In connection with the Offering, we have granted to CIMB Securities (as defined in this Prospectus) the Over-allotment Option to subscribe for up to an aggregate of 22,000,000 Additional Shares (which in aggregate represents not more than 20.0% of the New Shares) within 30 days from the date of commencement of dealing of our Shares on the SGX-ST, at the Issue Price, exercisable in full or in part, solely for the purpose of covering over-allotments (if any) made in connection with the Offering. The total number of issued Shares immediately after the completion of the Offering (and prior to the exercise of the Over-allotment Option in full) will be 410,000,000 Shares. If the Over- allotment Option is exercised in full, the total number of issued Shares immediately after completion of the Offering will increase by 22,000,000 Shares to 432,000,000 Shares. A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the ‘‘Authority’’). The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares, the Option Shares or the Additional Shares, as the case may be, being offered or in respect of which an invitation is made for investment. We have not lodged or registered this Prospectus in any other jurisdiction. The Shares in the Offering have not been and will not be registered under the US Securities Act of 1933, as amended (the “US Securities Act”) and may not be offered or sold within the USA or to, or for the account or benefit of, US persons (as defined under Regulation S under the US Securities Act (“Regulation S”)) except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act. The Shares in the Offering are being offered and sold outside the USA in an offshore transaction in reliance on Regulation S under the US Securities Act. Investing in our Shares involves risks which are described in the section entitled “Risk Factors” in this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six (6) months after the date of registration of this Prospectus by the Authority. PROSPECTUS DATED 17 OCTOBER 2012 (registered by the Monetary Authority of Singapore on 17 October 2012) This document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser. We have made an application to the Singapore Exchange Securities Trading Limited (“SGX- ST”) for permission to deal in and for quotation of all the ordinary shares (the “Shares”) in the capital of Gaylin Holdings Limited (the “Company”) already issued, the new Shares which are the subject of this Offering (the “New Shares”), the new Shares which may be issued upon the exercise of the options to be granted under the Gaylin Employee Share Option Scheme (the “Option Shares”) and the new Shares which may be issued upon the exercise of the over-allotment option (the “Over-allotment Option”) (the “Additional Shares”). Such permission will be granted when we have been admitted to the Official List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars. Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all of the existing issued Shares, the New Shares, the Option Shares and the Additional Shares. If the completion of the Offering does not occur because the SGX-ST’s permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom and you will not have any claims whatsoever against us, the Issue Manager, the Underwriter and the Placement Agent (as defined in this Prospectus). The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Offering, our Company and our subsidiaries, our Shares, the New Shares, the Option Shares or the Additional Shares. Offering in respect of 110,000,000 New Shares comprising: (i) 5,000,000 Offer Shares at S$0.35 for each Offer Share by way of public offer; and (ii) 105,000,000 Placement Shares at S$0.35 for each Placement Share by way of placement, payable in full on application (subject to the Over-allotment Option). Issue Manager CIMB Bank Berhad (13491-P) Singapore Branch (Incorporated in Malaysia) Underwriter and Placement Agent CIMB Securities (Singapore) Pte. Ltd. (Company Registration No.: 198701621D) (Incorporated in the Republic of Singapore) GAYLIN HOLDINGS LIMITED (Company Registration No.: 201004068M) (Incorporated in the Republic of Singapore on 25 February 2010)
Transcript
In connection with the Offering, we have granted to CIMB Securities (as defined in
this Prospectus) the Over-allotment Option to subscribe for up to an aggregate of 22,000,000
Additional Shares (which in aggregate represents not more than 20.0% of the New Shares) within 30 days from the
date of commencement of dealing of our Shares on the SGX-ST, at the Issue Price, exercisable in full or in part, solely for the purpose of
covering over-allotments (if any) made in connection with the Offering. The total number of issued Shares immediately after the completion of the Offering (and prior to the exercise of the Over-allotment Option in full) will be 410,000,000 Shares. If the Over-allotment Option is exercised in full, the total number of issued Shares immediately after completion of the Offering will increase by 22,000,000 Shares to 432,000,000 Shares.
A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the ‘‘Authority’’). The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares, the Option Shares or the Additional Shares, as the case may be, being offered or in respect of which an invitation is made for investment. We have not lodged or registered this Prospectus in any other jurisdiction.
The Shares in the Offering have not been and will not be registered under the US Securities Act of 1933, as amended (the “US Securities Act”) and may not be offered or sold within the USA or to, or for the account or benefit of, US persons (as defined under Regulation S under the US Securities Act (“Regulation S”)) except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act. The Shares in the Offering are being offered and sold outside the USA in an offshore transaction in reliance on Regulation S under the US Securities Act.
Investing in our Shares involves risks which are described in the section entitled
“Risk Factors” in this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six (6) months after the date of registration of this Prospectus by the Authority.
PROSPECTUS DATED 17 OCTOBER 2012(registered by the Monetary Authority
of Singapore on 17 October 2012)
This document is important. If you are in any doubt
as to the action you should take, you should consult your
legal, financial, tax or other professional adviser.
We have made an application to the Singapore Exchange Securities Trading Limited (“SGX-ST”) for permission to deal in and for quotation of all the ordinary shares (the “Shares”) in the capital of Gaylin Holdings Limited (the “Company”) already issued, the new Shares which are the subject of this Offering (the “New Shares”), the new Shares which may be issued upon the exercise of the options to be granted under the Gaylin Employee Share Option Scheme (the “Option Shares”) and the new Shares which may be issued upon the exercise of the over-allotment option (the “Over-allotment Option”) (the “Additional Shares”). Such permission will be granted when we have been admitted to the Official List of the SGX-ST. The dealing in and quotation of the Shares will be in Singapore dollars.
Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all of the existing issued Shares, the New Shares, the Option Shares and the Additional Shares. If the completion of the Offering does not occur because the SGX-ST’s permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom and you will not have any claims whatsoever against us, the Issue Manager, the Underwriter and the Placement Agent (as defined in this Prospectus).
The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Offering, our Company and our subsidiaries, our Shares, the New Shares, the Option Shares or the Additional Shares.
Offering in respect of 110,000,000 New Shares comprising:
(i) 5,000,000 Offer Shares at S$0.35 for each Offer Share by way of public offer; and
(ii) 105,000,000 Placement Shares at S$0.35 for each Placement Share by way of
placement,
payable in full on application (subject to the Over-allotment Option).
(Company Registration No.: 201004068M)(Incorporated in the Republic of Singapore on 25 February 2010)
CORPORATE PROFILE
With an operating history that can be
traced back to 1974, Gaylin Holdings
Limited is one of the largest Singapore-
based multi-disciplinary specialist
providers of rigging and lifting solutions
to the global offshore oil and gas
(“O&G”) industry. Our customers
include vessel and oil rig owners and
operators, charterers, shipbuilders,
and drilling and mooring contractors.
Our comprehens ive range o f
inventory, years of experience and
engineering capabilities allow us to
be a one-stop solutions provider
for our customers. Currently, we
have two (2) warehouses and one
(1) fabrication facility in Singapore
occupying approximately 316,950
sq ft and one (1) warehouse facility
in Vietnam occupying approximately
10,463 sq ft. Our sales and distribution
markets comprise mainly Asia, Oceania,
Europe, the Middle East and Africa.
We have been recognised with the
international ISO 9002 certification
in respect of the manufacture of
wire rope slings since 1998 and the
latest certification (ISO 9001:2008)
was awarded to us in 2012. We were
conferred the “Enterprise 50 (E50)
Award” in 2009, the “2011 Singapore
Brand Award” in 2011 and the “Promising
SME 500 Award” in the platinum
category in 2012.
Signed a
Memorandum Of
Understanding for the proposed
acquisition of a South Korean company
Strong relationships with customers in the global offshore oil and gas industry
Proposed dividend
Expansion into Asian and other markets
Our Directors intend to recommend and distribute dividends of
not less than 30% of our net profits attributable to our shareholders for FY2013 and FY2014
New Malaysian plant operations will commence in
December 2012
HEAVY LIFT SLING & GROMMETS
SYNTHETIC FIBRE WIRE ROPE
Establishment of
representative
offices in
Kuala Lumpur, Malaysia and Perth, Australia
GAYLIN HOLDINGS LIMITED
COMPETITIVE STRENGTHS
One of the largest Singapore-based rigging and lifting solutions providers
(a) sourcing and procurement, (b) design, engineering, fabrication and assembly, (c) installation, inspection and testing and (d) after-sales services such as routine testing.
can test breaking loads of up to 2,000 tonnes.
meet customers’ needs.
Comprehensive and well-stocked inventory of products, including a wide range of high quality products from various well-established brand names
from more than 20 brands worldwide such as TEUFELBERGER, Usha Martin and Kiswire.
their corresponding needs, and helps our customers to avoid delays arising from the need to indent such products.
some of whom we have been in business with for more than 15 years.
Experienced and committed management team with an established track record
and offshore O&G industry.
has more than 30 years of experience in the industry, and each of our Executive Directors and Chief Administrative Officer has over 25 years of experience in the industry.
Spool of customers
Markets comprise mainly Asia, Oceania, Europe, the Middle East and Africa.
corporations mainly in the global offshore O&G industry such as Acteon Group, Bourbon Group, Britoil Offshore, DOF Group, Technip Group and Sapura Acergy Sdn. Bhd., some of whom we have been servicing for more than ten (10) years.
PROSPECTS
Demand for energy resources
The PRC and India are expected to account for 50% of the global demand for oil in this decade – 2011 to 2020(1). Industry players estimate that Asian companies will increase their investments by more than 50% in deepsea exploration, drilling and production in the next four (4) years(1).Opportunities in the Australian O&G sector given new investments into the LNG projects there.
Oil and gas prices and the impact on O&G activity
Resiliency of high oil prices pushing upstream O&G companies to increase exploration and production spending and fuelling a “construction boom” in the offshore sector(1). Growing trend towards deepwater O&G exploration(1).More offshore and deepwater prospects in Asia(1).Singapore is known to operate one of the most technically advanced and efficient shipbuilding and ship-repair facilities in South East Asia(1). These coupled with the strategic location of Singapore makes it a natural hub for the marine industry and attractive to vessels and marine companies worldwide, in particular those involved in the global offshore O&G industry.
(1) Industry Report titled “The Offshore Oil and Gas Industry – Singapore” prepared by the Independent Market Researcher, Converging Knowledge dated 4 June 2012.
FINANCIAL HIGHLIGHTS
Rigging & Lifting Ship Supply
REVENUE(In S$ Millions)
FY2010 FY2011 FY2012
68.6
3.2
65.4 67.6 68.9
2.52.5
70.171.4
GROSS PROFIT & MARGIN(In S$ Millions)
23.7%
16.3
25.023.7
35.6% 33.1%
FY2010 FY2011 FY2012
GP Margin
CAGR
NET PROFIT(In S$ Millions)
6.9
13.4 13.0
FY2010 FY2011 FY2012
CAGR
20.6%
37.4%
CAGR 2.0%
F
NE(In S
F
BUSINESS STRATEGIES AND FUTURE PLANS
Expansion of our operations into Asian or other markets through the set up of new facilities, acquisitions, joint ventures and/or strategic collaborations
Increase our competitiveness through faster response and other advantages from being in close proximity to our customers.Considering opportunities in North Asia, South East Asia, Middle East, Europe, Australia and South America.Signed a Memorandum of Understanding for the proposed acquisition of a South Korean company engaged in the supply of wire ropes and related fittings to Korean customers in the offshore and marine industry.
Expansion of our operations into Malaysia
(approximately 103,145 sq ft) in Tanjung Langsat, State of Johor, Malaysia in February 2012 and expect full operations to commence in December 2012.
Expansion of sales and marketing capabilities
Malaysia in September 2012.
representative offices in various strategic locations such as Perth, Australia to strengthen ties with existing customers and to forge relationships with new customers.
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TABLE OF CONTENTS
CORPORATE INFORMATION ............................................................................................................ 1
SELECTED FINANCIAL INFORMATION ........................................................................................... 60
COMBINED STATEMENTS OF COMPREHENSIVE INCOME OF OUR GROUP ............................. 60
COMBINED STATEMENT OF FINANCIAL POSITION OF OUR GROUP ......................................... 61
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTSOF OPERATIONS ............................................................................................................................... 62
REMUNERATION OF EMPLOYEES RELATED TO OUR DIRECTORS AND SUBSTANTIALSHAREHOLDERS ............................................................................................................................... 134
STATEMENT BY DIRECTORS OF OUR COMPANY.......................................................................... 166
DOCUMENTS AVAILABLE FOR INSPECTION .................................................................................. 167
APPENDIX AINDEPENDENT AUDITORS’ REPORT AND THE COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 MARCH 2010, 2011 AND 2012 .................................................................. A-1
APPENDIX BSUMMARY OF SELECTED ARTICLES OF ASSOCIATION OF OUR COMPANY ........................... B-1
APPENDIX CRULES OF THE GAYLIN EMPLOYEE SHARE OPTION SCHEME .................................................. C-1
APPENDIX DTERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE ................ D-1
BOARD OF DIRECTORS : Ang Mong Seng (Independent Non-Executive Chairman) Desmond Teo Bee Chiong (Executive Director and CEO) Teo Bee Kheng (Executive Director and COO) Teo Bee Hoe (Executive Director and Deputy COO) Wu Chiaw Ching (Independent Director) Ng Sey Ming (Independent Director) Lau Lee Hua (Independent Director) COMPANY SECRETARY : Yeoh Kar Choo Sharon, ACIS
REGISTERED OFFICE AND : 7 Gul Avenue PRINCIPAL PLACE OF Singapore 629651 BUSINESS SHARE REGISTRAR AND : Boardroom Corporate & Advisory Services Pte. Ltd.SHARE TRANSFER OFFICE 50 Raffl es Place #32-01 Singapore Land Tower Singapore 048623 ISSUE MANAGER : CIMB Bank Berhad, Singapore Branch 50 Raffl es Place #09-01 Singapore Land Tower Singapore 048623 UNDERWRITER AND : CIMB Securities (Singapore) Pte. Ltd.PLACEMENT AGENT 50 Raffl es Place #19-00 Singapore Land Tower Singapore 048623
INDEPENDENT AUDITORS : Deloitte & Touche LLP AND REPORTING 6 Shenton Way ACCOUNTANTS #32-00 DBS Building Tower Two Singapore 068809 Partner-in-charge: Ong Bee Yen Certifi ed Public Accountants Singapore SOLICITORS TO THE : Rajah & Tann LLP OFFERING AND LEGAL 9 Battery Road ADVISER TO THE COMPANY #25-01 Straits Trading Building ON SINGAPORE LAWS Singapore 049910
LEGAL ADVISER TO THE : R&T Vietnam LLC COMPANY IN RESPECT OF 65 Le Loi Boulevard VIETNAM LAWS Unit 10-02 Saigon Centre District 1 Ho Chi Minh City Vietnam LEGAL ADVISER TO THE : Kamilah & Chong COMPANY IN RESPECT OF Suite 3B-16-7 Level 16 MALAYSIAN LAWS Block 3B Plaza Sentral Jalan Stesen Sentral 5 Kuala Lumpur Sentral 50470 Kuala Lumpur
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SOLICITORS TO THE ISSUE : Rodyk & Davidson LLP MANAGER AND THE 80 Raffl es Place UNDERWRITER AND #33-00 UOB Plaza 1 PLACEMENT AGENT Singapore 048624 INDEPENDENT MARKET : Converging Knowledge Pte Ltd RESEARCHER 43 B&C Tras Street Singapore 078982 PRINCIPAL BANKERS : United Overseas Bank Limited 80 Raffl es Place UOB Plaza Singapore 048624 Citibank, N.A., Singapore Branch P.O. Box 2388 Singapore 904388 RECEIVING BANK : CIMB Bank Berhad, Singapore Branch 50 Raffl es Place #09-01 Singapore Land Tower Singapore 048623
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DEFINITIONS
In this Prospectus, the accompanying Application Forms and, in relation to Electronic Applications, the instructions appearing on the screens of ATMs and IB websites of the relevant Participating Banks, unless the context otherwise requires, the following defi nitions apply throughout where the context so admits: Our Group Companies “Bridge Testing” : Bridge Testing Centre (Pte) Ltd. “Company” or “Gaylin” : Gaylin Holdings Limited, a company incorporated in the Republic of
Singapore “Gaylin International” : Gaylin International Pte Ltd “Gaylin Malaysia” : Gaylin Malaysia Sdn. Bhd. (formerly known as Gaylin Offshore (M)
Sdn Bhd) “Gaylin Power” : Gaylin Power Pte. Ltd. “Gaylin Vietnam” : Gaylin Vietnam Pte. Ltd. “Group” : Our Company and its subsidiaries following the completion of the
Restructuring Exercise Our Customers
“Acteon Group” : Intermoor Pte Ltd (formerly known as Acteon International Mooring Systems Pte Ltd) and its related companies
“Bourbon Group” : Bourbon Supply Investissements SAS and its related companies “Britoil Offshore” : Britoil Offshore Services Pte Ltd “DOF Group” : DOF Management AS, and DOF Subsea Pte. Ltd. and their related
companies “Technip Group” : Technip Far East Sdn Bhd, Technip Geoproduction (M) Sdn Bhd,
Technip Oceania Pty Ltd and Technip UK Limited and their related companies
Our Suppliers
“Diepa” : DIEPA Drahtseilwerk Dietz GmbH & Co. KG “DSR Group” : DSR Corp. and DSR Wire Corp. and their related companies “GN” : Grofsmederij Nieuwkoop B.V. “Gunnebo” : Gunnebo Industrier AB “Kiswire Group” : Kiswire Ltd and Kiswire Sdn. Bhd. and their related companies “pewag” : pewag austria GmbH “Samson Rope” : Samson Rope Technologies, Inc. “Sea-Fit” : Sea-Fit, Inc.
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“Slingmax” : Slingmax, Inc. “Technotex” : Technotex Industrial Supply B.V. “TEUFELBERGER” : TEUFELBERGER Seil Ges.m.b.H “Usha Martin” : Usha Martin Singapore Pte Ltd “Wirop” : Wirop Industrial Co., Ltd “Yoke” : Yoke Industrial Corp. Other Corporations and Agencies
“Amhoist” : Amhoist Holding Pte. Ltd. “Authority” : The Monetary Authority of Singapore “CDP” : The Central Depository (Pte) Limited “CIMB” or “Issue Manager” : CIMB Bank Berhad, Singapore Branch
“CIMB Securities” or : CIMB Securities (Singapore) Pte. Ltd.“Underwriter” or “Placement Agent” “Comfort Shipping” : Comfort Shipping Pte. Ltd. “CPF” : The Central Provident Fund “Halo Wire Rope” : Halo Wire Rope, L.L.C. “Independent Market : Converging Knowledge Pte LtdResearcher” or “Converging Knowledge” “JTC” : Jurong Town Corporation “Keh Swee” : Keh Swee Investment Pte. Ltd. “OTH” : Old-Tech Holdings Pte. Ltd. (formerly known as Gaylin (USA) Pte. Ltd.)
“Pre-Offering Investors” : Rhodus, Amhoist, Comfort Shipping and Wee Seng “Rhodus” : Rhodus Capital Limited (formerly known as Rhodus Limited) “SCCS” : Securities Clearing & Computer Services (Pte) Ltd “SGX-ST” : Singapore Exchange Securities Trading Limited “Wee Seng” : Wee Seng Investments Pte. Ltd. General
“Acquisition of OTH” : The potential acquisition by our Company of the entire issued share capital of OTH pursuant to the Call Option Agreement, as described in the section entitled “Interested Person Transactions – Potential Acquisition of OTH” of this Prospectus
“Additional Shares” : Up to 22,000,000 new Shares (representing up to 20.0% of the New Shares) to be issued upon the exercise of the Over-allotment Option
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“Application Forms” : The offi cial printed application forms to be used for the purpose of the Offering and which form part of this Prospectus
“Application List” : The list of applications for subscription of the New Shares “Articles” or “Articles of : Articles of Association of the Company Association” “associates” : (a) in relation to an entity, means:
(i) in a case where the entity is a substantial shareholder, controlling shareholder, substantial interest-holder or controlling interest-holder, its related corporation, related entity, associated company or associated entity; or
(ii) in any other case, (A) a director or an equivalent person, (B) where the entity is a corporation, a controlling shareholder of the entity, (C) where the entity is not a corporation, a controlling interest-holder of the entity, (D) a subsidiary, a subsidiary entity, an associated company, or an associated entity, or (E) a subsidiary, a subsidiary entity, an associated company, or an associated entity, of the controlling shareholder or controlling interest-holder, as the case may be, of the entity; and
(b) in relation to an individual, means:
(i) his immediate family (being spouse, child, adopted child, step-child, sibling and parent);
(ii) a trustee of any trust of which the individual or any member of the individual’s immediate family is (A) a beneficiary or, (B) where the trust is a discretionary trust, a discretionary object, when the trustee acts in that capacity; or
(iii) any corporation in which he and his immediate family (whether directly or indirectly) have interests in voting shares of an aggregate of not less than 30.0% of the total votes attached to all voting shares
“ATM” : Automated teller machines of a Participating Bank “Audit Committee” : The audit committee of our Company “Board” : Board of Directors of our Company “business trust” : Has the same meaning as in Section 2 of the Business Trusts Act
2004, Chapter 31A of Singapore “Call Option” : The option to acquire the OTH Equity pursuant to the Call Option
Agreement, as described in the section entitled “Interested Person Transactions – Potential Acquisition of OTH” of this Prospectus
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“Call Option Agreement” : The agreement dated 26 September 2012 entered into between our Company and our controlling shareholder, Keh Swee (as from time to time varied, supplemented or amended), pursuant to which our Company was granted the Call Option, as described in the section entitled “Interested Person Transactions – Potential Acquisition of OTH” of this Prospectus
“CAO” : Chief Administrative Offi cer “CEO” : Chief Executive Offi cer “CFO” : Chief Financial Offi cer “Companies Act” : The Companies Act (Chapter 50) of Singapore, as amended, modifi ed
or supplemented from time to time “Controlling Shareholder” : In relation to a corporation, means:
(a) a person who has an interest in the voting shares of a corporation and who exercises control over the corporation;
(b) a person who has an interest of 15.0% or more of the aggregate of the nominal amount of all the voting shares in a corporation, unless he does not exercise control over the corporation; or
(c) a person who in fact exercises control over a corporation “COO” : Chief Operating Offi cer “Directors” : The directors of our Company as at the date of this Prospectus “Electronic Applications” : Applications for the Offer Shares made through an ATM or the IB
website of one of the relevant Participating Banks in accordance with the terms and conditions of this Prospectus
“entity” : Has the same meaning as in Section 2 of the Securities and Futures
Act “EPS” : Earnings per Share “ESOS” : Gaylin Employee Share Option Scheme “Executive Directors” : The executive directors of our Company as at the date of this
Prospectus “Executive Officers” : The executive officers of our Company as at the date of this
Prospectus “Finance Director” : The fi nance director of our Company “FY” : Financial year ended or, as the case may be, ending 31 March “GST” : Goods and services tax “IB” : Internet Banking
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“Independent Directors” : The independent non-executive directors of our Company as at the date of this Prospectus
“Independent Non-Executive : The independent non-executive chairman of our BoardChairman” “Industry Report” : The industry report titled “The Offshore Oil and Gas Industry –
Singapore” by the Independent Market Researcher set out in Appendix E to this Prospectus
“Issue Price” : S$0.35 for each New Share “Latest Practicable Date” : 14 September 2012, being the latest practicable date prior to the
printing of this Prospectus
“Listing Date” : The date on which our Shares commence trading on the SGX-ST
“Listing Manual” : The Listing Manual of the SGX-ST, as amended, modified or supplemented from time to time
“Market Day” : A day on which the SGX-ST is open for trading in securities “NAV” : Net asset value “New Shares” : The 110,000,000 new Shares for which our Company invites
applications to subscribe for pursuant to the Offering, subject to and on the terms and conditions of this Prospectus
“Non-Executive Director” : A non-executive director of our Company “NTA” : Net tangible assets “O&G” : Oil and gas “Offer” : The offer by our Company of the Offer Shares to the public in
Singapore for subscription at the Issue Price subject to and on the terms and conditions of this Prospectus
“Offer Shares” : The 5,000,000 New Shares which are the subject of the Offer “Offering” : The Offer and the Placement “Option Shares” : The new Shares which may be issued upon the exercise of the
options to be granted under the ESOS “OTH Equity” : The entire issued and paid up share capital of OTH
“Over-allotment Option” : The over-allotment option granted by our Company to CIMB Securities which is exercisable by CIMB Securities in whole or in part, within 30 days from the Listing Date to subscribe for up to an aggregate of 22,000,000 Shares (representing not more than 20.0% of the New Shares) at the Issue Price, solely for the purpose of covering over-allotments (if any) made in connection with the Offering (Please refer to the section entitled “The Offering – Over-allotment Option” and “The Offering – Stabilisation” of this Prospectus for more information). Unless indicated otherwise, all information in this Prospectus assumes that CIMB Securities does not exercise the Over-allotment Option
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“MOM” : Ministry of Manpower
“Participating Banks” : United Overseas Bank Limited (“UOB”) and its subsidiary, Far Eastern Bank Limited (collectively, the “UOB Group”), DBS Bank Ltd (including POSB) (“DBS Bank”) and Oversea-Chinese Banking Corporation Limited (“OCBC”)
“PAT” : Profi t after tax “PBT” : Profi t before tax “PER” : Price earnings ratio “Period under Review” : The period comprising FY2010, FY2011 and FY2012 “Placement” : The placement by the Placement Agent on behalf of our Company of
the Placement Shares at the Issue Price subject to and on the terms and conditions of this Prospectus
“Placement Shares” : The 105,000,000 New Shares which are the subject of the Placement “PRC” : The People’s Republic of China, which for the purposes of this
Prospectus and for geographical reference only, excludes Hong Kong and Macau Special Administrative Regions of the People’s Republic of China, and Taiwan
“Regulation S” : Regulation S under the US Securities Act “Restructuring Exercise” : The corporate restructuring exercise undertaken prior to the Offering,
as described in the section entitled “Restructuring Exercise” in this Prospectus
“Securities Account” : The securities account maintained by a Depositor with CDP and does
not include a securities sub-account “Securities and Futures Act” : The Securities and Futures Act (Chapter 289) of Singapore, as or “SFA” amended, modifi ed or supplemented from time to time “Service Agreements” : The service agreements entered into between our Company and
our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and our CAO, Mr Steven Teo, as described in the section entitled “Service Agreements” in this Prospectus
“SGXNET” : Singapore Exchange Network, a system network used by listed
companies in sending information and announcements to the SGX-ST or any other system networks prescribed by the SGX-ST
“Share Lending Agreement” : The share lending agreement dated 17 October 2012 entered into between Keh Swee and CIMB Securities in connection with the Over-allotment Option
“Share Registrar” : Boardroom Corporate & Advisory Services Pte. Ltd. “Share Split” : The sub-division of every one (1) ordinary share in the share capital of
the Company into 100 ordinary shares
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“Shareholders” : Registered holders of Shares, except where the registered holder is CDP, the term “Shareholders” shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares
“Shares” : Ordinary shares in the capital of our Company “Singapore Take-over Code” : The Singapore Code on Take-overs and Mergers “Substantial Shareholder” : A person who has an interest or interests in Shares, the nominal
amount of which is not less than fi ve per cent. (5.0%) of the aggregate of the nominal amount of all the voting shares of our Company
“UK” : United Kingdom “US Securities Act” : The US Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder
“USA” or “US” : The United States of America “Vietnam” : The Socialist Republic of Vietnam Currencies, Units and Others
“EUR” : Euro Dollars “ft” : Foot “m” : Metre “mm” : Millimetre “RM” or “Ringgit” : Malaysian Ringgit “sq ft” : Square feet “sq m” : Square metres “US$” : United States Dollars “VND” : Vietnamese Dong “$” or “S$” and “cents” : Singapore Dollars and Cents respectively “%” or “per cent.” : Per centum
For the purpose of this Prospectus, the following persons named in the second column below are also known by the names set out in the fi rst column:
Name used in this : Name in National Registration Identity CardProspectus (NRIC)/Passport
Any reference in this Prospectus, the Application Forms and Electronic Applications to any statute or enactment is a reference to that statute or enactment for the time being amended or re-enacted. Any word defi ned under the Companies Act, the Securities and Futures Act, or any statutory modifi cation thereof and used in this Prospectus, the Application Forms and Electronic Applications shall, where applicable, have the meaning assigned to it under the Companies Act, the Securities and Futures Act or such statutory modifi cation, as the case may be.
Any reference in this Prospectus, the Application Forms and Electronic Applications to Shares being allotted to an applicant includes allotment to CDP for the account of that applicant.
Any reference to a time of day in this Prospectus, the Application Forms and Electronic Applications shall be a reference to Singapore time unless otherwise stated.
The expressions “the Group”, “we”, “us”, “our”, “ourselves”, or other grammatical variations thereof in this Prospectus shall, unless otherwise stated, mean our Company, our Group or our subsidiaries as the context requires.
The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.
The terms “associated company”, “associated entity”, “controlling interest-holder”, “related corporation”, “related entity”, “subsidiary”, “subsidiary entity” and “substantial interest-holder” shall have the same meanings ascribed to them respectively in the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.
Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include corporations.
Any discrepancies between the amounts listed and the totals thereof in tables included herein are due to rounding. Accordingly, fi gures shown as totals in certain tables may not be an arithmetic aggregation of the fi gures which precede them.
Any information on our website or any website directly or indirectly linked to such website does not form part of this Prospectus and should not be relied on.
Unless indicated otherwise, all information in this Prospectus assumes that CIMB Securities does not exercise the Over-allotment Option, and does not take into account any changes in shareholding that may arise as a result of any Shares lent or re-delivered pursuant to the Share Lending Agreement described in the section entitled “Plan of Distribution – Share Lending” in this Prospectus.
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GLOSSARY OF TECHNICAL TERMS
To facilitate better understanding of the business of our Group, the following glossary contains an explanation and description of certain terms and abbreviations used in this Prospectus in connection with our Group. The terms and abbreviations, and their assigned meanings may not correspond to standard industry or common meanings, as the case may be, or usage of these terms. “cable” : A very strong thick rope made of twisted hemp or steel wire “CR socket” : A socket which connects a chain and a steel wire system “fi tting” : Any functional accessory attached to a wire rope, chain or textile sling “grade” : A measure of the tonnage capacity (strength) of connecting links. For
example, Grade 100 has a higher tonnage capacity than Grade 80 “grommet” : A ring formed by twisting on itself a single strand of an unlaid rope “IMCA M 179” : A guidance prepared for the International Marine Contractors Association
(IMCA) on the use of cable laid slings and grommets “ISO 9001:2008” : A constituent part of the ISO 9000 series which specifi es the requirements
for a quality management system “ISO 9002” : A constituent part of the ISO 9000 series which specifi es the model for
quality assurance in production, installation and servicing “load cell” : A device that is used to convert a force into an electrical signal “shackle” : A U-shaped bar of which the open end can be passed through chain links
and closed with a bar “sheave” : A wheel having a groove in the rim for a rope to work in, and set in a block,
mast, or the like; the wheel of a pulley “sling” : A loop of rope, or a rope or chain with hooks, for suspending a barrel, bale,
or other heavy object, in hoisting or lowering “snatch-block” : A pulley-block that can be opened to receive the bight of a rope “socket” : A generic name for a type of wire rope fi tting “splicing” : (a) making a loop or eye in the end of a rope by tucking the ends of the
strands back into the main body of the rope; or
(b) formation of loops or eyes in a rope by means of mechanical attachments pressed onto the rope; or
(c) joining of two (2) rope ends so as to form a long or short splice in two (2) pieces of rope
“spreader bar” : A lifting device to allow a load to be lifted in a stable form “synthetic rope” : Consists of several strands, made of synthetic materials such as nylon,
polyester and polypropylene “water load bag” : A type of load used for providing a load in place of dead weights for load
testing
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“winch” : A lifting device consisting of a horizontal cylinder turned by a crank on which a cable or rope winds
“wire rope” : Consists of several strands, made of metal wires, laid or twisted together like
a helix “WLL” : Working load limit. The maximum load that lifting equipment is certifi ed to
withstand under normal use and in a given confi guration
All statements contained in this Prospectus, statements made in press releases and oral statements that may be made by us or our Directors, Executive Offi cers or employees acting on our behalf, that are not statements of historical fact, constitute ‘forward-looking statements’. You can identify some of these statements by forward-looking terms such as ‘expect’, ‘believe’, ‘plan’, ‘estimate’, ‘forecast’, ‘project’, ‘future’, ‘intend’, ‘probable’, ‘possible’, ‘anticipate’, ‘may’, ‘will’, ‘would’, and ‘could’ or similar words. However, you should note that these words are not the exclusive means of identifying forward-looking statements. All statements regarding our expected fi nancial position, business strategy, plans and prospects are forward-looking statements.
These forward-looking statements, including without limitation, statements as to:
(a) our revenue and profi tability;
(b) expected growth in demand;
(c) expected industry trends;
(d) anticipated expansion plans; and
(e) other matters discussed in this Prospectus regarding matters that are not historical fact,
are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, inter alia:
(i) changes in political, social and economic conditions and the regulatory environment in Singapore, Malaysia, Vietnam and other countries in which we conduct business and, in general, globally and regionally;
(ii) fl uctuations in currency exchange rates;
(iii) our anticipated growth strategies and expected internal growth;
(iv) changes in the availability and prices of raw materials and goods which we require to operate our business;
(v) changes in customer preferences;
(vi) changes in competitive conditions and our ability to compete under such conditions;
(vii) changes in our future capital needs and the availability of fi nancing and capital to fund such needs;
(viii) other factors beyond our control; and
(ix) other factors that are described under the section entitled “Risk Factors” of this Prospectus.
Some of these risk factors are discussed in more detail under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Position and Results of Operations” of this Prospectus.
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All forward-looking statements made by or attributable to us, or persons acting on our behalf contained in this Prospectus are expressly qualifi ed in their entirety by such factors. Given the risks and uncertainties that may cause our actual future results, performance or achievements to be materially different than expected, expressed or implied by the forward-looking statements in this Prospectus, undue reliance must not be placed on those statements which apply only as at the date of this Prospectus. Neither our Company, the Issue Manager, the Underwriter and Placement Agent, nor any other person represents or warrants that our Group’s actual future results, performance or achievements will be as discussed in those statements.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us. We, the Issue Manager and the Underwriter and Placement Agent, disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to refl ect future developments, events or circumstances, even if new information becomes available or other events occur in the future. We are, however, subject to the provisions of the SFA and the Listing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of the SFA, if after the Prospectus is registered but before the close of the Offering, our Company becomes aware of (a) a false or misleading statement or matter in the Prospectus; (b) an omission from the Prospectus of any information that should have been included in it under Section 243 of the SFA; or (c) a new circumstance that has arisen since the Prospectus was lodged with the Authority and would have been required by Section 243 of the SFA to be included in the Prospectus, if it had arisen before the Prospectus was lodged and that is materially adverse from the point of view of an investor, our Company may lodge a supplementary or replacement prospectus with the Authority.
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SELLING RESTRICTIONS
This Prospectus does not constitute an offer, solicitation or invitation to subscribe for our Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will be taken under the requirements of the legislation or regulations of, or of the legal or regulatory authorities of, any jurisdiction, except for the lodgement and/or registration of this Prospectus in Singapore in order to permit a public offering of our Shares and the public distribution of this Prospectus in Singapore. The distribution of this Prospectus or any offering material and the offering, sale or delivery of our Shares in certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may come into possession of this Prospectus are required by our Company, the Issue Manager and the Underwriter and Placement Agent to inform themselves about, and to observe and comply with, any such restrictions at their own expense and without liability to our Company, the Issue Manager and the Underwriter and Placement Agent.
Hong Kong
The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. Please note that (1) shares may not be offered or sold in Hong Kong by means of this document or any other document other than to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571) (“SFO”) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” as defi ned in the Companies Ordinance of Hong Kong (Cap. 32) (“CO”) or which do not constitute an offer or invitation to the public for the purposes of the CO or the SFO, and (2) no person shall issue, or possess for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to shares which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to such professional investors.
USA
Each purchaser of our Shares in the Offering outside the USA pursuant to Regulation S, by accepting delivery of this Prospectus and those Shares, will be deemed to have represented, agreed and acknowledged that:
(1) Such purchaser is, or at the time our Shares in the Offering are purchased pursuant to Regulation S will be, the benefi cial owner of such shares and (a) it is acquiring the New Shares in an offshore transaction in accordance with Regulation S and (b) it is not our affi liate or a person acting on our behalf or on behalf of our affi liate.
(2) At the time of its acquisition of Shares, such purchaser is not resident in the USA.
(3) With respect to sales of Shares, either:
(a) at the time the buy order for the Shares was originated, the purchaser was outside the USA or the purchaser of Shares and any person acting on its behalf reasonably believed that the purchaser was outside the USA; or
(b) the transaction in the Shares was executed in, on or through the facilities of a designated offshore securities market as defi ned in Regulation S (including, for the avoidance of doubt, a bona fi de sale on the SGX-ST).
(4) Such purchaser of Shares is not an affi liate of our Company or acting on our behalf or on behalf of any such affi liate.
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(5) Such purchaser understands that our Shares in the Offering have not been and will not be registered under the US Securities Act or with any securities regulatory authority of any state or jurisdiction in the USA and that it will not offer, sell, pledge or otherwise transfer such shares unless our Shares are registered under the US Securities Act or an exemption from the registration requirements of the US Securities Act is available, in each case in accordance with any applicable laws of any state or territory of the USA and any foreign jurisdiction.
(6) Any offer, sale, pledge or other transfer made other than in compliance with the above-stated restrictions in respect of our Shares shall not be recognised by us.
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DETAILS OF THE OFFERING
LISTING ON THE SGX-ST
We have applied to the SGX-ST for permission to deal in, and for quotation of, all our Shares already issued and the New Shares, the Option Shares as well as the Additional Shares on the Offi cial List of the SGX-ST. Such permission will be granted when our Company has been admitted to the Offi cial List of the SGX-ST. Acceptance of applications for the New Shares will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in, and for the quotation of, all our existing issued Shares, the New Shares, the Option Shares and the Additional Shares. If the said permission is not granted or for any other reasons (including where the Authority issues a stop order (as defi ned below), monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefi t arising therefrom, and you will not have any claim against our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent.
In connection with the Offering, our Company has granted CIMB Securities an Over-allotment Option to subscribe for up to an aggregate of 22,000,000 Additional Shares (which in aggregate represents no more than 20.0% of the New Shares) at the Issue Price exercisable in full or in part within 30 days from the Listing Date solely for the purpose of covering over-allotments (if any) made in connection with the Offering. CIMB Securities may, in its discretion but subject to compliance with applicable laws and regulations in Singapore, over-allot or effect transactions which stabilise or maintain the market price of our Shares. Such stabilisation activities, if commenced, may be discontinued by CIMB Securities at any time at CIMB Securities’ discretion in accordance with the laws of Singapore and shall not be effected after the earlier of (a) the date falling 30 days from the Listing Date; or (b) the date when the over-allotment of Shares which are subject to the Over-allotment Option has been fully covered (either through the purchase of our Shares on the SGX-ST or the exercise of the Over-allotment Option by CIMB Securities, or through both).
The SGX-ST assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Prospectus. Admission to the Offi cial List of the SGX-ST is not to be taken as an indication of the merits of the Offering, our Company, our subsidiaries, our existing Shares, the New Shares, the Option Shares or the Additional Shares.
A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our existing Shares, the New Shares, the Option Shares or the Additional Shares, as the case may be, being offered or in respect of which an offer is made for investment. We have not lodged or registered this Prospectus in any other jurisdiction. No Shares shall be allotted on the basis of this Prospectus later than six (6) months after the date of registration of this Prospectus by the Authority.
Our Company is subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, if after this Prospectus is registered but before the close of the Offering, we become aware of:
(a) a false or misleading statement or matter in this Prospectus;
(b) an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or
(c) a new circumstance that has arisen since this Prospectus was lodged with the Authority which would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it had arisen before this Prospectus was lodged,
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that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act.
In the event that a supplementary or replacement prospectus is lodged with the Authority, the Offering shall be kept open for at least 14 days after the lodgement of such supplementary or replacement prospectus.
Where prior to the lodgement of the supplementary or replacement prospectus, applications have been made under this Prospectus to subscribe for the New Shares and:
(a) where the New Shares have not been issued to the applicants, our Company shall:
(i) within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of the lodgement of the supplementary or replacement prospectus, give the applicant notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to withdraw their applications; and take all reasonable steps to make available within a reasonable period, the supplementary or replacement prospectus, as the case may be, to the applicants who have indicated that they wish to obtain, or who have arranged to receive, a copy of the supplementary or replacement prospectus; or
(ii) within seven (7) days from the date of lodgement of the supplementary or replacement prospectus, give the applicants a copy of the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to withdraw their applications; or
(iii) treat the applications as withdrawn and cancelled, in which case the applications shall be deemed to have been withdrawn and cancelled, and our Company shall, within seven (7) days from the date of lodgement of the supplementary or replacement prospectus, return to the applicants all monies which they have paid on account of any application, without interest or any share of revenue or other benefi t arising therefrom and at the applicants’ own risk and the applicants will not have any claim against our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent; or
(b) where the New Shares have been issued to the applicants but trading has not commenced, our Company shall either:
(i) within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of lodgement of the supplementary or replacement prospectus, give the applicants notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to return to our Company the New Shares which they do not wish to retain title in and take all reasonable steps to make available within a reasonable period the supplementary or replacement prospectus, as the case may be, to the applicants who have indicated that they wish to obtain, or who have arranged to receive, a copy of the supplementary or replacement prospectus; or
(ii) within seven (7) days from the date of lodgement of the supplementary or replacement prospectus, give the applicants a copy of the supplementary or replacement prospectus, as the case may be, and provide the applicants with an option to return to our Company the New Shares, which they do not wish to retain title in; or
(iii) treat the issue of the New Shares as void, in which case the issue shall be deemed void and our Company shall within seven (7) days from the date of lodgement of the supplementary or replacement prospectus, return all monies paid in respect of any application, without interest or a share of revenue or benefi t arising therefrom at the applicant’s own risk and the applicant will not have any claims whatsoever against our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent.
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An applicant who wishes to exercise his option under the above paragraphs (a)(i) and (a)(ii) to withdraw his application shall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notify our Company of this, whereupon our Company shall, within seven (7) days from the receipt of such notifi cation, pay to him all monies paid by him on account of his application for those New Shares without interest or a share of revenue or benefi t arising therefrom, at the applicant’s risk and the applicant will not have any claims whatsoever against our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent.
An applicant who wishes to exercise his option under the above paragraphs (b)(i) and b(ii) to return the New Shares issued to him shall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notify our Company of this and return all documents, if any, purporting to be evidence of title to those New Shares, to our Company, whereupon our Company shall, within seven (7) days from the receipt of such notifi cation and documents, if any, pay to him all monies paid by him for those New Shares, without interest or a share of revenue or benefi t arising therefrom, at the applicant’s risk and the applicant will not have any claims whatsoever against our Company, our Directors,the Issue Manager and/or the Underwriter and Placement Agent and the issue of those Shares shall be deemed to be void.
Pursuant to Section 242 of the Securities and Futures Act, the Authority may, in certain circumstances issue a stop order (the “Stop Order”) to our Company, directing that no Shares or no further Shares to which this Prospectus relates, be allotted or issued. Such circumstances will include a situation where this Prospectus (i) contains a statement or matter, which in the opinion of the Authority is false or misleading, (ii) omits any information that should be included in accordance with Section 243 of the Securities and Futures Act, (iii) does not, in the opinion of the Authority comply with the requirements of the Securities and Futures Act or (iv) if the Authority is of the opinion that it is in the public interest to do so.
Where applications to subscribe for the New Shares to which this Prospectus relates have been made prior to the Stop Order, and:
(a) where the New Shares have not been issued to the applicants, the applications shall be deemed to have been withdrawn and cancelled and our Company shall within 14 days from the date of the Stop Order, pay to the applicants all monies the applicants have paid on account of their applications for the New Shares; or
(b) where the New Shares have been issued to the applicants, the Securities and Futures Act provides that the issue of the New Shares shall be deemed to be void and our Company is required to, within 14 days from the date of the Stop Order, pay to the applicants all monies paid by them for the New Shares.
Where monies are to be returned to applicants for the New Shares, it shall be paid to the applicants without interest or share of revenue or other benefi t arising therefrom, and at the applicant’s own risk and applicants will not have any claim against our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent.
This Prospectus has been seen and approved by our Directors, and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confi rm, having made all reasonable enquiries, that to the best of their knowledge and belief, this Prospectus constitutes full and true disclosure of all material facts about the Offering, the Listing and our Group, and our Directors are not aware of any facts the omission of which would make any statement in this Prospectus misleading. Where information in this Prospectus has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of our Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Prospectus in its proper form and context. The New Shares are offered for subscription solely on the basis of the Offering contained and the representation made in this Prospectus.
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Neither our Company, our Directors, the Issue Manager, the Underwriter and Placement Agent nor any other parties involved in the Offering is making any representation to any person regarding the legality of an investment in our Shares by such person under any investment or other laws or regulations. No information in this Prospectus should be considered as being business, legal or tax advice regarding an investment in our Shares. Each prospective investor should consult his own professional or other advisers for business, legal or tax advice regarding an investment in our Shares.
No person has been or is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Offering and, if given or made, such information or representation must not be relied upon as having been authorised by our Company, our Directors, the Issue Manager and/or the Underwriter and Placement Agent. Neither the delivery of this Prospectus and the Application Forms nor any document relating to the Offering nor the Offering shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or in the statements of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur and are material or are required to be disclosed by the law, the SGX-ST and/or any other regulatory or supervisory body or agency, we will make an announcement of the same to the SGX-ST and the public and/or the Authority and will comply with the requirements of the Securities and Futures Act and/or any other requirements of the SGX-ST and/or the Authority. If required under the SFA, we will lodge a supplementary or replacement prospectus with the Authority and will make the same available to the public after lodgement. All applicants should take note of any such announcement and, upon release of such an announcement or supplementary or replacement prospectus, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies.
This Prospectus has been prepared solely for the purpose of the Offering and may not be relied upon by any persons other than the applicants in connection with their application for the New Shares or for any other purpose.
This Prospectus does not constitute an offer, solicitation or invitation to subscribe for New Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation.
Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, from:
CIMB Securities (Singapore) Pte. Ltd.CIMB Investment Centre
50 Raffl es Place#01-01 Singapore Land Tower
Singapore 048623
and members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on:
(a) the SGX-ST website http://www.sgx.com; and
(b) the Authority’s OPERA website http://masnet.mas.gov.sg/opera/sdrprosp.nsf.
The Application List will open immediately upon the registration of the Prospectus and will remain open until 10.00 a.m. on 23 October 2012 or for such further period or periods as our Directors may, in consultation with the Issue Manager and the Underwriter and Placement Agent, in their absolute discretion decide, subject to any limitation under all applicable laws. In the event a supplementary prospectus or replacement prospectus is lodged with the Authority, the Application List will remain open for at least 14 days after the lodgement of the supplementary or replacement prospectus.
Details of the procedure for application for the New Shares are set out in Appendix D of this Prospectus.
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INDICATIVE TIMETABLE FOR LISTING
An indicative timetable for the Offering and trading of our Shares is set out below for reference of applicants:
Indicative date/time Event 10.00 a.m. on 23 October 2012 Close of Application List 24 October 2012 Balloting of applications, if necessary (in the event of
over-subscription for the Offer Shares) 9.00 a.m. on 25 October 2012 Commence trading on a “ready” basis 31 October 2012 Settlement date for all trades done on a “ready” basis
The above timetable is only indicative as it assumes that the date of closing of the Application List is 23 October 2012, the date of admission of our Company to the Offi cial List of the SGX-ST is 25 October 2012, the SGX-ST’s shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 25 October 2012. The actual date on which our Shares will commence trading on a “ready” basis will be announced when it is confi rmed by the SGX-ST.
The above timetable and procedure may be subject to such modifi cations as the SGX-ST may in its discretion decide, including the decision to permit commencement of trading on a “ready” basis and the commencement of such trading.
Investors should consult the SGX-ST announcement on the “ready” trading date on the Internet (at the SGX-ST website http://www.sgx.com) or the newspapers, or check with their broker on the date on which trading on a “ready” basis will commence.
