxy to attend and vote at an extraordinary general meeting or at an annual general meeting at which any business is to be transacted shall be such as to enable the member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in default of instructions, to exercise his discretion in respect of) each resolution dealing with any such business. (e) Accounts and audit The Board shall cause proper books of account to be kept of the sums of money received and expended by the Company, and of the assets and liabilities of the Company and of all other matters required by the Cayman Companies Law (which include all sales and purchases of goods by the company) necessary to give a true and fair view of the state of the Company s affairs and to show and explain its transactions. The books of accounts of the Company shall be kept at the head office of the Company or at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any account, book or document of the Company except as conferred by the Cayman Companies Law or ordered by a court of competent jurisdiction or authorised by the Board or the Company in general meeting. The Board shall from time to time cause to be prepared and laid before the Company at its annual general meeting balance sheets and profit and loss accounts (including every document required by law to be annexed thereto), together with a copy of the Directors report and a copy of the auditors report, not less than 21 days before the date of the annual general meeting. Copies of these documents shall be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles together with the notice of annual general meeting, not less than 21 days before the date of the meeting. Subject to the rules of the stock exchange of the Relevant Territory (as defined in the Articles), the Company may send summarized financial statements to members who have, in accordance with the rules of the stock exchange of the Relevant Territory, consented and elected to receive summarized financial statements instead of the full financial statements. The summarized financial statements must be accompanied by any other documents as may be required under the rules of the stock exchange of the Relevant Territory, and must be sent to those members that have consented and elected to receive the summarised financial statements not less than 21 days before the general meeting. The Company shall appoint auditor(s) to hold office until the conclusion of the next annual general meeting on such terms and with such duties as may be agreed with the Board. The auditors remuneration shall be fixed by the Company in general meeting or by the Board if authority is so delegated by the members. III-15

405 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The members may, at a general meeting remove the auditor(s) by a special resolution at any time before the expiration of the term of office of the auditor(s) and shall, by an ordinary resolution, at that meeting appoint new auditor(s) in place of the removed auditor(s) for the remainder of the term. The auditors shall audit the financial statements of the Company in accordance with generally accepted accounting principles of Hong Kong, the International Accounting Standards or such other standards as may be permitted by the Stock Exchange. (f) Dividends and other methods of distribution The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board. Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide: (i) (ii) (iii) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, although no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share; all dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion(s) of the period in respect of which the dividend is paid; and the Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise. Where the Board or the Company in general meeting has resolved that a dividend should be paid or declared, the Board may resolve: (aa) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members entitled to such dividend will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or (bb) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. Upon the recommendation of the Board, the Company may by ordinary resolution in respect of any one particular dividend of the Company determine that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to members to elect to receive such dividend in cash in lieu of such allotment. III-16

406 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and shall be sent at the holder s or joint holders risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders. Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind. The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may decide, but a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called up. All dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise used by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by the Board and, upon such forfeiture, shall revert to the Company. No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company. The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered. (g) Inspection of corporate records For so long as any part of the share capital of the Company is listed on the Stock Exchange, any member may inspect any register of members of the Company maintained in Hong Kong (except when the register of members is closed) without charge and require the provision to him of copies or extracts of such register in all respects as if the Company were incorporated under and were subject to the Hong Kong Companies Ordinance. III-17

407 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (h) Rights of minorities in relation to fraud or oppression There are no provisions in the Articles concerning the rights of minority members in relation to fraud or oppression. However, certain remedies may be available to members of the Company under Cayman Islands law, as summarized in paragraph 3(f) of this Appendix. (i) Procedures on liquidation A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution. Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares: (i) (ii) if the Company is wound up, the surplus assets remaining after payment to all creditors shall be divided among the members in proportion to the capital paid up on the shares held by them respectively; and if the Company is wound up and the surplus assets available for distribution among the members are insufficient to repay the whole of the paid-up capital, such assets shall be distributed, subject to the rights of any shares which may be issued on special terms and conditions, so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on the shares held by them, respectively. If the Company is wound up (whether the liquidation is voluntary or compelled by the court), the liquidator may, with the sanction of a special resolution and any other sanction required by the Cayman Companies Law, divide among the members in specie or kind the whole or any part of the assets of the Company, whether the assets consist of property of one kind or different kinds, and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be so divided and may determine how such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator thinks fit, but so that no member shall be compelled to accept any shares or other property upon which there is a liability. (j) Subscription rights reserve Provided that it is not prohibited by and is otherwise in compliance with the Cayman Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of the shares to be issued on the exercise of such warrants, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of such shares. III-18

408 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW 3. CAYMAN ISLANDS COMPANY LAW The Company was incorporated in the Cayman Islands as an exempted company on 27 March 2018 subject to the Cayman Companies Law. Certain provisions of Cayman Islands company law are set out below but this section does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of the Cayman Companies Law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar. (a) Company operations An exempted company such as the Company must conduct its operations mainly outside the Cayman Islands. An exempted company is also required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital. (b) Share capital Under Cayman Companies Law, a Cayman Islands company may issue ordinary, preference or redeemable shares or any combination thereof. Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the share premium account. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangements in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation, the following: (i) (ii) (iii) (iv) (v) paying distributions or dividends to members; paying up unissued shares of the company to be issued to members as fully paid bonus shares; any manner provided in section 37 of the Cayman Companies Law; writing-off the preliminary expenses of the company; and writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company. Notwithstanding the foregoing, no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business. III-19

409 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if authorised to do so by its articles of association, by special resolution reduce its share capital in any way. (c) Financial assistance to purchase shares of a company or its holding company There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance by a company to another person for the purchase of, or subscription for, its own, its holding company s or a subsidiary s shares. Therefore, a company may provide financial assistance provided the directors of the company, when proposing to grant such financial assistance, discharge their duties of care and act in good faith, for a proper purpose and in the interests of the company. Such assistance should be on an arm s-length basis. (d) Purchase of shares and warrants by a company and its subsidiaries A company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a member and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares; an ordinary resolution of the company approving the manner and terms of the purchase will be required if the articles of association do not authorise the manner and terms of such purchase. A company may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless, immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business. Shares that have been purchased or redeemed by a company or surrendered to the company shall not be treated as cancelled but shall be classified as treasury shares if held in compliance with the requirements of Section 37A(1) of the Cayman Companies Law. Any such shares shall continue to be classified as treasury shares until such shares are either cancelled or transferred pursuant to the Cayman Companies Law. A Cayman Islands company may be able to purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is no requirement under Cayman Islands law that a company s memorandum or articles of association contain a specific provision enabling such purchases. The directors of a company may under the general power contained in its memorandum of association be able to buy, sell and deal in personal property of all kinds. III-20

410 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW A subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares. (e) Dividends and distributions Subject to a solvency test, as prescribed in the Cayman Companies Law, and the provisions, if any, of the company s memorandum and articles of association, a company may pay dividends and distributions out of its share premium account. In addition, based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may be paid out of profits. For so long as a company holds treasury shares, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company s assets (including any distribution of assets to members on a winding up) may be made, in respect of a treasury share. (f) Protection of minorities and shareholders suits It can be expected that the Cayman Islands courts will ordinarily follow English case law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions to that rule) which permit a minority member to commence a representative action against or derivative actions in the name of the company to challenge acts which are ultra vires, illegal, fraudulent (and performed by those in control of the Company) against the minority, or represent an irregularity in the passing of a resolution which requires a qualified (or special) majority which has not been obtained. Where a company (not being a bank) is one which has a share capital divided into shares, the court may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to report on such affairs. In addition, any member of a company may petition the court, which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up. In general, claims against a company by its members must be based on the general laws of contract or tort applicable in the Cayman Islands or be based on potential violation of their individual rights as members as established by a company s memorandum and articles of association. (g) Disposal of assets There are no specific restrictions on the power of directors to dispose of assets of a company, however, the directors are expected to exercise certain duties of care, diligence and skill to the standard that a reasonably prudent person would exercise in comparable circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in the best interests of the company under English common law (which the Cayman Islands courts will ordinarily follow). III-21

411 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (h) Accounting and auditing requirements A company must cause proper records of accounts to be kept with respect to: (i) all sums of money received and expended by it; (ii) all sales and purchases of goods by it and (iii) its assets and liabilities. Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company s affairs and to explain its transactions. If a company keeps its books of account at any place other than at its registered office or any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2013 Revision) of the Cayman Islands, make available, in electronic form or any other medium, at its registered office copies of its books of account, or any part or parts thereof, as are specified in such order or notice. (i) Exchange control There are no exchange control regulations or currency restrictions in effect in the Cayman Islands. (j) Taxation Pursuant to section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Financial Secretary that: (i) (ii) no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to the Company or its operations; and no tax be levied on profits, income gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable by the Company: (aa) on or in respect of the shares, debentures or other obligations of the Company; or (bb) by way of withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Law (2018 Revision). The undertaking for the Company is for a period of 20 years from 11 April III-22