In the event of any changes in the closure of the Application List or the time period during which the Offering is open, we will publicly announce the same:
(a) through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com; and
(b) in a local English newspaper(s).
We will publicly announce the level of subscription and the results of the distribution of the New Shares pursuant to the Offering, as soon as it is practicable after the close of the Application List through channels in (a) and (b) above.
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PLAN OF DISTRIBUTION
The Offering
The Offering is for 110,000,000 New Shares offered in Singapore by way of a public offer and placement comprising 5,000,000 Offer Shares and 105,000,000 Placement Shares respectively.
The Issue Price is determined by us, in consultation with the Issue Manager and the Underwriter and Placement Agent based on, inter alia, market conditions and estimated market demand for our Shares determined through a book-building process. The Issue Price is the same for each New Share and is payable in full on application.
Investors may apply to subscribe for any number of New Shares in integral multiples of 1,000 Shares. In order to ensure a reasonable spread of shareholders, we have the absolute discretion to prescribe a limit to the number of New Shares to be allotted to any single applicant and/or to allot New Shares above or under such prescribed limit as we shall deem fi t.
Offer Shares
The Offer Shares are made available to the members of the public in Singapore for subscription at the Issue Price. Members of the public may apply for the Offer Shares by way of printed Application Forms or by Electronic Application as described under “Terms, Conditions and Procedures for Application and Acceptance” as set out in Appendix D of this Prospectus.
In the event of an under-subscription for the Offer Shares as at the close of the Application List, that number of Offer Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List.
In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or the Placement Shares are fully subscribed for or over-subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by our Directors after consultation with the Issue Manager and the Underwriter and Placement Agent and approved by the SGX-ST.
Pursuant to the Management Agreement signed between our Company and the Issue Manager dated 17 October 2012, our Company appointed CIMB to manage the Offering. Pursuant to the Underwriting and Placement Agreement signed between our Company and the Underwriter and Placement Agent dated 17 October 2012, our Company appointed CIMB Securities as the Underwriter to underwrite our Offer Shares. CIMB Securities may, at its absolute discretion, appoint one (1) or more sub-underwriters for the Offer Shares.
Placement Shares
Application for the Placement Shares is reserved for placement to members of the public and institutional investors in Singapore. Application for the Placement Shares may only be made by way of the printed Application Form. The terms and conditions and procedures for application and acceptance are described in Appendix D to this Prospectus.
Pursuant to the terms and conditions in the Underwriting and Placement Agreement, CIMB Securities has agreed to subscribe for and/or procure subscribers for the Placement Shares at the Issue Price. CIMB Securities may, at its absolute discretion, appoint one (1) or more sub-placement agents for the Placement Shares.
In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number of Placement Shares not subscribed for shall be made available to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List.
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Subscribers for Placement Shares may be required to pay brokerage of up to 1.0% of the Issue Price as well as stamp duties, GST and any other similar charges, where applicable, to the Placement Agent or any sub-placement agent that may be appointed by the Placement Agent.
Over-allotment and Stabilisation
In connection with this Offering, our Company has granted CIMB Securities an Over-allotment Option, exercisable in whole or in part within 30 days from the Listing Date, to subscribe for up to an aggregate of 22,000,000 Additional Shares (which in aggregate represents not more than 20.0% of the New Shares) at the Issue Price solely to cover the over-allotment (if any), made in connection with the Offering. In the event that the Over-allotment Option is exercised, we will pay a commission of 3.25% of the Issue Price for each Additional Share subscribed by CIMB Securities.
In connection with this Offering, CIMB Securities may, in its capacity as stabilising manager and in its discretion but subject always to applicable laws and regulations in Singapore, over-allot or effect transactions which stabilise or maintain the market price of the Shares at levels which might not otherwise prevail in the open market. Such transactions may be effected on the SGX-ST and in all jurisdictions where it is permissible to do so, in each case, in compliance with all applicable laws and regulatory requirements including the SFA and any regulation thereunder. Such stabilisation activities, if commenced, may be discontinued by CIMB Securities at any time at CIMB Securities’ discretion in accordance with the laws of Singapore and shall not be effected after the earlier of (a) the date falling 30 days from the Listing Date; or (b) the date when the over-allotment of Shares which are subject to the Over-allotment Option has been fully covered (either through the purchase of our Shares on the SGX-ST or the exercise of the Over-allotment Option by CIMB Securities, or through both).
We will publicly announce the total number of Additional Shares which is subject to the Over-allotment Option, through a SGXNET announcement to be posted on the internet at the SGX-ST website http://www.sgx.com, no later than the day immediately following the close of the Application List.
Neither our Company, CIMB nor CIMB Securities makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our Shares. In addition, neither our Company, CIMB nor CIMB Securities makes any representation that CIMB Securities or any person acting for it will engage in such transaction(s), or that such transaction(s), once commenced, will not be discontinued without notice (unless such notice is required by law). CIMB Securities, being the stabilising manager effecting the stabilising activities, will be required to make an announcement through the SGX-ST on the connection of stabilising activities and the amount of the Over-allotment Option that has been exercised.
Share Lending
In connection with the over-allotment and stabilisation, CIMB Securities has entered into the Share Lending Agreement, pursuant to which CIMB Securities may borrow up to 22,000,000 Shares from Keh Swee before the Listing Date for the purpose of effecting the over-allotment or price-stabilisation activities in connection with this Offering, if any.
Persons intending to subscribe for the New Shares in the Offering
None of our Directors (including our Independent Non-Executive Chairman and our Independent Directors) or Substantial Shareholders intends to subscribe for any of the New Shares in the Offering. Should any of our Directors (including our Independent Non-Executive Chairman and Independent Directors) or Substantial Shareholders subscribe for any of the New Shares in the Offering, we will make the necessary announcements as required under the Listing Manual.
None of the members of our Company’s management or our employees intends to subscribe for more than 5% of the New Shares in the Offering.
To the best of our knowledge and belief, we are not aware of any person or potential investor who intends to subscribe for more than 5% of the New Shares.
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However, through a book-building process to assess market demand for our New Shares, there may be persons who may indicate their interests to subscribe for more than 5% of the New Shares. If such persons were to make an application for more than 5% of the New Shares pursuant to the Offering and subsequently be allotted such number of New Shares, we will make the necessary announcements at an appropriate time. The fi nal allotment of New Shares will be in accordance with the shareholding spread and distribution guidelines as set out in Rule 210 of the Listing Manual.
No Shares shall be allotted and issued on the basis of this Prospectus later than six (6) months after the date of registration of this Prospectus.
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PROSPECTUS SUMMARY
The information contained in this summary is derived from, and should be read in conjunction with, the full text of this Prospectus. Because it is a summary, it does not contain all of the information that prospective investors should consider before investing in our Shares. Prospective investors should read this entire Prospectus carefully, especially the matters set out in the section entitled “Risk Factors” in this Prospectus and our fi nancial statements and related notes before deciding on whether or not to invest in our Shares.
Under no circumstances should any information in this Prospectus Summary be regarded as a representation or warranty by our Company, the Issue Manager and/or the Underwriter and Placement Agent that such information will not change.
OUR GROUP
Our Company was incorporated in the Republic of Singapore on 25 February 2010 under the Companies Act as a private limited company, under the name of “Gaylin Holdings Pte. Ltd.”. Pursuant to the Restructuring Exercise, which was completed on 30 September 2011, our Company became the holding company of our subsidiaries, namely Gaylin International, Gaylin Vietnam, Gaylin Malaysia, Gaylin Power and Bridge Testing. On 25 September 2012, our name was changed to “Gaylin Holdings Limited” in connection with our Company’s conversion to a public company limited by shares. Please refer to the section entitled “Restructuring Exercise” in this Prospectus for further details.
OUR BUSINESS
We are one of the largest Singapore-based multi-disciplinary specialist providers of rigging and lifting solutions to the global offshore O&G industry.
We supply and manufacture rigging and lifting equipment. We also provide a wide range of engineering services to our customers who require customisation or manufacturing of products specifi c to their requirements. Such engineering services include the design, fabrication, testing and certifi cation of rigging and lifting equipment.
Our rigging and lifting equipment comprises a wide range of products such as heavy lift slings and grommets, wire rope slings, crane wire, mooring equipment and related fi ttings and accessories.
Our customers operate mainly in the global offshore O&G industry which demands higher precision specifi cations in our products. Due to our comprehensive range of inventory, our years of experience and our engineering capabilities, we pride ourselves in being able to respond to these needs quickly and effi ciently. This ability allows us to be a one-stop solutions provider for our customers.
In addition, as part of our value-added customer service, we supply a wide range of ship stores and equipment to ships and oil rigs.
We are primarily based in Singapore. We also have an operating subsidiary in Vietnam, and a subsidiary in Malaysia which is expected to commence operations in December 2012. Our sales and distribution markets comprise mainly Asia, Oceania, Europe, the Middle East and Africa.
Further details are set out in the sections entitled “History and Development” and “Business Overview” in this Prospectus.
COMPETITIVE STRENGTHS
We believe that our competitive strengths are:
We are one of the largest Singapore-based rigging and lifting solutions providers
We carry a comprehensive and well-stocked inventory of products, including a wide range of high quality products from various well-established brand names
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We have an experienced and committed management team with an established track record
We have developed strong relationships with our large and diversifi ed pool of customers
For more details, please refer to the section entitled “Competitive Strengths” in this Prospectus.
BUSINESS STRATEGIES AND FUTURE PLANS
Expansion of our operations into Asian or other markets through the set up of new facilities, acquisitions, joint ventures and/or strategic collaborations
Expansion of our operations into Malaysia
Expansion of our sales and marketing capabilities
For more details, please refer to the section entitled “Business Strategies and Future Plans” in this Prospectus.
SUMMARY OF OUR FINANCIAL INFORMATION
The following table represents a summary of the fi nancial highlights of our Group. The data presented in this table is derived from the sections entitled “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” and “Selected Financial Information” and the fi nancial statements and notes thereto which are included elsewhere in this Prospectus. You should read those sections and the section entitled “Management’s Discussion and Analysis of Financial Position and Results of Operations” of this Prospectus for a further explanation of the fi nancial data summarised here.
Selected items from the combined statements of comprehensive income of our Group
Audited
S$’000 FY2010 FY2011 FY2012
Revenue 68,618 70,119 71,447
Gross profi t 16,287 24,954 23,674
Profi t before income tax 8,472 16,311 15,634
Profi t for the year 6,870 13,385 12,971
Selected items from the combined statement of fi nancial position of our Group
S$’000Audited
As at 31 March 2012
Non-current assets 8,876
Non-current liabilities 22,450
Net current assets 48,536
Total equity 34,962
WHERE YOU CAN FIND US
Our registered offi ce and business address is at 7 Gul Avenue, Singapore 629651. Our telephone number is +65 6861 3288 and our facsimile number is +65 6861 5433. Our Group’s website address is www.gaylin.com. Information contained on our website does not constitute part of this Prospectus.
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THE OFFERING
Issue Size : 110,000,000 New Shares (excluding the Additional Shares) comprising:
(a) 5,000,000 Offer Shares; and
(b) 105,000,000 Placement Shares.
The New Shares, upon issue and allotment, will rank pari passu in all respects with the existing issued Shares.
Issue Price : S$0.35 for each New Share.
The Offer : The Offer comprises an offer by our Company to the public in Singapore to subscribe for 5,000,000 Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus.
In the event that any of the Offer Shares are not taken up, they will be made available to satisfy excess application for the Placement Shares.
The Placement : The Placement comprises a placement of 105,000,000 Placement
Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. In the event that any of the Placement Shares are not taken up, they will be made available to satisfy excess application for the Offer Shares.
The Placement Shares have not been and will not be registered under the US Securities Act. The New Shares are being offered and sold outside of the USA in reliance on Regulation S and other applicable laws as defi ned in and in reliance on Regulation S.
Over-allotment Option : In connection with the Offering, we have granted CIMB Securities the Over-allotment Option which is exercisable in whole or in part within 30 days of the Listing Date, to subscribe for up to 22,000,000 Shares (representing not more than 20.0% of the New Shares) at the Issue Price, solely for the purpose of covering over-allotments (if any) made in connection with the Offering. Unless indicated otherwise, all information in this Prospectus assumes that CIMB Securities does not exercise the Over-allotment Option.
Stabilisation : In connection with the Offering, CIMB Securities may, in its capacity as stabilising manager and in its discretion but subject always to applicable laws and regulations in Singapore, over-allot or effect transactions which stabilise or maintain the market prices of the Shares at levels which might not otherwise prevail in the open market. Such transactions may be effected on the SGX-ST and in all jurisdictions where it is permissible to do so, in each case, in compliance with all applicable laws and regulatory requirements including the SFA and any regulation thereunder. Such stabilisation activities, if commenced, may be discontinued by CIMB Securities at any time at CIMB Securities’ discretion in accordance with the laws of Singapore and shall not be effected after the earlier of (a) the date falling 30 days from the Listing Date, or (b) the date when the over-allotment of our Shares which are subject to the Over-allotment Option has been fully covered (either through the purchase of our Shares on the SGX-ST or the exercise of the Over-allotment Option by the CIMB Securities or through both).
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Purpose of the Offering : Our Directors believe that the listing of our Company and the quotation of our Shares on the SGX-ST will enhance the public image of our Group locally and overseas and enable us to tap the capital markets for the expansion of our business and operations.
In addition, the proceeds from our Offering will provide us with additional capital to fund our business growth. Please refer to the section entitled “Use of Proceeds and Listing Expenses” of this Prospectus for more details.
Listing Status : Prior to the Offering, there had been no public market for our Shares.
Our Shares will be quoted on the Offi cial List of the SGX-ST in Singapore Dollars, subject to admission of our Company to the Offi cial List of the SGX-ST and permission for dealing in and for quotation of our Shares being granted by the SGX-ST and the Authority not issuing a Stop Order.
Risk Factors : Investing in our Shares involves risks which are set out in the section
entitled “Risk Factors” of this Prospectus.
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RISK FACTORS
An investment in our Shares involves risks. Prospective investors should carefully consider and evaluate each of the following risk factors and all other information set forth in this Prospectus before deciding to invest in our Shares. To the best of our Directors’ knowledge and belief, all risk factors that are material to investors in making an informed judgement have been set out below.
The following describes some of the signifi cant risks known to us now that could directly or indirectly affect us and the value or trading price of our Shares. The following does not state risks unknown to us now but which could occur in future, and risks which we currently believe to be immaterial, which could turn out to be material. Should these risks occur or turn out to be material, they could materially and adversely affect our business, fi nancial condition, results of operations and prospects. If any of the following risks occurs, our business, fi nancial condition, results of operations and prospects could be materially and adversely affected, the trading price of our Shares could decline and you could lose all or part of your investment. This Prospectus also contains forward-looking statements having direct and/or indirect implications on our future performance. You should also consider the information provided below in connection with the forward-looking statements in this Prospectus and the warning regarding forward-looking statements at the beginning of this Prospectus. Our actual results may differ materially from those anticipated by those forward-looking statements due to certain factors including the risks and uncertainties faced by us, as described below and elsewhere in this Prospectus.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We are dependent on the global offshore O&G industry
A large proportion of our customers comprises companies operating in the global offshore O&G industry, including vessel (such as anchor handling tugs) and oil rig owners and operators, charterers, shipbuilders and drilling and mooring contractors. Please refer to the section entitled “General Information On Our Group – Major Customers” of this Prospectus for further details.
As such, our business and fi nancial performance are dependent on the level of activities in the exploration, development and production of oil and gas as well as capital expenditure in the global offshore O&G industry. The level of activity in the global offshore O&G industry is in turn affected by oil and gas prices and expectations of potential changes in such prices. Oil and gas prices are affected by various factors including (a) global economy and economic growth; (b) actual and perceived changes in demand and supply of oil and gas; (c) costs of exploring for, producing and delivering oil and gas; (d) economic state and political climate in major oil and gas producing regions; and (e) government policies and regulations, including energy and resources policies and environmental as well as safety regulations. However, if there is a signifi cant reduction in the level of offshore exploration activities or if there is a reduction in the demand for oil and gas, this could adversely affect our Company. In addition, government policies which impose restrictions on the activity of oil and gas companies could also reduce the activity of O&G companies, thereby affecting demand for our products in that region.
Our business, revenues and profi ts may fl uctuate with changes in oil and gas prices
A large proportion of our customers comprises companies operating in the global offshore O&G industry and their businesses are dependent upon the prices of, and demand for, oil and gas. As a result, we are also dependent on the levels of activities in oil and gas exploration, development, production and effects on oil and gas prices. We are exposed through our customers to the risk of fl uctuations in the prices of oil and gas and we cannot predict such price movements. Any prolonged reduction in oil and gas prices may discourage exploration and production activities, thereby causing a reduction in the demand for services provided by offshore oil and gas companies. As a result, a period of depressed oil prices may affect the revenue of oil and gas operators and cause them to delay the execution of a decommissioning project or the laying of new pipelines, thus affecting the quantity of wire ropes and other products required from us in support of exploration and production activities.
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The price received by our Group for our products will depend on changes in the supply of, and demand for, oil and gas in the global markets, market uncertainty and a variety of additional factors that are beyond our control, including, inter alia, the following:
(a) economic and political conditions in the countries where we operate and in other petroleum producing regions;
(b) the ability of Organisation of the Petroleum Exporting Countries (OPEC) and other petroleum
producing nations to set and maintain production levels and prices;
(c) changes in domestic and foreign government regulations; and
(d) changes in weather conditions which affect the production of oil and gas.
We are dependent on our Executive Director and CEO and key management personnel
We believe that the success and growth of our business depend to a signifi cant extent on the continued services of our Executive Director and CEO, Mr Desmond Teo. Mr Desmond Teo has been with our Group for over 30 years and is currently responsible for our Group’s overall management, formulating our Group’s strategic directions and expansion plans, developing and maintaining relationships with our customers and suppliers and overseeing our Group’s general operations. Notwithstanding that Mr Desmond Teo has entered into a service agreement with our Company for a period of three (3) years, there can be no assurance that we will be successful in retaining him or hiring qualifi ed management personnel to replace him should such a need arise. The loss of Mr Desmond Teo’s services without suitable replacement will have a material and adverse impact on our business and results of operations.
The growth and success of our Group is also dependent on our ability to retain our key management personnel, in particular, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe as well as our Executive Offi cers, such as our CAO, Mr Steven Teo. Our continued success will depend on our ability to retain the services of our key management personnel and train new employees. Moreover, the process of hiring employees with the required combination of skills and attributes may be time consuming and competitive. If our key management personnel is unable or unwilling to continue in their present positions, our business and results of operations may be materially and adversely affected.
We may be affected by inventory holding costs and a downward adjustment in the net realisable value of our inventory
In order to meet the immediate demands of our customers and to provide quality after-sales services, we have been adopting a strategy of keeping a ready inventory of rigging and lifting equipment. Our level of inventory is mainly based on the actual and anticipated demand for specifi c products from our customers in the global offshore O&G industry as well as economic considerations.
Our inventory, comprising mainly rigging and lifting equipment, accounted for approximately 78.8% of our total current assets as at 31 March 2012, and our inventory turnover days for each of FY2010, FY2011 and FY2012 were 470, 609 and 622 days respectively.
As a result of holding and managing a signifi cant level of inventory, we may incur high holding costs such as fi nancing costs, warehousing and logistic costs and insurance costs. A signifi cant increase in these costs may have a material and adverse impact on our fi nancial position.
While our inventory range and inventory levels are reviewed regularly to ensure that we have suffi cient inventories on hand to meet confi rmed and projected sales orders, we are unable to predict with certainty our customers’ demands. There is also no certainty that our customers will not reschedule the delivery of their purchases or whether there would be cancellation of orders. Please refer to the risk factor entitled “We face risks of payment delays and/or default by our customers” for more information. In the event that we are unable to convert our inventory into sales with a satisfactory profi t margin, our operating cashfl ow and fi nancial position will be materially and adversely affected.
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In addition, as our accounting policies require us to record our inventories at the lower of cost or net realisable value, any downward adjustment in the carrying value of these inventories may have a material adverse impact on our fi nancial position.
Please refer to the section entitled “Inventory Management” of this Prospectus for more information.
We may be affected by fl uctuations in the costs of the components sold by us and used in the manufacture of our products
We are subject to fl uctuations in the prices of the components procured from our suppliers and sold by us or used in the manufacture of our products. The costs of such components and products fl uctuate largely according to supply and demand conditions. In the event of any disruption or shortage of supply in the market, the costs of such components or products may increase. There can be no assurance that we will be able to pass on the increase in the costs to our customers and sustain our profi t margins. If this develops into an actual event, our results of operations and fi nancial performance may be adversely affected.
We require adequate fi nancing to fund our operations
We will require adequate funding either from internal resources or borrowings to fund the working capital of our business. Our ability to arrange adequate fi nancing on terms which are acceptable depends on a number of factors that are beyond our control, including general economic, and liquidity and political conditions, the terms on which fi nancial institutions are willing to extend credit to us and the availability of other sources of debt fi nancing or equity fi nancing. If we are unable to secure adequate fi nancing, our business and growth may be adversely affected.
We may not be able to secure new customers and maintain relationships with our existing customers
Due to the project based nature of our industry, whereby our customers’ projects typically differ in their scope and size, and their occurrence is irregular, resulting in us supplying different products to them on an irregular basis, we have to continuously and consistently secure new customers and maintain relationships with our existing customers. There is no assurance that we will be able to secure new customers and contracts. If we are unable to do so for any reason, our business and results of operations will be materially and adversely affected. While we have good working relationships with our customers, there is no assurance that they will continue to place orders with us in the future. In the event that our major customers signifi cantly reduce their orders with us or we are unable to secure continued orders from them and we are unable to secure alternative orders of comparable size, our business and results of operations will be adversely affected.
We are reliant on our major suppliers and the loss of any long-term arrangements with such major suppliers will have an impact on our performance We distribute products from leading suppliers such as Kiswire Group, Samson Rope, TEUFELBERGER and Usha Martin. These leading suppliers accounted for, in aggregate, approximately 50.9%, 47.4% and 48.2% of our total purchases in FY2010, FY2011 and FY2012 and the loss of any long-term arrangements with these suppliers will have an impact on the supply of our products.
Although we have entered into long-term arrangements with several of our major suppliers such as TEUFELBERGER and Kiswire Group, there is no assurance that we will be able to maintain the long-term arrangements with these major suppliers.
In the event we are unable to maintain such long-term arrangements with these major suppliers on favourable terms for such products or should they terminate the supply of any of their products to us, and we are not able to seek alternative sources in a timely manner and/or at reasonable prices, we may not be able to meet our customers’ demand for such products. This may have an adverse effect on our business and fi nancial performance. Please refer to the section entitled “Major Suppliers” of this Prospectus for further details.
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We may be affected by disruption in the global fi nancial markets and associated impact
Our results of operations and fi nancial condition may be materially and adversely affected by conditions in the fi nancial markets and the economies in Singapore, Asian and/or other countries or the global market.
In the second half of 2008, a disruption in the global credit markets and the general slowdown in the global economy had created turbulent and diffi cult conditions in the fi nancial markets. These conditions resulted in much economic volatility, less liquidity, tightening of credit and a lack of price transparency in certain markets.
These conditions have also resulted in the failures of a number of fi nancial institutions in the USA and unprecedented action by government authorities and central banks around the world. Any further government intervention, restrictions or regulation could have a material adverse effect on our business, results of operations, fi nancial performance and prospects. This economic situation is further exacerbated by the recent debt crises in Greece, Portugal, Spain, Ireland and Italy and the potential impact of these crises on the rest of Europe and the world. It is diffi cult to predict the extent to which global markets are affected by these conditions and the extent and nature of such effects on our markets, products and business. The continuation or intensifi cation of such disruptions may lead to additional adverse effects including, among others, lack of availability of credit to businesses, and could lead to a further weakening of the global economies. Any prolonged downturn in general economic conditions would present risks for our business, such as a potential slowdown in our sales to customers.
Although there are signs that the fi nancial markets and economies in Singapore, Asia and the global economy may be improving, whether a full and sustainable recovery will occur, and the pace of the recovery, if any, or whether the global economy or parts of it could relapse into recessionary conditions, remains uncertain. Any adverse economic developments in the markets that we operate in or that have an indirect impact on our business could have material and adverse effects on our business, results of operations, fi nancial performance and prospects.
The global economic situation as well as any political crisis in oil producing countries or regions may produce drastic impact on the price of oil. This would in turn have an impact on the O&G industry which may result in sales to our customers being adversely impacted.
We may need to incur additional expenses and resources in the event we receive any product liability claims or claims for defects or delays in delivery
Any defects in our products, or failure to satisfy the requirements of our customers could lead to claims made against us. These claims may include payment for the recall of a product, or to indemnify our customers for the costs of any such claims or recalls which they face as a result of using our products. In addition, our customers may claim against us for delayed delivery which may have arisen from the late delivery of any of the suppliers from whom we procure our products. There can be no assurance that we will be able to claim from our suppliers any indemnifi cation or compensation for such claims against us. In the event that we are involved in any legal dispute or court proceedings relating to our products, we may have to spend a signifi cant amount of resources defending ourselves. As such, our business, results of operations and fi nancial performance may be materially and adversely affected.
Our insurance coverage may not be adequate
Our insurance policies include public liability insurance, fi re insurance, burglary and theft insurance, machinery and equipment insurance, comprehensive machinery insurance and insurance for workmen’s compensation claims. In addition, we have taken up group personal accident and hospitalisation and surgical insurance for our employees. However, no insurance can compensate for all potential losses and there can be no assurance that the insurance coverage will be adequate or that our insurers will pay a particular claim. There are also certain types of risks that are not covered by our insurance policies, because they are either uninsurable or not economically insurable, including acts of war and acts of terrorism. In addition, we are not insured against business interruption. If such events were to occur, we will incur additional expenses and our fi nancial performance and fi nancial position may be adversely affected as a result.
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We face competition from existing industry players and new entrants
We face competition from local and international players. Some of our competitors may possess longer operating history, stronger relationships with suppliers and customers, greater fi nancial strength, and better technical and marketing know-how in the markets we operate in or intend to venture into. In the event that we are unable to provide competitive pricing and/or quality products and services on a timely basis, we may lose our customers and market share to our competitors. This will materially and adversely affect our fi nancial performance. Please refer to the section entitled “Competition” of this Prospectus for more details.
We may face labour shortages or increased costs of labour for our Singapore operations
Due to the relative lack of local workers in our industry and the lower cost of hiring foreign workers, we have become partially reliant on foreign labour.
The number of full time employees as at the Latest Practicable Date is 160. Our Company does not employ a signifi cant number of temporary or part time employees. As at the Latest Practicable Date, approximately half of our employees in Singapore were foreign workers. The supply of skilled workers is subject to demand and supply conditions in the labour market and the local and foreign governments’ labour regulations.
Due to Singapore’s strict immigration policy which limits the supply of foreign labour, we may not be able to employ suffi cient workers. In addition, we may be required to bear a higher levy of employing foreign workers and the local to foreign workers’ ratio may increase from time to time. Further, any changes in the policies of the foreign workers’ countries of origin may affect the supply of foreign labour and cause disruptions to our business and operations.
In the event that there is a shortage of local or foreign workers to meet our operational requirements, we may be unable to fulfi l customers’ demands in a timely manner or our costs of labour may increase resulting in adverse impact on our fi nancial performance and fi nancial position. Please see the section entitled “Government Regulations - Singapore” of this Prospectus for further details on the employment of foreign workers.
We may be adversely affected by the changes in the Singapore government’s policies and regulations on the immigration and employment of foreign workers
The employment of foreign workers is subject to the payment of levies. Pursuant to the Singapore Budget 2010, the Singapore government increased levy rates for most work permits in stages during the period from 2010 to 2012 and in the range of S$10 to S$30. In the Singapore government’s Budget 2011, the Singapore government announced further increases in the foreign workers’ levy, which will be phased in at six (6)-monthly intervals from 1 January 2012 to 1 July 2013. There is no assurance that the Singapore government will not impose higher levy rates in the future. The S Pass is intended for mid-level skilled foreigners who earn a monthly fi xed income of at least S$2,000. Any increase in such levy or any increase in the minimum monthly fi xed income for S Pass holders would increase our costs of operation and may lead to an increase in compliance costs.
At present, we may source for work permit holders in the manufacturing sector only from Malaysia, Taiwan, Hong Kong, South Korea, Macau and the PRC. Any changes to the regions from which we may source workers holding work permits or any increase in the minimum monthly income of the S-Pass workers would negatively affect our business operations. In addition, if the local to foreign workers’ ratio is increased, we may face further restrictions in the number of foreign workers that we are permitted to employ. If we are unable to make up for this shortage through employing local workers, or if employing local workers increases our costs of labour signifi cantly, our fi nancial performance and fi nancial position may be adversely impacted.
Please see the section entitled “Government Regulations - Singapore” of this Prospectus for further details on the employment of foreign workers.
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We face risks of payment delays and/or default by our customers
Our customers may be unable to meet their contractual payment obligations to us, either in a timely manner or at all, or may otherwise default on these obligations. The reasons for payment delays and/or cancellations may include, inter alia, our customers’ insolvency or bankruptcy, or inability to raise suffi cient fi nancing. For FY2010 and FY2011, we made provision for doubtful debts of approximately S$214,000 and S$36,000. We did not make any provision for doubtful debts in FY2012.
In the event our customers extend the delivery date for the products they place orders for or cancel their orders, we may incur signifi cant inventory holding costs and our cash fl ow, working capital and fi nancial position may be materially affected. In addition, our customers may even forgo their deposit and cancel their orders with us before the stipulated date of delivery. Additional time and costs may then be incurred to fi nd alternative purchasers for such products and we may not be able to sell such products to our other customers, either at a comparable price or in a timely manner or at all. Therefore there is no assurance that we are able to recover such costs from our customers. Further, we may not be able to enforce our contractual rights to receive payment through legal proceedings. In such an event, our fi nancial performance and fi nancial position may be adversely affected.
We require various licences and permits
We are required to obtain various licenses and permits to carry out our business. Please refer to the section entitled “Government Regulations” of this Prospectus for more details.
The licenses and permits are generally subject to conditions stipulated in such licenses and permits and/or relevant laws and regulations under which such licences and permits are issued. Failure to comply with such conditions, laws or regulations could result in us being penalised or the revocation or non-renewal of the relevant licence or permit. Accordingly, we have to constantly monitor and ensure our compliance with such conditions imposed, if any. A failure to comply with such conditions may result in the revocation or non-renewal of any of the licenses and permits and we may not be able to carry out our business and operations. In such instances, our business, results of operations and fi nancial performance may be materially and adversely affected.
We may be affected by any adverse impact on our reputation and goodwill
We have built our reputation as a reliable provider of quality rigging and lifting solutions. Any negative publicity about us or our products and services, whether founded or unfounded may tarnish our reputation and goodwill with our customers. Under these circumstances, our customers may lose confi dence in our products and services, and we risk losing business from them and their referral of new business opportunities. This may have a material and adverse impact on our business and fi nancial performance.
There is no assurance that our expansion plans will be successfully carried out
Our growth strategies include expanding our geographical coverage through acquisitions of existing businesses in the Asia Pacifi c region such as South Korea and expanding our sales and distribution channels. Please refer to the section entitled “Business Strategies and Future Plans” of this Prospectus for more details. These expansion plans will require substantial capital expenditure, fi nancial and management resources. The success of our expansion plans depends on many factors, some of which are not within our control. In the event that we are not able to achieve a suffi cient level of revenue or manage our costs effectively or the commencement of these planned expansions is delayed, our future fi nancial performance and position will be materially and adversely affected.
Gaylin Malaysia may be required to obtain various licences, consents, permits and other regulatory approvals for its operations in Malaysia
For the purposes of manufacturing steel wire ropes in Malaysia, Gaylin Malaysia may be required to obtain a manufacturing licence (depending on the size of its operations) and a sales tax licence (if it is not exempted) from the Malaysian Industrial Development Agency and the Royal Malaysian Customs respectively.
35
Gaylin Malaysia may also be required to obtain approvals from other governmental authorities such as the Department of Environment, Fire Department and local authority for the conduct of its operations in Malaysia. Depending on the specifi c type of machineries and installations which Gaylin Malaysia intends to install in its facilities, approvals and permits may also be required for such machineries and installations.
In addition, in the event Gaylin Malaysia intends to engage the services of foreign employees for the conduct of its operations in Malaysia, it will also be required to obtain valid work permits and employment passes for the foreign employees.
Please refer to the section entitled “Government Regulations” of this Prospectus for further information on the various licences, consents, permits and other regulatory approvals which may be required for Gaylin Malaysia’s operations in Malaysia.
In the event Gaylin Malaysia’s application for any of the above licences, consents, permits and other regulatory approvals (where required) cannot be obtained due to any reasons whatsoever, we may not be able to carry on our operations in Malaysia in the manner originally planned and our business in Malaysia will be adversely affected.
We operate in countries or may expand into other countries where we would be subject to local legal and regulatory conditions and may be affected by the political, economic and social conditions in these countries
We are primarily based in Singapore. We also have an operating subsidiary in Vietnam, and a subsidiary in Malaysia which is expected to commence operations in December 2012. We may also expand into other countries in which we presently do not have a business presence. Some of these countries may in the future be affected by political upheavals, internal strife, civil commotions and epidemics. The occurrence of political and social conditions in these countries may affect our ability to operate or do business in these countries. Our business and operations are subject to the legal and regulatory framework in these countries. Laws and regulations governing business entities in these countries may change and are often subject to a number of possibly confl icting interpretations, both by business entities and by the courts. Our business, results of operations and fi nancial performance may be adversely affected by changes in and uncertainty surrounding governmental policies, in particular with respect to business laws and regulations, licences and permits, taxation, infl ation, interest rates, currency fl uctuations, price and wage controls, exchange control regulations, labour laws and expropriation. Any changes in the economic, political, legal and regulatory conditions or policies in these countries could adversely affect the results of our operations.
We are subject to the applicable laws, regulations and guidelines in the countries and jurisdictions in which we currently or may in the future operate in, such as equity restrictions, entry and employment requirements and restrictions in respect of our employees and workers. If we fail to comply with such laws, regulations and guidelines, we may be subject to penalties for such breaches, including fi nes or restrictions on our ability to carry on business or operate in such countries or jurisdictions. In addition, the relevant employees in breach of such laws regulations and/or guidelines may also be subject to penalties such as fi nes, imprisonment or deportation.
In Malaysia, the Malaysian Companies Act 1965 does not restrict foreign ownership of equity interests in Malaysian companies. Additionally, the Foreign Investment Committee’s (“FIC”) (a committee of the Economic Planning Unit of the Malaysian Prime Minister’s Department) guidelines in connection with the acquisition of assets or interests and mergers and takeovers of companies and businesses incorporated or registered in Malaysia have been repealed.
Based on Gaylin Malaysia’s current dormant status or even if it were to commence manufacturing activities, there is currently no Malaysian law or applicable governmental guideline which restricts our shareholding in Gaylin Malaysia or which requires us to obtain any Malaysian governmental approval in relation to such shareholding. However, there still remains certain sectors in the Malaysian economy where Malaysian governmental guidelines or laws exist which restrict foreign ownership of equity
36
interest in a Malaysian company (especially in relation to a company which owns immovable properties) or which requires the approval of certain Malaysian governmental authorities to be obtained before a non-Malaysian entity may acquire equity or interests in a Malaysian company (collectively “Equity Restrictions”).
In the event that we shall, at any time in the future, be compelled by any changes in policy and/or laws or regulations in Malaysia to comply with Equity Restrictions, we may have to dilute our shareholding in Gaylin Malaysia and divest the requisite shareholding percentages within the time stipulated by the relevant laws or authority. In such an event, our fi nancial performance and fi nancial condition may be adversely affected.
We are subject to the foreign exchange legislation and regulations in Vietnam and Malaysia
Vietnam has implemented exchange control mechanisms which were designed to limit foreign currency outfl ows. This includes generally requiring the use of the VND for domestic transactions and channelling the fl ow of foreign currencies into the banking system. The State Bank of Vietnam is the primary authority in the formulation and administration of the exchange control policy in Vietnam. Dividends and capital gains from the transfer of shares in Vietnam can be remitted overseas through certain registered accounts of an accredited credit institution after payment of applicable Vietnam taxes. As the VND is not a freely convertible currency, conversion of dividends paid to non-residents into foreign currency is necessary prior to the outward remittance from Vietnam.
In Malaysia, local and foreign investors are subject to the Exchange Control Act 1953 (Revised 1969) and various foreign exchange rules and regulations issued by the Controller of Foreign Exchange in Malaysia. The rules are directed at ensuring the stability of the Ringgit as well as encouraging the use of Malaysia’s fi nancial resources for productive purposes.
These rules are reviewed regularly by Bank Negara Malaysia, the central bank of Malaysia, in line with the changing environment. As at the Latest Practicable Date, foreign investors are free to repatriate foreign currency, divestment proceeds, profi ts, dividends, rental and fees arising from investments in Malaysia and Malaysian companies are permitted to borrow any amount whether denominated in Ringgit or in foreign currency from their non-bank non-resident related companies, provided that such borrowing if in Ringgit, is used for the purposes of fi nancing activities in sectors involving the production of goods and services (except fi nancial services) in Malaysia.
Any future restriction imposed by the relevant authority on, inter alia, capital controls and borrowings, including repatriation of funds, may limit our ability on, inter alia, dividends distribution to our Shareholders or business expansion outside Vietnam and in and outside Malaysia.
We are subject to foreign exchange transaction risks
Our revenue is mainly denominated in S$, which constituted, on average, approximately 82.0% of our total revenue in the last three (3) fi nancial years ended 31 March 2012. Our purchases are mainly denominated in US$ and EUR and they constituted, on average, approximately 63.0% and 16.4% respectively of our total purchases in the last three (3) fi nancial years ended 31 March 2012. Our expenses are mainly denominated in S$.
To the extent that our purchases are not naturally matched in the same currency as our sales and to the extent that there are timing differences between invoicing and the payment of suppliers, we are exposed to foreign exchange fl uctuations which may adversely affect our fi nancial results. In FY2012, we recorded a net foreign exchange loss of approximately S$199,000 as compared to net foreign exchange gains of approximately S$663,000 and S$219,000 in FY2010 and FY2011 respectively.
Please refer to the section entitled “Foreign Exchange Management” of this Prospectus for further details.
37
We are exposed to risk in respect of outbreaks of H1N1 infl uenza, bird fl u, virus and/or other communicable diseases which, if uncontrolled, could affect our fi nancial performance and prospects
An outbreak of contagious diseases in the countries in which we, our customers or our suppliers operate may have an adverse effect on the economies of such countries. This may materially and adversely affect our business, results of operations and fi nancial performance.
In 2009, there was a global outbreak of a new strain of infl uenza A virus sub-type H1N1, commonly known as the H1N1, fi rst identifi ed in April 2009. During the last few years, large parts of Asia also experienced outbreaks of avian fl u, while in the fi rst half of 2003, certain countries in Asia experienced an outbreak of SARS, a highly contagious form of atypical pneumonia. These infectious diseases seriously interrupted economic activities and general demand for goods plummeted in the affected regions. There can be no assurance that an outbreak of H1N1, avian fl u, SARS or other contagious disease, or the measures taken by the governments of affected countries against such potential outbreaks, will not seriously interrupt our operations or those of our suppliers and/or customers. This, in turn, may have a material and adverse effect on our business, results of operations and fi nancial performance. The perception that there may be a recurrence of an outbreak of H1N1, avian fl u, SARS or other contagious diseases may also have an adverse effect on the economic conditions of countries in which we, our customers or suppliers operate.
RISKS RELATING TO INVESTMENT IN OUR SHARES
Our controlling shareholder will retain majority control over our Group after the Offering
Upon the completion of the Offering, our controlling shareholder, Keh Swee will have an interest in 64.5% of our Company’s post-Offering share capital. Keh Swee is held by Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo and Mr Teo Bee Yen in equal proportions.
As a result, Keh Swee together with its corporate representative, will be able to exercise signifi cant infl uence over all matters requiring Shareholders’ approval, including the election of Directors and the approval of signifi cant corporate transactions.
They will, jointly or severally also have veto power with respect to any Shareholders’ action or approval requiring a majority vote except where they are each required by the rules of the Listing Manual to abstain from voting. Such concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Group which may benefi t our Shareholders.
Our Share price may be volatile in the future
The price of our Shares after the Offering may fl uctuate widely, depending on many factors, including:
changes in market valuations and share prices of companies with similar businesses to our Group that may be listed in Singapore;
announcements of signifi cant acquisitions, strategic alliances or joint ventures;
fl uctuations in stock market prices and trading volume;
involvement in material litigation;
addition or departure of key personnel;
success or failure of management in implementing business and growth strategies;
variations in operating results;
38
changes in securities analysts’ recommendations, perceptions or estimates of our Group’s fi nancial performance;
general changes in rules/regulations with regard to the industries that our Group operates in, including those that affect the demand for our Group’s products and services; and
changes in conditions affecting the industries in which our Group operates, such as the general economic conditions or stock market sentiments or other events or factors.
Investors in our Shares would face immediate and substantial dilution to the book value per Share and may experience future dilution
The Issue Price of our Shares is substantially higher than the NAV per Share of approximately S$0.17 as at 31 March 2012 after adjusting for the estimated net proceeds from the issue of the New Shares and based on the post-Offering issued share capital. If we were liquidated for NAV immediately following the Offering, each shareholder subscribing to the Offering would receive less than the price they paid for their Shares. Details of the immediate dilution of our Shares incurred by new investors are described under the section entitled “Dilution” of this Prospectus.
Further, if we were to raise funds in the future by way of a placement of Shares or rights issue or other equity-linked securities, and if any Shareholder is unable or unwilling to participate in such fund-raising, such Shareholder will suffer dilution to their shareholdings.
Our Shares have never been publicly traded and the Offering may not result in an active or liquid market for our Shares
Prior to the Offering, there has been no public market for our Shares and an active public market for our Shares may not develop or be sustained after the Offering. We have applied to the SGX-ST for permission to have our Shares listed and quoted on the SGX-ST. Listing and quotation does not, however, guarantee that a trading market for our Shares will develop or, if a market does develop, there is no guarantee of the liquidity of that market for our Shares.
The market price of our Shares could be subject to signifi cant fl uctuations due to various external factors and events including the liquidity of our Shares in the market, difference between our actual fi nancial or operating results and those expected by investors and analysts, the general market conditions and broad market fl uctuations. Accordingly, investors may not be able to resell their Shares at a price that is attractive to them.
Negative publicity may adversely affect our Share price
Any negative publicity or announcement involving our Group, any of our Directors, Controlling Shareholder or key personnel may adversely affect the market’s perception of our Company or performance of our Share price, regardless of whether this is justifi able. Such negative publicity or announcement may include, inter alia, an involvement in insolvency proceedings or failed attempts in takeovers and joint ventures.
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OFFERING STATISTICS
Issue Price 35 cents
NAV
The NAV per Share based on the audited combined fi nancial statements of our Group as at 31 March 2012 and after adjusting for the Share Split referred to in the section entitled “Share Capital” in this Prospectus (the “Adjusted NAV”):
(a) before adjusting for the estimated net proceeds from the Offering and based on the pre-Offering share capital of 300,000,000 Shares
11.7 cents
(b) after adjusting for the estimated net proceeds from the Offering and based on the post-Offering share capital of 410,000,000 Shares
17.2 cents
Premium of Issue Price over the Adjusted NAV per Share:
(a) before adjusting for the estimated net proceeds from the Offering and based on the pre-Offering share capital of 300,000,000 Shares
200.3%
(b) after adjusting for the estimated net proceeds from the Offering and based on the post-Offering share capital of 410,000,000 Shares
104.1%
Earnings
Historical net EPS of our Group for FY2012 based on the pre-Offering share capital of 300,000,000 Shares
4.3 cents
Historical net EPS of our Group for FY2012 based on the pre-Offering share capital of 300,000,000 Shares, assuming that the Service Agreements had been in effect in FY2012
4.1 cents
Price Earnings Ratio
Historical price earnings ratio based on the historical net EPS of our Group for FY2012 and based on the pre-Offering share capital of 300,000,000 Shares
8.1 times
Historical price earnings ratio based on the historical net EPS of our Group for FY2012 assuming that the Service Agreements had been in effect in FY2012 and based on the pre-Offering share capital of 300,000,000 Shares
8.5 times
Net Operating Cash Flow(1)
Historical net operating cash fl ow per Share of our Group for FY2012 and based on the pre-Offering share capital of 300,000,000 Shares
4.9 cents
Historical net operating cashfl ow per Share of our Group for FY2012 assuming that the Service Agreements had been in effect in FY2012 and based on the pre-Offering share capital of 300,000,000 Shares
4.7 cents
Price to Net Operating Cash Flow Ratio
Issue price to historical net operating cash fl ow per Share of our Group for FY2012 and based on the pre-Offering share capital of 300,000,000 Shares for FY2012
7.1 times
Issue Price to historical net operating cash fl ow per Share of our Group for FY2012 assuming that the Service Agreements had been in effect in FY2012 and based on the pre-Offering share capital of 300,000,000 Shares
7.4 times
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Market Capitalisation
Market capitalisation based on the Issue Price and the post-Offering share capital of 410,000,000 Shares
S$143.5 million
Note:
(1) Net operating cash fl ow is calculated as net profi t after tax with depreciation expense added back.
41
USE OF PROCEEDS AND LISTING EXPENSES
The estimated net proceeds to be raised from the issue of the New Shares (after deducting estimated expenses incurred in relation to the Offering of approximately S$3.1 million) is approximately S$35.4 million. We intend to use such proceeds in the following manner:
Use of ProceedsAmount(S$’000)
Amount allocated for each dollar of the proceeds raised from
the Offering (as a % of the gross proceeds)
Expansion of our operations into Asian and/or other marketsthrough the set up of new facilities, acquisitions, joint ventures and/or strategic collaborations(1)
20,000 51.9
Expansion of our operations into Malaysia(1) 2,000 5.2
General working capital(2) 13,355 34.7
Net proceeds 35,355 91.8
Listing Expenses(4)
Professional fees 1,301 3.4
Underwriting commission, placement commission and brokerage(3) 1,251 3.3
(1) Please refer to the section entitled “Business Strategies and Future Plans” of this Prospectus for further details.
(2) This includes purchase of inventory for our new operations in Malaysia.
(3) Please refer to the section entitled “Management, Underwriting and Placement Arrangements” in this Prospectus for more details.
(4) Assuming the Over-allotment Option is not exercised.
If the Over-allotment Option is exercised in full, the additional net proceeds (after the payment of fees, commission and other expense related to the subscription of the Additional Shares) which we will receive is approximately S$7.4 million. Such net proceeds will be used for general working capital purposes.
Any remaining fi nancing requirement in respect of the activities highlighted above will be funded through other sources, including internally generated funds and/or bank borrowings, at our Company’s absolute discretion.
Pending the deployment of the net proceeds from the issue of the New Shares as aforesaid, the funds will be placed in short-term deposits or invested in money market instruments or used for our working capital requirements as our Directors may, in their absolute discretion, deem fi t.
We will make announcements on the material disbursements of the net proceeds on SGXNET and provide a status update on the use of the net proceeds in our annual report(s).
The foregoing represents our Company’s best estimates of our allocation of the net proceeds of the Offering based on our current plans and estimates regarding our anticipated expenditures. In the event that any part of our proposed uses of the net proceeds from the issue of New Shares does not materialise or proceed as planned, our Directors will carefully evaluate the situation and may reallocate the proceeds to other purposes and/or hold such funds on short-term deposits or money market instruments for so long as our Directors deem it to be in the interest of our Company and our Shareholders, taken as a whole.
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Any change in the use of the net proceeds will be subject to the listing rules of the SGX-ST and appropriate announcements will be made by our Company on SGXNET if required under the listing rules of the SGX-ST.
In the event that the actual expenses incurred in connection with the Offering listed above are less than the estimated expenses incurred in connection with the Offering, such excess amount will be used as our working capital.
In the opinion of our Directors, no minimum amount must be raised by the Offering. In the event the Offering is cancelled, such amounts proposed to be provided for the items above will be provided out of our existing bank facilities and/or funds generated from our operations.
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DIVIDEND POLICY
Our Company had declared interim tax-exempt dividends of S$3.3 million on 15 September 2011, S$20.0 million on 13 October 2011 and S$2.0 million on 18 November 2011 out of our retained profi ts for FY2012. These dividends were paid to our controlling shareholder Keh Swee.
Save for the above, our Company has not declared or paid any dividends since the date of its incorporation on 25 February 2010 up to the Latest Practicable Date.
Our subsidiary, Gaylin International, had declared and paid two (2) interim tax-exempt dividends amounting to an aggregate of S$3.6 million in FY2010(1). These dividends were paid to the then shareholders of Gaylin International, Ms Lew Siew Poh, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Desmond Teo and Mr Steven Teo. In FY2012, Gaylin International declared and paid interim tax-exempt dividends amounting to an aggregate S$27.5 million to our Company.
Our subsidiary, Bridge Testing, had declared a fi nal tax-exempt dividend of approximately S$1.07 million for the fi nancial year ended 31 July 2011 on 19 July 2011. The dividend was paid in FY2012 to the then shareholders of Bridge Testing, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
Save as disclosed above and in the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012”, our subsidiaries had not paid any other dividends in the last three (3) fi nancial years ended 31 March 2012.
We currently do not have a formal dividend policy. We may, by ordinary resolution of our Shareholders, declare annual dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Directors. The declarations and payment of dividends will be determined at the sole discretion of our Directors subject to the approval of our Shareholders.
Subject to the above, our Directors intend to recommend and distribute dividends of not less than 30% of our net profi ts attributable to our Shareholders for FY2013 and FY2014 (the “Proposed Dividend”). However, investors should note that all the foregoing statements, including the statements on the Proposed Dividend, are merely statements of our present intention and shall not constitute legally binding statements in respect of our future dividends which may be subject to modifi cation (including reduction or non-declaration thereof) in our Directors’ sole and absolute discretion. Investors should not treat the Proposed Dividend as an indication of our Group’s future dividend policy. No inference should or can be made from any of the foregoing statements as to our actual future profi tability or ability to pay dividends in any of the periods discussed.
Our Directors may also declare an interim dividend without the approval of our Shareholders. We must pay all dividends out of our profi ts and in accordance with the Companies Act and applicable accounting standards.
In making their recommendations, our Directors will consider the factors outlined below as well as any other factors deemed relevant by our Board:
(a) the level of our cash, gearing, return on equity and retained earnings;
(b) our actual and projected fi nancial performance and working capital needs;
(c) our projected levels of capital expenditure and other investment plans;
(c) restrictions on payment of dividends imposed on us by our fi nancing arrangements (if any); and
(e) the general economic and business condition in countries in which we operate.
Information relating to taxes payable on dividends is set out in the section entitled “Taxation” in this Prospectus.
(1) This payment includes offsetting of advances to the relevant Directors and/or their Associates. Please refer to the section entitled “Interested Person Transactions – Advances granted to our Executive Directors and/or their Associates” of this Prospectus.
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SHARE CAPITAL
Our Company (Registration No. 201004068M) was incorporated in the Republic of Singapore on 25 February 2010 under the Companies Act as a private limited company, under the name of “Gaylin Holdings Pte. Ltd.”. Our Company was converted into a public company limited by shares on 25 September 2012. The name of our Company was changed to “Gaylin Holdings Limited” on 25 September 2012. As at the date of incorporation, our issued and paid-up share capital was S$1.00 comprising one (1) Share. On 14 September 2011, Keh Swee subscribed for 2,999,999 Shares for the consideration of S$2,999,999.
At an Extraordinary General Meeting held on 24 September 2012, our Shareholders approved, inter alia, the following:
(a) the sub-division of each Share in the existing issued share capital of our Company into 100 Shares;
(b) conversion of our Company into a public limited company and the change of our name to “Gaylin Holdings Limited”;
(c) the adoption of the new Articles;
(d) the issue of the New Shares which are the subject of the Offering. The New Shares, when allotted, issued and fully paid-up, will rank pari passu in all respects with the existing issued Shares in the capital of the Company;
(e) the adoption of the ESOS, and the authorisation of our Directors, pursuant to Section 161 of the Companies Act, to allot and issue Shares upon the exercise of Options granted under the ESOS and that authority be given to our Directors to grant Options at a discount up to a maximum discount of 20.0% to the market price; and
(f) that authority be given to our Directors, pursuant to Section 161 of the Companies Act, to:
(i) allot and issue Shares whether by way of rights, bonus or otherwise (including Shares as may be issued pursuant to any Instrument (as defi ned below) made or granted by our Directors while this resolution is in force notwithstanding that the authority conferred by this resolution may have ceased to be in force at the time of issue of such Shares); and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue (as well as adjustments to) of warrants, debentures or other instruments convertible into Shares, at any time and upon such terms and conditions and for such purposes and to such persons as our Directors may in their absolute discretion deem fi t,
Provided that the aggregate number of Shares issued pursuant to such authority (including Shares issued pursuant to any Instrument), shall not exceed 50.0% of the Post-Offering Issued Share Capital, and provided further that the aggregate number of such Shares to be offered other than on a pro rata basis in pursuance to such authority (including Shares issued pursuant to any Instrument) to the existing Shareholders shall not exceed 20.0% of the Post-Offering Issued Share Capital (as defi ned below).
Unless revoked or varied by our Company in general meeting, such authority shall continue in force until the conclusion of the next annual general meeting of our Company or the date by which the next annual general meeting of our Company is required by law to be held, whichever is the earlier, except that our Directors shall be authorised to allot and issue Shares pursuant to any Instrument notwithstanding that such authority has ceased.
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For the purposes of this resolution, the “Post-Offering Issued Share Capital” shall mean the enlarged issued share capital of our Company (excluding treasury shares, as applicable) immediately after the Offering, after adjusting for: (i) new Shares arising from the conversion or exercise of any convertible securities; (ii) new Shares arising from exercising share options, provided the options were granted in compliance with the Listing Manual; and (iii) any subsequent bonus issue, consolidation or sub-division of Shares.
At an Extraordinary General Meeting held on 15 October 2012, our Shareholders approved the allotment and issue of 110,000,000 New Shares and up to 22,000,000 Additional Shares; such New Shares and Additional Shares when allotted, issued and fully paid-up, shall rank pari passu in all respects with the existing issued Shares. As at the Latest Practicable Date, our Company has only one (1) class of shares, being ordinary shares. The rights and privileges of our Shares are stated in our Articles. There are no founder, management, deferred or unissued shares reserved for the issuance for any purpose. Save for the ESOS and the Over-allotment Option, no person has been, or is entitled to be, given an option to subscribe for any securities of our Company or any of our subsidiaries. There are no Shares that are held by or on behalf of our Company or by our subsidiaries.
As at the Latest Practicable Date, the issued and paid-up share capital of our Company is S$3 million comprising 3,000,000 Shares. Upon completion of the Share Split, the issued and paid-up share capital of our Company is S$3.0 million comprising 300,000,000 shares. Upon the allotment of the New Shares, the resultant issued and paid-up share capital of our Company will be increased to approximately S$39.8 million comprising 410,000,000 Shares.
Details of the changes in the issued and paid-up share capital of our Company since incorporation and the resultant issued and paid-up share capital immediately after the Offering are as follows:
PurposeNumber of
shares
Issued and paid-up share capital
(S$)
Issued and paid-up Shares as at date of incorporation 1 1
Issue of new Shares to Keh Swee pursuant to the Restructuring Exercise 2,999,999 2,999,999
Issued and paid-up Shares immediately after the Restructuring Exercise 3,000,000 3,000,000
Share Split 300,000,000 3,000,000
New Shares to be issued pursuant to the Offering 110,000,000 36,780,672(1)
Post-Offering issued and paid-up share capital 410,000,000 39,780,672(1)
Note:
(1) This takes into account set-off of estimated issue expenses incurred in connection with the Offering of approximately S$1.7 million against share capital, and excludes estimated issue expenses incurred in connection with the Offering of approximately S$1.4 million to be charged directly to the income statement.
The shareholders’ equity of our Company as at incorporation, after adjustments to reflect the Restructuring Exercise and the issue of the New Shares are set out below. This should be read in conjunction with the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus.
As at incorporation
(S$)
After the Restructuring
Exercise(S$)
Immediately after the Offering
(S$)
Shareholders’ EquityIssued and paid-up share capital 1 3,000,000 39,780,672(1)
Retained earnings and reserves – 31,962,244 30,536,519
1 34,962,244 70,317,191
Note:
(1) This takes into account set-off of estimated issue expenses incurred in connection with the Offering of approximately S$1.7 million against share capital, and excludes estimated issue expenses incurred in connection with the Offering of approximately S$1.4 million to be charged directly to the income statement.
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Our Subsidiaries
Except as disclosed below, there was no change in the issued and paid-up share capital of our subsidiaries for the period of three (3) years preceding the Latest Practicable Date.
Gaylin Malaysia
Date
No. of ordinary shares of RM1.00
issuedIssue price per share Purpose of issue
Resultant issued share capital
22 January 2010 2 RM1.00 Subscribers’ shares issued upon incorporation
RM2.00
19 August 2011 999,998 RM1.00 Increase in capital contribution RM1,000,000
Gaylin Power
DateNo. of ordinary shares issued
Issue price per share Purpose of issue
Resultant issued share capital
25 July 2011 1 S$1.00 Subscribers’ shares issued upon incorporation
S$1.00
Save as disclosed above, no shares in, or debentures of, our Company or any of our subsidiaries have been issued, or are proposed to be issued, as fully or partly paid for cash or for a consideration other than cash, for the three (3) years preceding the Latest Practicable Date and up to the date of this Prospectus.
Save as disclosed in the sections entitled “The Offering – Over-allotment Option” and “The Offering –Stabilisation”, “Restructuring Exercise” and “Gaylin Employee Share Option Scheme” in this Prospectus, no person has, or has the right to be given, an option to subscribe for or purchase any shares in or debentures of our Company or any of our subsidiaries.
Subscription and Issuance of Exchangeable Bonds
Keh Swee entered into the following subscription agreements (the “Subscription Agreements”) with the Pre-Offering Investors for the issuance of exchangeable bonds amounting in aggregate to S$9.75 million (the “Exchangeable Bonds”):
(a) the subscription agreement dated 16 July 2010 for the issuance of exchangeable bonds amounting in aggregate to an amount of S$2.5 million (resulting in an aggregate of S$5.0 million) by Keh Swee to each of Comfort Shipping and Amhoist(1);
(b) the subscription agreement dated 20 January 2011 for the issuance of exchangeable bonds amounting to S$2.0 million by Keh Swee to Wee Seng Investments; and
(c) the subscription agreement dated 15 February 2011 as amended and restated by an amendment and restatement agreement dated 1 August 2011 for the issuance of exchangeable bonds amounting to S$2.75 million by Keh Swee to Rhodus.
The consideration for the Exchangeable Bonds was paid to Keh Swee.
Note:
(1) Pursuant to the subscription agreement dated 16 July 2010, exchangeable bonds amounting in aggregate to an amount of S$2.5 million was issued by Keh Swee to each of Comfort Shipping and another company, American Equipment Services Pte. Ltd. (“American Equipment”). Pursuant to the form of transfer dated 29 September 2011, American Equipment transferred its S$2.5 million bonds to Amhoist.
47
Pursuant to the Subscription Agreements, the parties agreed, inter alia, that the Exchangeable Bonds were exchangeable into such number of fully paid Shares of the Company on the terms and conditions of the Subscription Agreements and the Exchangeable Bonds (the “Exchange Right”).
Keh Swee issued the Exchangeable Bonds to the Pre-Offering Investors and the aggregate consideration of S$9.75 million for the Exchangeable Bonds was satisfi ed in full in cash.
The Pre-Offering Investors exercised their Exchange Rights and an aggregate of 35,590,000 Shares in the capital of the Company were transferred by Keh Swee to the Pre-Offering Investors (“Exchange Shares”) on 5 October 2012 in the following proportions:
Pre-Offering Investor
Amount of Exchangeable
Bonds(S$)
Number of Shares
Percentage of pre-Offering share
capital (%)
Comfort Shipping 2,500,000(1) 8,400,000 2.8
Amhoist 2,500,000(1) 8,400,000 2.8
Wee Seng 2,000,000(1) 6,490,000 2.2
Rhodus 2,750,000(2) 12,300,000 4.1
Total 9,750,000 35,590,000 11.9
Notes:
(1) Pursuant to the relevant subscription agreements between (i) Comfort Shipping, Amhoist and Keh Swee and (ii) Wee Seng and Keh Swee, the number of Exchange Shares transferred to (i) each of Comfort Shipping, Amhoist or (ii) Wee Seng upon exchange of the Exchangeable Bonds was based on the following formula:
(i) Exchange Shares to be transferred to each of Comfort Shipping and Amhoist = S$2.5 million / (85% of the Agreed Offering Price); or
(ii) Exchange Shares to be transferred to Wee Seng = S$2.0 million / (88% of the Agreed Offering Price)
The “Agreed Offering Price” was the offering price as agreed upon by the Pre-Offering Investors and Keh Swee prior to the registration of the fi nal prospectus with the Authority. As the actual offering price at the point of listing is the same as the Agreed Offering Price, there will be no cash adjustment paid to/by Keh Swee.
(2) Pursuant to the relevant subscription agreement between Rhodus and Keh Swee, the number of Exchange Shares transferred to Rhodus upon the exchange of the Exchangeable Bonds was based on the following formula:
Exchange Shares to be transferred to Rhodus = 3% x (Enlarged Share Capital)
The “Enlarged Share Capital” was determined based on the agreed size of the Offering as agreed upon between Rhodus and Keh Swee prior to the registration of the fi nal prospectus with the Authority. As the actual enlarged share capital at the point of listing is the same as the Enlarged Share Capital, there will be no cash adjustment paid to/by Keh Swee.
48
RESTRUCTURING EXERCISE
Our Group was formed through the Restructuring Exercise which involved a series of acquisitions and the rationalisation of our corporate and shareholding structure for the purposes of the Offering. Pursuant to the Restructuring Exercise, our Company became the holding company of our Group.
The Restructuring Exercise involved the following steps:
1. Incorporation of our Company
Our Company was incorporated on 25 February 2010 in the Republic of Singapore in accordance with the Companies Act as a private limited company with an issued and paid-up share capital of S$1.00 comprising one (1) Share, which was held by Keh Swee. On 14 September 2011, Keh Swee subscribed for 2,999,999 Shares for the consideration of S$2,999,999.
Keh Swee was incorporated on 25 February 2010 in the Republic of Singapore in accordance with the Companies Act as a private limited company with an issued and paid-up share capital of S$5.00 comprising fi ve (5) shares, held by Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo, respectively.
2. Incorporation of Gaylin Malaysia
On 22 January 2010, Gaylin Malaysia was incorporated in Malaysia with Mr Teo Bee Hoe and Gaylin International as subscribers with each holding one (1) ordinary share in Gaylin Malaysia. The subscribers transferred the two (2) ordinary shares in Gaylin Malaysia to our Company on 15 April 2011. 999,998 ordinary shares in the issued and paid-up share capital of Gaylin Malaysia have been issued and allotted to Gaylin Holdings on 19 August 2011. As at the Latest Practicable Date, no further shares in Gaylin Malaysia have been issued to our Company.
3. Acquisition of Gaylin International and its subsidiary Gaylin Vietnam by our Company
Pursuant to a sale and purchase agreement dated 28 February 2011, our Company acquired from Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo and Ms Lew Siew Poh (the wife of Mr Teo Bee Yen), the entire issued and paid-up capital of 5,000,000 ordinary shares of Gaylin International at an aggregate consideration of S$5,000,000, which was determined based on the issued and paid-up share capital of Gaylin International. Gaylin International owns 100% of the equity interest in Gaylin Vietnam at the date of the sale and purchase agreement.
The consideration was payable to the vendors based on their respective shareholdings in Gaylin International as follows:
Upon completion of the acquisition, Gaylin International became a wholly-owned subsidiary of the Company, which was in turn wholly-owned by Keh Swee.
49
A portion of the consideration amounting to an aggregate of S$1,500,000 was paid by our Company to Ms Lew Siew Poh by way of cash payment. The balance of S$3,500,000 payable by the Company to Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo (“Acquisition Debt”) was not satisfi ed in cash.
Pursuant to a novation agreement dated 28 February 2011, Keh Swee assumed the obligations in respect of the Acquisition Debt. The consideration for the novation of the Acquisition Debt by the Company to Keh Swee was S$3,500,000 which was fully paid by the Company to Keh Swee in September 2011.
On 28 February 2011, Keh Swee effected full settlement of the Acquisition Debt by way of the allotment and issuance of an aggregate of 3,500,000 Shares, credited as fully paid, to Mr Desmond Teo (1,000,000 Shares), Mr Teo Bee Kheng (1,000,000 Shares), Mr Teo Bee Hoe (750,000 Shares) and Mr Steven Teo (750,000 Shares).
Further, on 28 February 2011, each of Mr Teo Bee Hoe, Mr Steven Teo and Mr Teo Bee Yen subscribed for 250,000 shares, 250,000 shares and 1,000,000 shares respectively in Keh Swee. As a result, each of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo owns 1,000,001 ordinary shares representing 20.0% of the issued share capital of Keh Swee and, accordingly, is deemed to be interested in the Shares held by Keh Swee.
4. Incorporation of Gaylin Power
Following the acquisition of Gaylin International by our Company, Gaylin Power was incorporated as a wholly-owned subsidiary of Gaylin International on 25 July 2011.
5. Acquisition of Bridge Testing by our Company
Pursuant to a sale and purchase agreement dated 30 September 2011, our Company acquired from Mr Teo Bee Kheng and Mr Teo Bee Hoe the entire issued and paid-up share capital of two (2) ordinary shares of Bridge Testing at an aggregate consideration of S$81,841, which was determined based on the unaudited NAV of Bridge Testing as at 30 September 2011. The consideration was paid in cash to each of the vendors in equal proportions.
Upon completion, Bridge Testing became a wholly-owned subsidiary of our Company.
50
GROUP STRUCTURE
Our Group structure as at the Latest Practicable Date is as follows:
Gaylin Holdings
Gaylin International
Gaylin Vietnam
100%
Gaylin Malaysia Bridge Testing
Gaylin Power
100% 100%
100% 100%
Save for the above wholly-owned subsidiaries of our Group, there are no other subsidiaries, subsidiary entities, associated companies and associated entities of our Group.
The details of the wholly-owned subsidiaries of our Group are as follows:
Name of Company
Date and Place of
Incorporation
Principal Place of
BusinessPrincipal Activities
Paid Up Capital
Equity held by our
Company / Group
Gaylin International
16 February 1978 / Singapore
Singapore Supply and manufacture of rigging and lifting equipment and provision of related services, and ship supply
S$5,000,000.00 100%
Gaylin Vietnam 24 July 2007 / Vung Tao City, Ba Ria
Vung Tau Province
Vietnam Supply and manufacture of rigging and lifting equipment and provision of related services
US$500,000.00 100%
Gaylin Power 25 July 2011 / Singapore
Singapore Supply of rigging and lifting equipment
S$1.00 100%
Gaylin Malaysia 22 January 2010 / Malaysia
Malaysia Supply and manufacture of rigging and lifting equipment and provision of related services
RM1,000,000.00 100%
Bridge Testing 1 June 1990 / Singapore
Singapore Provision of testing, i n s p e c t i o n a n d certification services for rigging and lifting equipment
S$2.00 100%
None of our subsidiaries is listed on any stock exchange. We do not have any associated company.
51
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52
Notes:
(1) Keh Swee is an investment holding company incorporated in Singapore on 25 February 2010. Each of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo owns 1,000,001 ordinary shares representing 20.0% of the issued share capital of Keh Swee, following completion of the Restructuring Exercise. Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo are deemed to be interested in all the Shares held by Keh Swee.
(2) Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo are siblings.
(3) Mr Teo Bee Yen’s wife, Ms Lew Siew Poh, is a sibling of Mr Lew Kah Hoo @ Peter Lew, who is a director of Franklin Offshore International Pte. Ltd., a company engaged in repair and service of ships and vessels and in the supply of wire rope, mooring, rigging products and offshore construction services.
(4) Rhodus is an investment holding company incorporated in the British Virgin Islands on 20 August 2010. Rhodus is owned by Mr Wong Leon Keat and Mr Omar Loebis, who are not related to the Directors, Executive Offi cers or Shareholders of our Company. Mr Wong Leon Keat is a partner at Wong, Lee & Associates, who was the previous auditors of Gaylin International from March 1978 up to FY2010.
(5) Wee Seng is an investment holding company incorporated in Singapore on 4 January 2011. The shareholders of Wee Seng are Ms Teo Ai Moy and Mr Ng Wee Seng who are not related to the Directors, Executive Offi cers or Shareholders of our Company.
(6) Comfort Shipping is a company principally engaged in the business of ship and boat leasing (including chartering) and shipping agencies (freight). It is incorporated in Singapore on 3 September 1983. The shareholders of Comfort Shipping are Mdm Heng Meng Lang and Mr Tan Guan who are not related to the Directors, Executive Offi cers or Shareholders of our Company.
(7) Amhoist is a company incorporated in Singapore on 12 September 2011, which is an investment holding company. The shareholders of Amhoist are Mr Denis F White and Ms Tina Teresa Malpas who are not related to the Directors, Executive Offi cers or Shareholders of our Company.
The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from the New Shares which are the subject of the Offering. To the best of our knowledge, our Directors are not aware of any arrangement, the operation of which may at a subsequent date result in a change in control of our Company.
Save as disclosed above, our Company is not directly or indirectly owned or controlled by another corporation, any government or other natural or legal person whether severally or jointly.
Save for the Shares issued by our Company as disclosed in the section entitled “Restructuring Exercise” of this Prospectus, there has been no signifi cant change in the percentage of ownership of our Shares since our incorporation.
MORATORIUM
To demonstrate its commitment to our Group, Keh Swee, which will hold 264,410,000 Shares representing 64.5% of our Company’s post-Offering share capital, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholding in our Company for a period of six (6) months commencing from the date of admission of our Company to the Offi cial List of the SGX-ST.
In addition, Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo, who collectively hold the entire share capital of Keh Swee, have each undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective interests in Keh Swee for a period of six (6) months commencing from the date of admission of our Company to the Offi cial List of the SGX-ST. In connection with the Share Lending Agreement, Keh Swee may lend up to 22,000,000 Shares to CIMB Securities. The restrictions above do not apply to the Shares lent to CIMB Securities pursuant to the Share Lending Agreement, provided that these restrictions shall apply to the Shares returned to Keh Swee pursuant to the Share Lending Agreement. Please refer to the section entitled “Plan of Distribution” of this Prospectus for further details.
53
Rhodus, Wee Seng, Comfort Shipping and Amhoist, which will respectively hold 12,300,000, 6,490,000, 8,400,000 and 8,400,000 Shares representing 3.0%, 1.6%, 2.0% and 2.0% of our Company’s post-Offering share capital, have each also undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholding in our Company for a period of 6 months commencing from the date of admission of our Company to the Offi cial List of the SGX-ST. In addition, the ultimate shareholders of Rhodus, Wee Seng, Comfort Shipping and Amhoist have each also undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of their respective shareholdings in Rhodus, Wee Seng, Comfort Shipping and Amhoist (as the case may be) for a period of six (6) months commencing from the date of admission of our Company to the Offi cial List of the SGX-ST.
54
CAPITALISATION AND INDEBTEDNESS
The following information should be read in conjunction with the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus and the section entitled “Management’s Discussion and Analysis of Financial Position and Results of Operations” of this Prospectus.
The following table shows the cash and cash equivalents as well as capitalisation and indebtedness of our Group as at 31 July 2012:
(i) based on our audited combined fi nancial position as at 31 March 2012;
(ii) based on our unaudited management accounts as at 31 July 2012; and
(iii) as adjusted for the net proceeds from the Offering (“As Adjusted”).
Audited as at 31 March 2012
As at 31July 2012
(S$’000)Unaudited(S$’000)
As Adjusted(S$’000)
Cash and cash equivalents 4,200 2,244 37,599
Indebtedness
Current
– secured and guaranteed 25,426 25,519 25,519
– unsecured and guaranteed 22,674 25,014 25,014
Non-current
– secured and guaranteed 22,321 21,732 21,732
Total Indebtedness 70,421 72,265 72,265
Total Shareholders’ equity 34,962 39,468 74,823
Total capitalisation and indebtedness 105,383 111,733 147,088
Cash and Cash Equivalents
As at 31 July 2012, we had cash and cash equivalents of approximately S$2.2 million, which are placed with fi nancial institutions.
Indebtedness
As at 31 July 2012, we had total indebtedness of approximately S$72.3 million comprising term loans of approximately S$31.4 million, time loans of S$5.0 million, money market loan of S$3.0 million, bank bills payables of S$30.4 million, fi nance leases of S$2.2 million and bank overdraft of S$0.3 million.
Term loans
As at 31 July 2012, we had outstanding term loans of approximately S$31.4 million, of which S$11.4 million are secured by a legal mortgage over our Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore and 7 Gul Avenue, Singapore and by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe and of which S$20.0 million is secured by a fl oating charge over certain inventories of our Group, corporate guarantee by Gaylin International and by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
55
Money market loan
This loan is secured by a legal mortgage over our Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore and 7 Gul Avenue, Singapore. It is also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
Time loans
The time loans are guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo.
Bank bills payables
The bank bills payables are secured depending on the fi nancial institutions which provided us the facilities by way of (i) a legal mortgage over our Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore and 7 Gul Avenue, Singapore and by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe; (ii) joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo or (iii) joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe.
Bank overdrafts
The bank overdrafts are secured depending on the fi nancial institutions which provided us the facilities by way of (i) a legal mortgage over our Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore and 7 Gul Avenue, Singapore and by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe; (ii) joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe and Mr Steven Teo or (iii) joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe. For further details of the guarantees provided by Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo, please refer to the “Interested Person Transactions” section of this Prospectus.
Save as disclosed in this Prospectus, since 31 March 2012 and up to the Latest Practicable Date, there were no material changes in our total capitalisation and indebtedness except for changes in our retained earnings arising from the day-to-day operations in the ordinary course of our business.
We are presently in discussion with the fi nancial institutions which provided us the above facilities and subsequent to the Offering, we intend to obtain a release and discharge of the above personal guarantees provided by our Executive Directors and our CAO, Mr Steven Teo to the respective fi nancial institutions. Our Directors are of the view that with our listing status and strengthened fi nancial position due to the estimated proceeds arising from the Offering, we should be able to secure the release of such guarantees.
Should any of the fi nancial institutions disagree to the release and we fail to secure alternative facilities on terms similar to those applicable to our current facilities, these Executive Directors and our CAO, Mr Steven Teo will continue to guarantee the facilities.
56
Credit facilities
As at the Latest Practicable Date, our total credit facilities for working capital purposes (utilised and unutilised) were as follows:
Amount of facilities granted(S$’000)
Amountutilised(S$’000)
Amountunutilised(S$’000) Interest rates Maturity profi le
Overdraft(1) 3,700 881 2,819 5% – 6% Revolving
Trade Financing(2) 48,500 36,592 11,908 2.0%–3.4% Up to 180 days
Short Term Loan(3) 8,000 8,000 – 2.6% – 3.3% Revolving
Credit Card(4) 350 9 341 Not applicable(6) Revolving
Performance Guarantee(5) 20 – 20 1% per annum
Total 60,570 45,482 15,088
Notes:
(1) The overdraft facilities granted to our Group comprised the following amounts: S$2,500,000 from United Overseas Bank Limited, S$200,000 from Citibank, N.A., Singapore Branch, S$500,000 from Standard Chartered Bank and S$500,000 from DBS Bank Ltd.
(2) The trade fi nancing granted to our Group comprised the following amounts: S$13,000,000 from United Overseas Bank Limited, S$9,000,000 from Citibank, N.A., Singapore Branch, S$8,000,000 from Industrial and Commercial Bank of China (Singapore Branch), S$3,000,000 from Malayan Banking Berhad, S$6,500,000 from Standard Chartered Bank, S$6,000,000 from DBS Bank Ltd and S$3,000,000 from the Hongkong and Shanghai Banking Corporation Limited.
(3) The short term loans granted to our Group comprised the following amounts: S$3,000,000 from United Overseas Bank Limited and S$5,000,000 from Citibank, N.A., Singapore Branch.
(4) The credit card facilities were granted to our Group by United Overseas Bank Limited.
(5) The performance guarantee was granted to our Group by United Overseas Bank Limited.
(6) Outstanding amounts not paid within the monthly payment cycle on the corporate credit card are charged an interest of up to 24.0% of the outstanding amount.
As at the Latest Practicable Date, to the best of our Directors’ knowledge, we are not in breach of any of the terms and conditions or covenants associated with any credit arrangement or bank loan which could materially affect our fi nancial position and results or business operations, or the investments of our Shareholders.
Certain of our credit facilities as described in this section contain provisions which make reference to the shareholding interests of our controlling shareholders. As at the date of this Prospectus, our Group has, in anticipation of the Offering, obtained letters of waiver in relation to such provisions from the fi nancial institutions which have provided such facilities.
Pursuant to Rule 728 of the Listing Manual, each of Keh Swee, the Executive Directors and our CAO, Mr Steven Teo, being controlling shareholders of our Company, have provided an undertaking to our Company that he/it will notify our Company, as soon as he/it becomes aware of any share pledging arrangements relating to his/its Shares and of any event which may result in a breach of our Company’s loan provisions. Upon notifi cation by the controlling shareholder(s), our Company will make the necessary announcements in compliance with the said rule.
57
In the event that any Group company enters into a loan agreement or issues debt securities that contain a condition making reference to shareholding interests of any controlling shareholder of that Group company, or places restrictions on any change in control of our Company, and the breach of this condition or restriction will cause a default in respect of the loan agreement or debt securities, signifi cantly affecting the operations of our Company, we will immediately announce the details of the condition(s) in accordance with Rule 704(31), making reference to the shareholding interests of any shareholder in our Company or restrictions placed on any change in control of our Company and the aggregate level of these facilities that may be affected by a breach of such condition or restriction.
Contingent liabilities
As at the Latest Practicable Date, we do not have any contingent liabilities.
Save as disclosed in this Prospectus, our Group has no other borrowings or indebtedness (direct and indirectly) or liabilities (including contingent liabilities) as at the Latest Practicable Date.
58
DILUTION
Dilution is the amount by which the Issue Price paid by subscribers of the New Shares in this Offering exceeds our NAV per Share after the Offering. The NAV of our Company as of 31 March 2012 but before adjusting for the net proceeds from the Offering and based on the pre-Offering issued and paid-up share capital of 300,000,000 Shares was 11.7 cents per Share.
Pursuant to the Offering in respect of 110,000,000 New Shares at the Issue Price and after deducting estimated issue expenses, the NAV per Share of our Company would have been 17.2 cents per Share. This represents an immediate increase in NAV of 5.5 cents per Share to our existing Shareholders and an immediate dilution in NAV of 17.8 cents per Share to our new investors. The following table illustrates this per Share dilution:
Cents
Issue Price per Share 35.0
NAV per Share based on the pre-Offering share capital of 300,000,000 Shares(1)
(adjusted for the Share Split and the Restructuring Exercise) 11.7
Increase in NAV per Share attributable to existing Shareholders 5.5
NAV per Share after the Offering(1) 17.2
Dilution in NAV per Share after Offering 17.8
Note:
(1) The computed NAV does not take into account our actual fi nancial performance from 1 April 2012 to the Latest Practicable Date. Depending on our actual fi nancial performance, our NAV per Share may be higher or lower than the computed NAV.
The following table summarises the total number of Shares acquired by our Directors, Substantial Shareholder and the Pre-Offering Investors (after adjusting for the Restructuring Exercise and the Share Split) during the period of three (3) years prior to the date of this Prospectus, the total consideration paid by them and the average price per Share paid by our Directors, Substantial Shareholder, the Pre-Offering Investors and paid by the new investors pursuant to the Offering.
Number of Shares acquired
(adjusted for the Share Split and Restructuring
Exercise)
Total cash consideration
(S$’000)
Average price per Share(cents)
Directors
Ang Mong Seng – – –
Desmond Teo – – –
Teo Bee Kheng – – –
Teo Bee Hoe – – –
Wu Chiaw Ching – – –
Ng Sey Ming – – –
Lau Lee Hua – – –
Substantial shareholders
Keh Swee(1) 300,000,000 3,000 1.0
Pre-Offering Investors
Rhodus 12,300,000(2) 2,750 22.4
Wee Seng 6,490,000(2) 2,000 30.8
Comfort shipping 8,400,000(2) 2,500 29.8
Amhoist 8,400,000(2) 2,500 29.8
New Investors pursuant to the Offering 110,000,000 38,500 35.0
59
Notes:
(1) Keh Swee is an investment holding company incorporated in Singapore on 25 February 2010. Each of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo owns 1,000,001 ordinary shares representing 20.0% of the issued share capital of Keh Swee, following completion of the Restructuring Exercise. Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo are deemed to be interested in all the Shares held by Keh Swee.
(2) These Shares were transferred to Rhodus, Wee Seng, Comfort Shipping and Amhoist by Keh Swee when it exchanged the Exchangeable Bonds for the Shares pursuant to the terms of the Exchangeable Bonds, details of which are set out in the section entitled “Share Capital” of this Prospectus.
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SELECTED FINANCIAL INFORMATION
The following selected combined fi nancial information of our Group should be read in conjunction with the full text of this Prospectus, including the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus.
COMBINED STATEMENTS OF COMPREHENSIVE INCOME OF OUR GROUP(1)
Audited
FY2010 FY2011 FY2012
S$’000 S$’000 S$’000
Revenue 68,618 70,119 71,447
Cost of sales (52,331) (45,165) (47,773)
Gross profi t 16,287 24,954 23,674
Other income 1,134 406 475
Distribution Costs (1,981) (2,265) (2,142)
Administrative expenses (4,938) (5,136) (4,643)
Other expenses (450) (39) (212)
Interest expense (1,580) (1,609) (1,518)
Profi t before income tax 8,472 16,311 15,634
Income tax expense (1,602) (2,926) (2,663)
Profi t for the year 6,870 13,385 12,971
Other comprehensive income / (loss) for the year, net of tax 6 (34) (36)
Total comprehensive income for the year 6,876 13,351 12,935
Basic EPS (cents)(2)(3) 2.3 4.5 4.3
Adjusted EPS (cents) (4) 1.7 3.3 3.2
Notes:
(1) The combined statements of comprehensive income have been accounted for using the principles of merger accounting where fi nancial statement items of the merged entities for the reporting periods in which the common control combination occurs are included in the combined fi nancial statements of our Group as if the combination had occurred from the date when the merged entities fi rst came under the control of the same shareholders. As our Group acquired Bridge Testing on 30 September 2011, the combined statement of comprehensive income excludes the fi nancials of this company prior to the date of acquisition. Please refer to the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus for the basis of preparation of the combined fi nancial statements of our Group.
(2) For comparative purposes, EPS have been computed based on profi t for the year and the pre-Offering share capital of 300,000,000 Shares.
(3) Had the Service Agreements (as disclosed in the section entitled “Service Agreements” of this Prospectus) been in effect
since the beginning of FY2012, the profi t before income tax and profi t for the year of our Group for FY2012 would have been approximately S$15.0 million and approximately S$12.4 million respectively, and the EPS based on the pre-Offering share capital of 300,000,000 Shares would have been 4.1 cents.
(4) For comparative purposes, Adjusted EPS have been computed based on profi t for the year and the post-Offering share
capital of 410,000,000 Shares.
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COMBINED STATEMENT OF FINANCIAL POSITION OF OUR GROUP(1)
AuditedAs at
31 March 2012S$’000
ASSETS
Current assets
Cash and bank balances 4,200
Trade receivables 18,773
Other receivables 494
Inventories 86,973
110,440
Non-current assets
Property, plant and equipment 8,876
Total assets 119,316
LIABILITIES AND EQUITY
Current liabilities
Trade payables 9,896
Other payables 503
Current portion of bank borrowings 47,163
Current portion of fi nance leases 937
Income tax payable 3,405
61,904
Non-current liabilities
Bank borrowings 20,693
Finance leases 1,628
Deferred tax liability 129
22,450
Capital and reserves
Share capital 3,000
Retained earnings 32,051
Translation reserve (89)
Total equity 34,962
Total liabilities and equity 119,316
NAV per share (cents)(2) 11.7
Notes:
(1) The combined statement of fi nancial position of our Group has been accounted for using the principles of merger accounting where fi nancial statement items of the merged entities for the reporting periods in which the common control combination occurs are included in the combined fi nancial statements of our Group as if the combination had occurred from the date when the merged entities fi rst came under the control of the same shareholders. As our Group acquired Bridge Testing on 30 September 2011, the combined statement of fi nancial position excludes the fi nancials of this company prior to the date of acquisition. Please refer to the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus for the basis of preparation of the combined fi nancial statements of our Group.
(2) For comparative purposes, NAV per Share has been computed based on the net asset value of our Group and our pre-Offering share capital of 300,000,000 Shares.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
In the following section we discuss our historical combined results of operations for the fi nancial years ended 31 March 2010, 2011 and 2012, our historical combined fi nancial condition as at 31 March 2012 and our management’s assessment of the factors that may affect our prospects and performance in future periods. You should read the following discussion together with the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus.
This discussion and analysis contains forward-looking statements which involve risks and uncertainties. Our actual results may differ from those anticipated in these forward-looking statements. Factors that might cause our actual future results to differ from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly in the section entitled “Risk Factors” of this Prospectus.
The fi gures in this section are approximate fi gures and have been rounded to the nearest one (1) decimal place for ease of reference.
OVERVIEW
We are one of the largest Singapore-based multi-disciplinary specialist providers of rigging and lifting solutions to the global offshore O&G industry.
We supply and manufacture rigging and lifting equipment. We also provide a wide range of engineering services to our customers who require customisation or manufacturing of products specifi c to their requirements. Such engineering services include the design, fabrication, testing and certifi cation of rigging and lifting equipment.
Our rigging and lifting equipment comprises a wide range of products such as heavy lift slings and grommets, wire rope slings, crane wire, mooring equipment and related fi ttings and accessories.
Our sales and distribution markets comprise mainly Asia, Oceania, Europe, the Middle East and Africa.
Revenue
We derive our revenue primarily from the following business activities:
(a) Supply and manufacture of rigging and lifting equipment and provision of related services (“Rigging and Lifting Business”)
The revenue derived from this business activity comprises:
Supply and manufacture of rigging and lifting equipment such as heavy lift slings and grommets, wire ropes and mooring equipment;
Supply of related fittings and accessories such as shackles, sockets, alloy chains, connecting links, master links, hooks, lever hoist/chain hoist, snatch blocks and remotely operated vehicle (ROV) hooks; and
Provision of related services such as (i) load testing; (ii) spooling services; (iii) rental services; and (iv) other fabrication services.
The orders received from our customers often include both the supply of products manufactured by our Group (“Manufactured Products”) and products distributed by our Group (“Distributed Products”) in varying proportions. Our Group manages the supply of Manufactured Products and Distributed Products in the same business activity.
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We typically experience a fl uctuation in revenue contribution from each customer in each fi nancial year due to the project based nature of our industry, whereby our customers’ projects typically differ in their scope and size, and their occurrence is irregular, resulting in us supplying different products to them on an irregular basis.
Revenue from supply and manufacture of rigging and lifting equipment, and related fi ttings and accessories are recognised upon the transfer of signifi cant risks and rewards of ownership of the goods to our customers.
Revenue from the provision of related services is recognised upon the completion of the services
rendered and acceptance by customer.
(b) Provision of ship supplies (“Ship Supply Business”)
We are also involved in the provision of ship supplies such as ship stores and equipment to ships and oil rigs. We source these ship stores and equipment from third party suppliers all over the world. We facilitate the sale of such products by third party suppliers to our customers and our Company does not store such supplies on our premises. We charge a fee based on a markup of the goods supplied.
Revenue from our Ship Supply Business is recognised upon delivery of our products and when signifi cant risks and rewards of ownership have been transferred to our customers.
The following table sets out a breakdown of revenue generated by each of our business activities:
Revenue FY2010 FY2011 FY2012
S$’000 % S$’000 % S$’000 %
Rigging and Lifting Business 65,414 95.3 67,603 96.4 68,924 96.5
Ship Supply Business 3,204 4.7 2,516 3.6 2,523 3.5
Total 68,618 100.0 70,119 100.0 71,447 100.0
Please refer to “Our Products and Related Services” under the section entitled “General Information on Our Group” of this Prospectus for a more comprehensive discussion of the products and services we provide.
For the Period under Review, our major source of revenue was derived from our Rigging and Lifting Business. It accounted for 95.3%, 96.4% and 96.5% of our total revenue in FY2010, FY2011 and FY2012 respectively. Revenue from our Ship Supply Business accounted for the balance of our revenue for the Period under Review.
Our revenue may be affected by, inter alia, the following key factors:
(a) demand for our products and services which is largely affected by the level of activities in the exploration, development and production of oil and gas in the global offshore O&G industry;
(b) the conditions in the fi nancial markets and economies of Singapore, Asia and/or other countries;
(c) our ability to retain the continued services of our Executive Director and CEO, Mr Desmond Teo and other key management personnel and our ability to identify, recruit, train and retain qualifi ed employees for technical, marketing and managerial positions;
(d) our ability to maintain our long-term arrangements with several of our major suppliers;
(e) the stability of the global fi nancial markets;
(f) our ability to continually source for or produce, in a cost effective and timely manner, the product that meets our customers’ requirements and specifi cations and are free from defects; and
(g) our ability to compete effectively in our industry with competitors in this market as we generally compete on key attributes such as service quality, product quality, timely delivery and pricing.
64
Please refer to the section entitled “Risk Factors” of this Prospectus for a more comprehensive discussion of other factors which may affect our business operations, revenue and fi nancial performance.
Revenue by Geographical Area
Our revenue by geographical area is prepared based on the country where the customer is located, which may not necessarily be where the products purchased from us are deployed. The products are typically deployed at project areas in which our customers are involved in, which could be anywhere globally. The following table sets out a breakdown of revenue received from each of our geographical area:
FY2010 FY2011 FY2012
S$’000 % S$’000 % S$’000 %
Singapore 36,085 52.6 33,759 48.1 37,080 51.9
Malaysia 5,682 8.3 7,414 10.6 5,635 7.9
Asia (excluding Singapore and Malaysia)(1) 6,178 9.0 5,773 8.2 9,935 13.9
Europe(2) 10,865 15.8 13,037 18.6 9,170 12.8
Others(3) 9,808 14.3 10,136 14.5 9,627 13.5
Total 68,618 100.0 70,119 100.0 71,447 100.0
Notes:
(1) Asia refers to Brunei, Hong Kong, India, Indonesia, Japan, Pakistan, Philippines, the PRC, South Korea, Taiwan, Thailand and Vietnam.
(2) Europe refers to Cyprus, France, Germany, Greece, Netherlands, Norway, Portugal, Switzerland and the UK.
(3) Others refers to Africa, Australia, North and South America, New Zealand and Papua New Guinea and the UAE.
Our marketing and sales efforts are led by Mr Desmond Teo and Ms Jessica Teo and they are assisted by 11 staff based in Singapore, two (2) staff based in Vietnam and one (1) staff based in Malaysia. In addition, we have also appointed an agent to represent us in Hong Kong and the PRC.
Cost of Sales and Gross Profi t
Our cost of sales comprises mainly direct material costs (which includes cost of components for our Rigging and Lifting Business and cost of supplies for our Ship Supply Business), direct labour costs and other direct costs.
The following table sets forth a breakdown of cost of sales in FY2010, FY2011 and FY2012.
Cost of Sales FY2010 FY2011 FY2012
S$’000 % S$’000 % S$’000 %
Direct material costs 44,801 85.6 36,850 81.6 38,676 81.0
Direct labour costs 3,771 7.2 3,900 8.6 4,466 9.3
Other direct costs 3,759 7.2 4,415 9.8 4,631 9.7
Total Cost of Sales 52,331 100.0 45,165 100.0 47,773 100.0
Our direct material costs forms the biggest part of our cost of sales and these costs include cost of components for our Rigging and Lifting Business and cost of supplies for our Ship Supply Business.
Cost of components comprise mainly wire ropes and related fi ttings and accessories like shackles and sockets. We source from our network of overseas and local suppliers based on quality of products, quality of service, delivery schedule and price. We have a close working relationship with numerous suppliers for the supply of components. For the Period under Review, we purchased the components from our suppliers located mainly in Europe, India, Malaysia, PRC, Singapore, South Korea and USA. Cost of components accounted for 85.6%, 81.6% and 81.0% of our cost of sales in FY2010, FY2011 and FY2012 respectively.
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Cost of ship supplies comprise mainly our cost of purchasing ship stores and equipment such as electrical products, safety equipment, medical supplies, dry provisions and duty-free products (namely liquor and tobacco products).
Our direct labour costs comprise salaries and other staff-related expenses (comprising mainly foreign workers’ levy) of our engineers, technicians and staff (including two (2) of our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe) involved in direct production and services activities. Direct labour costs accounted for 7.2%, 8.6% and 9.3% of our cost of sales in FY2010, FY2011 and FY2012 respectively.
Other direct costs comprise mainly depreciation charges, repair and maintenance, freight and handling inward charges. Other direct costs accounted for 7.2%, 9.8% and 9.7% of our cost of sales in FY2010, FY2011 and FY2012 respectively.
Our cost of sales may be affected by, inter alia, the following key factors:
(a) our ability to source for and purchase components at competitive prices that meet our customers’ demands and requirements;
(b) any signifi cant changes to the carrying value of our inventories which are taken to our cost of sales. For instance, any downward adjustment arising from such changes will be accounted for as an expense which would increase our cost of sales. On the other hand, any upward adjustment arising from such changes will be accounted for as a credit which would reduce our cost of sales;
(c) our ability to maintain our existing relationships with our suppliers particularly in our Rigging and Lifting Business, thereby maintaining the current purchase cost of our components; and
(d) the exchange rate between US$ and EUR against S$. As a substantial amount of our purchases are denominated in foreign currency, particularly US$
and EUR, and since our functional currency is S$, any fl uctuation in the relevant exchange rates will have an impact on our cost of sales.
In FY2010, FY2011 and FY2012, our purchases denominated in US$ accounted for approximately 69.1%, 58.9% and 58.8% of our total purchases respectively whilst our purchases in EUR accounted for approximately 15.3%, 17.5% and 16.8% of our total purchases respectively.
Please refer to the section entitled “Risk Factors” of this Prospectus for a more comprehensive discussion of other factors which may affect our business operations, revenue and fi nancial performance.
Gross profi t
Gross profi t and Gross profi t margin for each of FY2010, FY2011 and FY2012 are as set out below:
Gross profi t FY2010 FY2011 FY2012
Gross profi t (S$’000) 16,287 24,954 23,674
Gross profi t margin (%) 23.7 35.6 33.1
Other income
Other income comprise mainly net foreign exchange gains, government grants under the Jobs Credit Scheme, gain on disposal of property, plant and equipment, sundry income (which includes sales of scrap metal and rental income) as well as interest income. The Jobs Credit Scheme is a cash grant scheme introduced by the Singapore government to help businesses preserve jobs during the global economic crisis in 2009. The scheme expired in June 2010.
Other income amounted to approximately S$1.1 million, S$0.4 million and S$0.5 million in FY2010, FY2011, and FY2012 respectively.
66
Distribution costs
Distribution costs comprise mainly (i) salaries and other staff-related expenses of our employees involved in our marketing and sales activities; (ii) freight expenses (rental of trailers and shipping costs); and (iii) our advertising expenses.
Distribution expenses amounted to approximately S$2.0 million, S$2.3 million and S$2.1 million, and accounted for approximately 2.9%, 3.2%, and 3.0% of our revenue for FY2010, FY2011, and FY2012 respectively.
Administrative expenses
Administrative expenses comprise mainly (i) expenses related to our employees (including Executive Directors and our CAO) involved in our administrative functions; (ii) entertainment and refreshment expenses; (iii) offi ce expenses; (iv) depreciation; and (v) other miscellaneous expenses (such as insurance costs, transportation and travelling expenses, professional fees, donations and telecommunication expenses).
Administrative expenses amounted to approximately S$4.9 million, S$5.1 million and S$4.6 million, and accounted for approximately 7.2%, 7.3%, and 6.5% of our revenue for FY2010, FY2011, and FY2012 respectively.
Other operating expenses
Other operating expenses comprise mainly net foreign exchange loss, allowance made for doubtful trade receivables and bad debts written off.