412 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save for certain stamp duties which may be applicable, from time to time, on certain instruments. (k) Stamp duty on transfers No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands. (l) Loans to directors There is no express provision prohibiting the making of loans by a company to any of its directors. However, the company s articles of association may provide for the prohibition of such loans under specific circumstances. (m) Inspection of corporate records The members of a company have no general right to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company s articles of association. (n) Register of members A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. There is no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of member, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2013 Revision) of the Cayman Islands. (o) Register of Directors and officers Pursuant to the Cayman Companies Law, the Company is required to maintain at its registered office a register of directors, alternate directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 60 days of any change in such directors or officers, including a change of the name of such directors or officers. III-23

413 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (p) Winding up A Cayman Islands company may be wound up by: (i) an order of the court; (ii) voluntarily by its members; or (iii) under the supervision of the court. The court has authority to order winding up in a number of specified circumstances including where, in the opinion of the court, it is just and equitable that such company be so wound up. A voluntary winding up of a company (other than a limited duration company, for which specific rules apply) occurs where the company resolves by special resolution that it be wound up voluntarily or where the company in general meeting resolves that it be wound up voluntarily because it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the company is obliged to cease to carry on its business from the commencement of its winding up except so far as it may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the directors cease, except so far as the company in general meeting or the liquidator sanctions their continuance. In the case of a members voluntary winding up of a company, one or more liquidators are appointed for the purpose of winding up the affairs of the company and distributing its assets. As soon as the affairs of a company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and the property of the company disposed of, and call a general meeting of the company for the purposes of laying before it the account and giving an explanation of that account. When a resolution has been passed by a company to wind up voluntarily, the liquidator or any contributory or creditor may apply to the court for an order for the continuation of the winding up under the supervision of the court, on the grounds that: (i) the company is or is likely to become insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious liquidation of the company in the interests of the contributories and creditors. A supervision order takes effect for all purposes as if it was an order that the company be wound up by the court except that a commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator. For the purpose of conducting the proceedings in winding up a company and assisting the court, one or more persons may be appointed to be called an official liquidator(s). The court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than one person is appointed to such office, the court shall declare whether any act required or authorized to be done by the official liquidator is to be done by all or any one or more of such persons. The court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the court. III-24

414 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (q) Reconstructions Reconstructions and amalgamations may be approved by a majority in number representing 75% in value of the members or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the courts. Whilst a dissenting member has the right to express to the court his view that the transaction for which approval is being sought would not provide the members with a fair value for their shares, the courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management, and if the transaction were approved and consummated the dissenting member would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting members of a United States corporation. (r) Take-overs Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may, at any time within two months after the expiration of that four-month period, by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting member may apply to the Cayman Islands courts within one month of the notice objecting to the transfer. The burden is on the dissenting member to show that the court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority members. (s) Indemnification Cayman Islands law does not limit the extent to which a company s articles of association may provide for indemnification of officers and directors, save to the extent any such provision may be held by the court to be contrary to public policy, for example, where a provision purports to provide indemnification against the consequences of committing a crime. 4. GENERAL Appleby, the Company s legal adviser on Cayman Islands law, has sent to the Company a letter of advice which summarises certain aspects of the Cayman Islands company law. This letter, together with a copy of the Cayman Companies Law, is available for inspection as referred to in the paragraph headed Documents Available for Inspection in Appendix V. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice. III-25