Other operating expenses amounted to approximately S$0.4 million, S$0.04 million and S$0.2 million, and accounted for approximately 0.7%, 0.1%, and 0.3% of our revenue for FY2010, FY2011, and FY2012 respectively.
Interest expense
Interest expense relates to interest paid on bank borrowings, overdraft facilities and fi nance leases from banks and fi nancial institutions. Income tax expense
We are subject to the prevailing tax regulations of the countries where our operations are located, namely Singapore and Vietnam. The statutory tax rates for Singapore and Vietnam for the Period under Review were as follows:
FY2010 FY2011 FY2012
Singapore 17.0% 17.0% 17.0%
Vietnam 25.0% 25.0% 25.0%
Our effective tax rate was 18.9%, 17.9% and 17.0% in FY2010, FY2011 and FY2012 respectively. The difference between the effective tax rate and the statutory rate was mainly due to certain expenses such as donations and upkeep of motor vehicles not being deductible for tax purposes.
REVIEW OF RESULTS OF OPERATIONS
FY2010 vs FY2011
Revenue
Our revenue increased by approximately S$1.5 million or 2.2% from S$68.6 million in FY2010 to S$70.1 million in FY2011.
Our revenue from our Rigging and Lifting Business increased by approximately S$2.2 million or 3.3% from S$65.4 million in FY2010 to S$67.6 million in FY2011, being a refl ection of our overall increase in sales to our customers during that period.
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Sales to our Europe and Malaysia based customers increased by approximately S$3.9 million mainly due to one-off projects obtained by two (2) of our customers in these two (2) regions, while sales to our Singapore based customers declined by approximately S$2.3 million due mainly to a decrease in orders from one of our major customers.
We typically experience a fl uctuation in revenue contribution from our customers in each fi nancial year due to the project based nature of our industry, whereby our customers’ projects typically differ in their scope and size.
Revenue from our Ship Supply Business decreased by approximately S$0.7 million or 21.5% from S$3.2 million in FY2010 to S$2.5 million in FY2011 due mainly to a decrease in orders from one of our major customers.
Gross profi t and gross profi t margin
Overall gross profi t increased by approximately S$8.7 million or 53.2% from S$16.3 million in FY2010 to S$25.0 million in FY2011. The corresponding gross profi t margin increased from approximately 23.7% in FY2010 to approximately 35.6% in FY2011.
The increase in our gross profi t margin in FY2011 compared to FY2010 was due to:
(i) higher proportion of sales secured on an ex-stock basis in FY2011 compared with FY2010 (as opposed to those made on an indent basis). When we sell on ex-stock basis, we manufacture or supply the products from our existing stock-on-hand for immediate delivery to our customers. When we sell on indent basis, we purchase components from our suppliers only upon securing confi rmed orders from our customers. Generally we are able to command better margins for sales made on an ex-stock basis because these sales are made to customers that demand shorter delivery times which we are able to meet or fulfi ll. Our ability to secure more sales on an ex-stock basis was a result of our strategy of maintaining a comprehensive range of inventory level in terms of quantity and product range; and
(ii) a write back of the carrying value of inventories of approximately S$0.8 million in FY2011 as a result of higher net realisable value of the inventories assessed by an independent valuer on the back of improving market conditions compared to a write down of carrying value of inventories of approximately S$11.5 million for FY2010 when the net realisable value of the inventories was assessed to be lower as a result of the global economic crisis, as well as due to our Company’s strategy of positioning itself as an inventory specialist.
Other income
Other income decreased by approximately S$0.7 million from S$1.1 million in FY2010 to S$0.4 million in FY2011. The decrease was mainly due to (i) the decline in net foreign exchange gain of approximately S$0.4 million; (ii) lower government grants under the Jobs Credit Scheme of approximately S$0.1 million due to the expiry of the scheme in June 2010; (iii) decline in gain recorded on disposal of property, plant and equipment of approximately S$0.1 million; and (iv) absence of any write back of trade payables in FY2011 as compared to FY2010 when there was a write back of trade payables amounting to approximately S$0.1 million that were outstanding for more than seven (7) years.
Distribution costs
Distribution costs increased by approximately S$0.3 million or 14.3% from S$2.0 million in FY2010 to S$2.3 million in FY2011. The increase was mainly due to the increase in freight and handling charges of approximately S$0.2 million and our advertisement and promotion costs of approximately S$0.1 million. These increases are in line with the higher revenue recorded by our Group in FY2011.
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Administrative expenses
Administrative expenses increased marginally by approximately S$0.2 million or 4.0% from S$4.9 million in FY2010 to S$5.1 million in FY2011. The increase was mainly due to (i) an increase in donations made mainly to charitable organisations by our Company of approximately S$0.14 million; and (ii) an increase in general expenses by approximately S$0.2 million mainly due to the annual company dinner held in FY2011 which did not take place in FY2010. This was partially offset by the decrease in professional fees incurred of approximately S$0.2 million arising from fewer projects which were secured during the fi nancial year that required third party advice.
Other operating expenses
Other operating expenses decreased by approximately S$0.4 million or 91.3% from S$0.45 million in FY2010 to S$0.04 million in FY2011. The decrease was mainly due to a decline in (i) bad debts written off of approximately S$0.2 million; and (ii) allowance for doubtful trade receivable of approximately S$0.2 million.
Interest expense
Interest expense was relatively stable at approximately S$1.6 million in line with the stable average bank borrowings in FY2010 which stood at approximately S$36.2 million compared to FY2011 at S$35.9 million.
Profi t before income tax
As a result of the foregoing, profi t before income tax increased by approximately S$7.8 million or 92.5% from S$8.5 million in FY2010 to S$16.3 million in FY2011.
FY2011 vs FY2012
Revenue
Our revenue increased by approximately S$1.3 million or 1.9% from S$70.1 million in FY2011 to S$71.4 million in FY2012.
Our revenue from our Rigging and Lifting Business increased by approximately S$1.3 million or 2.0% from S$67.6 million in FY2011 to S$68.9 million in FY2012. Sales to our Singapore based customers increased by approximately S$3.3 million as orders from one of our major customers increased in FY2012 and sales to our Asia based customers increased by approximately S$4.2 million mainly due to more orders awarded to our customers in Asia. This increase was partially offset by a decrease in sales to our Europe and Malaysia based customers by S$5.6 million mainly due to one-off projects obtained by two of our customers in these two (2) regions in FY2011.
Revenue from our Ship Supply Business remained constant at approximately S$2.5 million for both FY2011 and FY2012.
Gross profi t and gross profi t margin
Overall gross profi t decreased by approximately S$1.3 million or 5.1% from S$25.0 million in FY2011 to S$23.7 million in FY2012 with a decrease in the gross profi t margin from approximately 35.6% in FY2011 to approximately 33.1% in FY2012.
The decline in our gross profi t margin was mainly due to:
(i) the effects of the rising direct material costs in line with the rising prices of the raw materials such as steel, offset by a further decline in the exchange rate of US$ against S$. In FY2012, 58.8% of our purchases were in US$ versus 14.2% of our sales in US$;
(ii) increase in direct labour costs of approximately S$0.6 million mainly due to higher number of production workers to cater for increase in sales, for which we were unable to pass on the increased costs to our customers; and
(iii) increase in other direct costs of approximately S$0.2 million mainly due to increase in depreciation for plant and machinery of approximately S$0.2 million.
69
Other income
Other income increased by approximately S$0.1 million from S$0.4 million in FY2011 to approximately S$0.5 million in FY2012. The increase was mainly due to the increase in gain on disposal of motor vehicles of approximately S$0.3 million which was partially offset by a decline in net foreign exchange gain of approximately S$0.2 million.
Distribution costs
Distribution costs decreased marginally by approximately S$0.1 million or 5.4% from S$2.3 million in FY2011 to S$2.2 million in FY2012 mainly from lower advertising expenses of S$0.1 million.
Administrative expenses
Administrative expenses decreased by approximately S$0.5 million or 9.6% from S$5.1 million in FY2011 to S$4.6 million in FY2012. The decrease was mainly due to (i) decline in entertainment and travelling expenses by approximately S$0.3 million and S$0.1 million respectively; (ii) decline in general expenses by approximately S$0.3 million mainly due to the annual company dinner held in FY2011, which did not take place in FY2012; and (iii) partially offset by the increase in professional fees of approximately S$0.2 million arising mainly from the preparation for the Offering.
Other operating expenses
Other operating expenses increased by approximately S$0.2 million from S$0.04 million in FY2011 to S$0.2 million in FY2012. The increase was mainly due to foreign exchange loss of S$0.2 million recognised in FY2012 while there were no foreign exchange losses recognised in FY2011.
Interest expense
Interest expense decreased by approximately S$0.1 million or 5.7% from S$1.6 million in FY2011 to S$1.5 million in FY2012. The decrease was mainly due to lower bank overdraft interest of approximately S$0.1 million due to lower average bank overdraft balance (FY2012: S$2.0 million, FY2011: S$3.1 million), lower bank bills payable interest of approximately S$0.3 million mainly due to lower interest rate obtained from bank, which was partially offset by an increase of approximately S$0.3 million in term loan interest due to larger term loan balances.
Profi t before income tax
As a result of the foregoing, profi t before income tax decreased by approximately S$0.7 million or 4.2% from S$16.3 million in FY2011 to S$15.6 million in FY2012.
REVIEW OF OUR FINANCIAL POSITION
Current Assets
Our current assets comprise inventories, trade receivables, other receivables and cash and bank balances.
As at 31 March 2012, our current assets amounted to approximately S$110.4 million, representing approximately 92.6% of our total assets. The largest component of our current assets, inventories amounted to approximately S$87.0 million, representing 78.8% of our current assets. Inventories comprise of wire ropes and related fi ttings and accessories such as shackles and sockets. Trade receivables amounted to approximately S$18.8 million, representing approximately 15.7% of our total assets. Cash and bank balances was S$4.2 million while the remaining balance related to other receivables was approximately S$0.5 million. Other receivables are mainly made up of prepaid expenses and deposits.
Non-Current Assets
Our non-current assets comprise property, plant and equipment which include leasehold land and buildings, plant, machinery and equipment, crane, motor vehicles, furniture and fi ttings, offi ce equipment, an enterprise resource planning software which is currently under development and construction-in-progress factory in Malaysia.
As at 31 March 2012, our non-current assets amounted to approximately S$8.9 million, representing approximately 7.4% of our total assets.
70
Current Liabilities
Our current liabilities comprise trade payables, other payables, current portion of bank borrowings, current portion of fi nance leases and income tax payable.
As at 31 March 2012, our current liabilities amounted to approximately S$61.9 million, representing approximately 73.4% of our total liabilities. The current portion of our bank borrowings amounted to approximately S$47.2 million or 76.2% of our current liabilities while the current portion of our fi nance leases amounted to approximately S$0.9 million, representing 1.5% of our current liabilities. Trade payables amounted to approximately S$9.9 million, representing 16.0% of our current liabilities. Other payables amounted to approximately S$0.5 million, representing 0.8% of our current liabilities. Other payables comprise mainly accrued operating expenses and other non-trade amounts due to outside parties. Our income tax payable amounted to approximately S$3.4 million or 5.5% of our current liabilities.
Non-Current Liabilities
Our non-current liabilities comprise long term bank borrowings, fi nance leases and deferred tax liability.
As at 31 March 2012, our non-current liabilities amounted to approximately S$22.5 million, representing approximately 26.6% of our total liabilities. This comprised mainly bank borrowings of approximately S$20.7 million representing 92.2% of our non-current liabilities and fi nance leases of approximately S$1.6 million representing 7.2% of our non-current liabilities. The balance of our non-current liabilities comprised our deferred tax liability of approximately S$0.1 million.
Capital and Reserves
Capital and reserves comprise share capital, retained earnings and translation reserve. As at 31 March 2012, our capital and reserves amounted to approximately S$35.0 million.
LIQUIDITY AND CAPITAL RESOURCES
Our operations have been funded through a combination of capital contributions from our shareholders, cash generated from our operating activities and bank borrowings. The principal uses of these funds have been for working capital and capital expenditures. Please refer to the section entitled “Capitalisation and Indebtedness” of this Prospectus for further details on our bank borrowings as at the Latest Practicable Date.
Our Directors are of the opinion that, after taking into account our Group’s internal resources, cash fl ow generated from operating activities and available banking facilities (as set out in the section “Capitalisation and Indebtedness”), our Group has suffi cient working capital to meet our present requirements as at the date of lodgement of this Prospectus.
We set out below a summary of our Group’s cash fl ow statements for the Period under Review. The following summary of cash fl ow statements should be read in conjunction with the full text of this Prospectus, including the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus.
FY2010 FY2011 FY2012
S$’000 S$’000 S$’000
Net cash (used in)/from operating activities (4,612) 8,797 3,111
Net cash (used in)/from investing activities (205) 268 (1,294)
Net cash from/(used in) fi nancing activities 3,737 (8,633) 5,874
Net (decrease)/increase in cash and cash equivalents (1,080) 432 7,691
Effect of exchange rate changes on cash and cash equivalents (6) (9) 5
Cash and cash equivalents (overdrawn) at beginning of the fi nancial year (2,833) (3,919) (3,496)
Cash and cash equivalents (overdrawn) at end of the fi nancial year (3,919) (3,496) 4,200
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FY2010
Net cash used in operating activities
In FY2010, we generated net cash of S$23.2 million from operating activities before changes in working capital.
Our net working capital outfl ow amounted to approximately S$25.0 million.
The net working capital outfl ow was due mainly to: (i) an increase in inventories of approximately S$26.3 million as we continued to increase the range
and quantity of our products and components in anticipation of market demand and also attractive pricing; and
(ii) a decrease in trade payables of approximately S$6.5 million as we made payments in respect of a larger proportion of our trade payables,
and was partly offset by:
(a) a decrease in trade receivables of approximately S$5.0 million which was in line with the lower revenue earned in FY2010;
(b) decrease in other receivables of approximately S$2.1 million arising from the repayment of amounts due from directors, shareholders and related parties; and
(c) increase in other payables of approximately S$0.7 million mainly due to over-payment by certain customers in FY2010.
In FY2010, we paid income tax of approximately S$2.8 million.
Overall our net cash used in operating activities in FY2010 amounted to approximately S$4.6 million.
Net cash used in investing activities
Net cash used in investing activities amounted to approximately S$0.2 million.
This was mainly due to: (i) cost of construction-in-progress for a computer software to be installed for our Group and
renovation of leasehold property amounting to, in aggregate, approximately S$0.5 million; and (ii) purchase of property, plant and equipment of approximately S$0.7 million (out of which S$0.6
million was acquired under fi nance lease agreements).
This was partially offset by proceeds arising from disposal of motor vehicles of approximately S$0.4 million.
Net cash from fi nancing activities
Net cash from fi nancing activities amounted to approximately S$3.7 million in FY2010.
This was mainly due to the increase in net utilisation of bank borrowings and bank bills payable by approximately S$10.1 million mainly to fund the purchase of inventories which was partially offset by:
(i) payment of dividends amounting to approximately S$3.6 million;
(ii) payment of interest on bank borrowing of approximately S$1.6 million; and
(iii) repayment of obligations under fi nance leases of approximately S$1.2 million.
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FY2011
Net cash from operating activities
In FY2011, we generated net cash of S$18.6 million from operating activities before changes in working capital.
Our net working capital outfl ow amounted to approximately S$8.0 million.
The net working capital outfl ow was due mainly to:
(i) an increase in trade receivables of approximately S$5.9 million arising from the higher sales made towards the end of the fi nancial year which remained outstanding as at 31 March 2011;
(ii) a decrease in trade payables of approximately S$2.6 million as we made payments in respect of a larger proportion of our trade payables;
(iii) an increase in inventories of approximately S$0.2 million; and
(iv) a decrease in other payables of approximately S$0.5 million due to the absence of any over-payment by customers as in FY2010.
This was partly offset by a decrease in other receivables of approximately S$1.2 million arising from proceeds from the surrender of life insurance policies that covered certain key management of our Group for which our Group acts as the policy contract benefi ciary. These life insurance policies had previously been taken up by our Group to insure the lives of key personnel of our Company. Subsequently, following a review by our Group of our key management insurance policies, it was determined that such coverage was excessive in light of the assessed risks and the insurance coverage was revised to refl ect the current key management.
In FY2011, we paid income tax of approximately S$1.8 million.
Overall our net cash from operating activities amounted to S$8.8 million in FY2011.
Net cash generated from investing activities
Net cash generated from investing activities amounted to approximately S$0.3 million in FY2011.
This was mainly due to:
(i) proceeds from the disposal of available-for-sale investment of approximately S$0.5 million; and
(ii) proceeds on disposal of motor vehicles of approximately S$0.14 million,
and was partially offset by the purchase of property, plant and equipment of approximately S$0.4 million (out of which S$0.02 million was acquired under fi nance lease agreements).
Net cash used in fi nancing activities
Net cash used in fi nancing activities amounted to approximately S$8.6 million in FY2011.
This was mainly due to:
(i) the repayment of bank borrowings and bank bills payable of approximately S$15.6 million;
(ii) payment of interest on bank borrowings of approximately S$1.6 million, payment to former shareholder pursuant to the Restructuring Exercise of approximately S$1.5 million; and
(iii) repayment of obligations under fi nance leases of approximately S$1.1 million.
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This was partially offset by:
(i) a loan provided by our ultimate holding company of approximately S$7.3 million; and
(ii) new bank borrowings of approximately S$3.9 million for working capital purposes.
FY2012
Net cash from operating activities
In FY2012, we generated net cash of S$17.7 million from operating activities before changes in working capital.
Our net working capital outfl ow amounted to approximately S$12.5 million.
This was due mainly to:
(i) an increase in inventories of approximately S$10.1 million as we continued to increase the range and quantity of our inventories in anticipation of market demand; and
(ii) a decrease in trade payables of approximately S$4.3 million as we made payments in respect of a larger proportion of our trade payables.
This was partly offset by a decrease in trade receivables of approximately S$2.1 million arising from increased efforts to monitor collections.
We paid income tax of approximately S$2.2 million. Overall our net cash from operating activities amounted to S$3.1 million in FY2012.
Net cash used in investing activities
Net cash used in investing activities amounted to approximately S$1.3 million in FY2012. This was mainly due to the purchase of property, plant and equipment of approximately S$3.1 million (out of which S$1.4 million was acquired under fi nance lease agreements) which was offset by proceeds from the disposal of motor vehicle of approximately S$0.5 million.
Net cash from fi nancing activities
Net cash from fi nancing activities amounted to approximately S$5.9 million in FY2012. This was mainly due to:
(i) proceeds from issuance of shares of S$3.0 million;
(ii) new bank borrowings of approximately S$34.0 million; and
(iii) an increase in utilisation of bank bills payable of S$9.8 million.
These proceeds were partially applied to:
(i) the payment of dividends of S$25.3 million to our shareholders in FY2012;
(ii) repayment of loan to Keh Swee of approximately S$10.8 million;
(iii) payment of interest on bank borrowings of approximately S$1.5 million; and
(iv) repayment of bank loans of approximately S$2.1 million and obligations under fi nance leases of approximately S$1.3 million.
74
CAPITAL EXPENDITURES AND DIVESTMENTS
The material capital expenditures and divestments of our Group for the Period under Review and from 1 April 2012 to the Latest Practicable Date were as follows:
FY2010 FY2011 FY2012
From 1 April 2012 to the Latest
Practicable Date
S$’000 S$’000 S$’000 S$’000
Capital Expenditure
Motor Vehicles(1) 657 14 971 –
Plant, Machinery & Equipment(1) – 216 1,758 499
Offi ce Equipment(1) 18 30 141 9
Furniture and Fittings(1) – – 49 78
Construction in progress(2) 479 147 225 305
Total Expenditures 1,154 407 3,144 891
Divestments(3)
Motor Vehicles 225 71 123 –
Plant, Machinery & Equipment – – 11 9
Offi ce Equipment – – 18 –
Total Divestments 225 71 152 9
Notes:
(1) This relates to the cost of property, plant and equipment acquired during the Period under Review. The purchases include motor vehicles, hydraulic machines, spooling machines, test machines, welding machines, load cells and generators for our operations in Singapore and Vietnam.
(2) The aggregate amount for construction in progress of approximately S$1,156,000 relates to addition and alteration to our warehouse at 17 Joo Koon Way amounting to approximately S$434,000 for the purposes of qualifying for an extension of the land lease from JTC, construction in progress for the factory in Malaysia of approximately S$519,000 and the development cost of a computer software of approximately S$203,000.
(3) This relates to the net book value of property, plant and equipment disposed off during the Period under Review. The disposal of motor vehicles relate to the disposal of motor vehicles provided to our Directors and shareholders while the disposal of plant, machinery and equipment relates to disposal of a load cell and disposal of offi ce equipment no longer in use.
The above capital expenditures were fi nanced by bank borrowings, fi nance leases and internally generated funds.
Capital commitments
As at the Latest Practicable Date, our Group has capital commitments of S$1.9 million arising from our operations in Malaysia, of which S$1.8 million is for the purchase of plant, machinery and equipment while the remaining S$0.1 million is for the construction of our factory.
OPERATING LEASE COMMITMENTS
Our operating lease commitments are in respect of our Group’s land rental, offi ce space, warehouse and dormitory. Our operating lease commitments as at 31 March 2012 and the Latest Practicable Date are as follows:
As at31 March 2012
As at Latest Practicable Date
S$’000 S$’000
Within one (1) year 692 714
Within two (2) to fi ve (5) years 1,735 1,905
After fi ve (5) years 5,716 5,523
Total 8,143 8,142
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Please refer to the section entitled “Properties and Fixed Assets” of this Prospectus for further details on our operating lease commitments in respect of our operating leases for premises.
Our Group expects to meet our operating lease commitments through our existing working capital.
FOREIGN EXCHANGE MANAGEMENT
Foreign Exchange Exposure
Transaction
Our reporting currency is in Singapore dollars. While we have a presence in Vietnam, our operations are primarily carried out in Singapore. Our sales and purchases are largely denominated and transacted in S$, US$ and EUR. For FY2010, FY2011 and FY2012, the percentage of revenue and purchases of inventories denominated in the various currencies, are as set out below:
FY2010 FY2011 FY2012
% of revenue denominated in
S$ 86.3 75.4 84.4
US$ 10.8 18.2 14.2
Others 2.9 6.4 1.4
100.0 100.0 100.0
% of purchases denominated in
US$ 69.1 58.9 58.8
EUR 15.3 17.5 16.8
S$ 13.9 21.6 22.8
Others 1.7 2.0 1.6
100.0 100.0 100.0
Purchases of inventories, on average, constitute more than 75.0% of our total operating expenditures. Other operating expenses such as staff costs are primarily denominated in S$.
To the extent that our purchases are not naturally matched in the same currency as our sales and to the extent that there are timing differences between invoicing and the payment to our suppliers, we are exposed to foreign exchange fl uctuations which may adversely affect our fi nancial results.
Currently, we do not have a formal hedging policy with respect to our foreign exchange exposure. We have not used any fi nancial hedging instruments to manage our foreign exchange risk. We will continue to monitor our foreign exchange exposure and may employ hedging instruments to manage our foreign exchange exposure should the need arise.
Prior to entering any hedging transactions, we will seek the approval of our Board on the policy for entering into any foreign exchange hedging transactions and put in place adequate procedures which will be reviewed and approved by our Audit Committee. Our Audit Committee will monitor the implementation of the policy, including reviewing the instruments, processes and practices in accordance with the policy approved by our Board.
Our net foreign exchange (gains)/losses for each of FY2010, FY2011 and FY2012 are as follows:
FY2010 FY2011 FY2012
Net foreign exchange (gains)/losses (S$’000) 663 219 (199)
As a percentage of revenue (%) 1.0 0.3 0.3
As a percentage of profi t before tax (%) 7.8 1.3 1.3
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We recorded net foreign gains of approximately S$0.7 million and approximately S$0.2 million in FY2010 and FY2011 respectively and net foreign exchange losses of approximately S$0.2 million in FY2012. As a signifi cant portion of the payments to suppliers for purchases of inventories are denominated in US$, the net foreign exchange gains in FY2010 and FY2011 were due to the depreciation of US$ against S$.
SEASONALITY
We generally do not experience any signifi cant seasonality patterns in our operations and business.
INFLATION
During the Period under Review, infl ation did not have a material impact on the performance of our Group.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in our accounting policies for the last three (3) fi nancial years from FY2010 to FY2012. Please refer to Appendix A – “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012 – Summary of Signifi cant Accounting Policies” of this Prospectus for details on our Group’s accounting policies.
77
INDUSTRY OVERVIEW
Set out below is a summary of the industry report titled “The Offshore Oil and Gas Industry – Singapore” we commissioned the Independent Market Researcher, Converging Knowledge to provide (“Industry Report ”). Converging Knowledge had drawn its analysis from the offshore O&G industry, and has based the Industry Report on a combination of primary and desktop (published resources) research. Primary research involves discreet interviews tapping on the knowledge, experience and opinions of relevant companies, industry associations, technical institutions, government bodies and academic institutions. Desktop research includes, but is not limited to, a review of local newspapers and news wires/agencies, leading industry and trade publications, websites of regulatory authority as well as relevant government agencies and websites of companies. Converging Knowledge has advised that it has prepared the Industry Report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the Industry Report. Converging Knowledge has also advised us that the Industry Report represents a true and fair view of the industry within the boundaries and limitations of secondary statistics, primary research and continued industry movements. It notes that the opinions expressed are opinions of human sources and cautions as to the subjective nature of such information. Converging Knowledge’s methodologies for identifying and collecting information and data, and therefore the information discussed in this section and the Industry Report, may differ from those of other sources, including that of our Company.
The Industry Report contains certain statements that are “forward-looking” and are based on underlying assumptions containing variables that may have changed since the date of issue. By their nature, forward-looking statements are subject to risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. No forward-looking statements contained herein should be relied upon as predictions of future events. No assurance can be given that the expectations expressed in these forward-looking statements will prove to be correct. The information in the Industry Report have not been independently verifi ed by us, the Issue Manager, Underwriter and Placement Agent, or any of our and their respective affi liates or advisors. The information may not be consistent with other information compiled within or outside Singapore. Please see the section entitled “Cautionary Note on Forward-looking Statements”. You should be aware that since the date of the Industry Report, there may have been changes in the industry and the various sectors therein which could affect the accuracy or completeness of the information in this section.
Offshore O&G refers to oil and gas exploration and drilling activities that are carried out on the ocean fl oor as well as all other support services therein. The industry is segmented into four (4) major categories – offshore O&G exploration, rig building and offshore engineering, ship repair and conversion and offshore O&G support services.
The rigging and lifting equipment market is part of the offshore O&G support services segment of the offshore O&G industry. Rigging and lifting equipment is used to hoist, lift, push or pull another object. These include products such as heavy lift slings, wire ropes and chains, all of which are built to withstand high stress levels.
The rigging and lifting equipment industry in Singapore comprises suppliers, distributors and/or manufacturers of such equipment. Many of these companies also provide other products and services and cater to other sectors beyond offshore O&G. However, the offshore O&G industry is a major contributor to the rigging and lifting equipment market.
Many rigging and lifting equipment companies operate on a smaller scale and function mainly as suppliers and distributors. Those with larger scale operations may have manufacturing capabilities to customise ropes and slings in accordance to customers’ specifi cations. In Singapore, Gaylin Holdings Limited is one of the largest players with the capabilities to manufacture large slings (diameter of at least fi ve (5)-inches and above).
Rigging and lifting equipment players are dependent on the level of activity in the exploration, development and production of oil and gas as well as capital expenditure in the offshore O&G industry. The level of activity in the offshore O&G industry is, in turn, affected by oil and gas prices and expectations of potential changes in such prices.
78
Some of the key market trends of the offshore O&G industry are summarised as follows:
The resiliency of high oil prices is pushing upstream oil and gas companies to increase exploration and production;
The decline in available resources for onshore oil and gas exploration has prompted industry
players to gear towards deepwater offshore exploration activities; Aided by technology advancements for deepwater exploration, exploration efforts into deepwater
fi elds have resulted in the demand for more fl oating production systems; and Asia will be in the forefront in terms of investments in deepsea oil and gas exploration and
production. Industry players estimate that Asian companies will increase their investments by more than 50% in deepsea exploration, drilling and production in the next four (4) years.
Prospects of the offshore O&G industry are bright, in view of contributing factors such as continued growth in deepwater drilling activities and strong rig pipeline, among others. The rigging and lifting equipment industry plays a very important role in supporting the offshore O&G industry and thus, stands to benefi t from the positive developments in offshore O&G activities. The factors spurring industry developments are discussed as follows:
More Offshore and Deepwater Prospects in Asia
Among Southeast Asian nations, drilling activities in Malaysia and Vietnam have been very active in the last three years (2009 - 2011). Several jack-up rigs were ordered during this period for delivery to these countries. Activities in oil and gas exploration and production in Malaysia are now moving offshore, mainly in West Malaysia. Vietnam reportedly ranks third in oil production among its Southeast Asian neighbours. Of recent, it has been opening up offshore options on the Ham Rong and Gau Chua-Ca Cao oilfi elds. Increased interest in Liquefi ed Natural Gas (LNG) as an alternative energy source will bring more focus to Myanmar. Myanmar is expected to offer more onshore and offshore blocks off the Rakhine, Tanintharyi and Moattama areas.
Decommissioning of Oil Rigs and Ageing Offshore Fleet
Decommissioning of ageing offshore structures is reportedly a new business segment in the Asia-Pacifi c region that is showing great potential. The decommissioning segment is growing, and industry experts predict that the market for decommissioning in Asia Pacifi c could be as high as US$32.0 billion.
Strong Rig Pipeline
The rig pipeline for 2013 is expected to be strong, with 68 rigs expected to be completed during this period. With increasing deepwater exploration, demand for drillships is on the rise. It is expected that drillships will account for approximately 34.0% of the total new-builds for this period.
79
GENERAL INFORMATION ON OUR GROUP
HISTORY AND DEVELOPMENT
Our Company was incorporated in the Republic of Singapore on 25 February 2010 under the Companies Act as a private limited company, under the name of “Gaylin Holdings Pte. Ltd.”. On 25 September 2012, our name was changed to “Gaylin Holdings Limited” in connection with our conversion to a public company limited by shares. Pursuant to the Restructuring Exercise, which was completed on 30 September 2011, our Company became the holding company of our wholly-owned subsidiaries, namely Gaylin International, Gaylin Vietnam, Gaylin Malaysia, Gaylin Power and Bridge Testing. Please refer to the section entitled “Restructuring Exercise” of this Prospectus for further details.
Our history can be traced back to 1974 when Gaylin Trading Company was set up as an unincorporated business by our founder, Mr Teo Bee Yen to carry out the business of hand splicing of wire ropes and trading ropes, chains, fi ttings and other related products. Gaylin Trading Company initially had fi ve (5) employees and carried on business at a shophouse located at Jalan Sultan / Beach Road in Singapore. Having identifi ed the growth potential of the wire rope industry, Mr Teo Bee Yen seized the opportunity to expand the business and it was corporatised and converted to a private limited company, Gaylin International. Gaylin International was incorporated on 16 February 1978 under the name “Gaylin Trading Co. (Pte.) Ltd.”.
In 1978, due to the strong customer demand, we acquired our fi rst splicing machine in order to carry out aluminum alloy ferrule splicing, which enabled us to produce mechanical-spliced wire rope slings with higher rated capacity than hand-spliced wire rope slings. This allowed us to produce mechanical-spliced wire rope slings ranging from 12mm up to 52mm in diameter.
Our Executive Director and CEO, Mr Desmond Teo, joined our Group in 1979. Following his appointment as the managing director of Gaylin International in the late 1990s, he was instrumental in the regional expansion of our Group and continually sources for investment opportunities to promote the growth of our Group’s business.
The 1980s saw a signifi cant expansion of our business. In 1981, we leveraged on the downturn in the economy to acquire a larger warehouse at Kian Teck Drive, which further supported the growth in our business operations. In 1984, as the growth of our business called for a larger warehouse facility, we relocated our operations to one of our existing warehouses at 17 Joo Koon Way, occupying approximately 74,981 sq ft. We then disposed of the warehouse at Kian Teck Drive. In 1985, we set up our ship supply department in order to complement our range of products and services for the expanding global marine industry. Between the years 1986 and 1989, we expanded our inventory to include a range of wire ropes with up to 103mm in diameter and 1,000m in length.
As part of our vision to expand internationally, we started marketing our products to customers in the global O&G and marine industries in 1989. Since then, our focus has been on developing offshore markets for our products and services.
The 1990s saw the evolution of Gaylin International to become a one-stop specialist provider of rigging and lifting solutions. Over the course of 1990s, we commenced manufacturing of cable laid slings and grommets. We also upgraded our fabrication facilities by procuring additional equipment and machineries such as a 2,000 tonne press and a 650 tonne by 100 ft long testing machine. With the testing machine, we set up Bridge Testing which serves as our in-house testing centre, enabling us to test all types of rigging and lifting products of up to a breaking load of 650 tonnes. From then onwards, our range of services was expanded to include load testing services, inspections and spooling services at our own premises, which completed our business as a one-stop specialist provider of rigging and lifting solutions.
In line with our expansion into the international market, we changed our name to “Gaylin International Pte Ltd” on 1 April 2000. Between the years 2001 and 2005, to further support the growth of our business, we procured a number of press machines, comprising a 1,000 tonne press, two (2) units of 500 tonne press, a 3,000 tonne press, a 4,500 tonne press and a 2,600 tonne by 330 ft long testing machine, expanding our then capability in load-testing services.
80
In 2004, our operations were further expanded by the acquisition of a leasehold property at 7 Gul Avenue occupying an aggregate land area of approximately 241,969 sq ft, which houses our present head offi ce, warehouse and fabrication facilities. At the same time, we continued to utilise 17 Joo Koon Way as our warehouse.
Buoyed by the growth of our business, our Group also saw the expansion of our business operations into Vietnam so as to better serve our customers with operations in Vietnam. In 2008, we commenced full operations in Vietnam by establishing an operating subsidiary with one (1) press machine and one (1) testing machine.
Since the early days, our focus has been on the procurement and distribution of quality products from suppliers from all over the world. We had procured wire ropes of brand names from various countries, including Japan (such as Shinko and Tokyo Rope), South Korea (such as DSR and Kiswire) and the UK (such as Bridon). We had also procured chains and fi ttings of brand names from various countries such as Canada (such as Dominion chain), South Africa (such as Mckinon chain) and the USA (such as Campbell chain).
In 2004, we began to distribute high performance synthetic ropes manufactured by Samson Rope, enabling us to supply higher quality synthetic rigging and lifting products to our customers. From 2007, we secured distributorship from Slingmax for the manufacture of Twin-Path Slings, Single-Path Slings, Check-Fast System, Gator-Laid Slings, Gator-Max Slings, Gator-Flex Slings, Tri-Flex Slings and T&D Ultra-Flex Slings.
As a testament to our quality commitment, we have been recognised with international ISO 9002 certifi cation in respect of the manufacture of wire rope slings since 1998. The latest certifi cation (ISO 9001:2008) was given to us in 2012. Further, as a testament to our achievement and performance, we were conferred the “Enterprise 50 (E50) Award” in 2009 and the “2011 Singapore Brand Award” in 2011. In 2012, we received the “Promising SME 500 Award” in the platinum category.
As part of our plans to expand our operations overseas, we have commenced the construction of our new facilities in Malaysia in February 2012 and we expect our Malaysian operations to commence in December 2012. Please refer to the section entitled “Business Strategies and Future Plans” of this Prospectus for further details. In addition, as part of our efforts to streamline our inventory management process, we set up Gaylin Power on 25 July 2011 to hold part of our wire ropes inventory.
BUSINESS OVERVIEW
We are one of the largest Singapore-based multi-disciplinary specialist providers of rigging and lifting solutions to the global offshore O&G industry.
We supply and manufacture rigging and lifting equipment. We also provide a wide range of engineering services to our customers who require customisation or manufacturing of products specifi c to their requirements. Such engineering services include the design, fabrication, testing and certifi cation of rigging and lifting equipment.
Our rigging and lifting equipment comprises a wide range of products such as heavy lift slings and grommets, wire rope slings, crane wire, mooring equipment and related fi ttings and accessories.
Our customers operate mainly in the global offshore O&G industry which demands higher precision specifi cations in our products. Due to our comprehensive range of inventory, our years of experience and our engineering capabilities, we pride ourselves in being able to respond to these needs quickly and effi ciently. This ability allows us to be a one-stop solutions provider for our customers.
In addition, as part of our value-added customer service, we supply a wide range of ship stores and equipment to ships and oil rigs.
We are primarily based in Singapore. We also have an operating subsidiary in Vietnam, and a subsidiary in Malaysia which is expected to commence operations in December 2012. Our sales and distribution markets comprise mainly Asia, Oceania, Europe, the Middle East and Africa.
81
OUR PRODUCTS AND RELATED SERVICES
We have a team of experienced engineers and technicians to design, engineer and fabricate customised items to meet the customers’ requirements and specifi cations. A brief description of the products and related services we provide is as follows:
A. Rigging and Lifting Equipment
(a) Heavy Lift Slings and Grommets
We are a specialist manufacturer of heavy lift slings and grommets, which are fabricated from synthetic or steel wire ropes. Heavy lift slings and grommets are typically used for lifting heavy and complex structures, such as the installation of offshore jacket platforms.
We currently provide a range of heavy lift slings and grommets which can be broadly described as follows:
Product Description
(i) Cable laid slings and grommets
Our cable laid slings and grommets are manufactured in accordance with IMCA M 179 specifi cations. We fabricate cable laid slings and grommets (from steel wire ropes), such as cable laid slings of 358mm in diameter and cable laid grommets of 345mm in diameter, with respective breaking loads of 6,131 and 10,200 tonnes. We use ropes from various suppliers. These products are used for heavy lifting mainly in the offshore industry.
(ii) Synthetic heavy lift sling
We fabricate high performance synthetic slings, such as synthetic slings of 203mm in diameter with a breaking load of 2,792 tonnes. We use Samson-branded ropes. These products are used for heavy lifting in the offshore industry.We also fabricate high performance synthetic heavy lift slings with a high capacity, such as slings with a capacity of 350 tonnes and with a safety factor of 5:1. We use Slingmax technology to fabricate such slings. These products had been used in many areas, such as offshore installation, aircraft lifting and vessel lifting.
(iii) Gator laid slings and grommets
We fabricate gator laid slings and grommets (from steel wire ropes) such as gator laid slings and grommets that are 304mm in diameter with a breaking load of approximately 3,138 tonnes. We use Slingmax technology to fabricate such slings. These products are used for heavy lifting mainly in the offshore industry.
(b) Wire Ropes
We offer different types of wire rope products, which are produced by established manufacturers such as Diepa, Kiswire Group, TEUFELBERGER and Usha Martin.
We are currently able to offer wire ropes measuring up to 152mm in diameter, which is the largest size (diameter) available in the market.
Wire rope comes in different constructions and sizes for different applications. We currently manufacture and supply a wide range of wire rope products which can be broadly described as follows:
Crane wire rope for offshore usage, including offshore cranes and riser tensioner applications
(iii) Steel wire rope Kiswire – South Korea Steel wire rope for the following applications:- Abandonment and recovery winches anchor lines- Drilling lines- Marine riser tensioner lines
(iv) Steel wire rope Usha Martin - India Steel wire rope for the following applications:- Anchor mooring & pennant rope- Drilling lines
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(c) Mooring Equipment
We supply various grades of anchor chains, mooring components and parts for use in the global offshore O&G industry, such as ASAC anchor chains. The various grades of such anchor chains, mooring components and parts are used to suit the requirements of different mooring systems.
(d) Related Fittings and Accessories
Our range of rigging and lifting fi ttings and accessories can be broadly described as follows:
Product Brand Description(i) Shackles Crosby – USA
GN Rope Fittings – Netherlands
Green Pin – Netherlands
Shackles are connections to chains, wire ropes and other fi ttings.
(ii) Sockets Crosby – USA
GN Rope Fittings – Netherlands
Sea-Fit – USA
Sockets are used for termination on wire rope ends so as to be able to connect other gears. Sockets used include open spelter socket, closed spelter socket, CR socket and wedge socket.
(iii) Alloy chains Gunnebo – Sweden
pewag – Austria
Yoke – Taiwan
Alloy chains are used for lifting or fastening with the connections of other gears such as connecting links and master links.
(iv) Connecting links Gunnebo – Sweden
pewag – Austria
Yoke – Taiwan
Connecting links are parts used in assembling gears, such as connecting a hook to a chain. We carry connecting links of grade 80 and grade 100.
(v) Master links GN Rope Fittings – Netherlands
Gunnebo – Sweden
Yoke – Taiwan
Master links are used on lifting slings to form, either a single leg or multiple-legs assembly; it is used as the lifting point of the set.
(vi) Hooks GN Rope Fittings – Netherlands
Gunnebo – Sweden
Yoke – Taiwan
Hooks are used for grabbing and lifting loads by means of a device such as a hoist or crane. A lifting hook is usually attached to a wire rope sling or chain sling and equipped with a safety latch to prevent the disengagement of attached load.
(vii) Lever hoist / Chain hoist
Titan – Australia
Vital – Japan
A hoist is a device used for lifting or lowering a load by means of a drum or lift-wheel around which rope or chain wraps. It may be manually operated, electrically or pneumatically driven and may use chain, fi ber or wire rope as its lifting medium. The load is attached to the hoist by means of a lifting hook.
(viii) Snatch blocks Crosby – USA Gaylin
Yoke – Taiwan
A snatch block is a specially-designed block which is used to “snatch” loads or anchors, and is designed so that the side plate can be opened or swung away for the easy insertion of a loop of rope or cable without having to thread a bitter end through the side plates, and can thus be inserted anywhere in the cable without having to remove the load fi rst to change the direction of the cable pull. We can fabricate snatch block with up to a 300 metric tonne WLL.
(ix) Remotely operated veh ic le (ROV) hooks
Crosby – USA
GN Rope Fittings – Netherlands
Triton – UK
Yoke – Taiwan
Hooks that are used for easy handling in the subsea usually with a remotely operated vehicle.
83
B. Related Services
We provide the following related services to our customers globally, mainly in the global offshore O&G industry:
(a) Load Testing
All rigging and lifting equipment supplied by us or by other suppliers have to be load tested and certifi ed with reference to standards around the world. We are equipped with a test facility of 2,600 tonnes by 330 ft and load cells ranging from fi ve (5) tonnes to 1,000 tonnes which are calibrated by Det Norske Veritas (DNV) regularly. All rigging and lifting equipment are required to have valid (less than one (1) year old) certifi cates. Prior to the expiry of the certifi cate, we are also able to provide re-certifi cation by carrying out inspection and load testing for our customers. The load test service comprises (a) scanning the gear or equipment for defects and damages, (b) assessing the level of damage to the equipment and (c) recommending continual usage or removal from service. We carry out both in-house and on-site testing and inspection. Our inspectors are competent in providing such services for rigging and lifting equipment supplied by us or by other suppliers.
(b) Spooling Services
We provide spooling services for all types of ropes. Spooling refers to the coiling and uncoiling of steel and synthetic ropes. Our spooling machines, comprising both in-house and mobile machines, are capable of handling steel and synthetic ropes with cumulative weight ranging from 15 tonnes to 250 tonnes. This is further supported by an experienced spooling team which can perform spooling jobs both onshore and offshore. As at the Latest Practicable Date, we have 17 spooling machines.
(c) Rental Services
We offer a wide range of rigging and lifting equipment for rental, such as spooling machines, heavy lift slings and grommets, anchors and related fi ttings and accessories such as lifting gears, mooring gears, load cells and water load bags.
(d) Other Fabrication Services
We also offer fabrication services to produce custom-made items to meet the customers’ requirements and specifi cations. Some of the examples are (a) horizontal or vertical sheaves with rollers as wire rope protectors for deck usage; (b) spreader bar; and (c) test frames that are used for special testing items, such as chain stoppers.
C. Ship Supply Business
As part of our value-added customer service, we are also involved in the provision of ship supplies such as ship stores and equipment to ships and oil rigs. We source these ship stores and equipment from third party suppliers all over the world.
84
OUR PROCESS FOR PROVISION OF RIGGING AND LIFTING SOLUTIONS
The following events in chronological order represent a typical process cycle for the provision of rigging and lifting solutions:
Receiving enquiries from customers
Check materials / components availability and procurement (if necessary)
Design / Fabrication / Assembly (if required)
Collection or delivery Undertake and/or supervision of on-site installation
and testing (if required)
Quality assurance, inspection and testing
Provision of quotation / recommendation
Receiving enquiries from customers
We typically receive enquiries from our customers, who provide us with the type of product / service required and other relevant information (such as the intended use of such product, specifi cations and expected delivery time).
Checking materials / components availability and procurement (if necessary)
Upon receipt of enquiries from our customers, we will check the availability of the materials and components required in our inventory based on the customer’s enquiry. It has been our strategy to maintain a ready supply of main materials, namely wire ropes, and other related fi ttings and accessories in our inventory to cater to the immediate needs of our customers. In the event of insuffi cient inventory or unavailable stock, we will obtain price quotations from our suppliers for such materials and/or components.
Provision of quotation / recommendation
Our sales team will provide a price quotation to the customer. We will, if necessary, make recommendations or propose the appropriate equipment and such other necessary modifi cations for the consideration of our customers, taking into account the customers’ intended use as well as budget.
If the price quotation is acceptable, the customer will then issue us the purchase order and we will fi nalise the technical specifi cations of the equipment for procurement and/or production.
In the event of insuffi cient inventory or unavailable stock, we will then procure the relevant materials and/or components to meet the customers’ orders.
85
Design / Fabrication / Assembly (if required)
Design, fabrication and assembly works, if required, are carried out by trained and qualifi ed personnel during this phase. All works are performed and monitored based on specifi ed procedures or work instructions. Clear specifi cations for such processes are communicated to the team performing the task to ensure compliance with safety and specifi cation requirements.
All design, fabrication and assembly works will be carried out in accordance with contract specifi cations.
Quality assurance, inspection and testing
Our operations personnel will conduct inspections and load tests prior to delivery of each product based on our customers’ requirements and specifi cations. Please refer to the section entitled “Quality Control” of this Prospectus for more details.
Collection or delivery and, if required, undertake and/or supervision of on-site installation and testing
Upon completion of the fi nal quality assurance inspection by our operations personnel and, depending on our customers’ requirements, with the representative of our customers’ local offi ces, we will arrange for the fi nished products to be either collected by customers from our premises or delivered to our customers’ local or overseas sites.
Depending on the terms of our contract, we may also supervise and/or undertake the installation of the equipment. In the event our contract requires us to supervise and/or undertake the installation of the equipment on-site, we will also conduct the relevant load tests to ensure the equipment meets the requisite specifi cations. Load test reports and/or certifi cates are also issued to the customers post testing.
QUALITY CONTROL
We have established the following quality assurance and control system to ensure consistency in the quality of our products and services that we supply:
(a) Incoming product / Material handling
Upon the receipt of products or materials at our warehouse, we will cross-check them against the packing list or delivery order provided by our suppliers as a preliminary check. Thereafter, detailed checks will be conducted to ensure that the correct products or materials, the right quantities are delivered and that the technical specifi cations are met. Depending on the nature of products or materials, detailed inspections and/or tests will be conducted. In the event of any discrepancies in the quantity or quality of products or materials delivered to us, or if the products or materials do not conform to the specifi cations stated in the delivery order, such products or materials will be rejected and returned to our suppliers.
(b) In-process and outgoing product quality procedures
During and after fabrication or assembly of the required rigging and lifting equipment, we conduct various inspections and tests to ensure that the fi nished products conform to our customers’ specifi cations.
We will conduct inspections and tests on all our products prior to delivering the same to our customers. Where required by our customers or under the terms of the relevant contracts, we will also supervise the installation and testing of the rigging and lifting equipment on-site to ensure that they meet the requisite specifi cations.
As a testament to our commitment to quality, we have been awarded the international ISO 9002 certifi cation in respect of the manufacture of wire rope slings since 1998. We were awarded the latest certifi cation (ISO 9001:2008) in 2012.
During the period 1 April 2009 up to the Latest Practicable Date, we had not received any
signifi cant complaints from customers of our products and services.
86
AWARDS AND CERTIFICATIONS
Our commitment to excellence is evidenced by the following awards and certifi cations which we have received:
Award Award authority Date of award
Circle of Excellence in Offshore & Marine Industry Circle of Excellence Singapore 2012
Promising SME 500 Award Small Medium Business Association 2012
2011 Singapore Brand Award 2011 Singapore Brands 2011
Enterprise 50 (E50) Award The Enterprise 50 Association 2009
As a testament to our commitment to quality, we have been recognised with international ISO 9002 certifi cation in respect of the manufacture of wire rope slings since 1998. The latest certifi cation (ISO 9001:2008) was awarded to us in 2012.
MARKETING AND SALES
Our global marketing and sales activities are led by our Executive Director and CEO, Mr Desmond Teo, with the assistance of our Marketing and Sales Director, Ms Jessica Teo. They are responsible for formulating our marketing and sales strategies and conducting marketing activities to promote our products and services to local and overseas markets. As at the Latest Practicable Date, they are assisted by 11 staff based in Singapore, two (2) staff based in Vietnam and one (1) staff based in Malaysia. In addition, we have also appointed an agent to represent us in Hong Kong and the PRC.
A. Direct Sales and Marketing Activities
Our sales team is primarily based in Singapore and is responsible for maintaining and enhancing our customer relationships as well as sourcing for business opportunities. Our sales team conducts regular local and overseas customer visits to increase our understanding of their requirements so as to secure more orders, as well as to promote our products and services to prospective customers. Furthermore, we encourage having an open line for feedback from our customers on our products and services. This will enable us to better understand their business needs and to recommend suitable solutions which cater to their specifi c needs.
Through our direct sales and marketing efforts over the years, we have established an extensive customer base in both the local and overseas markets, comprising mainly Asia, Oceania, Europe, the Middle East and Africa. In addition, we have a subsidiary operating in Vietnam which facilitates our direct sales and marketing activities in Vietnam.
B. Participation in Trade Fairs and Exhibitions
We attend and/or participate regularly in major trade exhibitions and conferences including the following:
(i) Australasian Oil & Gas (AOG) Exhibition & Conference in Perth, Australia;
(ii) Offshore South East Asia (OSEA) Conference & Exhibition in various cities in South East Asia;
(iii) Offshore Technology Conference (OTC) in Houston, Texas;
(iv) Offshore Northern Seas (ONS) Exhibition in Stavanger, Norway;
(v) Rio Oil & Gas Expo and Conference in Rio de Janeiro, Brazil; and
(vi) Offshore Korea 2012 in Busan, South Korea.
We also participate jointly with our suppliers (such as GN, Samson Rope, TEUFELBERGER and Yoke) in some of the trade exhibitions from time to time.
87
We believe that, through our participation in trade exhibitions, we will be able to raise our corporate profi le, market our products and services to an international audience and at the same time generate new sales.
C. Advertisements
We advertise our products and services via print media particularly in publications with a focus on the global offshore O&G industry (such as “Upstream”, “Wire Rope News and Sling Technology” and “Oil & Gas Asia”).
In addition, we advertise through our website (www.gaylin.com) which contains information on our profi le, contact details and range of products and services. We also receive enquiries from prospective customers through referrals from our existing suppliers and customers. Our sales team follows up closely on these sales leads in order to convert them into successful sales.
We believe that our sales and marketing activities have heightened our profi le in the global offshore O&G market and provided us with an effective tool for marketing our products and services to our customers.
MAJOR CUSTOMERS
Our customers are located mainly in Asia, Oceania, Europe, the Middle East and Africa. The products that they purchase from us may not necessarily be deployed in the country or countries where they are situated at. The products are typically deployed at project areas in which our customers are involved in, which could be anywhere globally.
A large proportion of our customers comprise mainly companies operating in the global offshore O&G industry, including vessel (such as anchor handling tugs) and oil rig owners and operators, charterers, shipbuilders and drilling and mooring contractors. Our Group’s key customers in the past three (3) fi nancial years include Bourbon Group, Britoil Offshore, DOF Group, Technip Group, Acteon Group and Sapura Acergy Sdn. Bhd, which are companies in the engineering, shipbuilding and rig-building business in the offshore O&G and marine industries. The following table sets forth our customers which accounted for fi ve per cent. (5.0%) or more of our total sales for each of the past three (3) fi nancial years. Customers that are, to the best of our knowledge, related to one another have been grouped together and treated as a single customer.
Percentage of our total sales
Name of Customers Products FY2010 FY2011 FY2012
Acteon Group Supply of rigging and lifting equipment and provision of related services
4.7 3.6 5.5
Britoil Offshore Supply of rigging and lifting equipment and provision of related services
4.0 1.4 5.3
DOF Group Supply of rigging and lifting equipment and provision of related services
0.2 4.4 5.2
Our Directors are of the opinion that our business and profi tability are currently not dependent on any single customer or on any particular industrial, commercial or fi nancial contract with any customer.
To the best of their knowledge, our Directors are not aware of any information or arrangement which would lead to a cessation or termination of our current relationship with any of our key customers.
As at the date of this Prospectus, none of our Directors, Substantial Shareholders or their associates has any interest, direct or indirect, in any of the above major customers.
88
MAJOR SUPPLIERS
We purchase our products and components for our products from various suppliers, including established international suppliers operating in Europe, India, Malaysia, PRC, Singapore, South Korea and USA. The key considerations in selecting our suppliers include the quality of their products, pricing, services and timeliness of delivery.
The following table sets forth our suppliers accounting for fi ve per cent. (5.0%) or more of our total purchases for each of the past three (3) fi nancial years. Suppliers that are, to the best of our knowledge, related to one another have been grouped together and treated as a single supplier.
Name of supplier
Products / Componentsfor Products
Percentage of our total purchasesFY2010 FY2011 FY2012
Dae Kwang Co., Ltd. (“Dae Kwang”)
Related fi ttings & accessories 7.9 1.1 1.1
Kiswire Group General purpose wire rope 18.8 21.9 19.7
TEUFELBERGER Crane rope 7.3 8.4 9.7
Usha Martin General purpose wire rope 22.4 13.5 17.2
Our total purchases from Dae Kwang declined between FY2010 and FY2012 due to available inventory which was previously accumulated and was suffi cient to meet our customers’ demand. For TEUFELBERGER, as a percentage of our total purchases, an increase was registered due to the purchase of crane ropes required by our customers. Our total purchases from each of Kiswire Group, Usha Martin and Zhenjiang Hansen fl uctuated year-on-year due mainly to the fl uctuating demand for their products from our customers and our procurement policy of maintaining suffi cient inventory of their products.
We were given certain awards by our suppliers which are as follows:
Supplier Award Year
TEUFELBERGER Most Successful TEUFELBERGER Distributor Worldwide
Highest Turnover of TEUFELBERGER Distributors Worldwide
2008 and 2011
2011
Largest TEUFELBERGER Distributor Worldwide 2012
Usha Martin Biggest Distributor of Usha Martin for Asia Pacifi c Region 2008, 2009, 2010, and 2011
We have the following exclusive arrangements with some of our major suppliers:
Name of supplier Key Terms of Distributorship Arrangements
Kiswire Ltd Sole distributorship for all of Kiswire Group’s products.
TEUFELBERGER Sole distributorship for all of TEUFELBERGER’s crane rope products.
The exclusive agreements with our major suppliers have expiry dates which are more than fi ve (5) years away.
Save as disclosed, we do not have any other exclusive long-term arrangements with our major suppliers.
Our Directors believe that our business and profi tability will not be materially affected by the loss of any single supplier or any particular industrial, commercial or fi nancial contract with any supplier.
89
To the best of their knowledge, our Directors are not aware of any information or arrangements which would lead to a cessation or termination of our current relationship with any of our major suppliers.
As at the date of this Prospectus, none of our Directors, Substantial Shareholders or their associates has any interest, direct or indirect, in any of the above major suppliers.
CREDIT MANAGEMENT
Credit policy to our customers
We typically give our existing customers credit terms of between 30 and 90 days and require payment on delivery for new customers. The credit terms granted to these existing customers are determined based on their fi nancial background and creditworthiness, the transaction volume, payment history and length of relationship with us. Our fi nance department regularly monitors and oversees payment from our customers.
We will perform credit evaluation on debtors who have overdue debts. In addition, for debtors with payments outstanding for more than 360 days, we will make allowance for doubtful trade receivables on a case-by-case basis, depending on the creditworthiness of the debtor at the relevant time. Doubtful trade receivables (where provision has not been previously made) will be written off after legal proceedings have been concluded and such debts are deemed not recoverable.
The allowances for doubtful trade receivables, trade receivables written off and average trade receivables turnover of our Group for the Period under Review are set out below:
FY2010 FY2011 FY2012
Allowance for doubtful trade receivables made during the year (S$’000)
214 36 –
As a % of total revenue 0.3% 0.1% –
Trade receivables written off during the year (S$’000) 107 2 12
Average trade receivables turnover (days) (1) 94 93 101
Note:
(1) The average trade receivables turnover days = (average trade receivables / revenue) x 365.
Our average trade receivables turnover days remained generally constant for FY2010 and FY2011 and increased by eight (8) days in FY2012, mainly due to higher sales in the last quarter of FY2012.
Our total trade receivables as at 31 March 2012 amounted to approximately S$18.8 million. The ageing schedule of the balance of our trade receivables (net of allowances for doubtful trade receivables) as at 31 March 2012 and the collection as at the Latest Practicable Date was as follows:
Number of months past due date
% of trade receivables as
at 31 March 2012
% of trade receivables collected as at Latest
Practicable Date
Not past due 38.2 32.6
Less than 1 month 31.1 28.8
1 – 2 months 5.9 4.7
2 – 3 months 7.1 7.0
3 – 6 months 9.3 8.0
6 – 12 months 6.7 5.8
More than 12 months 1.7 1.3
As at the Latest Practicable Date, approximately 88.2% of the trade receivables as at 31 March 2012 had been collected. To the best of our Company’s knowledge, our Company does not foresee any material diffi culties with the collection of the balance of our trade receivables as at 31 March 2012.
90
Credit terms from our suppliers
Generally, our suppliers grant us credit terms ranging from 30 to 90 days from delivery of products. Nonetheless, we have from time to time been granted extensions to the payment terms. The payment terms granted by our suppliers vary from supplier to supplier and are also dependent on, inter alia, the size of the transaction and our relationship with the suppliers.
Our average trade payables turnover days during the Period under Review were as follows:
FY2010 FY2011 FY2012
Average trade payables turnover (days) (1) 142 124 91
Note:
(1) The average trade payables turnover days = (average trade payables / cost of sales) x 365.
Our average trade payables turnover days declined during the Period under Review as we were able to make payments in respect of a larger proportion of our trade payables.
RESEARCH AND DEVELOPMENT
We do not carry out any research and development activities and have not incurred any research and development expenses for the Period under Review.
We are constantly leveraging on our technical expertise and industrial knowledge to enhance our rigging and lifting solutions for wider applications in order to meet our customers’ changing needs and requirements.
INTELLECTUAL PROPERTY
As at the Latest Practicable Date, our Group has registered and applied to register the following trademarks:
TrademarkPlace of
application ClassRegistration
date Status
Madrid Agreement and
Protocol(1)(2)
6 (Wire rope slings; heavy lift slings made of wire ropes)
28 November 2003
Registered(1)
Singapore 6 (Wire rope slings; heavy lift slings made of wire ropes)
– Pending
22 (Slings, not of metal, for handling loads; non–metallic lifting slings for handling loads)
– Pending
Malaysia 6 (Wire rope slings; heavy lift slings made of wire ropes)
– Pending
22 (Slings, not of metal, for handling loads; non–metallic lifting slings for handling loads)
– Pending
Indonesia 6 (Wire rope slings; heavy lift slings made of wire ropes)
– Pending
91
Notes:
(1) An International Registration of Marks maintained under the Madrid Agreement and Protocol with its basic registration in Singapore and designating the countries of Australia, Austria, Benelux, the PRC, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Norway, Portugal, Republic of Korea, Russian Federation, Spain, Sweden, Switzerland and the UK. The international registration is valid for ten (10) years until 28 November 2013.
(2) The application to the State Intellectual Property Offi ce of China was refused.
As at the Latest Practicable Date, our business or profi tability is not materially dependent on any registered trademark, patent or other intellectual property rights.
INVENTORY MANAGEMENT
We are an inventory specialist. Our inventory, comprising mainly wire ropes and related fi ttings and accessories, allows us to be a one stop rigging and lifting solutions provider to meet the varied demands of our customers.
We maintain a readily available stock which allows us to achieve time savings for our customers by avoiding the need to indent products. Our ability to identify market trends and the changing demands of our customers allows us to manage our inventory level effectively and respond to our customers in a timely manner.
The product range and inventory levels of our wire ropes and related fi ttings and accessories are monitored and reviewed regularly to ensure that we have suffi cient inventory on hand to meet confi rmed and/or anticipated sales. This is made based on customer feedback, historical data and anticipated market trends. Products or materials which are not available in our inventory are typically procured as and when the demand arises. As and when our inventory level falls below management pre-determined threshold, we procure the necessary products and materials to replenish our stock. Please refer to the section entitled “Risk Factors” for risks relating to our inventory holding.
The carrying value of our inventory as at 31 March 2010 and 31 March 2011 was S$74.8 million and S$75.8 million respectively. In FY2012, in line with our strategy to be an inventory specialist, and due to anticipated market demand, we increased our inventory signifi cantly.
Our total inventory carrying value as at 31 March 2012 amounted to S$87.0 million and our inventory ageing schedule as at 31 March 2012 is as follows:
Age of Inventories (%)
0 - 12 months 36.8
13 - 24 months 16.1
25 - 36 months 22.1
37 - 48 months 20.2
>48 months 4.8
Our Group’s inventory as a percentage of total current assets as at 31 March 2010, 31 March 2011 and 31 March 2012 was 83.0%, 78.0% and 78.8% respectively.
Our average inventory turnover days for the Period under Review were as follows:
FY2010 FY2011 FY2012
Average inventory turnover (days) (1) 470 609 622
Note:
(1) The average inventory turnover days = (average inventory / cost of sales) x 365.
92
We have gradually increased our inventory levels (in terms of quantity and product range) from FY2010 to FY2012 and this has resulted in the corresponding increase in our average inventory turnover days over the Period under Review.
Our accounting policies require us to record our inventories at the lower of cost and net realisable value. Net realisable value is based on a valuation by an independent valuer. Our inventory writedown/(writeback) was approximately S$11.5 million, S$(0.8 million) and S$(1.1 million) for FY2010, FY2011 and FY2012 respectively. The writedown in FY2010 was mainly due to the impact of the global economic crisis as well as due to our Company’s strategy of positioning itself as an inventory specialist. The writedown/(writeback) is included in the carrying value of our inventory.
As at the Latest Practicable Date, our Directors are not aware of any information or reasons that our Group may have to make provision or write down our inventory.
93
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95
Our head offi ce, principal warehouse and fabrication facilities are located at 7 Gul Avenue Singapore 629651. The premises at 17 Joo Koon Way Singapore 628948 are also used as our warehouse. Our warehouse and offi ce in Vietnam is located at 973-30/4 Street, Ward 11, Vung Tau City, Ba Ria Vung Tau Province, Vietnam.
Gaylin Malaysia’s facilities (“Facilities”) are currently under construction on land located within Tanjung Langsat Port (“Land”). This Land has been leased by Kiswire Neptune Sdn Bhd (“Kiswire”) from Tanjung Langsat Port Sdn Bhd (“TL Port”) pursuant to an agreement for lease dated 29 April 2008. TL Port is a wholly-owned subsidiary of Johor Corporation, a statutory body established by the Johor State Government under the 4th State Legislative Enactment of 1968 for the purposes of development of housing, trade and industries in Johor(1). We have engaged a contractor to construct the Facilities at a cost of RM1.45 million. The Facilities are approximately 90% completed as of the Latest Practicable Date. TL Port has on 4 July 2012 granted its written consent to the sub-lease of the Land by Kiswire to Gaylin Malaysia. On 11 September 2012, Gaylin Malaysia and Kiswire executed the agreement for the sub-lease of the Land.
As at 31 March 2012, the net book value of our fi xed assets comprising mainly leasehold land and building, plant, machinery, equipment and cranes and motor vehicles amounted to approximately S$8.9 million.
To the best of our Directors’ knowledge, there are no regulatory requirements or environmental issues that may materially affect our utilisation of the above properties and fi xed assets, save as disclosed under the section entitled “Government Regulations” of this Prospectus.
STAFF TRAINING
We believe that our team of staff is instrumental to the delivery of quality products and services.
All new employees are required to undergo on-the-job training under a senior staff, who shall train and equip them with the necessary knowledge and practical skills to perform their tasks. The type of training depends on the job scope of the employee.
Our operations personnel are required to undergo compulsory training on safety and product handling, as our products are used in areas where safety standards are stringent. All operations personnel are also required to undergo compulsory in-house basic training to operate splicing and testing machines. Selected operations personnel are sent for external training to operate splicing and testing machines for certain products. When we acquire new products, the supplier of these products will send trainers to train our warehouse and operations personnel on the operation of these new products.
On-the-job training is also provided for our non-operational personnel in the area of general management, finance, communications and any other relevant areas. This allows them to improve their work performance in their respective business units.
During the Period under Review, our expenses incurred for external training courses were not signifi cant.
(1) The information was obtained from the Malaysian Auditor-General’s Report on Government Agencies in Johor, 2005. We have not sought the consent of the Malaysian Auditor-General, nor have the foregoing persons provided their consent to the inclusion of the relevant information extracted from the relevant website or publication and disclaim any responsibility in relation to reliance on these statistics and information. As they have not consented to the inclusion of the above information in this Prospectus for the purposes of section 249 of the SFA, they are therefore not liable for the relevant information under sections 253 and 254 of the SFA. While reasonable actions have been taken by our Directors to ensure that the relevant statements from the relevant information are reproduced in their proper form and context, and that the information is extracted accurately and fairly from the relevant website or publication, all other parties and ourselves have not conducted an independent review of the information contained in the relevant website or publication and have not verifi ed the accuracy of the contents of the relevant statements.
96
INSURANCE
As at the Latest Practicable Date, we have taken up insurance policies in respect of the following:
(a) damage and consequential loss caused by fi re to our factory, offi ce, store, machinery, utensils and stock-in-trade;
(b) losses due to theft of inventory and/or machinery;
(c) damage and losses for certain machinery;
(d) public liability in relation to members of the public who suffer injury from our products or on our premises;
(e) workmen compensation for our employees;
(f) group hospital and surgical insurance in respect of our employees;
(g) personal accident insurance for our employees;
(h) travel insurance for certain employees; and
(i) keyman insurance for our Executive Director and CEO, Mr Desmond Teo.
Our Directors are of the view that the above insurance policies are adequate for our existing operations. However, any signifi cant damage to our operations, whether as a result of fi re or other causes, may still have a material and adverse effect on our business, results of operations or fi nancial performance. We are not insured against business interruption. If such events were to occur, our business may be materially or adversely affected. Please refer to the section entitled “Risk Factors” of this Prospectus for more details. We will review our insurance coverage annually to ensure that it is adequate and relevant.
COMPETITION
We operate in a highly competitive environment and face keen competition from new and existing competitors based in Singapore and elsewhere.
To the best of our knowledge and belief, we consider the following to be our closest competitors:
Franklin Offshore International Pte. Ltd.
KTL Global Limited
We do not believe that there are other signifi cant regional competitors.
Our Directors or Substantial Shareholders do not have any interest, direct or indirect, in any of the above competitors.
We compete for customers based on, other than pricing, the quality of our products and services, experience in handling projects, reputation and timely delivery. Even though we operate in a highly competitive environment, we believe that our competitive strengths distinguish us from our competitors.
To the best of the knowledge of our Directors, there are no published statistics that can be used to accurately measure our market share.
Please also refer to the Industry Report set out in Appendix E of this Prospectus.
97
COMPETITIVE STRENGTHS
We have identifi ed the following as our key competitive strengths:
We are one of the largest Singapore-based rigging and lifting solutions providers
As one of the largest rigging and lifting solutions provider in Singapore, we provide a full suite of services to our customers: (a) sourcing and procurement, (b) design, engineering, fabrication and assembly, (c) installation, inspection and testing and (d) after-sales services such as routine testing.
With one of the largest test facilities in Singapore, our team of highly skilled and experienced engineers and technicians are also able to produce and test a broad range of rigging and lifting products. Our test facility in Singapore can test breaking loads up to 2,000 tonnes.
We are able to deliver such solutions with a quick lead time to meet customers’ needs. This allows us to forge strong relationships with our customers and generate repeated sales.
We carry a comprehensive and well-stocked inventory of products, including a wide range of high quality products from various well-established brand names
We offer an extensive product range of wire ropes, heavy lift slings and grommets, cables and fi ttings for a variety of markets including the global offshore O&G, marine and construction industry. We carry various types of rigging and lifting products from more than 20 brands worldwide, including well-established brand names such as pewag and TEUFELBERGER from Austria, Diepa from Germany, Usha Martin from India, Green Pin, GN Rope Fittings and Technotex from the Netherlands, Gunnebo from Sweden, DSR and Kiswire from South Korea, Yoke and Wirop from Taiwan, Crosby, Samson, Slingmax and Sea-Fit from the USA.
Such a comprehensive inventory range enables us to cater to a wide range of customers and their corresponding needs. Our well-stocked inventory helps our customers to avoid delays arising from the need to indent such products. Furthermore, we are able to fulfi l our customers’ needs without them having to look for other suppliers.
We have established strong relationships with our suppliers based on many years of business dealings and transactions. For some of our suppliers, we have been in business for more than 15 years with them. These suppliers have been and continue to be responsive in fulfi lling our orders, thereby allowing us to respond to the requirements of our customers in a timely manner.
We have an experienced and committed management team with an established track record
We have a track record of over 30 years servicing the marine and offshore O&G industry. Our Group is led by our Executive Director and CEO, Mr Desmond Teo, who has more than 30 years of experience in the industry. He has been instrumental in developing the business of our Group and charting its strategic directions. Each of our Executive Directors and our CAO, Steven Teo, has over 25 years of experience in our industry. In addition, our Marketing and Sales Director, Ms Jessica Teo, has nine (9) years of experience in our industry. We also have production staff with more than 20 years of experience in the production and operations of rigging and lifting products. Their strong management capabilities, product, industry and technical knowledge, business network, ability to identify market trends and new business opportunities have contributed signifi cantly to the growth of our business and are vital to our continued growth and future development.
We believe that we are one of the leading specialist providers of rigging and lifting solutions in the region. Over the years, we have built up a successful track record as a reliable provider of rigging and lifting solutions in the global offshore O&G industry. As a testament to our achievement and performance, we were conferred the “Enterprise 50 (E50) Award” in 2009, the “2011 Singapore Brand Award” in 2011, the “Promising SME 500 Award” in 2012 and the “Circle of Excellence in Offshore & Marine Industry” in 2012.
98
We have developed strong relationships with our large and diversifi ed pool of customers
We sell to markets comprising mainly Asia, Oceania, Europe, the Middle East and Africa. Our Group’s customer base includes both local and multinational corporations mainly in the global offshore O&G industry such as Bourbon Group, Britoil Offshore, DOF Group, Technip Group, Acteon Group and Sapura Acergy Sdn. Bhd. We have been servicing some of these customers for more than 10 years.
We maintain regular contacts with these customers and they provide us with regular updates on market trends and in-depth knowledge of the market conditions which enable us to better understand our customers’ requirements. Through such contacts, we are also able to plan our inventory requirements and delivery schedules effectively so that our customers’ needs are being met.
We believe that we have been able to develop strong relationships with our customers by virtue of our ability to meet their product needs, in particular in terms of quality and product range, and we are able to do so in a timely manner with effective service and competitive pricing.
PROSPECTS
Our Company manufactures and supplies rigging and lifting equipment and provides a wide range of engineering services to our customers who require customisation or manufacturing of products specifi c to their requirements. Accordingly, the prospects for our business are dependent upon the economic conditions and activities in the global offshore O&G industry in particular:
(i) demand for energy resources; and
(ii) oil and gas prices and their resulting impact on O&G activities.
Demand for energy resources
According to the Industry Report, Asia has become the world’s largest petroleum consumer, and its demand for energy resources will drive the growth of the offshore O&G industry. The PRC and India are expected to account for 50.0% of the global demand for oil in this decade - 2011 to 2020. Asia will also be in the forefront in terms of investments in deepsea oil and gas exploration and production. Industry players estimate that Asian companies will increase their investments by more than 50% in deepsea exploration, drilling and production in the next four (4) years.
Based on the Industry Report, the International Energy Agency has projected that global oil demand will continue to increase at an annual rate of 1.0% per annum till 2030, raising the requirement from 85 million barrels per day in 2008 to 106 million barrels per day by 2030. For the Period under Review, Asia was our largest geographical market accounting for S$47.9 million, S$46.9 million and S$52.7 million of our revenue for FY2010, 2011 and 2012 respectively.
According to the Industry Report, the Middle East region is rich in oil reserves, with Saudi Arabia commanding a vast lead in production compared to other countries in the region. Drilling activities in the Middle East have continued despite economic uncertainties in other regions. This refl ects the potential of the region. In addition, our Directors have observed and believe that trends in the growing offshore sub-salt exploration (such as those in the Nile Delta, East Mediterranean Sea and the Red Sea) and offshore production of natural gas (such as those in the Arabian Gulf) offer opportunities to our Group.
Increasing liquefi ed natural gas (“LNG”) demand in Asia coupled with Australia’s sizable gas resources is creating a boom in LNG projects in Australia, with a number of projects under construction. Our Directors believe that there are enormous opportunities in the Australian O&G sector, in view of new project investments into the LNG projects.
99
Oil and gas prices and their resulting impact on O&G activities
According to the Industry Report, in the last decade, prices of oil have consistently been on an upward trend, with the exception of 2009, the aftermath of the 2008 global fi nancial crisis. The combined compounded annual growth rate of three (3) of the leading oil price benchmarks, namely Brent Blend, West Texas Intermediate and OPEC Basket Price, shows an average increase of 15.1% during the period between 2001 to 2011. We believe that an increase in oil prices may drive an increase in offshore O&G exploration and production.
Based on the Industry Report, the resiliency of high oil prices is pushing upstream oil and gas companies to increase exploration and production spending, including capital expenditure on machinery and equipment purchase. High oil prices are also fuelling a “construction boom” in the offshore sector, as more drilling ships are needed for ultra-deep water rigs. In addition, there appears to be a growing trend towards deepwater O&G exploration as evidenced by the growing proportion of jack-up rigs, drillships and semi-submersibles being used in O&G exploration activities.
In Asia, there is growing potential in emerging economies such as Vietnam and Myanmar. According to the Industry Report, Vietnam has been opening up offshore options on the Ham Rong and Gau Chua-Ca Cao oilfi elds. Alternatively, increased interest in LNG as an alternative energy source will bring more focus to Myanmar. Myanmar is expected to offer more onshore and offshore blocks off the Rakhine, Tanintharyi and Moattama areas.
Singapore is one of the leading rig builders in the world. The continued rig building activity in Singapore favours the offshore O&G services sector. With several rigs under construction, there is an increase in revenue prospects for rigging and lifting equipment players. Based on the Industry Report, Singapore is known to operate one of the most technically advanced and effi cient shipbuilding and ship-repair facilities in Southeast Asia.
The availability of such facilities coupled with the strategic location of Singapore makes it a natural hub for the marine industry, and attracts vessels and marine companies worldwide, in particular, those involved in the global offshore O&G industry. As Singapore continues to attract more offshore oil and gas activities, the demand for products such as wire ropes, synthetic slings, heavy lift slings and synthetic fi bres is anticipated to continue its upward trend.
Our Directors believe that we are well poised to benefi t from this increase in the marine industry and rig-building industry in Singapore as this will lead to an increase in exploration and production spending, including capital expenditure on machinery and equipment purchase. Our Directors believe that our presence in Singapore, Vietnam and Malaysia gives us a competitive advantage and we are well placed to benefi t from the offshore O&G activities in Singapore and the region.
Notwithstanding the growth in demand for rigging and lifting equipment, the competitive landscape in Singapore remains largely fragmented, with three (3) signifi cant local players, of which we are one such player and many smaller players. Nevertheless, we believe that there are still ample opportunities for us to strengthen relationships with existing customers and secure new customers.
Furthermore, so as to better tap into the opportunities in Asia and Oceania, we have set up a representative offi ce in Kuala Lumpur, Malaysia and intend to establish another representative offi ce in Perth, Australia. In this way, we can strengthen ties with existing customers and to forge relationships with new customers in the offshore O&G and marine industries with the added competitive advantage of being close to them. We intend to expand our geographical coverage through acquisitions, joint ventures or strategic collaborations with parties in Asian or other countries and are actively exploring possible expansion plans in South Korea. We believe that Australia and the Asia Pacifi c region are important markets due to their proximity to major O&G resources and exposure to the maritime sectors.
In addition, we are also optimistic about prospects in the African continent due to the relatively benign political situation in that region which has seen some major O&G projects recently announced. We are also positive about our prospects in South America as the region has vast oil and gas reserves.
Please also refer to the Industry Report set out in Appendix E of this Prospectus.
100
TRENDS AND ORDER BOOK
The demand for our products and services are generally affected by the level of activities in the exploration, development and production of oil and gas in the global offshore O&G industry.
Based on the revenue and operations of our Group as at the Latest Practicable Date, our Directors have observed the following trends for FY2013:
(a) We expect our revenue to generally follow the activity trend in the offshore oil and gas exploration industry. Subject to competitive and pricing pressures, our revenue should rise in tandem with any increase in activity in the offshore oil and gas exploration industry, more particularly in the Asia region as the demand for our rigging and lifting equipment would increase. In addition, the availability of the right inventory on hand will also determine whether we are able to secure such new orders.
(b) Any difference in the net realisable value of our inventory and our carrying cost of the inventory will impact our cost of sales arising from the write down or write back of such differences.
(c) Our operating expenses is expected to move in tandem with our level of activities as we would need to hire more employees to cater for any signifi cant increase in the scale of our business operations. In addition, higher expenses will be incurred arising from the Service Agreements signed with our Executive Directors and CAO.
(d) For the immediate term, our operating expenses will increase due to the fees and expenses incurred in relation to the Offering. Accordingly, immediately after the Offering, our half-year fi nancial results may be lower than the results for the corresponding period in the preceding year.
Typically, we do not have any long term contracts with our customers for the supply of products and services and our delivery time frame ranges from one (1) day up to six (6) months from the receipt of purchase orders, depending on factors such as stock availability, complexity of the fabrication requirements, destination and method of delivery.
As at 31 March 2012, our order books based on confi rmed sales orders was approximately S$2.2 million, out of which approximately S$2.0 million has been completed as at the Latest Practicable Date.
As at the Latest Practicable Date, our order books based on confi rmed sales orders was approximately S$8.4 million.
Save as disclosed above and in the sections entitled “Risk Factors”, “Management Discussion’s and Analysis of Financial Position and Results of Operation” and “Prospects” in this Prospectus respectively, and barring any unforeseen circumstances, our Directors believe that there are no other known recent trends in production, sales and inventory, the costs and selling prices of our products and services or other known trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material and adverse effect on our revenue, profi tability, liquidity or capital resources, or that would cause fi nancial information disclosed in this Prospectus to be not necessarily indicative of our future operating results or fi nancial condition. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Prospectus.
BUSINESS STRATEGIES AND FUTURE PLANS
Our future plans for the growth and expansion of our businesses are described below:
Expansion of our operations into Asian or other markets through the set up of new facilities, acquisitions, joint ventures and/or strategic collaborations
In order to increase our competitiveness through a faster response and other advantages from being in close proximity to our customers, we intend to expand our operations through acquisitions, joint ventures or strategic collaborations with parties in Asia or other countries.
101
The Group is currently considering opportunities in North Asia, South East Asia, Middle East, Europe, Australia and South America. Key factors that the Group will consider when assessing such opportunities include fi nancial performance, key markets they serve, and the expertise and experience of management.
In particular, we have on 22 September 2012 signed a memorandum of understanding for the proposed acquisition of a South Korean company engaged in the supply of wire ropes and related fi ttings to Korean customers in the offshore and marine industry. The purchase consideration and other salient terms have not been agreed at this stage and are still subject to further negotiations between the parties. If the proposed acquisition is entered into and completed, our Company would gain a foothold in the Korean market.
These future plans, however, are subject to economic and market conditions.
These expansion plans are expected to be funded by the net proceeds from the Offering, external fi nancing and our internal resources. We intend to set aside S$20.0 million of the net proceeds from the Offering to partly fund the above. In the event that we do not utilise such net proceeds for the above purposes, we will seek Shareholders’ approval for alternative uses.
Expansion of our operations into Malaysia
Currently, we have two (2) warehouses and one (1) fabrication facility in Singapore occupying approximately 316,950 sq ft and one (1) warehouse facility in Vietnam occupying approximately 10,463 sq ft.
In anticipation of the growth of our business, we have commenced construction of our new facilities in Malaysia (Tanjung Langsat, near Pasir Gudang, in the State of Johor) in February 2012. Gaylin Malaysia’s premises amount to approximately 103,145 sq ft. We are still in the process of installing the test bed facility and other necessary plant and equipment. We expect full operations to commence in December 2012.
This will bring us in close geographical proximity to customers in the offshore O&G industry in
Malaysia and in the region, thereby reducing delivery time for our products and improving our service to our customers.
Our Malaysian facilities are expected to cost an aggregate of approximately S$4.0 million (comprising construction, installation and purchase of equipment and machineries amounting to approximately S$3.2 million and construction of building amounting to approximately S$0.8 million). As at the Latest Practicable Date, we have incurred capital expenditure of S$0.5 million in Gaylin Malaysia.
This expansion plan into Malaysia is expected to be funded by the net proceeds from the Offering,
external fi nancing and our internal resources. We intend to use S$2.0 million of our net proceeds from the Offering to partly fund the above.
Expansion of sales and marketing capabilities
In September 2012, we set up a representative offi ce in Kuala Lumpur, Malaysia. We also intend to expand our sales and marketing capabilities through establishment of representative offi ces in various strategic locations such as Perth, Australia to strengthen ties with existing customers and to forge relationships with new customers.
To this end, we will focus on those customers located in the offshore O&G markets into which we are expanding.
102
GOVERNMENT REGULATIONS
Save as disclosed below, as at the Latest Practicable Date, our business operations in Singapore, Vietnam and Malaysia are not subject to any special legislation or regulatory control other than those generally applicable to companies (including foreign investment companies) and businesses incorporated and/or operating in Singapore, Vietnam and Malaysia. We have thus far not experienced any adverse effect on our business in complying with these regulations. Our Directors believe that our businesses and operations in Singapore, Vietnam and Malaysia have complied with all applicable laws and regulations generally applicable to companies and businesses operating in the respective countries of incorporation that would materially affect our business operations. Save as disclosed herein, we do not require any other material licences, registrations, permits or approvals in respect of our operations apart from those pertaining to general business registration requirements. As at the Latest Practicable Date, our Directors believe that we are not in breach of any laws or regulations applicable to our business operations in Singapore, Vietnam and Malaysia that would materially affect our business operations.
Singapore
The following is a summary of the main laws and regulations of Singapore that are relevant to our business as at the Latest Practicable Date.
Factory Registration
Any person who wishes to occupy or use any premises where any building operation or works of engineering construction is or are being carried out by way of trade or for the purposes of gain is required to register the premises (or worksite) as a “factory” with the Commissioner for Workplace Safety and Health (“CWSH”) pursuant to the Workplace Safety and Health (Registration of Factories) Regulations 2008 (“WSH Factories Regulations”).
Under the WSH Factories Regulations, occupiers of premises or worksites in which building operations and works of engineering construction are intended to be carried out (save for any premises or worksites in which building operations (other than excavation or piling works) or works of engineering construction are being carried out for a period not exceeding two (2) months) must apply to the CWSH to register the worksites as a “factory” one (1) month before the work begins. A certifi cate of registration issued by the CWSH for any factory engaged in the manufacture of fabricated metal products, machinery or equipment and in which 100 or more persons are employed shall remain in force from the date of its issue until such time as it is revoked in accordance with the WSH Factories Regulations. Under the WSH Factories Regulations, if any registered factory becomes unfi t for occupation or use as a factory because of any change in the type of the work for which the factory is registered or any structural change to the premises of the registered factory or any change in the layout of the premises, amongst other reasons, a notice in writing may be issued by the CWSH to the factory (“CWSH Notice”). The certifi cate of registration may be revoked under the WSH Factories Regulations due to reasons such as (a) a contravention of any condition of the certifi cate of registration; (b) an application by the occupier of the registered factory for such revocation; (c) where the occupier of a registered factory has ceased to occupy the factory; and (d) if the CWSH Notice has not been complied with.
Any person who desires to occupy or use any premises as a factory not falling within the classes of factories described within the First Schedule of the Workplace Safety and Health Act (Chapter 354A) of Singapore (“WSHA”), shall, before the commencement of operation of the factory, submit a notifi cation to the CWSH informing the CWSH of his intention to occupy or use those premises as a factory. The notifi cation is not subject to any renewal requirements. However, in the event that the CWSH is of the view that the factory in respect of which a notifi cation has been submitted is to pose or likely to pose a risk to the safety, health and welfare of persons at work in the factory, the CWSH may, by notice in writing, (i) specify the date from which the notifi cation shall cease to be valid; and (ii) direct the occupier of the factory to register the factory notwithstanding that the factory does not fall within any of the classes of the factories described in the First Schedule of the WSHA. Our factories, which are located at 17 Joo Koon Way, Singapore and 7 Gul Avenue, Singapore respectively, do not fall within any of the classes of the factories described in the First Schedule of the WSHA and accordingly, a notifi cation to the CWSH for each of the premises will suffi ce. We had submitted the relevant notifi cations to the CWSH.
103
Workplace Safety and Health Measures
Under the WSHA, every employer has the duty to take, so far as is reasonably practicable, such measures as are necessary to ensure the safety and health of his employees at work. These measures include providing and maintaining for the employees a work environment which is safe, without risk to health, and adequate as regards to the facilities and arrangements for their welfare at work, ensuring that adequate safety measures are taken in respect of any machinery, equipment, plant, article or process used by the employees, ensuring that the employees are not exposed to hazards arising out of the arrangement, disposal, manipulation, organisation, processing, storage, transport, working or use of things in their workplace or near their workplace and under the control of the employer, developing and implementing procedures for dealing with emergencies that may arise while those persons are at work and ensuring that the person at work has adequate instruction, information, training and supervision as is necessary for that person to perform his work.
Additional duties imposed on employers are also set out in the Workplace Safety and Health (General Provisions) Regulations (“WSHR”) including taking effective measures to protect persons at work from the harmful effects of any exposure to any biohazardous material which may constitute a risk to their health, ensuring adequate ventilation and maintaining suffi cient and suitable lighting.
Pursuant to the WSHR, the following equipment, inter alia, are required to be tested and examined by an examiner (“Authorised Examiner”), who is authorised by the CWSH, before they can be used in a factory and thereafter, at specifi ed intervals:
hoist or lift;
lifting gears; and
lifting appliances and lifting machines.
Upon examination, the Authorised Examiner will issue and sign a certifi cate of test and examination, specifying the safe working load of the equipment. Such certifi cate of test and examination shall be kept available for inspection. Under the WSHR, it is the duty of the owner of the equipment/occupier of the factory to ensure that the equipment complies with the provisions of the WSHR and to keep a register containing the requisite particulars with respect to the lifting gears, lifting appliances and lifting machines.
In addition to the above, under the WSHA, inspectors appointed by the CWSH may, inter alia, enter, inspect and examine any workplace and any machinery, equipment, plant, installation or article at any workplace, to make such examination and inquiry as may be necessary to ascertain whether the provisions of the WSHA are complied with.
Under the WSHA, the CWSH may serve a stop-work order in respect of a workplace if he is satisfi ed that:
(i) the workplace is in such condition, or is so located, or any part of the machinery, equipment, plant or article in the workplace is so used, that any process or work carried on in the workplace cannot be carried on with due regard to the safety, health and welfare of persons at work;
(ii) any person has contravened any duty imposed by the WSHA; or
(iii) any person has done any act, or has refrained from doing any act which, in the opinion of the CWSH, poses or is likely to pose a risk to the safety, health and welfare of persons at work.
The stop-work order shall direct the person served with the order to immediately cease to carry on any work indefi nitely or until such measures as are required by the CWSH have been taken, to the satisfaction of the CWSH, to remedy any danger so as to enable the work in the workplace to be carried on with due regard to the safety, health and welfare of the persons at work.
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We had on 26 July 2012, been served with a stop-work order for the workplace at 7 Gul Avenue. The stop-work order was issued by CWSH as a result of a workplace accident occurring approximately two (2) weeks before. Remedial measures were subsequently put in place and the stop-work order had been lifted on 10 August 2012. No penalties or fi nes had been imposed. In the future, our Board will ensure that all works carried out in the workplace at 7 Gul Avenue are done in accordance to the provision of the WSHA and its subsidiary legislations. Save for the stop-work order served on 26 July 2012, we have not been served with any other stop-work order during the Period under Review and up to the Latest Practicable Date. There was no material impact on our business and operations arising from the stop-work order.
Employment of Foreign Workers
The availability and the employment cost of skilled and unskilled foreign workers are affected by the Government’s policies and regulations on the immigration and employment of foreign workers in Singapore. The policies and regulations are set out in, inter alia, the Employment of Foreign Manpower Act, (Chapter 91A) of Singapore and the relevant Government Gazettes.
The availability of the foreign workers to the manufacturing industry is dependent on inter alia the MOM’s policies in connection with:
(a) the countries from which foreign workers may be sourced;
(b) the requirements and procedures for the issuance of work permits;
(c) the imposition of security bonds and levies; and
(d) the dependency ceilings based on the ratio of local to foreign workers.
In relation to the employment of foreign unskilled workers, employers must ensure that such persons apply for a work permit (“Work Permit”). The Work Permit is intended for unskilled foreigners who earn a monthly basic salary of less than S$2,000. In the manufacturing sector, Work Permit holders may be sourced only from Malaysia, Taiwan, Hong Kong, South Korea, Macau and the PRC.
In relation to the employment of foreign mid-level skilled workers, employers must ensure that such persons apply for an “S Pass”. The S Pass is intended for mid-level skilled foreigners who earn a monthly fi xed income of at least S$2,000.
The dependency ratio limit for S Pass and Work Permit holders in the manufacturing industry is currently 60.0%. This means that a company in the manufacturing sector can employ foreign workers (S Pass and Work Permit holders) up to 60.0% of its total workforce. By way of illustration, for every full-time Singapore Citizen or Singapore Permanent Resident the Company employs, the Company may employ approximately 1.5 foreign workers on S-Passes and Work Permits. The dependency ratio limit for S Pass is currently 20.0% for all industries. This allows a company in the manufacturing industry to employ S Pass holders up to 20.0% of its workforce. Accordingly, for every full-time Singapore Citizen or Singapore Permanent Resident the Company employs, the Company may employ 0.25 S Pass holders.
As at the Latest Practicable Date, approximately half of our employees in Singapore were foreign workers. The supply of skilled workers is subject to demand and supply conditions in the labour market and the local and foreign governments’ labour regulations.
Under the Employment of Foreign Manpower (Work Passes) Regulations (passed pursuant to the Employment of Foreign Manpower Act (Chapter 91A) of Singapore, employers of Work Permit holders are required, inter alia, to:
(a) Subsidise medical expenses of the foreign worker (unless agreed otherwise);
(b) Provide safe working conditions;
105
(c) Provide acceptable accommodation consistent with any law or governmental regulations; and
(d) Provide and maintain medical insurance for inpatient care and day surgery, with coverage of at least S$15,000 per every 12-month period.
Employers of S Pass holders are required, inter alia, to:
(a) Subsidise medical expenses of the foreign worker (unless agreed otherwise); and
(b) Provide and maintain medical insurance for inpatient care and day surgery, with coverage of at least S$15,000 per every 12-month period.
The employment of foreign workers is also subject to the payment of levies. In the manufacturing industry, the amount of foreign worker levy payable on each unskilled Work Permit holder ranges from S$290 to S$450 per month, while the amount of foreign worker levy payable on each skilled Work Permit holder ranges from S$190 to S$450 per month. In all industries, the amount of foreign worker levy payable on each S Pass holder is either S$160 or S$250 per month, depending on the company’s ratio of local to foreign workers.
An employer of foreign workers is also subject to, inter alia, the provisions set out in the Employment Act (Chapter 91) of Singapore, the Employment of Foreign Manpower Act (Chapter 91A) of Singapore, the Immigration Act (Chapter 133) of Singapore and the regulations issued pursuant to the Immigration Act.
During the Period under Review and up to the Latest Practicable Date, our Group has been in compliance with the Employment of Foreign Manpower (Work Passes) Regulations (passed pursuant to the Employment of Foreign Manpower Act (Chapter 91A), Employment Act (Chapter 91) of Singapore, the Employment of Foreign Manpower Act (Chapter 91A) of Singapore or the Immigration Act (Chapter 133) of Singapore and the regulations issued pursuant to the Immigration Act.
Workmen’s Compensation
The Work Injury Compensation Act (Chapter 354) of Singapore (“WICA”), which is regulated by the MOM, applies to all employees in all industries engaged under a contract of service in respect of injury suffered by them in the course of their employment and sets out, inter alia, the amount of compensation they are entitled to and the method(s) of calculating such compensation.
The WICA provides that if in any employment personal injury by accident arising out of and in the course of the employment is caused to an employee, the employer shall be liable to pay compensation in accordance with the provisions of the WICA.
Further, the WICA provides, inter alia, that, where any person (referred to as the principal) in the course of its business or for the purpose of his trade or business contracts with any other person (referred to as the contractor) for the execution by the contractor of the whole or any part of any work, or for the supply of labour to carry out any work, undertaken by the principal, the principal shall be liable to pay to any employee employed in the execution of the work any compensation which he would have been liable to pay if that employee had been immediately employed by the principal.
Employers are required to maintain Work Injury Compensation insurance for two (2) categories of employees engaged under contracts of service (unless exempted) - First, all employees doing manual work and second, non-manual employees earning S$1,600 or less a month.
Our subsidiary, Gaylin International, has in place workmen’s compensation insurance policies to cover its statutory obligations and liabilities under the WICA.
106
Vietnam
The following is a summary of the main laws and regulations of Vietnam that are relevant to our businesses as at the Latest Practicable Date.
Environmental Measures
Our business operations are required to comply with decrees of the government of Vietnam which provides guidance for the implementation of the Law on Environment Protection, which was passed by the National Assembly in 2005, in the aspects of strategic environment evaluation, environmental impact evaluation environmental protection commitment, management of solid waste and toxic waste.
Pursuant to the above, any (foreign) manufacturing enterprises operating in Vietnam shall have to comply with the regulations in relation with environment standards applicable to air, water waste, noise, vibration, protection of the environment during the manufacturing, business and service activities, management of toxic wastes. Because our business in Vietnam involves the production and/or disposal of water waste and hazardous solid waste, we are required to observe minimum prescribed standards relating to the management of (toxic) waste production and disposal. We also have registration obligations with the Department of Natural Resources and Environment of the People’s Committee of Ba Ria Vung Tau Province and are required, inter alia, to:
(a) improve our water waste treatment system to ensure the satisfaction of prescribed environmental standards relating to the treatment of water waste; and
(b) register, as the owner of toxic solid waste source, with the Department of Natural Resources and Environment of the People’s Committee of Ba Ria Vung Tau Province.
During the Period under Review and up to the Latest Practicable Date, our Group has complied with the regulatory environment and occupational hygiene standards, in terms of the criteria of air quality, noise, and regulations on solid waste.
Workplace Safety and Health Measures
Our business operations are required to comply with the Labour Code, which was originally passed by the National Assembly of the Socialist Republic of Vietnam in 1994, and its amendments afterwards of which the latest was passed in 2007, and the decrees and circulars providing guidance, amongst other things, for the implementation of workplace occupational safety and hygiene.
Pursuant to the above, any enterprise engaging in production activities must comply with the laws on occupational safety and hygiene and environment protection. The production, usage, storage, or transportation of machinery, equipment and materials must be carried out in accordance with occupational safety and hygiene standards. Furthermore, machinery, equipment, materials, and other items which have strict requirements for occupational safety and hygiene must be registered and verifi ed by the relevant competent environmental authorities.
Safety at the workplace must be ensured and the workplace has to satisfy the requirements of space, ventilation, lighting, and hygiene standards, such as dust, steam, toxic gas, radioactivity, electromagnetic fi eld, heat, humidity, noise, vibration, and other detrimental factors.