415 APPENDIX IV STATUTORY AND GENERAL INFORMATION A. FURTHER INFORMATION ABOUT OUR COMPANY 1. Incorporation Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 27 March Our Company has established a principal place of business in Hong Kong at Unit , 22/F, Tai Tung Building, 8 Fleming Road, Wan Chai, Hong Kong and was registered as a non-hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on 21 June In connection with such registration, Mr. Yuen Man Hong has been appointed as the authorised representative of our Company for the acceptance of service of process and notices on behalf of our Company in Hong Kong. As our Company is incorporated in the Cayman Islands, it is subject to the Companies Law and its constitution documents comprise the Memorandum of Association and the Articles of Association. A summary of various parts of the constitution documents and relevant aspects of the Companies Law is set out in Appendix III to this document. 2. Changes in authorised and issued share capital of our Company (a) (b) (c) (d) (e) Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 27 March 2018 with an authorised share capital of HK$380,000 divided into 38,000,000 Shares of HK$0.01 each, of which one Share was allotted and issued as fully paid to an initial subscriber. Subsequently on the same date, the subscriber transferred one subscriber Share to Decade Lion. On 18 May 2018, pursuant to the Reorganisation Agreement, our Company acquired all the issued shares of Precise One from Decade Lion, in consideration of which, our Company allotted and issued 869 shares to Decade Lion. After the said share transfer, Precise One became a wholly-owned subsidiary of our Company. The above share transfer was properly and legally completed and settled. On 25 May 2018, our Company allotted and issued 130 Shares to Strength Reach of a consideration of HK$18,000,000. The allotment was properly and legally completed. After the said allotment, our Company was owned as to 87% by Decade Lion and 13% by Strength Reach. Pursuant to the written resolutions of the sole Shareholder passed on [ ], the authorised share capital of the Company was increased from HK$380,000 divided into 38,000,000 Shares of par value HK$0.01 each to HK$[150,000,000] divided into [15,000,000,000] Shares of par value HK$0.01 each, by the creation of a further [14,962,000,000] Shares. Immediately following the completion of the [REDACTED] and the Capitalisation Issue (without taking into account any Share which may be issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), [REDACTED] Shares will be allotted and issued, all fully paid or credited as fully paid, and [REDACTED] Shares will remain unissued. Other than any Share which may be issued pursuant to the exercise of the [REDACTED] or any options which may fall to be granted IV-1

416 APPENDIX IV STATUTORY AND GENERAL INFORMATION under the Share Option Scheme, or the exercise of the general mandate referred to in A. Further information about our Company and our subsidiaries 3. Written resolutions of the Shareholders in this Appendix, our Directors have no present intention to issue any part of the authorised but unissued capital of our Company, and without the prior approval of our Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of our Company. (f) Save as disclosed above, there has been no alteration in the share capital of our Company since its incorporation. 3. Written resolutions of our Shareholders Pursuant to the written resolutions of our Shareholders passed on [ ], among other things: (a) (b) the authorised share capital of our Company was increased from HK$380,000 divided into 38,000,000 Shares of HK$0.01 each to HK$[150,000,000] divided into [15,000,000,000] Shares of HK$0.01 each by the creation of an additional [14,962,000,000] Shares of HK$0.01 each; conditional on the conditions as set out in the section headed Structure and Conditions of the [REDACTED] of this document: (i) (ii) (iii) the [REDACTED] and the [REDACTED] were approved and our Directors or any committee of the Board were authorised to (aa) allot and issue the [REDACTED] pursuant to the [REDACTED] and [REDACTED] to rank pari passu with the then existing Shares in all respects; (bb) implement the [REDACTED] and the [REDACTED] of Shares on Main Board; and (cc) do all things and execute all documents in connection with or incidental to the [REDACTED] and the [REDACTED] with such amendments or modifications (if any) as our Directors may consider necessary or appropriate; conditional on the share premium account of our Company being credited as a result of the allotment and issue of the [REDACTED] pursuant to the [REDACTED], our Directors were authorised to capitalise a maximum amount of HK$[REDACTED] standing to the credit of the share premium account of our Company and to apply such amount in paying up in full at par an aggregate of [REDACTED] Shares for allotment and issue, credited as fully paid at par and rank pari passu in all respects with each other and the existing issued Shares (except entitlement to the Capitalisation Issue), to Decade Lion and Strength Reach, and the Directors were authorised to give effect to such capitalisation and distribution; the rules of the Share Option Scheme, the principal terms of which are set out in D. Share Option Scheme in this Appendix, were approved and adopted and our Directors or any committee of the Board were authorised, subject to the terms and conditions of the Share Option Scheme, to implement the Share Option Scheme, to grant options to subscribe for Shares thereunder and to allot, issue and deal with the Shares pursuant to the exercise of options that may be granted under the Share Option Scheme and to take all such steps as may be necessary, desirable expedient to implement the Share Option Scheme; IV-2