As our business in Vietnam involves the operation of a manufacturing plant of wire rope slings servicing the O&G industries, we are required to:
(a) register with the Department of Labour-Invalids and Social Affairs, the machines and equipments subject to strict requirement of occupational safety; and
(b) provide in a strict and suffi cient manner occupational protective facilities to the employee.
During the Period under Review and up to the Latest Practicable Date, our Group has obtained licences, permits, or consents required by laws for its operation.
107
Labour Requirements
Our business operations are required to comply with the Labour Code, which was originally passed in 1994, and its amendments afterwards (the latest was passed in 2007), and the Law on Social Insurance which was passed in 2006, by the National Assembly of the Socialist Republic of Vietnam.
Pursuant to the above, employers shall have to ensure the strict compliance of labour regulations in respect of labour contract execution with employees, and participation in obligatory social and health insurance for employees.
During the Period under Review and up to the Latest Practicable Date, our Group has obtained licences, permits, or consents required by laws for its operation.
Malaysia
The following is a summary of the main laws and regulations of Malaysia that are relevant to our manufacturing businesses in Malaysia as at the Latest Practicable Date.
Manufacturing Activity Licences
The local authority in which the facilities is situated in, would by the local by-laws, require companies carrying on business activities (including manufacturing activities) in a location situated within the purview of the local authority to obtain a business licence for such activities. The factory premise where the activities are conducted will be inspected by the different departments of the local authorities such as the Fire Department and Environmental Department for compliance with their respective regulations, rules and guidelines before the business licence will be issued. Gaylin Malaysia will submit the relevant application to the local authority as soon as possible in order to obtain the relevant licence before the scheduled date for commencement of its manufacturing activity.
A manufacturer of taxable goods (goods which are not exempted from sales tax) is required to obtain a licensed manufacturer licence from the Director General of Customs and Excise pursuant to the Sales Tax Act 1972. Gaylin Malaysia has consulted a tax adviser to advise on the need or otherwise and/or whether it is entitled to be exempted from sales tax but in any event if required, Gaylin Malaysia will appoint an adviser to submit the requisite licence application on its behalf before the scheduled date for commencement of its manufacturing operations.
Although the Industrial Co-ordination Act 1975 (“ICA”) requires any person who is engaging in manufacturing activity to be licensed by the Malaysian Ministry of International Trade and Industry if certain criteria are fulfi lled, Gaylin Malaysia will not be required to obtain such licence as it does not anticipate its shareholders’ funds to be equal to or exceed RM2.5 million nor will Gaylin Malaysia be engaging 75 or more full time paid employees.
Workplace Safety and Health
By the Occupational Safety And Health Act 1994 (“OSH”), every employer is under a duty to ensure, so far as is practicable, the safety, health and welfare to work of all his employees. These measures include (so far as is practicable), providing and maintaining plant and systems of work that are, safe and without risks to health, making arrangements to ensure the safety and the absence of risks to health in connection with the use or operation, handling, storage and transport of plant and substances, providing information, instruction, training and supervision as is necessary to ensure, the safety and health at work of his employees, maintenance of a place of work and access to the place of work in a condition that is safe and without risks to health with adequate facilities for their welfare at work.
Additionally the OSH imposes a duty on the person who designed or manufactured any plant to ensure, so far as is practicable, that the plant is designed and constructed so as to be safe and without risks to health when properly used and to carry out necessary research with a view to the discovery and, so far as is practicable, the elimination or minimisation of any risk to safety or health to which the design or plant may give rise.
108
The Factories and Machineries Act 1967 (“FMA”) imposes various statutory duties on amongst others, the occupier of a factory premises, who is obliged to maintain at all times, the safety of appliances and machinery. The FMA also contain various provisions governing the safety and health of persons employed in the factory. It specifi es certain machinery in a factory which cannot be installed except with the prior approval of the Inspector of Factories and Machinery. The Inspector is empowered to serve a stop work notice until a certifi cate of fi tness required to be issued under the FMA is obtained. The Inspector has powers to enter, inspect and examine any factory when he has reasonable cause to believe that any part of the factory is storing explosive materials or to exercise his powers to inspect and examine any machinery, plant, appliance or fi tting therein.
As at the Latest Practicable Date, Gaylin Malaysia has not commenced manufacturing activity in Malaysia, pending completion of construction of the Facilities. No stop work notice has been issued on Gaylin Malaysia by any relevant Malaysian authority.
Environmental Laws
The Environmental Quality Act 1974 and the regulations made thereunder (“EQA”) set out acceptable conditions for the emission, discharge or the deposit of environmentally hazardous substances, pollutants or wastes or the emission of noise into any area. A person needs to be licensed under the EQA before it is allowed to exceed any of those acceptable conditions. Additionally, prior written approval of the Director General of Environmental Quality is required for a person to place, deposit or dispose of, or cause or permit to place, deposit or dispose of, except at prescribed premises only, any scheduled wastes on land or into Malaysian waters.
Gaylin Malaysia is presently in the process of evaluating environmental consultants for the purposes of advising Gaylin Malaysia to ensure its compliance with the Malaysian environmental laws.
Employment Laws
The Industrial Relations Act 1965 (“IRA”) provides a legal avenue for all workmen who have been unfairly dismissed by their employers to seek redress in the Industrial Court of Malaysia. Generally, workmen who are unfairly dismissed by an employer may seek reinstatement to their former position or compensation in lieu of reinstatement.
The Employment Act 1955 (“EA”) essentially provides for the minimum work benefi ts for certain categories of employees (local as well as foreign) only including employees who earn a monthly wage of RM1,500.00 and below and employees involved in manual labour, supervisors of such manual labourers and drivers, irrespective of their monthly wage.
For such employees covered by the EA, the EA provides as statutory minimum, amongst others, the employee’s working hours, overtime payment, annual leave, sick leave, maternity leave, public holidays, payment of wages, notice of termination as well as termination and lay-off benefi ts.
In the event there is any inconsistency between the terms of the contract of employment of an employee covered under the EA and the minimum work benefi ts conferred under the EA, the more favourable terms for the employee will apply.
In respect of those employees who are not covered by the EA, their terms of employment and benefi ts are governed by their respective contracts of employment.
The employment of non-citizens of Malaysia is prohibited by the Immigration Act and regulations thereunder unless there has been issued in respect of that person a valid employment permit.
109
The Workmen’s Compensation Act 1952 (“WCA”) regulates payment of compensation to workmen for injury suffered in the course of their employment but the category of workmen covered is limited to amongst others, employees whose monthly earnings are RM500 and less. The employer of a workman covered under the WCA is generally obliged to pay compensation and expenses incurred in the treatment and rehabilitation of the workman if the workman is injured by accident arising out of and in the course of his employment. Additionally, such employer is under a duty to obtain a workmen’s compensation insurance policy. Gaylin Malaysia has presently engaged one (1) person as its employee but such employee does not fall within the category of workmen covered by the WCA.
Workmen who are not covered by the WCA may be covered by the Employees’ Social Security Act, 1969 whereby such workmen will be insured in the manner provided under this Act in respect of injuries occurring in the course of their employment.
By the Employees Provident Fund Act 1991 employers are required to make statutory contributions to their employees’ account with the Employees Provident Fund.
Gaylin Malaysia has engaged a consultant to assist in the registration of Gaylin Malaysia as an employer with the Employees’ Social Security Organisation and the Employees Provident Fund and the registration process is expected to complete in October 2012.
110
INTERESTED PERSON TRANSACTIONS
In general, transactions between our Group and any of our interested persons (namely, Directors, CEO or controlling shareholders of our Company or the associates of such Directors, CEO or controlling shareholders) are known as interested person transactions. The following discussion sets out our material interested person transactions for the period from 1 April 2009 up to the Latest Practicable Date (the “Relevant Period”).
Save as disclosed below and in the section entitled “Restructuring Exercise” of this Prospectus, none of our Directors, CEO, controlling shareholders or their respective associates was or is interested in any material transaction undertaken by our Group during the Relevant Period.
PAST INTERESTED PERSON TRANSACTIONS
Transactions entered into between Gaylin International and Bridge Testing
Prior to the Restructuring Exercise, the shareholders of Bridge Testing were our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe. Following the Restructuring Exercise, Bridge Testing ceased to be an interested person and, accordingly, any future transactions between our Group and Bridge Testing will not be interested person transactions.
Provision of Services by Bridge Testing
Gaylin International had in the past engaged Bridge Testing as its in-house testing centre for the testing, inspection and certifi cation of its rigging and lifting equipment.
The aggregate fees payable to Bridge Testing for such services during the Relevant Period were as follows:
FY2010(S$’000)
FY2011(S$’000)
From 1 April 2011 to 30 September 2011(1)
(S$’000)
Services provided by Bridge Testing
76 82 47
Note:
(1) Pursuant to a sale and purchase agreement dated 30 September 2011, our Company acquired from Mr Teo Bee Kheng and Mr Teo Bee Hoe the entire issued and paid up share capital of Bridge Testing. Please refer to the section “Restructuring Exercise” of this Prospectus for further details.
The transactions made between our Group and Bridge Testing were not conducted on an arm’s length basis nor on normal commercial terms. The transactions were based on a willing buyer willing seller basis. The Directors are not aware of any average market rate to which they may have reference in deciding whether the aggregate fees payable were above or below market rate.
Rental Arrangement with Bridge Testing
Gaylin International and Bridge Testing had a rental arrangement, whereby Bridge Testing agreed to rent an area from Gaylin International for a rental amount of S$7,000 per annum.
111
The aggregate rental amounts paid by Bridge Testing during the Relevant Period were as follows:
FY2010(S$’000)
FY2011(S$’000)
From 1 April 2011 to 30 September 2011(1)
(S$’000)
Rental of offi ce to Bridge Testing
7 7 4
Note:
(1) Pursuant to a sale and purchase agreement dated 30 September 2011, our Company acquired from Mr Teo Bee Kheng and Mr Teo Bee Hoe the entire issued and paid up share capital of Bridge Testing. Please refer to the section “Restructuring Exercise” of this Prospectus for further details.
The rental arrangement was not entered into on an arm’s length basis nor on normal commercial terms. The rental arrangement was based on a willing buyer willing seller basis. Our Directors are not aware of any average market rate to which they may have reference in deciding whether the aggregate rental payable were above or below market rate.
Transaction between Keh Swee and Gaylin International
On 7 July 2011, Keh Swee purchased S$372,081 worth of wire ropes from Gaylin International on an arm’s length basis and on normal commercial terms. Keh Swee subsequently on-sold these wire ropes to Halo Wire Rope via OTH in a back-to-back transaction at cost plus an administrative fee of approximately 0.7% of the price of the goods (amounting to approximately S$2,700). Keh Swee did not obtain any other benefi t from this back-to-back transaction.
We understand that Keh Swee entered into this arrangement at the request of Halo Wire Rope, as we would not have entered into a transaction of this quantum directly with Halo Wire Rope based on our internal policies pertaining to customers’ credit standing. This was an ad hoc arrangement between Keh Swee and Halo Wire Rope. Keh Swee does not intend to enter into similar transactions in the future. In this connection, Keh Swee has undertaken that it will not, directly or indirectly, carry out any transactions involving the sale of rigging and lifting equipment and related fi ttings and accessories and the provision of related services to OTH and/or Halo Wire Rope.
Advances granted to our Executive Directors and/or their Associates
Our Group had in the past granted advances to our Executive Directors and/or their associates arising from the payments made for their taxes and personal expenses. These advances were made on a preferential basis as they were interest-free, were unsecured and had no fi xed terms of repayment. Accordingly, these transactions were not entered into on an arm’s length basis nor on normal commercial terms.
Amounts owing by our Executive Directors and/or their associates were offset by the dividend declared and paid to our Executive Directors and/or their associates in FY2010.
The largest amounts outstanding in each of FY2010, FY2011 and FY2012 and the fi nancial period from 1 April 2012 to the Latest Practicable Date (based on month-end fi gures) were as follows:
All outstanding amounts were fully settled by 31 October 2011. As at the Latest Practicable Date, there is no amount due from our Executive Directors and their associates. We do not intend to grant advances to our Executive Directors and their associates in the future.
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Shareholder’s advances from Keh Swee to our Company
In FY2011, Keh Swee made shareholder’s advances to our Company amounting to an aggregate of S$11.6 million. The largest amount outstanding in relation to such shareholder’s advances for FY2011 was S$10.8 million (based on monthly balances). In FY2012, Keh Swee made shareholder’s advances to our Company of an aggregate amount of S$500,000. The largest amount outstanding in relation to such shareholder’s advances for FY2012 was S$10.7 million (based on month-end balances). As of October 2011, all shareholder’s advances from Keh Swee have been fully settled. There were no outstanding amounts in relation to shareholder’s advances since then. The aforesaid shareholder’s advances were made on an interest-free basis with no fi xed terms of repayment. Accordingly these transactions were not on an arm’s length basis nor were they on normal commercial terms.
Personal guarantees provided by our Executive Director and CEO, Mr Desmond Teo, and our Executive Directors, Mr Teo Bee Kheng, Mr Teo Bee Hoe and our CAO, Mr Steven Teo, to secure bank and credit facilities for the benefi t of Gaylin International
During the Relevant Period, our Executive Director and CEO, Mr Desmond Teo, and our Executive Directors, Mr Teo Bee Kheng, Mr Teo Bee Hoe and our CAO, Mr Steven Teo, had provided guarantees for the bank and credit facilities granted to Gaylin International as set out below:
Financial institution
Type of facility
Guarantees provided by
Total amount of facilities
granted(S$’000)
Amount guaranteed
(S$’000)
Largest amount outstanding during the
Relevant Period(S$’000)
Australia and New Zealand Banking Group Limited, Singapore Branch
Term loan, renovation loan, overdraft, trade facilities and forward exchange contracts
Desmond TeoTeo Bee Kheng Teo Bee Hoe
8,000 8,000 8,120
UOB 3-year Bridging Loan under SPRING Singapore’s Local Enterprise Finance Scheme
Desmond TeoTeo Bee Kheng Teo Bee Hoe
4,000 4,000 4,000
Hire purchase facilities
Teo Bee Kheng Teo Bee Hoe
135 135 135
Orix Leasing Singapore Limited
Hire purchase facilities
Desmond TeoTeo Bee Kheng Teo Bee Hoe
791 791 791
Malayan Banking Berhad
Hire purchase facilities
Desmond Teo 40 40 40
Hire purchase facilities
Desmond TeoSteven Teo
522 522 522
Hire purchase facilities
Desmond Teo 776 776 776
Hire purchase facilities
Teo Bee Kheng 76 76 76
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Financial institution
Type of facility
Guarantees provided by
Total amount of facilities
granted(S$’000)
Amount guaranteed
(S$’000)
Largest amount outstanding during the
Relevant Period(S$’000)
OCBC Hire purchase facilities
Desmond TeoTeo Bee Kheng Teo Bee Hoe
862 862 862
Citibank Hire purchase facilities
Desmond Teo 295 295 295
UMF (Singapore) Limited
Hire purchase facilities
Desmond Teo 93 93 93
Toh Soon Huat Co Pte Ltd
Hire purchase facility
Desmond Teo 70 70 70
As at the Latest Practicable Date, the above facilities had been varied, supplemented, replaced and/or cancelled and the guarantees provided by the interested persons had been discharged.
As no fee was charged by the interested persons for the provision of the guarantees, the aforesaid arrangements were not carried out on an arm’s length basis and were not on normal commercial terms.
Potential Acquisition of OTH
On 26 September 2012, our Company and our controlling shareholder, Keh Swee, entered into the Call Option Agreement, pursuant to which our Company was granted the Call Option to acquire the OTH Equity at any time from the date of the Call Option Agreement. OTH owns 60% of Halo Wire Rope. Accordingly, Keh Swee holds an indirect interest of 60% of Halo Wire Rope by virtue of the OTH Equity.
OTH is an investment holding company that has no other business activities apart from holding a 60% interest in Halo Wire Rope. Halo Wire Rope was for its fi nancial year ended 31 December 2011 in a loss making and negative equity position. In addition, Halo Wire Rope operates in the US market, which is not a signifi cant market for our Group at the moment. In view of the above, our Company has decided not to include OTH or Halo Wire Rope in our Group at present. However, should the US market increase in signifi cance towards our Group or should the business of Halo Wire Rope improve signifi cantly, this Call Option Agreement would provide our Group with the option of including OTH and Halo Wire Rope within our Group.
Pursuant to the Call Option Agreement, our Company may exercise the Call Option at any time from the date of the Call Option Agreement. The exercise price of the OTH Equity shall be the fair market value of the OTH Equity prevailing as of the exercise date as determined by an independent appraiser jointly appointed by our Company and Keh Swee.
The Call Option Agreement will terminate (i) upon OTH ceasing to have any interest in Halo Wire Rope or Keh Swee ceasing to have an interest in the OTH Equity (as the case may be); or (ii) if the Call Option has been exercised, on fulfi lment of the parties’ obligations under the Call Option Agreement.
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Keh Swee has undertaken that, prior to the termination of the Call Option Agreement, Keh Swee shall procure that each of OTH and Halo Wire Rope shall:
(i) not effect any, inter alia, increase in issued share capital, capitalisation of profi ts or reserves, rights issue or offer by way of rights, consolidation, sub-division, reduction of capital or share buy-back;
(ii) provide quarterly management accounts to our Company within 45 days from the end of each quarter; and
(iii) carry on business only in the ordinary course and in a manner consistent with its past practices.
In relation to the exercise of the Call Option, our Deputy CEO and Finance Director will review the quarterly management accounts of Halo Wire Rope and present the same for review by our Independent Non-Executive Chairman and our Independent Directors and the Board. In addition, our Company will make available to our Independent Non-Executive Chairman and Independent Directors access to independent professional advice including technical advice and market information (if required) when conducting their review. The decision on the exercise of the Call Option will rest with our Board of Directors with the concurrence of our Audit Committee. The directors interested in the transaction shall abstain from voting. In the event of a confl ict between the decision of our Audit Committee and our Executive Directors, the decision of our Audit Committee shall prevail.
Prior to the exercise of the Call Option, our Company will make an appropriate announcement when we exercise the Call Option, setting out, inter alia, the exercise price (calculated based on the fair market value determined by the independent appraiser), the fi nancial effects of the Acquisition of OTH on our Group as well as the opinion of our Audit Committee on whether the terms of the Acquisition of OTH are in the interests of our Company and our Shareholders. Upon the exercise of the Call Option, OTH and Halo Wire Rope would be consolidated within our Group.
Our Audit Committee will review the terms of the Acquisition of OTH to satisfy itself that they will be carried out on an arm’s length basis and on normal commercial terms and not prejudicial to the interests of our Company and our minority Shareholders, and appoint appropriate professionals to assess the merits of the Acquisition of OTH. If Shareholders’ approval is required under Chapter 9 of the Listing Manual, our Company will seek Shareholders’ approval prior to the completion of the transaction. In the event that the terms of the Acquisition of OTH are not in the interests of our Company and our Shareholders, the Acquisition of OTH will not be proceeded with.
Our Independent Non-Executive Chairman and Independent Directors are of the view that such entry into the Call Option Agreement is benefi cial to our Group and is not prejudicial to the interests of the minority Shareholders.
Please refer to the section entitled “Potential Confl icts of Interest – Halo Non-Competition Deed” for further details.
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PRESENT ON-GOING INTERESTED PERSON TRANSACTIONS
Personal guarantees provided by our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and/or our CAO, Mr Steven Teo, to secure bank and credit facilities for the benefi t of Gaylin International
As at the Latest Practicable Date, our Executive Director and CEO, Mr Desmond Teo and our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and/or our CAO, Mr Steven Teo, have provided guarantees to secure bank and credit facilities extended to Gaylin International as set out below:
Financial institution
Type of facility
Total amount of facilities granted(S$’000)
Personal guarantees provided by
Amount guaranteed
(S$’000)
Largest amount
outstanding (Based on month end balances)(S$’000)
Amount outstanding as
at the Latest Practicable
Date(S$’000)
UOB Term loan, money market loan, overdraft and trade facilities
30,808 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
33,000 27,795 27,074
Term loan 20,000 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
20,000 20,000 20,000
Hire purchase facilities
2,875 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
Industrial and Commercial Bank of China Limited, Singapore Branch
Trade facilities
8,000 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
8,000 7,510 7,431
Standard Chartered Bank
Overdraft, short term loans and trade facilities
7,000 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
7,000 6,193 1,299
116
Financial institution
Type of facility
Total amount of facilities granted(S$’000)
Personal guarantees provided by
Amount guaranteed
(S$’000)
Largest amount
outstanding (Based on month end balances)(S$’000)
Amount outstanding as
at the Latest Practicable
Date(S$’000)
DBS Bank Ltd Overdraft and trade facilities
6,500 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
6,500 7,773 4,932
Malayan Banking Berhad, Singapore branch
Trade facilities and foreign exchange line
3,000 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
3,300 8,789(1) 1,086
Hire purchase facilities
586 Desmond Teo and Steven Teo(joint and several)
586 586 388
Hire purchase facilities
300 Desmond Teo 300 300 253
The Hongkong and Shanghai Banking Corporation Limited, Singapore
Trade facilities
3,000 Desmond TeoTeo Bee Kheng Teo Bee Hoe(joint and several)
3,000 4,263 1,883
Mercedes Benz Financial Services Singapore Ltd.
Hire purchase facility
308 Desmond Teo 308 308 140
Hire purchase facility
361 Teo Bee Hoe 361 361 238
B-T-S-C Agency
Hire purchase facility
16 Teo Bee Hoe 16 16 3
Note:
(1) The total amount of facilities granted under the current facility letter is less than the amounts granted under previous facility letters. Accordingly, the largest amount outstanding for this facility (based on month-end balances within the Period under Review) is higher than the total amount of facilities granted.
There were no fees paid to our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe, and our CAO, Mr Steven Teo, for providing the above personal guarantees. Accordingly, the above transactions are not carried out on an arm’s length basis nor on normal commercial terms but are nonetheless not prejudicial to the interests of our Group. The largest aggregate amount guaranteed was S$77.3 million during the Relevant Period.
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Transactions with Halo Wire Rope
Halo Wire Rope is a company incorporated in the USA and which is in the business of supplying wire rope and rigging hardware and providing related services. It was incorporated in July 2010 after Mr Kenneth Ragusa approached Mr Desmond Teo to incorporate a joint venture company.
Mr Desmond Teo and his family members decided to hold the investment in 60% of Halo Wire Rope through our controlling shareholder, Keh Swee and its 100% subsidiary, OTH, with the remaining 30% of the shareholding in Halo Wire Rope held by Mr Kenneth Ragusa and 10% held by an unrelated third party. Both Mr Kenneth Ragusa and the third party are entities/persons unrelated to the Directors, CEO or controlling shareholders of our Company. Our Executive Director and CEO, Mr Desmond Teo, and our Executive Director, Mr Teo Bee Kheng, are managers in Halo Wire Rope. The shareholders of Halo Wire Rope collectively decided to appoint Mr Kenneth Ragusa as the Chief Executive Offi cer of Halo Wire Rope.
Our subsidiary, Gaylin International, and Halo Wire Rope supply their products to each other from time to time. The total sales to and purchases from Halo Wire Rope during the Relevant Period were as follows:
FY2010(S$’000)
FY2011(S$’000)
FY2012(S$’000)
From 1 April 2012 to the Latest
Practicable Date(S$’000)
Sales – 18 – –
Purchases – – 113 – Our Company sold products to Halo Wire Rope at gross profi t margins consistent with those charged by our Company to our other customers, and was therefore on an arm’s length basis and on normal commercial terms. Our Company also purchased products from Halo Wire Rope. Our Company takes the view that our purchases from Halo Wire Rope were not on an arm’s length basis nor on normal commercial terms, but on terms benefi cial to us. This is due to our understanding that the price was more competitive as compared to the pricing of third party independent suppliers based in Singapore.
These transactions are ad-hoc and are not expected to recur. It is not intended that our Company would enter into further transactions with Halo Wire Rope. However, after the listing of our Company on the SGX-ST, in the event that there are any further transactions between our Group and Halo Wire Rope, such transactions will be subject to such guidelines as described in the section entitled “Review Procedures for Future Interested Person Transactions” of this Prospectus and Chapter 9 of the Listing Manual.
REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS
All future interested person transactions will be properly documented and submitted to our Audit Committee for periodic review to ensure that they are carried out on an arm’s length basis, on normal commercial terms and will not be prejudicial to the interests of our minority Shareholders. Our Audit Committee will adopt the following procedures when reviewing interested person transactions.
In relation to any purchase of products or procurement of services from interested persons, successful quotes from at least two (2) unrelated third parties in respect of the same or substantially the same type of transactions will be used as comparison wherever possible. The purchase price or procurement price shall not be higher than the most competitive price of the two (2) comparative prices from the two (2) unrelated third parties. Our Audit Committee will review the comparables, taking into account, the suitability, quality and cost of the product or service, and the experience and expertise of the supplier.
In relation to any sale of products or provision of services to interested persons, the price and terms of two (2) other completed transactions of the same or substantially the same type of transactions to unrelated third parties are to be used as comparison wherever possible. The interested persons shall not be charged at rates lower than that charged to the unrelated third parties.
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All interested person transactions above S$100,000 are to be approved by a member of our Audit Committee who shall not be an interested person in respect of the particular transaction. All interested person transactions below S$100,000 are to be approved by our Finance Director for the time being or such other senior executive(s) of our Company designated by our Audit Committee from time to time for such purpose.
Any contracts to be made with an interested person shall not be approved unless the pricing is determined in accordance with our usual business practices and policies, consistent with the usual margin given or price received by us for the same or substantially similar type of transactions between us and unrelated parties, and the terms are no more favourable than those extended to or received from unrelated parties.
In addition, we shall monitor all interested person transactions entered into by us categorising the transactions as follows:
(a) a “category one” interested person transaction is one where the value thereof is equal to or in excess of three per cent. (3.0%) of the NTA of our Group; and
(b) a “category two” interested person transaction is one where the value thereof is below three per cent. (3.0%) of the NTA of our Group.
“Category one” interested person transactions must be approved by our Audit Committee prior to entry. “Category two” interested person transactions need not be approved by our Audit Committee prior to entry but shall be reviewed on a quarterly basis by our Audit Committee.
When renting properties from or to an interested person, our Audit Committee shall take appropriate steps to ensure that such rent is commensurate with the prevailing market rates, including adopting measures such as making relevant enquiries with landlords of similar properties and obtaining suitable reports or reviews published by property agents (as necessary), including independent valuation report by property valuer, where appropriate. The rent payable shall be based on the most competitive market rental rate of similar properties in terms of size and location, based on the results of the relevant enquiries.
In the event that it is not possible for appropriate information (for comparative purposes) to be obtained, our Audit Committee will determine whether the price, fees and/or the other terms offered by or to the interested persons are fair and reasonable, and approve such interested person transaction. In so determining, our Audit Committee will consider whether the price, fees and/or other terms is in accordance with usual business practices and pricing policies and consistent with the usual margins and/or terms to be obtained for the same or substantially similar types of transactions to determine whether the relevant transaction is undertaken at an arm’s length basis and on normal commercial terms.
Our Audit Committee will review all interested person transactions, if any, at least quarterly to ensure that they are carried out on an arm’s length basis and normal commercial terms, are not prejudicial to the interests of our Group and/or minority shareholders and in accordance with the procedures set out above. It will take into account all relevant non-quantitative factors. In the event that a member of our Audit Committee is interested in any such transaction, he will abstain from reviewing and voting on that particular transaction. Further, if during these period reviews, our Audit Committee believes that the guidelines and procedures set out above are not suffi cient to ensure that interests of minority Shareholders are not prejudiced, we will adopt new guidelines and procedures. Our Audit Committee may request for an independent fi nancial adviser’s opinion as it deems fi t.
Furthermore, our Audit Committee will include the review of interested person transactions as part of its standard procedures while examining the adequacy of our internal controls. Our Board will also ensure that all disclosure, approval and other requirements on interested person transactions, including those required by prevailing legislation, the Listing Manual and accounting standards, are complied with.
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Designated persons of our Group, which include Mr Desmond Teo, Mr Teo Bee Hoe, Mr Teo Bee Kheng, Mr Ang Mong Seng, Mr Wu Chiaw Ching, Mr Ng Sey Ming, Ms Lau Lee Hua, Mr Steven Teo, Mr Teo Bee Yen, Ms Teo Sze Ting, Jessica, Ms Teo Sze Pan, Sarah, Mr Teo Sze Kiat, Jimmy, Mr Teo Sze Yao, Jayden, Mr Teo Sze Purn, Terry, Mr Teo Sze Wei, Jeremy, Ms Teo Sze Han, Jae, Keh Swee, OTH and Halo Wire Rope are required to submit details of all interested person transactions entered into immediately to our Finance Director, including the value of the transactions. As a minimum, a report is to be submitted quarterly. A ‘nil’ return is expected if there is no interested person transaction for a previous quarter. For monitoring purposes, our Finance Director will maintain a register of interested person transactions (the “IPT Register”) which will record all IPT Transactions, including transactions less than S$100,000. This IPT Register will be updated quarterly based on submissions by the designated persons. It will record all interested person transactions which are entered into (including the basis on which they are entered into) and the approval or review by our Audit Committee.
OTHER TRANSACTIONS
We set forth below transactions involving persons connected to our Group but which do not fall within the ambit of the defi nition of an “interested person transaction” under Chapter 9 of the Listing Manual.
Transactions with Ren-Zhu Trading
Ren-Zhu Trading Pte. Ltd. (“Ren-Zhu Trading”), a company incorporated in Singapore, is principally engaged in the manufacture, supply and logistics of wire and cable products. Mr Yeo Eng Giap, who is a director and shareholder of Ren-Zhu Trading, is the husband of Ms Teo Sok Tee, a sister of our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and our CAO, Mr Steven Teo. Ms Teo Sok Tee is neither a Shareholder nor an employee of our Company.
Our subsidiary, Gaylin International, and Ren-Zhu Trading supply products to each other from time to time, comprising mainly rigging, small diameter wire rope and related accessories. The total sales to and purchases from Ren-Zhu Trading during the Relevant Period were as follows:
Our Directors are of the view that these transactions are not material. The aforesaid transactions were not entered into on an arm’s length basis and were not carried out on normal commercial terms. Our Company made the purchases as it could buy these products from Ren-Zhu Trading at a competitive pricing and/or with a better delivery time.
Our Directors envisage that transactions with Ren-Zhu Trading will continue in future as and when the need arises.
Provision of legal services by Rajah & Tann LLP, Kamilah & Chong and R&T Vietnam LLC
Our Independent Director and Chairman of our Nominating Committee, Mr Ng Sey Ming, is a practising advocate and solicitor in Singapore and a partner of Rajah & Tann LLP, a law fi rm which has provided legal services to our Group and continues to do so from time to time. Rajah & Tann LLP are the solicitors to the Offering, Kamilah & Chong (which is an associate of Rajah & Tann LLP) are our Company’s advisers in respect of Malaysian laws and R&T Vietnam LLC (which is part of the Rajah & Tann LLP regional network) are our Company’s advisers in relation to Vietnamese laws. Save as set out below, the legal services are and have been provided by other partners and associates of the fi rm.
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The matters between Rajah & Tann LLP, Kamilah & Chong and R&T Vietnam LLC and our Group were carried out on an arm’s length basis and based on normal commercial terms and market prices which are charged to other clients for similar services. Mr Ng Sey Ming was not involved in the negotiation of the fees and terms for the appointment of Rajah & Tann LLP as the solicitors to the Offering, Kamilah & Chong as our Company’s advisers in respect of Malaysian laws and R&T Vietnam LLC as our Company’s advisers in relation to Vietnamese laws. He is not and has never been part of the team involved in the listing process.
Rajah & Tann LLP had in 2010 and 2011 acted for Keh Swee in relation to the investment by the Pre-Offering Investors in Keh Swee as set out in the “Share Capital” section of this Prospectus. Mr Ng Sey Ming was the responsible partner for this matter. The fees paid in relation to this matter was approximately S$44,100. This matter was carried out on an arm’s length basis and based on normal commercial terms and market prices which Rajah & Tann LLP charges to its other clients for similar services. Other than this matter, Mr Ng Sey Ming has never been involved in any other matter involving our Group, Keh Swee or Keh Swee’s current shareholders.
Legal services provided by Rajah & Tann LLP, Kamilah & Chong and R&T Vietnam LLC to our Group would not be interested person transactions unless Mr Ng Sey Ming was one of the partners involved in the matter. Where Mr Ng Sey Ming is personally involved in any matter where our Group has engaged Rajah & Tann LLP, Kamilah and Chong and R&T Vietnam LLC to act on, such transaction would be an interested person transaction, and our Group will comply with the relevant listing rules and subject the transaction to the review procedures for interested person transactions.
As matters involving our Group are expected to be handled by other partners and associates, our Directors are of the view that the provision of such services will not interfere or be reasonably perceived to interfere with the independent judgement of Mr Ng Sey Ming in his role as Independent Director of our Company and as Chairman of our Nominating Committee. In the event that Rajah & Tann LLP, Kamilah and Chong or R&T Vietnam LLC handles any matter for our Group, he will adhere to guidelines as described in the section entitled “Review Procedures for Future Interested Person Transactions” of this Prospectus and Chapter 9 of the Listing Manual.
Our Audit Committee will also review all the relevant transactions to ensure that the then prevailing rules and regulations of the SGX-ST are complied with.
121
POTENTIAL CONFLICTS OF INTEREST
All our Directors have a duty to disclose their interests in respect of any transaction in which they have any personal material interest or any actual or potential confl ict of interest (including a confl ict that arises from their directorship or employment or personal investment in any corporation). Upon such disclosure, such Directors will not participate in any proceedings of our Board and shall abstain from voting in respect of any such transaction where the confl ict arises.
Non-competition deeds
As described under the section entitled “Interested Person Transactions” of this Prospectus, Halo Wire Rope is a company incorporated in the USA which is in the business of supplying of wire rope and rigging hardware and provision of related services. Halo Wire Rope is 60.0% indirectly owned by our controlling shareholder, Keh Swee, which is owned collectively by Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo and Mr Teo Bee Yen. Our Executive Director and CEO, Mr Desmond Teo, and our Executive Director, Mr Teo Bee Kheng, are the managers of Halo Wire Rope. 30% of Halo Wire Rope is held by Mr Kenneth Ragusa and ten per cent. (10%) is held by an unrelated third party.
The role of “manager” was similar to that of a director in a Singapore incorporated company. Mr Kenneth Ragusa, Mr Desmond Teo and Mr Teo Bee Kheng are offi cers of Halo Wire Rope. Mr Desmond Teo and Mr Teo Bee Kheng are non-executive offi cers of Halo Wire Rope and are not involved in the management of Halo Wire Rope. It was the collective decision of the shareholders of Halo Wire Rope to appoint Mr Kenneth Ragusa as the Chief Executive Offi cer of Halo Wire Rope and place him in charge of the day-to-day operations of the company. In addition, Mr Desmond Teo and Mr Teo Bee Kheng have not received and will not be receiving any salary or manager’s fees from Halo Wire Rope.
Our Directors believe that Halo Wire Rope is not a direct competitor to our Group for the following reasons:
(a) to the best of our Directors’ knowledge, Halo Wire Rope (which has approximately 15 employees) operates on a much smaller scale compared to our Group and was for its fi nancial year ended 31 December 2011 in a loss making and negative equity position;
(b) the types of products sold by our Group are generally different from those sold by Halo Wire Rope as Halo Wire Rope’s main products include small diameter wire rope, while our Group generally carries wire ropes of a larger diameter;
(c) Halo Wire Rope has a different customer base as its operations are based in New Orleans, Louisiana and its products are sold to customers located in the USA only; and
(d) the role of Keh Swee in Halo Wire Rope is that of a fi nancial investor. The operations of Halo Wire Rope are run by Mr Kenneth Ragusa who is the CEO and shareholder of Halo Wire Rope. He is familiar with and has been operating in the local market in the USA for several years.
To mitigate the potential confl icts of interest arising from competition between the businesses of Halo Wire Rope and our Group, our Company has entered into the following non-competition deeds:
(i) a non-competition deed (the “Covenantors Non-Competition Deed”) with Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo, Mr Teo Bee Yen and Keh Swee (collectively, the “Covenantors”); and
(ii) a non-competition deed (the “Halo Non-Competition Deed”) with Halo Wire Rope.
122
Covenantors Non-Competition Deed
Under the Covenantors Non-Competition Deed, each of the Covenantors irrevocably and unconditionally undertook that he/it will not (save that the provisions of the Covenantors Non-Competition Deed do not apply in respect of OTH and Halo Wire Rope during the term of the Call Option Agreement) do the following:
(a) either on its own account or in conjunction with or on behalf of any person, fi rm or company, carry on or be employed, engaged, concerned, provide expertise or be interested directly or indirectly in, any business that may compete, directly or indirectly, with any business carried on from time to time by our Company or any of its present or future subsidiaries, whether as shareholder, director, employee, partner, agent or otherwise, that is the same, similar to, or in competition with the business of the manufacture and supply of rigging and lifting equipment and related fi ttings and accessories, and the provision of related services;
(b) either on his own account or in conjunction with or on behalf of any other person, fi rm or company, solicit or entice away or attempt to solicit or entice away from any Group company, the custom of any person, fi rm, company or organisation who shall at any time during the duration of the Covenantors Non-Competition Deed have been a supplier, customer, client, agent or correspondent of our Group or in the habit of dealing with our Group;
(c) either on his own account or in conjunction with or on behalf of any other person, fi rm or company, solicit or entice away or attempt to solicit or entice away from any Group company any person who is an offi cer, manager or employee of our Group who shall at any time during the duration of the Covenantors Non-Competition Deed have been an offi cer, manager or employee of our Group whether or not such person would commit a breach of his contract of or associated company employment by reason of leaving such employment;
(d) make use of or disclose or divulge to any third party any confi dential information or trade secrets relating to any Group company, other than any information properly available to the public or disclosed or divulged pursuant to an order of a court of competent jurisdiction; and
(e) in relation to any trade, business or company, use any trade name, trademark or symbol used by our Group at present or in the future (whether registered or not, including but not limited to such words and graphs as “Gaylin”) in such a way as to be capable of being or likely to be confused with the name of our Company, or any Group company and shall use all reasonable endeavours to procure that no such name shall be used by any person, fi rm or company with which it is connected.
In addition, under the Covenantors Non-Competition Deed, each of the Covenantors further irrevocably and unconditionally undertakes that he/it will do the following:
(a) refer all business opportunities involving the manufacture and supply of rigging and lifting equipment and related fi ttings and accessories, and the provision of related services to customers within the USA, to our Group; and
(b) refrain and/or abstain from participating in any decision making activities (within Halo Wire Rope) relating to the sales and marketing activities of Halo Wire Rope.
The Covenantors Non-Competition Deed shall commence on the date on which our Shares commence trading on the SGX-ST and shall terminate upon the happening of any of the following events:
(i) the Covenantors and their associates ceasing to be the following: (A) a controlling shareholder of our Company; and (B) an executive offi cer, chief executive offi cer or director of our Company; or
(ii) subsequent to the Listing, the shares of our Company ceasing to be listed and traded on SGX-ST
whichever is earliest.
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Halo Non-Competition Deed
Under the Halo Non-Competition Deed, Halo irrevocably and unconditionally undertook that it will not do the following:
(a) either on its own account or in conjunction with or on behalf of any person, fi rm or company, carry on or be employed, engaged, concerned, provide expertise or be interested directly or indirectly in, any business that may compete, directly or indirectly, with any business carried on from time to time by our Company or any of its present or future subsidiaries, whether as shareholder, director, employee, partner, agent or otherwise, that is the same, similar to, or in competition with the business of the manufacture and supply of rigging and lifting equipment and related fi ttings and accessories, and the provision of related services, save in the USA;
(b) either on its own account or in conjunction with or on behalf of any other person, fi rm or company, solicit or entice away or attempt to solicit or entice away from any Group company, the custom of any person, fi rm, company or organisation who shall at any time during the duration of the Halo Non-Competition Deed have been a supplier, customer, client, agent or correspondent of our Group or in the habit of dealing with our Group;
(c) either on its own account or in conjunction with or on behalf of any other person, fi rm or company, solicit or entice away or attempt to solicit or entice away from any Group company any person who is an offi cer, manager or employee of our Group who shall at any time during the duration of the Halo Non-Competition Deed have been an offi cer, manager or employee of our Group whether or not such person would commit a breach of his contract of or associated company employment by reason of leaving such employment;
(d) make use of or disclose or divulge to any third party any confi dential information or trade secrets relating to any Group company, other than any information properly available to the public or disclosed or divulged pursuant to an order of a court of competent jurisdiction; and
(e) in relation to any trade, business or company, use any trade name, trademark or symbol used by our Group at present or in the future (whether registered or not, including but not limited to such words and graphs as “Gaylin”) in such a way as to be capable of being or likely to be confused with the name of our Company, or any Group company and shall use all reasonable endeavours to procure that no such name shall be used by any person, fi rm or company with which it is connected.
The Halo Non-Competition Deed shall commence on the date on which our Shares commence trading on the SGX-ST and shall terminate upon the happening of any of the following events:
(i) the Teo Brothers, Keh Swee and their associates ceasing to be any of the following: (A) a controlling shareholder of our Company; and (B) an executive offi cer, chief executive offi cer or director of our Company; or
(ii) subsequent to the Listing, the shares of our Company ceasing to be listed and traded on SGX-ST
whichever is earliest.
Halo Wire Rope shall cease to be bound by the covenants and undertakings as set out in the Halo Non-Competition Deed upon the Covenantors and their associates ceasing to be interested directly or indirectly in any of the voting rights in Halo Wire Rope.
Keh Swee undertaking
In addition, Keh Swee has given an undertaking to our Company that it will within two (2) years from the date of the listing of our Company on the SGX-ST, either (1) divest its shareholding in OTH such that Keh Swee will no longer be a shareholder in OTH or (2) procure that OTH divests its shareholding in Halo Wire Rope such that OTH will not be a shareholder of Halo Wire Rope, as the case may be.
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In connection with the above, Keh Swee will notify our Company when it discharges its obligations under the Keh Swee undertaking and divests its shareholdings in OTH or if OTH divests its shareholdings in Halo Wire Rope. Our Company will accordingly make an announcement via SGXNET.
In addition, Keh Swee has undertaken to grant our Company a right of fi rst refusal in respect of any sale of any shares of OTH by Keh Swee and shall procure that OTH grants to our Company a right of fi rst refusal in respect of any sale of shares of Halo Wire Rope by OTH. Pursuant to the grant of such rights of fi rst refusal, and for as long as Keh Swee is interested directly or indirectly in any voting rights in OTH or Halo Wire Rope, Keh Swee shall procure that each of OTH and Halo Wire Rope shall: (i) not effect any, inter alia, increase in issued share capital, capitalisation of profi ts or reserves, rights
issue or offer by way of rights, consolidation, sub-division, reduction of capital or share buy-back;
(ii) provide quarterly management accounts to our Company within 45 days from the end of each quarter; and
(iii) carry on business only in the ordinary course and in a manner consistent with its past practices.
In relation to the exercise of the right of fi rst refusal, our Deputy CEO and Finance Director will review (i) the quarterly management accounts of OTH or Halo Wire Rope (as the case may be); and (ii) the terms of sale in the transfer notice provided by Keh Swee and present the same for review by our Independent Non-Executive Chairman and our Independent Directors and our Board. In addition, our Company will make available to our Independent Non-Executive Chairman and our Independent Directors access to independent professional advice including technical advice and market information (if required) when conducting their review. The decision on the exercise of the right of fi rst refusal will rest with our Board of Directors with the concurrence of our Audit Committee. The directors interested in the transaction shall abstain from voting. In the event of a confl ict between the decision of our Audit Committee and the Executive Directors, the decision of our Audit Committee shall prevail. In addition, approval of our Shareholders shall be obtained by our Company prior to the completion of the transaction, if required.
As described under the section entitled “Interested Person Transactions – Past Interested Person Transactions – Potential Acquisition of OTH” of this Prospectus, our Company had on 26 September 2012 entered into the Call Option Agreement with Keh Swee, pursuant to which our Company was granted the Call Option to acquire the OTH Equity at any time from the date of the Call Option Agreement until the termination of the Call Option Agreement in accordance with its terms. Upon exercise of the Call Option and completion of the Acquisition of OTH, both OTH and Halo Wire Rope would be consolidated within our Group.
Pursuant to the Call Option Agreement, the parties to the Covenantors Non-Competition Deed agree that the covenants and undertakings of the Covenantors set out in the Covenantors Non-Competition Deed do not apply in respect of OTH and Halo Wire Rope during the term of the Call Option Agreement.
Save as disclosed in sections entitled “Restructuring Exercise”, ‘Shareholders” and “Interested Person Transactions” of this Prospectus, and save in respect of OTH and Halo Wire Rope, during the Period under Review and up to the Latest Practicable Date:
(a) none of our Directors or controlling shareholders or any of their associates has had any interest, direct or indirect, in any material transactions to which we were or are a party;
(b) none of our Directors or shareholders or any of their associates has any interest, direct or indirect, in any company carrying on the same business or carrying on a similar trade as us; and
(c) none of our Directors or controlling shareholders or any of their associates has any interest, direct or indirect, in any enterprise or company that is our customer or supplier of goods or services.
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Transactions with LHT Holdings Limited and Hiap Tong Corporation Ltd.
LHT Holdings Limited (“LHT”) is a public company limited by shares which is in the timber industry and manufactures wooden pallets, boxes and crates in Singapore that our Group purchases goods from time to time in the ordinary course of business. The aggregate value of transactions with LHT in the past three (3) fi nancial years and up to the Latest Practicable Date amounted to an aggregate of approximately S$71,000. Mr Wu Chiaw Ching, our Independent Director, is a non-executive, independent director of LHT. These transactions did not require approval of our Directors and Mr Wu Chiaw Ching was not involved in the decision making process in relation to these transactions. Should future transactions with LHT require approval of our Directors, Mr Wu Chiaw Ching will abstain from any deliberations in relation to such transactions in view of his directorship in LHT.
Hiap Tong Corporation Ltd. (“Hiap Tong”) is a public company limited by shares which is in the business of providing hydraulic lifting and haulage services to the marine, petrochemical and construction industries in Singapore. Our Company from time to time sells products to Hiap Tong Crane & Transport Pte Ltd, a subsidiary of Hiap Tong, in the ordinary course of business. The aggregate value of transactions with Hiap Tong and its subsidiaries in the past three (3) fi nancial years and up to the Latest Practicable Date amounted to an aggregate of approximately S$52,000. Mr Ng Sey Ming, our Independent Director, is an independent director of Hiap Tong. These transactions did not require approval of our Directors and Mr Ng Sey Ming was not involved in the decision making process in relation to these transactions. Should future transactions with Hiap Tong and its subsidiaries require approval of our Directors, Mr Ng Sey Ming will abstain from any deliberations in relation to such transactions in view of his directorship in Hiap Tong.
The aforesaid transactions with Hiap Tong and LHT were entered into on an arm’s length basis and on normal commercial terms.
It is envisaged that transactions with Hiap Tong and LHT will continue in future as and when the need arises. After the listing of our Company on the SGX-ST, any transactions between our Group and Halo Wire Rope will be subject to such guidelines as described in the section entitled “Review Procedures for Future Interested Person Transactions” of this Prospectus and Chapter 9 of the Listing Manual.
Interests of Experts
None of the experts named in this Prospectus:
(i) is employed on a contingent basis by our Company or any of our subsidiaries;
(ii) has a material interest, whether direct or indirect, in the shares of our Company or our subsidiaries; and
(iii) has a material economic interest, whether direct or indirect, in our Company, including an interest in the success of the Offering.
Interests of Issue Manager, Underwriter and Placement Agent
In the reasonable opinion of our Directors, CIMB, being the Issue Manager, and CIMB Securities, our Underwriter and Placement Agent, do not have a material relationship with our Group save as disclosed below:
(a) CIMB is the Issue Manager of the Offering; and (b) CIMB Securities is the Underwriter and Placement Agent of the Offering.
126
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127
DIRECTORS
Our Board of Directors is entrusted with the responsibility for the overall management of our Group. Our Directors’ particulars are listed below:
Name Age Address Occupation
Ang Mong Seng 63 176 Yunnan CrescentSingapore 638009
Independent Non-Executive Chairman
Desmond Teo 53 7 Gul Avenue Singapore 629651 Executive Director and CEO
Teo Bee Kheng 58 7 Gul Avenue Singapore 629651 Executive Director and COO
Teo Bee Hoe 56 7 Gul Avenue Singapore 629651 Executive Director and Deputy COO
Ng Sey Ming 37 9 Battery Road #25-01 Straits Trading Building Singapore 049910
Advocate and Solicitor
Lau Lee Hua 46 33, Ubi Avenue 3, #04-71 Vertex Singapore 408868
Accountant
Information on the business and working experience of our Directors are set out below:
Mr Ang Mong Seng was appointed as our Independent Non-Executive Chairman on 26 September 2012. Mr Ang was the Chief Operating Offi cer of EM Services Pte Ltd between 2002 and 2011 and has recently retired. Prior to that, he also held the post of General Manager in EM Services Pte Ltd between 1988 and 1997. He has more than 30 years of experience in estate management. Mr Ang is also an independent director of United Fiber System Ltd, ecoWise Holdings Limited, Hoe Leong Corporation Ltd., AnnAik Limited, VicPlas International Ltd and Chip Eng Seng Corporation Ltd. Mr Ang is a former Member of Parliament for the Bukit Gombak single-member constituency from 1997 to 2001 and Hong Kah Group Representation Constituency from 2001 to 2011. He was the Chairman for the Hong Kah Town Council from 1997 to 2011. He was a member of the House Committee in Parliament until 2011 when he retired from politics. Mr Ang obtained a Bachelor of Arts degree from the Nanyang University in 1973.
Mr Desmond Teo is our Executive Director and CEO. He is responsible for our Group’s overall management, formulating our Group’s strategic directions and expansion plans, developing and maintaining relationships with our customers and suppliers and overseeing our Group’s general operations. He has more than 30 years of experience in the offshore O&G industry. He joined our Group in 1979 working as a junior employee and was involved in various aspects of the business through the years before being appointed the managing director of Gaylin International in the late 1990s. Since his appointment as managing director, he has been instrumental in the regional expansion of our Group and continually sources for investment opportunities to promote the growth of our Group’s business. He is the honorary president/president/trustee of the Singapore Ship-Chandlers Association. In addition, he was awarded the Public Service Medal (Pingat Bakti Masyarakat) in 2010.
Mr Teo Bee Kheng, our Executive Director and COO, joined our Group in 1974. He is responsible for managing the operations of the production department, which include the aspects of production, fabrication, logistics and delivery, as well as related services. He also assists our Executive Director and CEO, Mr Desmond Teo, in managing our Group’s day-to-day business operations. He has more than 35 years of operational experience in the supply of rigging and lifting equipment and related services.
Mr Teo Bee Hoe, our Executive Director and Deputy COO, joined our Group in 1974. He is responsible for overseeing the technical and services aspects of the operations of the production department. He has more than 35 years of operational experience in the supply of rigging and lifting equipment and related services.
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Generally, the duties and responsibilities of our Executive Director and COO, Mr Teo Bee Kheng and our Executive Director and Deputy COO, Mr Teo Bee Hoe, overlap and complement each other. Together, they lead the production department.
Mr Wu Chiaw Ching was appointed as our Independent Director on 26 September 2012. He has been the proprietor of Wu Chiaw Ching & Company since 1987. He is a fellow member of the Institute of Certifi ed Public Accountants of Singapore, the Association of Chartered Certifi ed Accountants, United Kingdom and Certifi ed Public Accountants, Australia and a member of the Singapore Institute of Directors. He was formerly an independent director of China Fashion Holdings Limited, a company listed on the SGX-ST and he is currently an independent director of the following companies listed on the SGX-ST: Goodland Group Limited, LHT Holdings Limited and Natural Cool Holdings Limited. He obtained a Bachelor of Commerce (Accountancy), Singapore from Nanyang University, Singapore in 1980 and a Post-graduate Diploma in Business and Administration from Massey University, New Zealand in 1985. He also obtained a Diploma in Management Consultancy from the National Productivity Board Singapore in 1988 and a Master of Arts (Finance and Accounting) from Leeds Metropolitan University, United Kingdom in 1996.
Mr Ng Sey Ming was appointed as our Independent Director on 26 September 2012. He is currently a partner in the Banking & Finance practice group in Rajah & Tann LLP (“R&T”), the Solicitors to the Offering and legal adviser to the Company on Singapore laws. He commenced his legal practice in R&T in 2000 and was made a partner of R&T in 2007. He was admitted as a Solicitor of England and Wales, and an Advocate and Solicitor of the High Court of Malaya, in 2007. He is currently an independent director of Hiap Tong Corporation Ltd., a company listed on Catalist, the sponsor-supervised trading platform of the SGX-ST as well as XMH Holdings Ltd, which is listed on the Mainboard of SGX-ST. He obtained a Bachelor of Laws (Honours) from the National University of Singapore in 1999 and is currently a member of the Singapore Academy of Law and the Law Society of Singapore.
Ms Lau Lee Hua was appointed as our Independent Director on 26 September 2012. She has been the proprietor-auditor of Lau Lee Hua & Co., a certifi ed public accounting fi rm, since 1995. She is a practising member of Institute of Certifi ed Public Accountants of Singapore and a Fellow of the Association of Chartered Certifi ed Accountants having been admitted in 1995 and 1997 respectively. She was awarded the “Long Service Award” by the People’s Association in 2001 and the “MINDS Meritorious Service Award” by Movement for the Intellectually Disabled of Singapore in 2009.
Our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe, our CAO, Mr Steven Teo, and our Substantial Shareholder, Mr Teo Bee Yen, are siblings.
None of our Independent Non-Executive Chairman or our Independent Directors sits on the board of our subsidiaries, Gaylin Malaysia, which is based in Malaysia, or Gaylin Vietnam, which is based in Vietnam. None of the other entities in our Group is based in a jurisdiction other than Singapore. The list of present and past directorships of each Director for the past fi ve (5) years excluding those held in our Company is set out below:
Name Present directorships Past directorships
Ang Mong Seng Group Companies
Nil
Other Companies
ABA Consultants Pte. Ltd.AnnAik Limited Chip Eng Seng Corporation LtdecoWise Holdings LimitedHoe Leong Corporation Ltd.Pei Hwa Foundation LimitedThe Chinese Opera InstituteUnited Fiber System LimitedVicPlas International Ltd
Group Companies
Nil
Other Companies
E M Property Management Private LimitedMedia Vision Technology Private LimitedPengda Investment & Development Pte LtdProperty Inc. Private LimitedTPS Holdings Pte. Ltd.Transtech Electronics Ltd
Gaylin-SWG Offshore Pte LtdIonian International Pte LtdKing of Houston Pte. Ltd.Ten Gu Pte. Ltd.The One Holding Pte. Ltd.
Teo Bee Kheng Group Companies
Bridge TestingGaylin InternationalGaylin MalaysiaGaylin Power
Other Companies
OTHHalo Wire RopeKeh Swee
Group Companies
Nil
Other Companies
Nil
Teo Bee Hoe Group Companies
Bridge TestingGaylin InternationalGaylin MalaysiaGaylin Power
Other Companies
OTHKeh Swee
Group Companies
Nil
Other Companies
Nil
Wu Chiaw Ching Group Companies
Nil
Other Companies
Aegis Knowledge Pte. Ltd.Aegis Portfolio Managers Pte LtdAegis Private Capital Pte LtdAegis Wealth Managers Pte. Ltd.E-Freight Centre (2008) Pte. Ltd.Goodland Group LimitedK & Q Realty Pte. Ltd.LHT Holdings Limited Natural Cool Holdings LimitedPinpoint Pte LtdShipping Freight Booking Centre Sendirian BerhadSingapore Shippers’ Academy Pte. Ltd.Singapore Teochew Foundation Limited
Group Companies
Nil
Other Companies
A-Plus International Consultancy Pte LtdArthur Wu Consultants Pte LtdChina Fashion Holdings LimitedEDC@SCCCI Pte. Ltd.E-Freight Centre Pte LtdFinancial Board of the Singapore Chinese Chamber of CommerceKellicare Marketing Pte LtdMQ Asia Capital Pte LtdNetwork Universal Consultants Singapore Pte Ltd Rabo Management Consultants Pte. Ltd.Sun Yat Sen Nanyang Memorial Hall Company Limited
Our Independent Non-Executive Chairman, Mr Ang Mong Seng and our Independent Directors, Mr Wu Chiaw Ching and Mr Ng Sey Ming have prior experience as directors of public listed companies in Singapore.
Our Executive Director & CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and our Independent Director, Ms Lau Lee Hua, do not have prior experience as director of public listed companies. They have attended briefi ngs and courses conducted by Singapore Chinese Chamber Institute of Business in relation to the roles and responsibilities of a director of a listed company in August 2011.
EXECUTIVE OFFICERS
The particulars of our Executive Offi cers are set out below:
Name Age Address Position
Steven Teo 48 7 Gul Avenue Singapore 629651 CAO
Patrick Teo 61 7 Gul Avenue Singapore 629651 Deputy CEO
Chia Wei Ho 57 7 Gul Avenue Singapore 629651 Finance Director
Goh Guat Bee 35 7 Gul Avenue Singapore 629651 CFO
Jessica Teo 34 7 Gul Avenue Singapore 629651 Marketing and Sales Director
Information on the business and working experience of our Executive Offi cers are set out below:
Mr Steven Teo joined our Group in May 1983 and is currently our CAO. He assists our CEO in all matters in relation to the Company’s general management and administration and, in particular, he is responsible for the inventory management and procurement functions of our Group. He was previously involved in the marketing and sales functions of our Group and was instrumental in improving the inventory management system of our Group. Since joining our Group, he has more than 25 years of experience in the business of supplying rigging and lifting equipment and related services.
Mr Patrick Teo joined our Group in June 2012 and is currently our Deputy CEO. He is responsible for corporate affairs and business development of our Group. He began his professional career in JTC Corporation in February 1982, after completing his studies on a JTC scholarship. He rose to the position of Senior Executive Surveyor in JTC over the course of 11 years. Mr Patrick Teo had also held the position of General Manager in Jurong Country Club. Since September 2004, he joined Excalibur Resorts Pte. Ltd (which is a company in the Crescendas group of companies) (“Excalibur Resorts”) as the Managing Director and subsequently became the Assistant CEO, overseeing the property development, corporate affairs and business development. Mr Teo left Excalibur Resorts in May 2012.
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Mr Patrick Teo graduated from Western Australian Institute of Technology in 1981 with a Bachelor’s Degree in Applied Science (with Distinction). He is a member of the Singapore Institute of Surveyors and Valuers and formerly a member of the Institute of Surveyors, Australia and a Registered Surveyor with the Land Surveyors Board of Singapore. For his active contribution to community service, he was conferred the Public Service Medal (PBM) in 1997 and the Public Service Star (BBM) in 2004 by the President of Singapore.
Mr Chia Wei Ho joined our Group in September 2012 as our Finance Director. He reports directly to our CEO and the Board and is responsible for the investor relations, corporate governance, corporate regulatory compliance and reporting of our Group. Mr Chia Wei Ho was previously the Regional Finance Director, Regional Shared Financial Services, Asia-Pacifi c for Dell Computer Asia-Pacifi c Sdn from 1999 to 2000 and Vice-President of Finance for Citibank Technology Division from 2000 to 2002 and prior to that he was the Senior Vice-President, Finance and Administration, Chairman’s Offi ce of Medtecs International Corporation Limited in 2002. From 2003 to 2004, he served as the CAO (Finance, Legal, Compliance and Board Matters) for EAF Pte Ltd, a foreign-owned start-up software company. From 2004 to 2007, Mr Chia Wei Ho served as the CFO and COO of Tri-M Technologies (S) Ltd, a company listed on the SGX-ST Mainboard, and then as the General Manager and Finance Director (Finance, Legal and Board Matters) for Chamberlain Computime Electronics (Shenzhen) Co Ltd, a joint-venture company, from 2008 to 2009. Prior to joining our Group, he was the COO and Executive Director of Medtecs International Corporation Limited.
He is a Certified Management Accountant of the Australian Institute of Certified Management Accountants since 2001 and a Senior Associate of the Australian Institute of Banking & Finance since 1999. He obtained a Bachelor of Arts (Economics Major) from the University of Singapore in 1980 and a Master of Applied Finance from the University of Western Sydney, Australia in 1999.
Ms Goh Guat Bee joined our Group in March 2011 as our fi nancial controller and is currently our CFO. She reports directly to our Finance Director and the Board and has been responsible for the fi nancial accounting and reporting function of our Group’s business since she joined. She is also involved in the oversight of our Group’s treasury functions as well as the day to day accounting and all fi nancial operations of our Group and she assists our Finance Director with the oversight of our Group’s compliance with regulatory bodies. She has more than ten (10) years of experience in the accounting and fi nance fi elds. In 1999, she started her career at Deloitte & Touche LLP (“Deloitte”) in audit and was an audit supervisor prior to leaving Deloitte in 2004. Subsequently in April 2004, she worked as a fi nance manager with Singapore Telecommunications Limited (“SingTel”) and was promoted to senior fi nance manager in 2007. She was further promoted in 2010 to deputy director of National Broadband Network Strategy team. She graduated with a degree of Bachelor of Accountancy (Banking and Finance Minor) from the Nanyang Technological University (NTU) in 1999 and has been a non-practicing member of the Institute of Certifi ed Public Accountants of Singapore since 2002.
Ms Jessica Teo joined our Group in June 2003 and is currently our Marketing and Sales Director. She leads the Marketing and Sales Department of our Group and her responsibilities include mainly assisting our CEO in formulating marketing and sales strategies, conducting marketing activities to promote our products and services to local and overseas markets, as well as sourcing sales opportunities. She began her career in November 2001 as an assistant manager responsible for marketing function in PSA Singapore. She obtained a degree of Bachelor of Social Sciences with Honours (Economics Major) from the National University of Singapore in 2001. Our CAO, Mr Steven Teo is a brother of our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and our Substantial Shareholder, Mr Teo Bee Yen. Ms Jessica Teo is the daughter of our Substantial Shareholder, Mr Teo Bee Yen and niece to our Executive Director and CEO, Mr Desmond Teo, our Executive Directors, Mr Teo Bee Kheng and Mr Teo Bee Hoe and our CAO, Mr Steven Teo.
Save as disclosed in this section, none of our Directors or Executive Offi cers has any familial relationship with another Executive Offi cer or with any Director or Substantial Shareholder of our Company.
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Save as disclosed below, none of our Executive Offi cers has any present and past directorships for the past fi ve (5) years:
Name Present directorships Past directorships
Steven Teo Group Companies
Nil
Other Companies
Nil
Group Companies
Nil
Other Companies
Nil
Patrick Teo Group Companies
Nil
Other Companies
Nil
Group Companies
Nil
Other CompaniesBudget Self Storage Pte LtdCrescendas Lifestyle (Sungei Kudut) Pte LtdCrescendas Nano Silver Pte LtdDollarton Pte Ltd Excalibur Resorts (S) Pte LtdJason Parquet Specialist (S) Pte LtdKatong Village Restaurant Pte LtdNepes-Crescendas Pte LtdOsteopore Medico Pte LtdOsteopore Technology Pte LtdOsteopore International Pte LtdTung Lok Arena Pte Ltd
Chia Wei Ho Group Companies
Nil
Other Companies
Weiye Holdings LimitedInvestpro Pte Ltd
Group Companies
Nil
Other Companies
Asia Paper Group Ltd.CCFH Ltd.Medtecs (Asia Pacifi c) Pte. Ltd.Medtecs International Corp LtdRH Petrogas Investments Pte. Ltd.Season Confectionery Company (Pte) LimitedTrim Technologies (China) Pte. Ltd.Tri-M Technologies International Pte. Ltd.
Goh Guat Bee Group Companies
Nil
Other Companies
Nil
Group Companies
Nil
Other Companies
Nil
Jessica Teo Group Companies
Nil
Other Companies
Nil
Group Companies
Nil
Other Companies
Nil
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To the best of our knowledge and belief, there are no arrangements or undertakings with any Substantial Shareholders, customers, suppliers or others, pursuant to which any of our Directors and Executive Offi cers was appointed.
REMUNERATION
The remuneration paid to our Directors and our Executive Offi cers (which comprises salaries, bonuses and benefi ts-in-kind only) for services rendered to our Group and our subsidiaries on an individual basis and in remuneration bands during FY2011, FY2012 and expected to be paid for the current fi nancial year is as follows:
Names FY2011 FY2012
Estimated amount for
FY2013
Directors
Ang Mong Seng – – Band ADesmond Teo(2) Band C Band C Band CTeo Bee Kheng(2) Band B Band B Band BTeo Bee Hoe(2) Band B Band B Band BWu Chiaw Ching – – Band ANg Sey Ming – – Band ALau Lee Hua – – Band A
Executive Offi cers
Steven Teo(2) Band B Band B Band BPatrick Teo – (3) – (3) Band AChia Wei Ho – (3) – (3) Band AGoh Guat Bee – (3) Band A Band AJessica Teo Band A Band A Band A
Notes:
(1) Band A refers to remuneration of an amount up to S$250,000. Band B refers to remuneration of an amount between S$250,001 and S$500,000. Band C refers to remuneration of an amount between S$500,001 and S$750,000. (2) The estimated amount for FY2013 does not take into account the performance bonus that our Executive Directors and our
CAO are entitled to receive under their respective Service Agreements, further details of which are set out in the section entitled “Service Agreements” in this Prospectus.
(3) Not in our employment during the relevant periods.
Save as disclosed in the section entitled “Directors, Executive Offi cers and Employees – Service Agreements” of this Prospectus, as at the date of this Prospectus, we do not have in place any formal bonus or profi t-sharing plan or any other profi t-linked agreement or arrangement with any of our employees.
Save for the ESOS, no remuneration was paid or is to be paid in the form of stock options to any of our Directors, Executive Offi cers or any of our employees.
As at the Latest Practicable Date, save as required for compliance with the applicable laws, we have not set aside or accrued any amounts for our Directors, Executive Offi cers or any of our employees to provide for pension, retirement or similar benefi ts.
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REMUNERATION OF EMPLOYEES RELATED TO OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
As at the Latest Practicable Date, excluding our Directors and Executive Offi cers whose relationship with one another is disclosed above, there are 12 employees (out of a total of 160 employees) who are related to our Directors and Substantial Shareholders, and their particulars are set out below.
Name Title Relationship with our Directors
Teo Sze Pan, Sarah Marketing & Sales Executive Daughter of Teo Bee YenTeo Sze Kiat, Jimmy Assistant Sales Manager Son of Teo Bee KhengTeo Sze Yao, Jayden Sales Manager Son of Teo Bee KhengTeo Sze Purn, Terry Operations Manager Son of Teo Bee KhengTeo Sze Wei, Jeremy Sales Executive Son of Desmond Teo Teo Sze Han, Jae Business Process Manager Daughter of Desmond TeoTeo Bee Chow Machinist Cousin of the Teo BrothersTeo Bee Hiap Logistic Co-Ordinator Cousin of the Teo BrothersTeo Shi Quan Welder & Flame Cutter Distant nephew of the Teo BrothersNg Kek Khin Assistant Finance Manager Sister-in-law of Teo Bee KhengZhang Mei Guo Computer Engineer Cousin of the Teo BrothersFu Jia Wei Production Worker/Production Operator Distant nephew of the Teo Brothers
Those who are occupying a managerial position in our Company are Mr Teo Sze Yao, Jayden (Sales Manager), Mr Teo Sze Purn, Terry (Operations Manager) and Ms Ng Kek Khin (Assistant Finance Manager).
The basis of determining the remuneration of these related employees is the same as the basis of determining the remuneration of other unrelated employees.
The aggregate remuneration (which comprises salaries, bonuses and benefi ts-in-kind only) paid to these related employees for each of FY2011 and FY2012 amounted to approximately ten per cent. (10.0%) of the aggregate remuneration paid to all our Group’s employees; and (b) the aggregate remuneration paid to these related employees, Executive Offi cers and Directors for each of FY2011 and FY2012 amounted to approximately 36.0% of the aggregate remuneration paid to all our Group’s employees.
The aggregate remuneration of each related employee would be subject to annual review and majority approval of our Remuneration Committee to ensure that their remuneration packages are in line with our Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibilities. Remuneration of employees who are related to our Directors and Substantial Shareholders exceeding S$150,000 during the year will be disclosed in our annual reports. Any bonus, salary increase, benefi ts-in-kind and/or promotion for these related employees will also be subject to the review and approval of our Remuneration Committee. In addition, any future employment of employees related to our Directors and/or Substantial Shareholders and their proposed terms of employment will be subject to the review and approval of our Nominating Committee. In the event that a member of our Remuneration Committee or Nominating Committee is related to the employee under review, he will abstain from participating in the review.
135
Pursuant to paragraph 9.4 in the Code of Corporate Governance 2012, the details of the remuneration (which comprises salaries, bonuses and benefi ts-in-kind only) of employees who are immediate family members of a director or the CEO, and whose remuneration exceeds S$50,000 during the year should be disclosed in the annual remuneration report. This will be done on a named basis with clear indication of the employee’s relationship with the relevant director or the CEO. The details of the remuneration of such employees are as set forth in the table below:
Name TitleRelationship with our Directors FY2011 FY2012
Estimated amount for
FY2013
Teo Sze Kiat, Jimmy Assistant Sales Manager Son of Teo Bee Kheng Band 1 Band 1 Band 1
Teo Sze Yao, Jayden Sales Manager Son of Teo Bee Kheng Band 1 Band 2 Band 2
Teo Sze Purn, Terry Operations Manager Son of Teo Bee Kheng Band 1 Band 1 Band 1
Teo Sze Wei, Jeremy Sales Executive Son of Desmond Teo Band 1 Band 1 Band 1
Teo Sze Han, Jae Business Process Manager
Daughter of Desmond Teo
–(3) Band 1 Band 1
Notes:
(1) Band 1: refers to remuneration between S$50,001 to S$100,000 per annum.
(2) Band 2: refers to remuneration between S$100,001 to S$150,000 per annum.
(3) Ms Teo Sze Han, Jae only joined our Group in January 2011.
EMPLOYEES
As at the Latest Practicable Date, we had a workforce of 160 full-time employees. We do not employ a signifi cant number of temporary or part-time employees. Our employees are not unionised. The relationship and cooperation between the management and staff have been good and are expected to continue in the future. There has not been any incidence of work stoppages or labour disputes which materially affected our operations.
The functional distribution of our full-time employees as at 31 March 2010, 2011 and 2012 and the Latest Practicable Date were as follows:
As at 31 March 2010
As at 31 March 2011
As at 31 March 2012
As at the Latest Practicable Date
Function
Management(1) 6 7 6 7
Finance, human resource and administration 15 19 22 23
Marketing and sales 14 11 12 14
Ship Supply Business 6 4 5 8
Operations, logistics, warehouse 93 95 103 108
Total 134 136 148 160
Note:
(1) Executive Directors and Executive Offi cers are classifi ed under Management.
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The geographical breakdown of our full-time employees as at 31 March 2010, 2011 and 2012 and the Latest Practicable Date were as follows:
As at 31 March 2010
As at 31 March 2011
As at31 March 2012
As at the Latest Practicable Date
Singapore 126 127 140 150
Vietnam 8 9 8 9
Malaysia – – – 1
Total 134 136 148 160
SERVICE AGREEMENTS
Our Company has entered into separate service agreements (the “Service Agreements”) with Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo for a period of three (3) years with effect from the date of our listing on the SGX-ST, and thereafter continue from year to year (unless otherwise terminated by either party giving not less than six (6) months’ prior written notice to the other).
We may also terminate the Service Agreements of our Executive Directors or CAO, Steven Teo, if he, inter alia, is disqualifi ed to act as Executive Director or Executive Offi cer under any applicable laws or regulations, guilty of dishonesty, gross misconduct or willful neglect of duty, commits any continued material breach of the terms of their respective Service Agreements, is guilty of conduct likely to bring himself into disrepute, becomes bankrupt or is convicted of any criminal offence. None of these Executive Directors or Executive Offi cers will be entitled to any benefi ts upon termination of their respective Service Agreements. The Service Agreements cover the terms of employment, specifi cally salaries and bonuses.
Pursuant to the terms of their respective Service Agreements, each of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo is entitled to an annual performance bonus (the “Annual Performance Bonus”) in respect of each fi nancial year commencing from FY2013, which is calculated based on the consolidated net profi t before tax and exceptional items (before deducting for such Performance Bonus payments) (“NPBT”) of our Group as follows:
NPBT Performance Bonus
Desmond Teo Teo Bee Kheng Teo Bee Hoe Steven Teo
S$10.0 million < NPBT S$17.5 million
3.0% of the amount of NPBT in excess of S$10.0 million and up to S$17.5 million
1.5% of the amount of NPBT in excess of S$10.0 million and up to S$17.5 million
0.75% of the amount of NPBT in excess of S$10.0 million and up to S$17.5 million
0.75% of the amount of NPBT in excess of S$10.0 million and up to S$17.5 million
S$17.5 million < NPBT S$25.0 million
S$225,000 plus 4.0% of the amount of NPBT in excess of S$17.5 million and up to S$25.0 million
S$112,500 plus 2.0% of the amount of NPBT in excess of S$17.5 million and up to S$25.0 million
S$56,250 plus 1.0% of the amount of NPBT in excess of S$17.5 million and up to S$25.0 million
S$56,250 plus 1.0% of the amount of NPBT in excess of S$17.5 million and up to S$25.0 million
NPBT > S$25.0 million
S$525,000 plus 5.0% of the amount of NPBT in excess of S$25.0 million
S$262,500 plus 2.5% of the amount of NPBT in excess of S$25.0 million
S$131,250 plus 1.25% of the amount of NPBT in excess of S$25.0 million
S$131,250 plus 1.25% of the amount of NPBT in excess of S$25.0 million
137
Directors’ fees do not form part of the terms of the Service Agreements as these require the approval of Shareholders in our Company’s annual general meeting.
Our Executive Directors and our CAO, Steven Teo, will be reimbursed for all travelling, accommodation, entertainment and other out-of-pocket expenses reasonably incurred by our Executive Directors and our CAO in the process of discharging their duties. Our Company shall provide each of our Executive Directors and the CAO with a car. Our Company shall bear all costs and expenses of the car, including but not limited to the costs of taxes, insurance, repair, maintenance and the running costs of the car.
Save as disclosed above, there are no other existing or proposed service agreements between our Company, our subsidiaries and any of our Directors. There are no existing or proposed service agreements entered or to be entered into by our Directors with our Company or any of its subsidiaries which provide for benefi ts upon termination of employment.
138
GAYLIN EMPLOYEE SHARE OPTION SCHEME
On 24 September 2012, our Shareholders approved an employee share option scheme known as the Gaylin Employee Share Option Scheme (the “ESOS”), the rules of which are set out in Appendix C to this Prospectus. The ESOS complies with the relevant rules of the SGX-ST as set out in Chapter 8 of the Listing Manual. The ESOS will provide eligible participants with an opportunity to participate in the equity of our Company and to motivate them towards better performance through increased dedication and loyalty. The ESOS, which forms an integral and important component of our employee compensation plan, is designed to primarily reward and retain executive directors, non-executive directors and employees of our Group whose services are vital to our well being and success.
As at the Latest Practicable Date, no Options have been granted under the ESOS.
Objectives of the ESOS
The objectives of the ESOS are as follows:
(a) to motivate participants to optimise their performance standards and effi ciency and to maintain a high level of contribution to our Group;
(b) to retain key employees and directors whose contributions are essential to the long-term growth and profi tability of our Group;
(c) to instill loyalty to and a stronger identifi cation by participants with the long-term prosperity of our Group;
(d) to attract potential employees with the relevant skill sets to contribute to our Group and to create value for our Shareholders; and
(e) to align the interest of participants with the interests of our Shareholders.
Summary of ESOS
A summary of the rules of the ESOS is set out as follows:
Participants
Under the rules of the ESOS, executive and non-executive directors (including our Independent Non-Executive Chairman and our Independent Directors) and confi rmed full-time employees of our Group are eligible to participate in the ESOS.
Executive and non-executive directors and confi rmed full-time employees of our Group who are also controlling shareholders of our Company or associates of a controlling shareholder of our Company are also eligible to participate in the ESOS, provided that the terms of each grant under the ESOS to a selected executive director and person who is a controlling shareholder of our Company or an associate of a controlling shareholder of our Company shall be approved by the independent Shareholders in a separate resolution.
The participation of such eligible controlling shareholders of our Company or associates of a controlling shareholder of our Company is subject to the following:
(a) the aggregate of the number of Shares comprised in Options granted to controlling shareholders of our Company or associate(s) of a controlling shareholder of our Company under the ESOS shall not exceed 25.0% of the aggregate of the total number of Shares (comprised in Options) which may be granted under the ESOS; and
(b) the aggregate of the number of Shares in respect of Options granted to each controlling shareholder of our Company or associate(s) of a controlling shareholder of our Company shall not exceed ten per cent. (10.0%) of the total number of Shares (comprised in Options) which may be granted under the ESOS.
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In addition, controlling shareholders of our Company or their associates shall not participate in the ESOS unless:
(c) written justifi cation have been provided to Shareholders for their participation at the introduction of the ESOS or prior to the fi rst grant of Options to them;
(d) the actual number and terms of any Options to be granted to them have been specifi cally approved by independent Shareholders who are not recipients of the Options in a general meeting in separate resolutions for each such controlling shareholder of our Company or his associates; and
(e) all conditions for their participation in the ESOS as may be required by the regulation of the SGX-ST from time to time are satisfi ed.
There will be no restriction on the eligibility of any participant to participate in any other share options schemes or share award schemes implemented or to be implemented by our Company or any member of our Group.
Administration
The ESOS shall be administered by the Remuneration Committee with powers to determine, inter alia, the following:
(a) persons to be granted Options;
(b) number of Options to be granted; and
(c) recommendations for modifi cations to the ESOS.
As at the date of this Prospectus, our Remuneration Committee comprises our Independent Non-Executive Chairman, Mr Ang Mong Seng and our Independent Directors Mr Ng Sey Ming, Mr Wu Chiaw Ching and Ms Lau Lee Hua. The Remuneration Committee will consist of Directors (including Directors or persons who may be participants of the ESOS). A member of the Remuneration Committee who is also a participant of the ESOS must not be involved in its deliberation in respect of Options granted or to be granted to him.
Size of the ESOS
The aggregate number of Shares in respect of which the Remuneration Committee may grant Options on any date, when added to the nominal amount of Shares issued and issuable in respect of all Options granted under the ESOS shall not exceed 15.0% of the issued share capital of our Company on the day immediately preceding the date of the relevant grant.
We believe that the 15.0% limit set by the SGX-ST gives our Company suffi cient fl exibility to decide the number of Option Shares to offer to our existing and new employees. 15.0% of the post-Offering share capital of our Company constitutes approximately 61.5 million Shares. As it is intended that the ESOS shall last for 10 years, assuming that there is no change in the total issued share capital of our Company, the number of Options that may be granted in a year will average approximately 6.2 million shares. The number of eligible participants is expected to grow over the years. Our Company, in line with its goal of ensuring sustainable growth, is constantly reviewing its position and considering the expansion of its talent pool which may involve employing new employees. The employee base, and thus the number of eligible participants will increase as a result. If the number of Options available under the ESOS is limited, our Company may only be able to grant a small number of Options to each eligible participant which may not be a suffi ciently attractive incentive. Our Company is of the opinion that it should have suffi cient number of Options to offer to new employees as well as to existing employees. The number of Options offered must also be signifi cant to serve as a meaningful reward for contributions to our Group. However, it does not necessarily mean that our Remuneration Committee will defi nitely issue Option Shares up to the prescribed limit. Our Remuneration Committee shall exercise its discretion in deciding the number of Option Shares to be granted to each employee which will depend on the performance and value of the employee to our Group.
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Maximum entitlements
The aggregate number of Shares comprised in any Option to be offered to a participant under the ESOS shall be determined at the absolute discretion of our Remuneration Committee, which shall take into account (where applicable) criteria such as rank, past performance, years of service and potential for future development of that participant.
Options, exercise period and exercise price
The Options that are granted under the ESOS may have exercise prices that are, at our Remuneration Committee’s discretion, set at a price (the “Market Price”) equal to the average of the last dealt prices for the Shares on the Offi cial List of the SGX-ST for the fi ve consecutive Market Days immediately preceding the relevant date of grant of the relevant Option; or at a discount to the Market Price (subject to a maximum discount of 20.0%). Options which are fi xed at the Market Price (“Market Price Option”) may be exercised after the fi rst anniversary of the date of grant of that Option while Options exercisable at a discount to the Market Price (“Discounted Option”) may only be exercised after the second anniversary from the date of grant of the Option. Options granted under the ESOS will have a life span of ten (10) years.
Alteration of capital
If there is a variation in the issued share capital of our Company, then our Remuneration Committee may adjust the exercise price of the shares comprised in the Options and/or the class or number of Shares in respect of which additional Options may be granted to Participants. Such adjustments may include retrospective adjustments and shall only be made upon the written confi rmation of the Auditors that in their opinion, such adjustment is fair and reasonable. The issue of securities as consideration for an acquisition of any assets by our Company will not be regarded as a circumstance requiring the aforementioned adjustment. Our Company shall notify each Participant upon any adjustment required to be made. Any adjustment shall take effect upon such written notifi cation being given.
Grant of options
Under the rules of the ESOS, there are no fi xed periods for the grant of Options. As such, offers for the grant of Options may be made at any time from time to time at the discretion of our Remuneration Committee. However, no Option shall be granted during the period of 30 days immediately preceding the date of announcement of our Company’s interim or fi nal results (as the case may be).
In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is imminent, offers may only be made after the second Market Day from the date on which the aforesaid announcement is made.
Termination of Options
Special provisions in the rules of the ESOS deal with the lapse or earlier exercise of Options in circumstances which include the termination of the participant’s employment in our Group, the bankruptcy of the participant, the death of the participant, a take-over of our Company and the winding-up of our Company.
Acceptance of Options
The grant of Options shall be accepted within 30 days from the date of offer. Offers of Options made to grantees, if not accepted before the closing date, will lapse. Upon acceptance of the offer, the grantee must pay our Company a consideration of S$1.00.
Rights of Shares arising
Shares arising from the exercise of Options are subject to the provisions of the Memorandum and Articles of Association of our Company. The Shares so allotted will upon issue rank pari passu in all respects with the then existing issued Shares, save for any dividend, rights, allotments or other distributions, the record date for which is prior to the relevant exercise date of the Option. “Record Date” means the date as at the close of business on which Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions (as the case may be).
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Duration of the ESOS
The ESOS shall continue in operation for a maximum duration of ten (10) years and may be continued for any further period thereafter with the approval of our Shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required.
Abstention from voting
Shareholders who are eligible to participate in the ESOS are to abstain from voting on any resolution of Shareholders relating to the ESOS.
Modifi cations to the ESOS
Our Remuneration Committee may modify the provisions of the ESOS by resolution. Any modifi cation or alteration which shall alter materially and adversely the rights attaching to any Option may only be made with the written consent of participants who would have held not less than three-quarters in nominal amount of all the Shares if all outstanding Options had been exercised in full. Any modifi cation or alteration which would be to the advantage of participants under the ESOS shall be subject to the prior approval of the Shareholders in general meeting. Written notice of any modifi cation or alteration shall be given to all participants. The prior approval of the SGX-ST is required for all modifi cations or alterations.
Grant of Discounted Options
The ability to offer Options to participants of the ESOS with exercise prices set at a discount to the prevailing market prices of the Shares will operate as a means to recognise the performance of participants as well as to motivate them to continue to excel while encouraging them to focus more on improving the profi tability and return of our Group above a certain level which will benefi t our Shareholders when these are eventually refl ected through share price appreciation. The ESOS will also serve to recruit new employees whose contributions are important to the long-term growth and profi tability of our Group. Discounted Options would be perceived in a more positive light by the participants, inspiring them to work hard and produce results in order to be offered Discounted Options as only employees who have made signifi cant contributions to the success and development of our Group would be granted Discounted Options.
The fl exibility to grant Discounted Options is also intended to cater to situations where the stock market performance has overrun the general market conditions. In such events, our Remuneration Committee will have absolute discretion to:
(a) grant Options set at a discount to the Market Price of a Share (subject to a maximum limit of 20.0%); and
(b) determine the participants to whom, and the Options to which, such reduction in exercise prices will apply.
In determining whether to give a discount and the quantum of the discount, our Remuneration Committee shall be at liberty to take into consideration factors including the performance of our Company, our Group, the performance of the participant concerned, the contribution of the participant to the success and development of our Group and the prevailing market conditions.
At present, our Company foresees that Discounted Options may be granted principally in the following circumstances:
(i) Firstly, where it is considered more effective to reward and retain talented employees by way of a Discounted Option rather than a Market Price Option. This is to reward the outstanding performers who have contributed signifi cantly to our Group’s performance and the Discounted Option serves as additional incentives to such Group employees. Options granted by our Company on the basis of market price may not be attractive and realistic in the event of an overly buoyant market and infl ated share prices. Hence during such period the ability to offer Discounted Options would allow our Company to grant Options on a more realistic and economically feasible basis. Furthermore, Discounted Options will give an opportunity to our Group employees to realise some tangible benefi ts even if external events cause the Share price to remain largely static.
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(ii) Secondly, where it is more meaningful and attractive to acknowledge a participant’s achievements through a Discounted Option rather than paying him a cash bonus. For example, Discounted Options may be used to compensate employees and to motivate them during economic downturns when wages (including cash bonuses and annual wage supplements) are frozen or cut, or they could be used to supplement cash rewards in lieu of larger cash bonuses or annual wage supplements. Accordingly, it is possible that merit-based cash bonuses or rewards may be combined with grants of Market Price Options or Discounted Options, as part of eligible employees’ compensation packages. The ESOS will provide our Group employees with an incentive to focus more on improving the profi tability of our Group thereby enhancing shareholder value when these are eventually refl ected through the price appreciation of our Shares after the vesting period.
(iii) Thirdly, where due to speculative forces and having regard to the historical performance of the Share price, the Market Price of the Shares at the time of the grant of the Options may not be refl ective of fi nancial performance indicators such as return on equity and/or earnings growth.
Our Remuneration Committee will have the absolute discretion to grant Discounted Options, to determine the level of discount (subject to a maximum discount of 20.0% of the Market Price) and the grantees to whom, and the Options to which such discount in the exercise price will apply, provided that our Shareholders in general meeting shall have authorised, in a separate resolution, the making of offers and grants of Options under the ESOS at a discount not exceeding the maximum discount as aforesaid.
Our Company may also grant Options without any discount to the market price. Additionally, our Company may, if it deems fi t, impose conditions on the exercise of the Options (whether such Options are granted at the market price or at a discount to the Market Price), such as restricting the number of Shares for which the Option may be exercised during the initial years following its vesting.
Rationale for participation of executive and non-executive directors (including our Independent Non-Executive Chairman and our Independent Directors) and employees of our Group
The extension of the ESOS to the executive and non-executive directors (including our Independent Non-Executive Chairman and our Independent Directors) and employees of our Group allows our Group to have a fair and equitable system to reward directors and employees who have made and who continue to make signifi cant contributions to the long-term growth of our Group.
Directors and employees of our Group who are controlling shareholders of our Company or associates of a controlling shareholder of our Company should be remunerated for their contribution to our Group on the same basis as other directors and employees by including them in the ESOS. Our Directors and employees who are controlling shareholders of our Company or associates of a controlling shareholder of our Company should not be unduly discriminated against by virtue of their existing shareholdings in our Company. The extension of the ESOS to our Directors and employees who are controlling shareholders of our Company or associates of a controlling shareholder of our Company will enhance their long-term commitment to the Group and further motivate them in their contribution towards the success of our Group, which is in line with the objectives of the ESOS.
Non-executive directors bring to our Group their wealth of knowledge, business expertise and contacts in the business community. It is desirable that non-executive directors of our Group be allowed to participate in the ESOS to incentivise and retain them and to further align their interests with that of our Group.
Granting eligibility to the non-executive directors of our Group gives us the ability to supplement the current cash-based remuneration by way of directors’ fees to the non-executive directors of our Group for their services and will help us remain competitive in the remuneration of the non-executive directors of our Group when other listed companies offer share options to their non-executive directors.
We are of the view that including the non-executive directors of our Group in the ESOS will show our appreciation for, and further motivate them in their contribution towards our success. However, as we recognise that the services and contributions of the non-executive directors of our Group cannot be measured in the same way as those of our full time employees, we envisage that the bulk of the Options will be given to our employees. The non-executive directors of our Group will be granted Options at the discretion of our Remuneration Committee.
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Our Remuneration Committee, when deciding on the selection of the non-executive directors of our Group to participate in the ESOS and the number of Options to be offered, will take into consideration the nature and extent of their input, the assistance and expertise rendered by them to the Board and the impact thereof on the growth, success and development of our Group, as well as their involvement and commitment to the board of directors on which they sit. Our Remuneration Committee may, where it considers relevant, take into account other factors such as the economic conditions and our Company’s performance.
Although the non-executive directors of our Group may be appointed as members of our Remuneration Committee, the rules of the ESOS provide that a member is not to be involved in its deliberations in respect of the grant of Options to him. We will ensure that the number of Options granted to the non-executive directors of our Group will be such that any confl ict of interests that may potentially arise is kept minimal and that the independence of the non-executive directors of our Group are not compromised.
It is our intention that all our employees whether key employees or not should be treated equally for the purposes of the ESOS. The main purpose of the ESOS is to align the interests of our Group’s directors and all employees who are involved in our business and prosperity with those of our Group. The extension of the ESOS to all employees of our Group allows us a fair and equitable system to reward employees who have made and will continue to make important contributions to our long-term growth, be they key employees or otherwise.
We believe that the ESOS will be an essential part of our strategy for recruiting and retaining capable employees. The ESOS will provide an incentive to our employees to achieve and maintain a high level of performance as well as to encourage greater dedication and loyalty by enabling our Group to give recognition to past contributions and services as well as to further encourage participants generally to contribute towards our long term prosperity. To this end, we will determine the number of Options to be granted to an employee by taking into account the appointment, responsibilities, length of service, potential and performance. The level of performance of each employee will be assessed on the basis of an annual appraisal process for all employees.
Cost of Options granted under the ESOS to our Company
The grant of Options under the ESOS will result in an increase in our Company’s issued share capital to the extent that Options are exercised and new Shares are issued. This will in turn depend on, inter alia, the number of Shares comprised in the Options granted, the vesting schedules and the prevailing market price of the Shares on the SGX-ST.
The issue of new Shares upon the exercise of Options granted under the ESOS will have the effect of increasing our Company’s consolidated NTA by the aggregate exercise price of the new Shares issued. On a per Share basis, the effect would be accretive if the exercise price is above the NTA per Share but dilutive otherwise.
No cash outlays would be expended by our Company at the time Options are granted by it (as compared with cash bonuses). Under Singapore Financial Reporting Standards (“SFRS”) 102, Share-based Payment, whenever the Options are granted by our Company to subscribe for new Shares, such Options which have a fair value attached to them at the time of grant will need to be expensed and charged to income statement over the period in which the Options are vested. This fair value is the estimated value of the Option on its date of grant and may be derived by applying a variety of valuation techniques or pricing models developed for valuing traded options.
Under the ESOS, each participant to whom an Option is offered pays a nominal consideration of S$1.00 to our Company on his acceptance of the offer of the Option. Insofar as such Options are granted at a consideration that is less than their fair value at the time of grant, there will be a cost to our Company (in that we will receive from the participant upon the grant of the Option to him, a consideration that is less than the fair value of the Option).
The cost to our Company in granting an Option would vary depending on the number of Options granted pursuant to the ESOS, whether these Options are granted at Market Price or at a discount and the validity period of the Options. Generally a greater discount and a longer validity period for an Option will result in a higher potential cost to our Company.
The issuance of new Shares under the ESOS will have a dilutive impact on our consolidated EPS. However, the impact is not expected to be material in any given fi nancial year as the Options are likely to be exercised over several years in accordance with the predetermined vesting schedules.
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CORPORATE GOVERNANCE
Our Articles provide that our board of Directors will consist of not less than two (2) Directors. None of our Directors are appointed for any fi xed terms, but one-third of our Directors are required to retire at every annual general meeting of our Company. Hence, the maximum term for each Director is three (3) years. Directors who retire are eligible to stand for re-election.
Our Directors recognise the importance of corporate governance and the offering of high standards of accountability to the shareholders of our Company. Accordingly, our Directors have established an Audit Committee, a Remuneration Committee and a Nominating Committee.
We have seven (7) Directors on our Board of Directors, of which one (1) is an Independent Non-Executive Chairman and three (3) are Independent Directors. Our Independent Non-Executive Chairman and Independent Directors do not have any existing business or professional relationship of a material nature with our Group, our other Directors and/or Substantial Shareholders, save as disclosed in the sections entitled “Interested Person Transactions”. Our Independent Non-Executive Chairman and Independent Directors are also not related to other Directors and/or Substantial Shareholders.
Corporate Social Responsibility
In addition, our Company shall be required to disclose its corporate social responsibility policies with reference to the SGX-ST’s Guide to Sustainability Reporting for Listed Companies published on 27 June 2011.
The Board of Directors of our Company will establish a corporate social responsibility policy which will include the review of the following areas of our Group’s activities:
(a) to review and recommend our Group’s policy in respect of corporate social responsibility issues;
(b) to review our Group’s health, safety and environment policies and standards;
(c) to review our Group’s environmental policies and standards;
(d) to review the social impact of our Group’s business practices in the communities that it operates in;
(e) to review and recommend policies and practices with regard to key stakeholders (suppliers, customers and employees); and
(f) to review and recommend policies and practices with regard to regulators.
Environment, Health and Safety
Safe and reliable operations are vital to us. We have established a Workplace Safety and Health Policy to ensure that our employees work in an accident-free environment. Such measures include ensuring that our staff are properly and adequately equipped with personal protective equipment such as helmets and boots at all times, fi re safety equipment are well-maintained and fi re safety procedures are made known to all staff. We believe that work accidents are preventable, therefore employees are constantly reminded to identify potential hazards and to maintain and ensure compliance with all regulatory requirements. We are therefore committed to provide a safe and healthy workplace for all our employees, contractors and visitors.
During the period 1 April 2009 up to the Latest Practicable Date, we did not experience any major accidents which have resulted in serious injury or death at our premises.
Community
From time to time, we make donations to local charities such as President’s Challenge 2010 and Singapore Red Cross Japan Disaster 2011 Relief Fund.
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Audit Committee
Our Audit Committee comprises our Independent Non-Executive Chairman, Mr Ang Mong Seng and our Independent Directors Mr Wu Chiaw Ching, Mr Ng Sey Ming and Ms Lau Lee Hua. The Chairman of the Audit Committee is Mr Wu Chiaw Ching. Our Directors recognise the importance of corporate governance and the offering of high standards of accountability to the shareholders of our Company. Our Audit Committee shall meet periodically to perform the following functions:
(a) review the audit plans of our Company’s external auditors, and where applicable, our internal auditors, including the results of our auditors’ review and evaluation of our system of internal controls;
(b) review the external auditors’ reports;
(c) review with independent internal auditors the fi ndings of their review report, internal control process and procedures, and make recommendations on the internal control process and procedures to be adopted by our Company;
(d) review the recommendations of the Independent Auditors and Reporting Accountants and monitor the implementation of an automated inventory and information system;
(e) review the co-operation given by our Company’s Directors and Executive Offi cers to the external auditors;
(f) review the fi nancial statements of our Company and our Group, and discuss any signifi cant adjustments, major risk areas, changes in accounting policies, compliance with Singapore fi nancial reporting standards, concerns and issues arising from the audits including any matters which the auditors may wish to discuss in the absence of management, where necessary, before their submission to our Board for approval;
(g) review and discuss with auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Group’s operating results or fi nancial position and our management’s response;
(h) making recommendations to our Board of Directors on the appointment, reappointment and removal of the external auditor, and approving the remuneration and terms of engagement of the external auditor;
(i) review our key fi nancial risk areas, with a view to providing independent oversight on our Group’s fi nancial reporting, with the outcome of such review to be disclosed in the annual reports or, if the fi ndings are material, to be immediately announced via SGXNET;
(j) review interested person transactions, falling within the scope of Chapter 9 of the Listing Manual, if any, and connected person transactions;
(k) review transactions falling within the scope of Chapter 10 of the Listing Manual, if any;
(l) review any potential confl icts of interest and set framework to resolve or mitigate any potential confl ict of interest;
(m) review and approve foreign exchange hedging policies implemented by our Group and conduct periodic review of foreign exchange transaction and hedging policies and procedures;
(n) undertake such other reviews and projects as may be requested by our Board and report to our Board its fi ndings from time to time on matters arising and requiring the attention of our Audit Committee;
(o) review arrangements by which our staff may, in confi dence, raise concerns about improprieties in matters of fi nancial reporting and to ensure those arrangements are in place for independent investigations of such matter and for appropriate follow-up; and
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(p) undertake generally such other functions and duties as may be required by law or the Listing Manual, and by such amendments made thereto from time to time.