417 APPENDIX IV STATUTORY AND GENERAL INFORMATION (iv) a general unconditional mandate was given to our Directors to exercise all the powers of our Company to allot, issue and deal with, otherwise than by way of rights issues or an issue of Shares upon the exercise of any subscription rights attached to any warrants of our Company or pursuant to the exercise of any options which may be granted under the Share Option Scheme or under any other option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of our Company and/or any of our subsidiaries of shares or rights to acquire shares or any scrip dividend schemes or similar arrangements providing for the allotment and issue of shares of our Company in lieu of the whole or part of a dividend on Shares in accordance with the Articles of Association or a specific authority granted by our Shareholders in general meeting, Shares with a total nominal value not exceeding (1) 20% of the aggregate number of issued shares of our Company in issue immediately following completion of the Capitalisation Issue and the [REDACTED] (without taking into account any Shares falling to be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme); and (2) the aggregate nominal value of shares repurchased under the Repurchase Mandate as defined in paragraph (v) below. Such mandate shall remain in effect until whichever is the earliest of: (1) the conclusion of the next annual general meeting of our Company; (2) the expiration of the period within which the next annual general meeting of our Company is required to be held by the Articles of Association or any other applicable laws of the Cayman Islands; or (3) the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing such mandate; (v) a general unconditional mandate (the Repurchase Mandate ) was given to our Directors to exercise all powers of our Company to repurchase on the Stock Exchange or on any other stock exchange on which the securities of our Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, such number of Shares as will represent up to 10% of the aggregate number of issued shares of our Company in issue immediately following the completion of the Capitalisation Issue and the [REDACTED] (without taking into account any Shares falling to be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme), such mandate shall remain in effect until whichever is the earliest of: (1) the conclusion of the next annual general meeting of our Company; (2) the expiration of the period within which the next annual general meeting of our Company is required to be held be the Articles of Association or any other applicable laws of the Cayman Islands; (3) the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing such mandate; IV-3

418 APPENDIX IV STATUTORY AND GENERAL INFORMATION (vi) the general unconditional mandate mentioned in paragraph (iv) above was extended by the addition to the aggregate nominal value of the share capital of our Company which may be allotted or agreed conditionally or unconditionally to be allotted, issued or dealt with by our Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of our Company repurchased by our Company pursuant to the Repurchase Mandate referred to in paragraph (v) above provided that such extended amount shall not exceed 10% of the aggregate number of issued shares of our Company in issue immediately following the completion of the Capitalisation Issue and the [REDACTED] excluding any Shares which may be issued upon exercise of any options that may be granted under the Share Option Scheme; and (vii) our Company approved and adopted the Memorandum of Association and Articles of Association, the terms of which are summarised in Appendix IV to his document, with effect upon the [REDACTED]. 4. Reorganisation The companies comprising our Group underwent a Reorganisation in preparation for the [REDACTED], details of which are set out in the paragraphs headed History, Reorganisation and Corporate Structure Reorganisation in this document. Following the Reorganisation, our Company became the holding company of our Group. Diagrams showing our Group s structure after the Reorganisation and immediately upon completion of the Capitalisation Issue and the [REDACTED] (assuming that no Share has been issued pursuant to the exercise of the [REDACTED] and any option which may be granted under the Share Option Scheme) are set out in the paragraphs headed History, Reorganisation and Corporate Structure Reorganisation in this document. 5. Changes in share capital of subsidiaries Our Company s subsidiaries are referred to in the Accountants Report, the text of which is set out in Appendix I to this document. Save as mentioned in the paragraph headed History, Reorganisation and Corporate Structure Corporate history in this document, there was no change in the share capital of the major subsidiaries of our Company during the two years preceding the date of this document. Save for the subsidiaries mentioned in Appendix I to this document, our Company has no other subsidiaries. 6. Repurchase by our Company of its own securities This paragraph includes information required by the Stock Exchange to be included in this document concerning the repurchase by our Company of its own securities. IV-4

419 APPENDIX IV STATUTORY AND GENERAL INFORMATION (a) Provisions of the Listing Rules The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, the most important of which are summarised below: (i) Shareholders approval All proposed repurchases of securities (which must be fully paid up in the case of shares) by a company listed on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders in a general meeting, either by way of general mandate or by specific approval of a particular transaction. Note: Pursuant to the written resolutions passed by the Shareholders on [ ], the Repurchase Mandate was given to our Directors authorising our Directors to exercise all powers of our Company to purchase the Shares as described above in the paragraphs headed A. Further information about our Company 3. Written resolutions of our Shareholders in this appendix. (ii) Source of funds Any repurchases must be financed out of funds legally available for such purpose in accordance with the Memorandum of Association and Articles of Association and any applicable laws of the Cayman Islands. A listed company is prohibited from repurchasing its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time. Under the Cayman Islands law, any repurchases by our Company may be made out of profits of our Company or out of the proceeds of a fresh issue of share made for the purpose of the repurchase or, if authorised by the Articles of Association and subject to the Companies Law, out of capital and, in case of any premium payable on the repurchase, out of profits of our Company or from sums standing to the credit of the share premium accounts of our Company, or if authorised by the Articles of Association and subject to the Companies Law, out of capital. (iii) Core connected persons Under the Listing Rules, a company shall not knowingly repurchase shares from a core connected person (as defined in the Listing Rules) and a core connected person shall not knowingly sell his shares to the company. (b) Exercise of the Repurchase Mandate Exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issue immediately after [REDACTED], could accordingly result in up to [REDACTED] Shares being repurchased by our Company during the period in which the Repurchase Mandate remains in force. IV-5

420 APPENDIX IV STATUTORY AND GENERAL INFORMATION (c) Reasons for repurchases Repurchases of Shares will only be made when our Directors believe that such a repurchase will benefit our Company and Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value and/or earnings per Share. (d) Funding of repurchases In repurchasing Shares, our Company may only apply funds legally available for such purpose in accordance with our Memorandum of Association and Articles of Association and the applicable laws and regulations of the Cayman Islands. On the basis of the current financial position of our Group as disclosed in this document and taking into account the current working capital position of our Group, our Directors consider that, if the Repurchase Mandate was to be exercised in full, it might have a material adverse effect on the working capital and/or the gearing position of our Group as compared with the position disclosed in this document. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of our Group or the gearing levels which in the opinion of our Directors are from time to time appropriate or our Group. (e) General None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates currently intends to sell any Shares to our Company. Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, our Memorandum and Articles and the applicable laws of the Cayman Islands. No core connected person of our Company has notified our Company that he or she has a present intention to sell Shares to our Company, or has undertaken not to do so, in the event that the Repurchase Mandate is exercised. If as a result of a repurchase of Shares, a Shareholder s proportionate interest in the voting rights of our Company is increased, such increase will be treated as an acquisition for the purpose of the Takeovers Code. As a result, a Shareholder, or a group of Shareholders acting in concert, depending on the level of increase in the Shareholder s interest, could obtain or consolidate control of our Company and become(s) obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequence which would arise under the Takeovers Code due to any repurchase made pursuant to the Repurchase Mandate immediately after the [REDACTED]. Our Directors will not exercise the Repurchase Mandate if the repurchase would result in the number of Shares which are in the hands of the public falling below 25% of the total number of Shares in issue (or such other percentage as may be prescribed as the minimum public shareholding under the Listing Rules). IV-6

421 APPENDIX IV STATUTORY AND GENERAL INFORMATION B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR GROUP 1. Summary of material contracts The following contracts (not being contracts entered into the ordinary course of business of our Group) have been entered into by members of our Group within the two years immediately preceding the date of this document and are or may be material: (a) (b) (c) (d) (e) the subscription agreement dated 6 March 2018 entered into between Strength Reach, Precise One, EC Excel Wire and Mr. Ng pursuant to which Strength Reach agreed to subscribe for, and Precise One agreed to procure its holding company to allot and issue 130 Shares, representing 13% of the issued share capital (of our Company at the total subscription price of HK$18,000,000). the Reorganisation Agreement dated 18 May 2018 entered into between Decade Lion and our Company; the Deed of Indemnity; the Deed of Non-competition; and the [REDACTED] Underwriting Agreement. 2. Intellectual property rights of our Company (a) Trademark As at the Latest Practicable Date, our Group has applied for registration of the following trademarks in Malaysia, which we believe are material to our business: Trademark Trademark Applicant Application number Class Status (Note) EC Excel Wire Application received EC Excel Wire Application received Note: Class 6 Common metals and their alloys, overs; metal materials for building and construction; transportable buildings of metal; non-electric cables and wires of common metal; small items of metal hardware; metal containers for storage or transport; safes. IV-7