Apart from the above functions, our Audit Committee will also commission and review the fi ndings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impact on our Group’s operating results and/or fi nancial position.
Our Company will, in consultation with our Audit Committee, commission a professional audit fi rm to review the internal control processes and procedures of our Group on an annual basis after our Company is listed on the Offi cial List of the SGX-ST. Upon completion of the internal control audit, appropriate disclosure will be made via SGXNET of any material, price-sensitive internal control weaknesses and any follow-up actions to be taken by our Board.
In considering the suitability of Mr Chia Wei Ho as our Finance Director, our Audit Committee has reviewed Mr Chia Wei Ho’s curriculum vitae and has interviewed Mr Chia Wei Ho. Our Audit Committee noted that Mr Chia Wei Ho has over 20 years of relevant experience in fi nance work and has been CFO and COO as well as independent director and chairman of audit committees in listed companies since 2004. Our Audit Committee has made reasonable enquiries into Mr Chia Wei Ho’s past working experience (as described in the section entitled “Directors, Executive Offi cers and Employees” of this Prospectus) and has not been made aware of any matter that would raise questions about Mr Chia Wei Ho’s suitability for the position of Finance Director. Accordingly, our Audit Committee is of the opinion that Mr Chia Wei Ho is suitable as our Finance Director, and will be able to discharge his duties as our Finance Director satisfactorily.
Mr Chia Wei Ho, our Finance Director, has reviewed (i) the management accounts of the subsidiaries of our Company for FY2010, FY2011 and FY2012; (ii) the management letters issued by the Independent Auditors and Reporting Accountants for FY2011 and FY2012; (iii) the Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012; and (iv) the internal control reports issued by KPMG Services Pte. Ltd. (“KPMG”).
In addition, Mr Chia Wei Ho has held discussions with (i) our Executive Directors, our CFO and the key fi nance staff of our Company; (ii) the Independent Auditors and Reporting Accountants; and (iii) KPMG, in respect of the business, and fi nancial operations of our Group (including its fi nance and accounting system and internal controls). Based on the above measures taken, he confi rms that he is familiar with the business operations, accounting system and policies and the internal controls of our Group.
In considering the suitability of Ms Goh Guat Bee as our CFO, our Audit Committee has reviewed Ms Goh Guat Bee’s curriculum vitae and has considered:
(a) the qualifi cations and past working experiences of Ms Goh Guat Bee (as described in the section entitled “Directors, Executive Offi cers and Employees” of this Prospectus) which are compatible with her position as CFO of our Group;
(b) Ms Goh Guat Bee’s length of service with our Group;
(c) Ms Goh Guat Bee’s demonstration of the requisite competency in fi nance-related matters in connection with the preparation for the listing of our Company;
(d) the absence of negative feedback on Ms Goh Guat Bee from the representatives of our Group’s Independent Auditors and Reporting Accountants; and
(e) the absence of internal control weaknesses attributable to Ms Goh Guat Bee identifi ed during the internal control review conducted.
Accordingly, our Audit Committee is of the opinion that Ms Goh Guat Bee is suitable as our CFO, and will be able to discharge her duties as our CFO satisfactorily.
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Our Audit Committee confi rms that, after making all reasonable enquiries, and to the best of their knowledge and belief, nothing has come to their attention to cause them to believe that either of Mr Chia Wei Ho and Ms Goh Guat Bee does not have the competence, character and integrity expected of a Finance Director and a CFO respectively of a company listed on the SGX-ST.
Based on the internal controls established and maintained by our Group, work performed by the internal and external auditors, and reviews performed by our management and our Board, our Board of Directors, to the best of its knowledge and belief, with the concurrence of our Audit Committee, is of the opinion that the internal controls of our Group are adequate to address the fi nancial, operational and compliance risks of our Group.
In addition, all future transactions with related parties shall comply with the requirements of the Listing Manual. Each member of our Audit Committee shall abstain from voting any resolutions in respect of matters in which he is interested.
Nominating Committee
Our Nominating Committee comprises our Independent Non-Executive Chairman, Mr Ang Mong Seng, our Independent Directors Mr Ng Sey Ming, Mr Wu Chiaw Ching and our Executive Director and CEO Mr Desmond Teo. The Chairman of our Nominating Committee is Mr Ng Sey Ming. Our Nominating Committee will be responsible for (i) re-nomination of our Directors having regard to our Director’s contribution and performance, (ii) determining annually whether or not a Director is independent, (iii) deciding whether or not a Director is able to and has been adequately carrying out his duties as a director, and (iv) reviewing and approving any new employment of employees related to our Directors and Substantial Shareholders, including the terms of such employment.
Further, our Nominating Committee will decide how our Board’s performance is to be evaluated and propose objective performance criteria, subject to the approval of our Board, which address how our Board has enhanced long term shareholders’ value. Our Board will also implement a process to be carried out by our Nominating Committee for assessing the effectiveness of our Board as a whole and for assessing the contribution by each individual Director to the effectiveness of our Board. Each member of the Nominating Committee shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as Director.
Our Nominating Committee (save for Mr Ang Mong Seng) has reviewed the appointment of Mr Ang as our Independent Non-Executive Chairman, the Chairman of our Remuneration Committee and a member of our Audit Committee and Nominating Committee respectively.
Having taken into consideration the following:
(a) Mr Ang does not currently hold any executive positions in a company or business;
(b) The fi nancial year end of all other listed companies that he is an independent director on are different from our Company’s fi nancial year end; and
(c) Mr Ang has been sitting on the the board of Hoe Leong Corporation Ltd, a company engaged in vessel chartering in the O&G industry, and trading and distribution of equipment parts for heavy equipment and industrial machinery, since September 2005,
our Nominating Committee is of the view that Mr Ang is able to commit suffi cient time to discharge his duties and has the necessary experience in the O&G industry to discharge his duties as the Independent Non-Executive Chairman of our Company, the Chairman of our Remuneration Committee and a member of our Audit Committee and Nominating Committee respectively.
Mr Ang has confi rmed that notwithstanding that he currently holds six (6) independent directorships in listed companies, he will have suffi cient time to serve as independent director of our Company. In addition, he confi rms that he will not be seeking re-election to the board of VicPlas International Ltd at the company’s next annual general meeting.
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Legal services provided by Rajah & Tann LLP, Kamilah and Chong and R&T Vietnam LLC to our Group would not be interested person transactions unless Mr Ng Sey Ming was one of the partners involved in the matter. Accordingly, all legal services provided by Rajah & Tann LLP to our Company in the future shall be handled by other partners of Rajah & Tann LLP who will not include Mr Ng Sey Ming. Our Directors will ensure that the fees paid to Rajah & Tann LLP for such services as mentioned above will be less than S$200,000, in compliance with the Code of Corporate Governance 2012. Our Nominating Committee (save for Mr Ng Sey Ming) will review the independence of Mr Ng Sey Ming annually, and as and when circumstances require.
Remuneration Committee
Our Remuneration Committee comprises our Independent Non-Executive Chairman Mr Ang Mong Seng and Independent Directors Mr Ng Sey Ming, Mr Wu Chiaw Ching and Ms Lau Lee Hua. The Chairman of our Remuneration Committee is Mr Ang Mong Seng. Our Remuneration Committee will recommend to our Board a framework of remuneration for our Directors and key executives, and determine specifi c remuneration packages for each Executive Director. The recommendations of our Remuneration Committee shall be submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to directors’ fees, salaries, allowances, bonuses, options issued under our ESOS and benefi ts-in-kind shall be covered by our Remuneration Committee. Our Remuneration Committee will also review bonus, salary increase, benefi ts-in-kind and/or promotion of employees related to our Directors and Substantial Shareholders. Each member of our Remuneration Committee shall abstain from voting on any resolutions in respect of his remuneration package or that of employees related to him.
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DESCRIPTION OF OUR SHARES
The following statements are brief summaries of the more important rights and privileges of Shareholders conferred by the laws of Singapore and our Articles of Association. These statements summarise the material provisions of our Articles of Association, but are qualifi ed in its entirety by reference to our Articles of Association and the laws of Singapore.
The statements below provide, inter alia, a description of Shareholders’ voting rights, restrictions on the transferability of shareholdings and Shareholders’ rights to share in any surplus in the event of liquidation, and provides information about our share capital.
Ordinary Shares and Preference Shares
Our Articles of Association provide that we may issue shares of a different class with preferential, deferred, qualifi ed or other special rights, privileges or conditions as our Board of Directors may determine and may issue preference shares which are, or at our option are, subject to redemption, subject to certain limitations. As of the date of this Prospectus, there are no preference shares in issue. All of our ordinary shares are in registered form. We may, subject to the provisions of the Companies Act and the rules of the SGX-ST purchase our own Shares. However, we may not, except in circumstances permitted by the Companies Act, grant any fi nancial assistance for the acquisition or proposed acquisition of our own ordinary shares.
New Ordinary Shares
New Shares may only be issued with the prior approval in a general meeting of our Shareholders. Our Shareholders may by ordinary resolution give our Directors a general authority, either unconditionally or subject to such conditions as may be specifi ed in the resolution conferring such general authority, to issue Shares and/or convertible securities (where the maximum number of Shares to be issued upon conversion can be determined at a time of issue of such convertible securities) from time to time (whether by way of rights, bonus or otherwise) and upon such terms and conditions and for such purposes and to such persons as our Directors may in their absolute discretion deem fi t. Unless revoked or varied by our Company in a general meeting, such authority shall continue in force until the conclusion of the next annual general meeting of our Company or on the date by which the next annual general meeting is required by law to be held, whichever is earlier. In exercising such general authority still in force, we shall comply with the provisions of the Companies Act, our Articles of Association and the rules of the SGX-ST (unless such compliance has been waived by the SGX-ST). The aggregate number of Shares and/or convertible securities which may be issued pursuant to such authority shall not exceed 50.0% of the issued shares of our Company, of which the aggregate number of Shares and/or convertible securities which may be issued other than on a pro-rata basis to the existing Shareholders of our Company shall not exceed 20.0%. Subject to the manner of calculation as may be prescribed by the SGX-ST, for the purpose of computing numerical limits, the percentage of issued Shares excluding treasury shares is calculated based on the total number of issued Shares excluding treasury shares at the time of the passing of the resolution conferring such general authority (or in the case the general authority obtained prior to the listing of our Company on the SGX-ST, the total number of issued Shares excluding treasury shares at the time immediately following the close of the Offering), after adjusting for new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that the general authority is given, and any subsequent bonus issue, consolidation or subdivision of Shares. Subject to the foregoing, the provisions of the Companies Act and any special rights attached to any class of shares currently issued, our Board of Directors control the allotment and issue of all new Shares and may impose such rights and restrictions as they think fi t.
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Shareholders
Only persons who are registered in our register of Shareholders and, in cases in which the person so registered is CDP, the persons named as the depositors (as defi ned in the Companies Act) in the depository register maintained by CDP for our ordinary shares, are recognised as shareholders. For the purpose of determining the number of votes which a Shareholder who is an account-holder directly with CDP or a depository agent, or his proxy, may cast at any general meeting on a poll, the reference to shares held or represented shall, in relation to shares of that Shareholder, be the number of shares entered against his name in the register maintained with CDP 48 hours before the time of the relevant general meetings as certifi ed by CDP to us.
We will not, except as required by law, recognise any equitable, contingent, future or partial interest in any ordinary share or other rights for any ordinary share other than the absolute right thereto of the registered holder of the ordinary share or of the person whose name is entered in the depository register for that ordinary share. We may close the register of Shareholders for any time or times if we provide the SGX-ST with at least ten (10) clear Market Days’ notice. However, the register may not be closed for more than 30 days in aggregate in any calendar year. We would typically close the register to determine Shareholders’ entitlement to receive dividends and other distributions.
Transfer of Ordinary Shares
Our Board of Directors may decline to register any transfer of ordinary shares which are not fully paid shares or ordinary shares on which we have a lien. Our Board of Directors may also decline to register any instrument of transfer unless, inter alia, it has been duly stamped and is presented for registration together with the share certifi cate and such other evidence of title as they may require. Ordinary shares may be transferred by a duly signed instrument of transfer in any form approved by the Directors and the SGX-ST. There is no restriction on the transfer of fully paid shares except where required by law or the listing rules or by-laws of the SGX-ST. A Shareholder may transfer any ordinary shares held through the SGX-ST book entry settlement system by way of a book-entry transfer without the need for any instrument of transfer. We will replace lost or destroyed certifi cates for Shares if we are properly notifi ed and if the applicant pays a fee which will not exceed S$2.00 and furnishes any evidence and indemnity that our Board of Directors may require. A Shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. Proxies need not be a Shareholder. A person who holds Shares through the SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a Shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting.
Voting Rights
Except as otherwise provided in our Articles of Association, two (2) or more Shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under our Articles of Association: on a show of hands, every Shareholder present in person or by proxy shall have one (1) vote (provided that in the case of a Shareholder who is represented by two (2) proxies, only one (1) of the two (2) proxies as determined by that Shareholder or, failing such determination, by the chairman of the meeting (or by a person authorized by the chairman) shall be entitled to vote on a show of hands); and on a poll, every Shareholder present in person or by proxy shall have one (1) vote for each Share which he holds or represents. A poll may be demanded in certain circumstances, including:
by the chairman of the meeting;
by any two (2) Shareholders present in person or by proxy and entitled to vote; or
by any Shareholder present in person or by proxy and representing not less than ten per cent. (10.0%) of the total voting rights of all Shareholders having the right to attend and vote at the meeting.
However, no poll may be demanded on the election of the chairman of the meeting or on a question of adjournment of the meeting. In the case of a tied vote, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote.
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General Meetings of Shareholders
We are required to hold an annual general meeting every year. Our Board of Directors may convene an extraordinary general meeting whenever it thinks fi t and must do so if Shareholders representing not less than ten per cent. (10.0%) of the total voting rights of all Shareholders request in writing that such a meeting be held. In addition, two (2) or more Shareholders holding not less than ten per cent. (10.0%) of our issued share capital may call a meeting. Unless otherwise required by law or by our Articles of Association, voting at general meetings is by ordinary resolution, requiring an affi rmative vote of a simple majority of the votes cast at that meeting. An ordinary resolution suffi ces, for example, for the appointment of directors. A special resolution, requiring the affi rmative vote of at least 75.0% of the votes cast at the meeting, is necessary for certain matters under Singapore law, such as the voluntary winding up of the company, amendments to our Memorandum and Articles of Association, a change of our Company’s corporate name and a reduction in our share capital.
We must give at least 21 days’ notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days’ notice in writing. For so long as our Shares are listed on the SGX-ST, at least 14 days’ notice of any general meeting shall be given in writing to the SGX-ST and by advertisement in the daily press. The notice must be given to every Shareholder holding shares conferring the right to attend and vote at the meeting and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business.
Limitations on Rights to Hold or Vote Shares
Singapore law and our Articles of Association do not impose any limitations on the right of non-resident or foreign Shareholders to hold or exercise voting rights attached to our Shares.
Dividends
We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Board of Directors. Our Board of Directors may also declare an interim dividend without the approval of our Shareholders. We must pay all dividends out of our profi ts. All dividends we pay are pro rata in amount to our Shareholders in proportion to the amount paid-up on each Shareholder’s Shares, unless the rights attaching to an issue of any Share provide otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each Shareholder at his registered address appearing in our register of members or (as the case may be) the depository register. However, our payment to CDP of any dividend payable to a Shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge us from any liability to that Shareholder in respect of that payment.
Bonus and Rights Issue
Our Board of Directors may, with the approval of our Shareholders at a general meeting, capitalise any reserves or profi ts (including profi t or monies carried and standing to any reserve) and distribute the same as bonus shares credited as paid-up to the Shareholders in proportion to their shareholdings. Our Board of Directors may also issue rights to take up additional ordinary shares to Shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue.
Takeovers
The Companies Act, the Securities and Futures Act and the Singapore Take-over Code regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of our Company. Any person acquiring an interest resulting in him, either on his own or together with parties acting in concert with him, holding 30.0% or more of our voting shares, or, if such person holds, either on his own or together with parties acting in concert with him, between 30.0% and 50.0% (both inclusive) of our voting shares and acquires (either on his own or together with parties acting in concert with him) more than one per cent. (1.0%) of our voting Shares in any six (6) month period, must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Take-over Code.
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“Parties acting in concert” comprise individuals or companies who, pursuant to an arrangement or understanding (whether formal or informal), co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They are as follows:
a company and its related and associated companies and companies whose associated companies include any of these companies;
any person who has provided fi nancial assistance (other than a bank in the ordinary course of business) to any of the entities set out immediately above for the purchase of voting rights;
a company and its directors (together with their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts);
a company and its pension funds and employee share schemes;
a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, but only in respect of the investment account which such person manages;
a fi nancial or other professional adviser and its clients in respect of shares held by (i) the adviser and persons controlling, controlled by or under the same control as the adviser and (ii) all the funds managed by the adviser on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total ten per cent. (10.0%) or more of the client’s equity share capital;
directors of a company (together with their close relatives, related trusts and companies controlled by any of such directors, their close relatives and related trusts) which is subject to an offer or where the directors have reason to believe a bona fi de offer for the company may be imminent;
partners;
an individual and his close relatives, related trusts, any person who is accustomed to act in accordance with his instructions and companies controlled by the individual, his close relatives, his related trusts or any person who is accustomed to act in accordance with his instructions; and
any person who has provided fi nancial assistance (other than a bank in the ordinary course of business) to any of the persons set out immediately above for the purchase of voting rights.
A mandatory offer for consideration other than cash must, subject to certain exceptions, be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the six (6) months preceding the acquisition of shares that triggered the mandatory offer obligation. Under the Singapore Take-over Code, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offeror must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the takeover offer must be given suffi cient information, advice and time to consider and decide on the offer.
Liquidation or Other Return of Capital
If our Company liquidates or in the event of any other return of capital, holders of our Shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares then existing.
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Indemnity
As permitted by Singapore law, our Articles of Association provide that, subject to the Companies Act, we will indemnify our Board of Directors and Executive Offi cers against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an offi cer, director or employee and in which judgement is given in his favour or if the proceedings are otherwise disposed of without any fi nding or admission of any material breach of duty on his part or in which he is acquitted or in connection with any application for relief which is granted to him by the court.
We may not indemnify our Directors and Executive Offi cers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to our Company.
Substantial Shareholdings
The Companies Act and the Securities and Futures Act of Singapore, require our Substantial Shareholders to give notice to us and the SGX-ST respectively, including particulars of their interest and the circumstances by which they have acquired such interest, within two (2) business days of their becoming our Substantial Shareholders and of any change in percentage level of their interest.
Under the Companies Act, a person has a substantial shareholding in our Company if he has an interest (or interests) in one (1) or more of the voting shares in our Company and the total votes attached to that share (or those shares) is not less than fi ve per cent. (5.0%) of the total votes attached to all voting shares in our Company.
Minority Rights
The rights of minority shareholders of Singapore incorporated companies are protected under Section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any Shareholder of our Company, as they think fi t to remedy any of the following situations:
(a) our affairs are being conducted or the powers of our Board of Directors are being exercised in a manner oppressive to, or in disregard of the interests of, one (1) or more of our Shareholders; or
(b) we take an action, or threaten to take an action, or our Shareholders pass a resolution, or threaten to pass a resolution, which unfairly discriminates.
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EXCHANGE CONTROL
The following is a description of the exchange controls that exist in the jurisdictions which our Group operates in.
Singapore
There are no exchange control restrictions in the repatriation of capital and the remittance of profi ts into or out of Singapore by or to our Group companies in Singapore. For more details, please refer to the section entitled “Taxation” in this Prospectus.
Vietnam
Vietnam exchange control mechanism has been designed to limit foreign currency outfl ows, generally requiring the use of the VND for domestic transactions and channelling the fl ow of foreign currencies into the banking system. The State Bank of Vietnam is the primary authority to formulate and administer the exchange control policy in Vietnam. The policy is developed in accordance with fi ve-year economic development plan of the Government, but it can be reviewed and adjusted by the State Bank of Vietnam in line with the changing environment. Since the introduction of the Ordinance on Foreign Exchange in 2005(1), the framework for capital transactions control has been gradually liberalised to stimulate the foreign exchange market.
The dividends and capital gains from the transfer of shares in Vietnam can be remitted overseas through certain registered accounts in accredited credit institution after payment of applicable Vietnam taxes. Both local and foreign invested entities in Vietnam are required to comply with Vietnam’s exchange control policy. As the VND is not a freely convertible currency, conversion of dividends paid to non-residents into foreign currency is necessary prior to the outward remittance from Vietnam.
Note:
(1) Ordinance on Foreign Exchange No. 28/2005/PL-UBTVQH11, dated 13 December 2005.
Malaysia
The exchange control policies in Malaysia are directed at ensuring the stability of the Ringgit as well as encouraging the use of Malaysia’s fi nancial resources for productive purposes. There is generally free movement of funds into and out of Malaysia subject to certain prudential regulations administered by Bank Negara Malaysia under the Exchange Control Act 1953.
Non-residents may maintain Ringgit accounts with licensed Malaysian fi nancial institutions designated as “External Accounts”.
Amongst others, the following may be credited into an “External Account”:
(a) Proceeds from the sale of Ringgit assets, the sale of goods and services to a resident or the sale of foreign currency to a licensed onshore bank;
(b) Income earned in Malaysia, including salaries, wages, royalties, commissions, fees, rental, interests, profi ts or dividends; and
(c) Drawdown or repayment of a permitted Ringgit credit facility.
The Ringgit in the External Account can be utilized for various purposes including for the purchase of foreign currency from a licensed onshore bank, the payment to another non-resident for purchase of Ringgit assets or for granting, servicing or repayment of any permitted Ringgit credit facility.
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TAXATION
The statements made herein regarding taxation are general in nature and based on certain aspects of the tax laws of Singapore and administrative guidelines issued by the relevant authorities in force as of the date of this Prospectus and are subject to any changes in such laws or administrative guidelines, or in the interpretation of these laws or guidelines, occurring after such date, which changes could be made on a retrospective basis. These laws and guidelines are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. The statements below are not to be regarded as advice on the tax position of any holder of our Shares or of any person acquiring, holding, selling or otherwise dealing with our Shares or on any tax implications arising from the acquisition, ownership, sale or other dealings in respect of our Shares. The statements made herein do not purport to be a comprehensive or exhaustive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of our Shares and do not purport to deal with the tax consequences applicable to all categories of investors some of which (such as dealers in securities) may be subject to special rules. Prospective Shareholders are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership or disposal of our Shares. The statements below are based on the assumption that our Company is a tax resident in Singapore for Singapore income tax purposes. It is emphasised that neither our Company nor any other persons involved in this Prospectus accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of our Shares.
Individual income tax
An individual is a tax resident in Singapore in a year of assessment if, in the preceding year, he was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more, or if he ordinarily resides in Singapore.
Individual taxpayers who are Singapore tax residents are subject to Singapore income tax on income accruing in or derived from Singapore. All foreign-sourced income received in Singapore on or after 1 January 2004 and certain Singapore sourced investment income from fi nancial instruments derived by a Singapore tax resident individual (except for income received through a partnership in Singapore or derived from the carrying on of a trade or business in Singapore) is exempt from Singapore income tax.
Non-resident individuals are subject to Singapore income tax on income accruing in or derived from Singapore. Non-resident individuals are not subject to tax on foreign-sourced income received in Singapore and certain Singapore-sourced investment income from fi nancial instruments.
A Singapore tax resident individual is taxed at progressive rates ranging from 0% to 20.0%. Income derived by a non-resident individual is, subject to certain exceptions and conditions, normally taxed at the rate of 20.0%. Singapore employment income derived by a non-resident individual is taxed at a fl at rate of 15.0% or at resident rates, whichever yields a higher tax.
Corporate income tax
A company is regarded as resident in Singapore for Singapore tax purposes if the control and management of its business is exercised in Singapore.
Singapore resident companies are subject to Singapore income tax on income that accrues in or is derived from Singapore and on foreign-sourced income received or deemed received in Singapore, subject to certain exceptions.
Foreign-sourced income in the form of dividends, branch profi ts and service income received or deemed to be received in Singapore by Singapore resident companies on or after 1 June 2003 are exempt from tax if the following prescribed conditions are met:
(i) such income is subject to tax of a similar character to income tax under the law of the jurisdiction from which such income is received;
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(ii) at the time the income is received in Singapore, the highest rate of tax of a similar character to income tax (by whatever name called) levied under the law of the territory from which the income is received on any gains or profi ts from any trade or business carried on by any company in that territory at that time is not less than 15.0%; and
(iii) the Comptroller of Income Tax is satisfi ed that the tax exemption would be benefi cial to the Singapore resident company.
Non-resident companies are subject to income tax on income that accrues in or is derived from Singapore, and on foreign-sourced income received or deemed received in Singapore.
The corporate tax rate in Singapore for both resident and non-resident companies is currently 17.0%. In arriving at the chargeable income, there is partial exemption on three quarters of the fi rst S$10,000 and one-half on the next S$290,000 of a company’s normal chargeable income. The remaining normal chargeable income will be taxable at the corporate tax rate of 17.0%.
In his 2012 Budget Statement delivered on 17 February 2012, the Minister for Finance proposed that an SME cash grant based on 5.0% of the company’s revenue for year of assessment 2012 capped at S$5,000, whichever is the higher be given to companies. To enjoy the cash grant, the company must have made CPF contributions for at least one (1) employee who is not a shareholder of the company during the relevant accounting period for the year of assessment 2012.
Dividend distributions
Singapore adopts the one-tier corporate tax system. Under the one-tier corporate tax system, the tax paid by Singapore resident companies would constitute a fi nal tax. Dividends payable by Singapore resident companies under the one-tier corporate tax system would be tax exempt in Singapore in the hands of its shareholders. Such dividends are referred to as tax exempt (one-tier) dividends.
Where our Company is considered to be resident in Singapore, it will be under the one-tier corporate tax system. In such a situation, when our Company distributes dividends, these dividends will be tax exempt (one-tier) dividends and such dividends are tax exempt in Singapore in the hands of our shareholders.
There is no Singapore withholding tax on dividends paid to both Singapore resident shareholders as well as non Singapore resident shareholders. Foreign shareholders are advised to consult their own tax advisors in respect of the tax laws of their respective countries of residence, which are applicable on such dividends received by them and the applicability of any double taxation agreement that their country of residence may have with Singapore.
Gains on disposal of Shares
Singapore does not impose tax on capital gains. Shareholders who hold our Shares on capital account will not be subject to income tax on the gains arising from the disposal of our Shares. However, there are no specifi c laws or regulations which deal with the characterisation of capital gains. In general, gains arising from the disposal of our Shares may be construed to be of an income nature and subject to Singapore income tax if they arise from activities which are regarded as the carrying on of a trade or business in Singapore.
In his 2012 Budget Statement delivered on 17 February 2012, the Minister for Finance proposed that for companies’ disposal of shares on or after 1 June 2012, gains derived from the disposal of equity investments by companies will not be taxed, if:
(i) the divesting company holds a minimum shareholding of 20% in the company whose shares are being disposed; and
(ii) the divesting company maintains the minimum 20% shareholding for a minimum period of 24 months just prior to the disposal.
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In addition, Shareholders who apply, or who are required to apply, the Singapore Financial Reporting Standard 39 Financial Instruments - Recognition and Measurement (“FRS 39”) may be required to recognise gains or losses in respect of our Shares in accordance with the provisions of FRS 39 and such gains or losses (not being gains or losses relating to fi nancial assets on capital account) may be brought into account for Singapore income tax purposes (as modifi ed by the applicable provisions of Singapore income tax law) even though no sale or disposal of our Shares is made. Shareholders who may be subject to such tax treatment should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding and disposal of our Shares.
Stamp duty
No stamp duty is payable if an instrument of transfer is not executed or the instrument of transfer is executed outside Singapore and not brought into Singapore. However, stamp duty may be payable if the instrument of transfer which is executed outside Singapore is received in Singapore.
There is no stamp duty payable on the subscription for, allotment or holding of our Shares.
Where our Shares evidenced in certifi cated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of our Shares at the rate of S$0.20 for every S$100.00 or part thereof of the consideration for, or market value of, our Shares, whichever is higher. The stamp duty is borne by the purchaser unless there is an agreement to the contrary.
Stamp duty is not applicable to electronic transfers of our Shares through the scripless trading system operated by CDP.
Estate duty
The Singapore government announced on 15 February 2008 that the estate duty will be abolished with immediate effect.
Goods and Services Tax (“GST”)
The sale of our Shares by a GST-registered investor belonging in Singapore through an SGX-ST member to another person belonging in Singapore is an exempt supply and so would not be subject to GST. In this regard, generally, GST directly incurred by the GST-registered investor in making such supplies may not be recovered from the Comptroller of GST. If our Shares are sold by a GST-registered person who is a member of the Association of Banks in Singapore, the input tax is recoverable subject to the conditions stipulated by the Comptroller of GST.
Where our Shares are supplied by a GST-registered investor to a person belonging outside Singapore and who is outside Singapore at the time the sale is executed, the sale is generally a taxable sale subject to GST at zero-rate. Any GST incurred by a GST-registered investor in the making of this taxable supply in the course or furtherance of a business, subject to the provision of the GST Act, may be recovered from the Comptroller of GST.
Services consisting of arranging, broking, underwriting or advising on the issue, allotment or transfer of ownership of our Shares rendered by a GST-registered person to an investor belonging in Singapore for GST purposes in connection with the investor’s purchase, sale or holding of our Shares will be subject to GST at the standard rate, currently at seven per cent. (7.0%). Similar services supplied contractually to and for the direct benefi t of an investor belonging outside Singapore and who is outside Singapore when the services are performed would generally be subject to GST at zero-rate.
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CLEARANCE AND SETTLEMENT
Upon listing and quotation on the SGX-ST, our Shares will be traded under the book-entry settlement system of CDP, and all dealings in and transactions of our Shares through the SGX-ST will be effected in accordance with the terms and conditions for the operation of Securities Accounts with CDP, as amended from time to time.
Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf of persons who maintain, either directly or through depository agents, Securities Accounts with CDP. Persons named as direct Securities Account holders and depository agents in the depository register maintained by CDP, rather than CDP itself, will be treated under our Articles and the Companies Act as members of our Company in respect of the number of Shares credited to their respective Securities Accounts.
Persons holding our Shares in Securities Accounts with CDP may withdraw the number of Shares they own from the book-entry settlement system in the form of physical share certifi cates. Such share certifi cates will, however, not be valid for delivery pursuant to trades transacted on the SGX-ST, although they will be prima facie evidence of title and may be transferred in accordance with our Articles. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of more than 1,000 Shares is payable upon withdrawing our Shares from the book-entry settlement system and obtaining physical share certifi cates. In addition, a fee of S$2.00 or such other amount as our Directors may decide, is payable to the share registrar for each share certifi cate issued and a stamp duty of S$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing our Shares or S$0.20 per S$100 or part thereof of the last-transacted price where it is withdrawn in the name of a third party. Persons holding physical share certifi cates who wish to trade on the SGX-ST must deposit with CDP their share certifi cates together with the duly executed and stamped instruments of transfer in favour of CDP, and have their respective Securities Accounts credited with the number of Shares deposited before they can effect the desired trades. A fee of S$10.00 is payable upon the deposit of each instrument of transfer with CDP.
Transactions in our Shares under the book-entry settlement system will be refl ected by the seller’s Securities Account being debited with the number of Shares sold and the buyer’s Securities Account being credited with the number of Shares acquired. No transfer stamp duty is currently payable for our Shares that are settled on a book-entry basis.
A Singapore clearing fee for trades in our Shares on the SGX-ST is payable at the rate of 0.04% of the transaction value subject to a maximum of $600.00 per transaction. The clearing fee, instrument of transfer deposit fee and share withdrawal fee may be subject to GST currently at seven per cent. (7.0%).
Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement on CDP on a scripless basis. Settlement of trades on a normal “ready” basis on the SGX-ST generally takes place on the third Market Day following the transaction date, and payment for the securities is generally settled on the following business day. CDP holds securities on behalf of investors in Securities Accounts. An investor may open a direct account with CDP or a sub-account with a CDP agent. The CDP agent may be a member company of the SGX-ST, bank, merchant bank or trust company.
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GENERAL AND STATUTORY INFORMATION
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS
1. Save as disclosed below, none of our Directors, Executive Offi cers or Controlling Shareholders is or was at any time involved in any of the following events:
(i) during the last ten (10) years, an application or a petition under any bankruptcy laws of any jurisdiction fi led against him or against a partnership of which he was a partner at the time when he was a partner or at any time within two (2) years from the date he ceased to be a partner;
(ii) during the last ten (10) years, an application or a petition under any law of any jurisdiction fi led against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within two (2) years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding-up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency;
(iii) any unsatisfi ed judgments against him;
(iv) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose;
(v) a conviction of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach;
(vi) during the last ten (10) years, judgment entered against him in any civil proceeding in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a fi nding of fraud, misrepresentation or dishonesty on his part, or has been the subject of any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part;
(vii) a conviction in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust;
(viii) disqualifi cation from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust;
(ix) has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body permanently or temporarily enjoining him from engaging in any type of business practice or activity;
(x) has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of affairs of:
(a) any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere;
(b) any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere;
160
(c) any business trust which has been investigated for breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere; or
(d) any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere,
in connection with any matter occurring or arising during the period when he was so concerned with the entity or business trust; and
(xi) has ever been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Authority or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere.
Assistance rendered by Gaylin International to CPIB
Between 1990 and 1995, Gaylin International was on separate occasions requested by the Corrupt Practices Investigation Bureau (“CPIB”) to assist in certain investigations. Our Executive Director and CEO, Mr Desmond Teo, who was then an executive director of Gaylin International, attended on behalf of the company. Mr Desmond Teo believes that the investigations related to alleged corrupt practices of certain employees of three (3) customers of Gaylin International but does not have any other details.
As far as our Group is aware, neither Gaylin International, Mr Desmond Teo or any of the other directors or employees of our Group was the subject of these or any other CPIB investigations. For the avoidance of doubt, neither Gaylin International, Mr Desmond Teo nor any of its directors or employees was charged and no action was taken against any of them in connection with these matters.
2. No option to subscribe for shares in, or debentures of, our Company has been granted to, or was exercised by, any Director or Executive Offi cer within the last fi nancial year.
3. Save for the ESOS and the Over-allotment Option, no person has, or has the right to be given, an option to subscribe for any securities of our Company or our subsidiaries.
4. Save as disclosed in the sections entitled “Interested Person Transactions” and “Interests of Experts” in this Prospectus, no Director or expert is (i) interested, directly or indirectly, in the promotion of, or in any assets acquired or disposed of by, or leased to, our Company within two years preceding the Latest Practicable Date, or in any proposal for such acquisition or disposal or leased as aforesaid, or (ii) interested where the interest consists in being a partner in a fi rm or a holder of shares in or debentures of a corporation interested in the same.
5. Save as disclosed in the section entitled “Interested Person Transactions’’, no Director has any interest in any existing contract or arrangement which is signifi cant in relation to our business taken as a whole.
6. There is no shareholding qualifi cation for Directors in the Articles of our Company.
7. No sum or benefi t has been paid or has been agreed to be paid to any Director or expert who is a partner of any fi rm in which a Director or expert or any corporation in which such Director or expert holds shares or debentures, in cash or shares or otherwise by any person (i) (in the case of a Director) to induce him to become, or to qualify him as our Director or otherwise for the services rendered by him or by such fi rm or corporation in connection with the promotion or formation of our Company or (ii) (in the case of an expert) for services rendered by him or such fi rm or corporation in connection with the promotion or formation of our Company.
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SHARE CAPITAL
8. Save as disclosed in the section entitled “Share Capital” in this Prospectus, there were no changes in the issued and paid-up capital of our Company, our subsidiaries and subsidiary entities within the three (3) years preceding the date of lodgement of this Prospectus.
9. Save as disclosed in the section entitled “Share Capital” in this Prospectus, no shares or debentures were issued or were agreed to be issued by our Company for cash or for a consideration other than cash during the last three (3) years preceding the Latest Practicable Date.
10. There has been no previous issue of Shares by our Company or offer for sale of our Shares to the public within the two (2) years preceding the Latest Practicable Date.
LITIGATION
11. Save as disclosed below, our Group was not engaged in any legal or arbitration proceedings in the last 12 months before the date of the lodgement of this Prospectus, as plaintiff or defendant in respect of any claims or amounts which are material in the context of the Offering and our Directors have no knowledge of any proceedings pending or threatened against our Company or any facts likely to give rise to any litigation, claims or proceedings which might materially affect the fi nancial position or profi tability of our Group:
(a) On 20 February 2012, our subsidiary, Gaylin International, initiated legal proceedings in
Singapore against one of its customers Hako Offshore Pte Ltd for a sum of approximately S$16,000 in respect of goods and materials sold and/or services rendered to Hako Offshore Pte Ltd. The case has been concluded and Hako Offshore Pte Ltd has been ordered to pay Gaylin International the judgment sum. Payment of the judgment sum is currently pending and Gaylin International has on 2 May 2012 fi led an application for a garnishee order to be made against Hako Offshore Pte Ltd.
(b) On 21 November 2011, Swee Bee Co. Pte. Ltd., a customer of our subsidiary, Gaylin
International, initiated legal proceedings in Singapore against Gaylin International for a sum of approximately S$36,820, in respect of losses incurred by Swee Bee Co. Pte. Ltd. due to a breach of contract for sale of goods by Gaylin International. Gaylin International has fi led a defence to the writ of summons on 22 December 2011 and a reply on 9 January 2012. As of 10 May 2012, lists of documents have been fi led and the suit is currently pending.
(c) On 3 May 2011, our subsidiary, Gaylin International, initiated legal proceedings in Singapore against its customer, Universal Testing & Inspection (Asia) Pte Ltd (“Universal Testing”), for a sum of approximately S$110,000, in respect of a contract for sale of goods. Universal Testing had on 13 May 2011 fi led a memorandum of appearance. The fi ling of a memorandum of appearance by Universal Testing indicated the intention of Universal Testing to defend the suit at that time. However, judgement was awarded in favour of our Company. The full payment of claim amount and costs was received by Gaylin International and a memorandum of satisfaction of judgment was entered by Gaylin International on 8 November 2011.
(d) On 18 January 2008, our subsidiary, Gaylin International, instituted legal proceedings in Malaysia against its customer, Intraline Resources Sdn Bhd (“Intraline Resources”), for a sum of approximately RM724,000, in respect of the supply of goods and materials and/or services rendered and/or rental of various equipments to Intraline Resources. A restraining order was given and the parties were restrained from taking further action in court. As the matter was restrained, no judgement was given.
(e) From time to time, we are subject to personal injury claims by workers who are involved in accidents at our premises during the course of their work or duties. These claims are generally settled through our insurers pursuant to the workmen’s compensation scheme where such workers may opt for a claim under the common law.
162
MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS
12. Pursuant to the Management Agreement dated 17 October 2012 (the “Management Agreement”), our Company appointed CIMB to manage the Offering. CIMB will receive a management fee from our Company for its services rendered in connection with the Offering.
13. Pursuant to the Underwriting and Placement Agreement dated 17 October 2012 (the “Underwriting and Placement Agreement”), our Company appointed CIMB Securities as the Underwriter to underwrite our offer of the Offer Shares for a commission of 3.25% of the Issue Price for the total number of Offer Shares, payable by our Company pursuant to the Offering. CIMB Securities may, at its absolute discretion, appoint one (1) or more sub-underwriters for the Offer Shares.
Pursuant to the Underwriting and Placement Agreement, our Company appointed CIMB Securities as the Placement Agent to subscribe or procure or both, subscriptions for the Placement Shares for a commission of 3.25% of the Issue Price for the total number of Placement Shares, payable by our Company pursuant to the Offering. CIMB Securities may, at its absolute discretion, appoint one (1) or more sub-placement agents for the Placement Shares.
14. Brokerage will be paid by our Company to members of the SGX-ST, merchant banks and members of the Association of Banks in Singapore in respect of successful applications made on Application Forms bearing their respective stamps, or to Participating Banks in respect of successful applications made pursuant to Electronic Applications at their respective ATMs or their IB websites at the rate of 0.25% of the Issue Price for each Offer Share or in the case of DBS Bank, 0.5% of the Issue Price for each Offer Share. In addition, DBS Bank will levy a minimum brokerage fee of S$10,000.
The Underwriting and Placement Agreement contemplates that the total income received by the Underwriter and Placement Agent thereunder shall not be less than S$1,300,000 and that the Company shall pay to the Underwriter and Placement Agent any shortfall as an additional fee.
15. Subscribers of Placement Shares may be required to pay a brokerage of up to 1.0% of the Issue Price in connection with the Placement Shares to the Placement Agent.
16. Save as aforesaid, no commission, discount or brokerage, has been paid or other special terms granted within the two (2) years preceding the Latest Practicable Date or is payable to any Director, promoter, expert or any other person for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares in, or debentures of, our Company.
17. Under the Management Agreement and the Underwriting and Placement Agreement, our Company will fully indemnify (i) the Issue Manager / Underwriter and Placement Agent, (ii) their respective affi liates, (iii) the controlling persons of the Issue Manager/Underwriter and Placement Agent and their respective affi liates, and (iv) the directors, employees, representatives and agents of the Issue Manager / Underwriter and Placement Agent in respect of claims arising from various matters including:
(a) any failure by our Company to comply with any requirements of any statute or statutory regulation, governmental or ministerial order or decree, or decision or circular of the SGX-ST (including the Listing Manual) or any other authority (including without limitation to the foregoing, any directive or order by the Authority pursuant to the Securities and Futures Act);
(b) the Prospectus not containing all information material in the context of the offering of the New Shares and Additional Shares, or any statement contained therein or in any information which is otherwise supplied by the Company to the Issue Manager / Underwriter and Placement Agent in connection with the Offering being untrue, incorrect or misleading;
(c) any misrepresentation or omission in the Prospectus; and
(d) any breach of our Company’s representations, warranties or obligations under the Management Agreement / Underwriting and Placement Agreement.
163
In addition, pursuant to the Management Agreement and the Underwriting and Placement Agreement respectively, our Company is required to fully and effectually indemnify the Issue Manager / Underwriter and Placement Agent from and against all losses, claims, costs (including legal costs on a full indemnity basis) charges, liabilities, actions and demands which the Issue Manager / Underwriter and Placement Agent may incur or suffer or which may be made against it in connection with or arising out of the registration and issue of the Prospectus or the Offering, any actual or alleged misrepresentations by the Company or in connection with any actual or alleged inaccuracies in, or actual or alleged omission from the Prospectus, any actual or alleged breach of the warranties, representations and undertakings contained in the Management Agreement and the Underwriting and Placement Agreement or any failure or delay in performing our Company’s undertakings or obligations in the Management Agreement and the Underwriting and Placement Agreement and such indemnity shall extend to include all costs, charges and expenses on a full indemnity basis which the Issue Manager / Underwriter and Placement Agent may pay or incur in disputing or defending any claim or action or other proceedings at any time in respect of which indemnity may be sought against the Company under the Management Agreement and the Underwriting and Placement Agreement save and except for any loss or damage arising out from any willful default, fraud or gross negligence on the part of the Issue Manager / Underwriter and Placement Agent or any of its employees.
18. The Management Agreement, subject to the terms and conditions thereof, may be rescinded or terminated by the Issue Manager, in its absolute discretion, if at any time prior to or on the date of commencement of trading of our Shares on the Offi cial List of the SGX-ST, inter alia:
(a) a stop order is issued by the Authority, or other competent authority in accordance with Section 242 of the SFA (notwithstanding that a supplementary or replacement prospectus is subsequently registered with the Authority pursuant to Section 241 of the SFA);
(b) there shall come to the knowledge of the Issue Manager any breach of the warranties or undertakings in the Management Agreement or that any of the warranties or undertakings in the Management Agreement is untrue or incorrect in any material respect;
(c) any occurrence of certain specifi ed events as described in the Management Agreement which comes to the knowledge of the Issue Manager;
(d) there shall have been, since the date of the Management Agreement:
(i) any material adverse change, or any development or event involving a prospective material adverse change in the condition (fi nancial or otherwise), performance or general affairs of our Company, any of our subsidiaries or of our Group as a whole; or
(ii) any introduction or prospective introduction of or any change or prospective change in any legislation, regulation, order, notice, policy, rule, guideline or directive (whether or not having the force of law and including, without limitation, any directive, notice or request issued by the Authority, the Securities Industry Council of Singapore, the SGX-ST or any other relevant authorities) in Singapore or elsewhere or in the interpretation or application thereof by any court, government body, regulatory authority or other competent authority in Singapore or elsewhere; or
(iii) any change, or any development involving a prospective change or any crisis in local, national, regional or international fi nancial (including stock market, foreign exchange market, inter-bank market or interest rates or money market), political, industrial, economic, legal or monetary conditions, taxation or exchange controls (including, without limitation, the imposition of any moratorium, suspension or material restriction on trading in securities generally on the SGX-ST due to exceptional financial circumstances or otherwise); or
(iv) any imminent threat or occurrence of any local, national, regional or international outbreak or escalation of hostilities whether war has been declared or not, or insurrection or armed confl ict (whether or not involving fi nancial markets); or
164
(v) any regional or local outbreak of disease that may have an adverse effect on the fi nancial markets; or
(vi) any other occurrence of any nature whatsoever, which event or events shall in the opinion of the Issue Manager (1) result or be likely to result in a material adverse fl uctuation or adverse conditions in the stock market in Singapore or elsewhere; or (2) be likely to materially prejudice the success of the Offering, subscription or placement of the New Shares (whether in the primary market or in respect of dealings in the secondary market); or (3) make it impracticable, inadvisable, inexpedient or uncommercial to proceed with any of the transactions contemplated in the Management Agreement; or (4) be likely to have a material adverse effect on the business, trading position, operations or prospects of our Company or of our Group as a whole; or (5) result or be likely to result in the issue of a stop order by the Authority, or other competent authority pursuant to the SFA; or
(e) without limiting the generality of the foregoing, if it comes to the notice of the Issue Manager (1) any statement contained in this Prospectus or the Application Forms relating thereto which in the opinion of the Issue Manager has become untrue, incorrect or misleading in any material respect or (2) circumstances or matters have arisen or have been discovered, which would, if this Prospectus was to be issued at that time, constitute in the opinion of the Issue Manager, an omission of material information, and our Company fails to lodge a supplementary or replacement prospectus within a reasonable time after being notifi ed of such misrepresentation or omission or fails to promptly take such steps as the Issue Manager may reasonably require to inform investors of the lodgement of such supplementary prospectus or document. In such an event, the Issue Manager reserves the right, at its absolute discretion, to inform the SGX-ST and to cancel the Offering and (if applicable) subject to the terms and conditions of the Prospectus, any application monies received in connection with the Offering will be refunded (without interest or any share of revenue or other benefi t arising therefrom) to the applicants for the New Shares by ordinary post, telegraphic transfer or such other means as the Issue Manager may deem appropriate at the applicant’s own risk within 14 days of the termination of the Offering; or
(f) the Underwriting and Placement Agreement is terminated pursuant to the termination clause of the Underwriting and Placement Agreement.
The Underwriting and Placement Agreement is conditional upon, among other things, the Management Agreement not having been terminated or rescinded pursuant to the provisions of the Management Agreement.
19. Save as disclosed above, we do not have any material relationship with the Issue Manager, Underwriter or Placement Agent.
MATERIAL CONTRACTS
20. The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by our Company and our subsidiaries within the two (2) years preceding the date of lodgement of this Prospectus and are or may be material:
(a) The sale and purchase agreement dated 28 February 2011 entered into between our Company as purchaser and Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo and Ms Lew Siew Poh, collectively as vendors, pursuant to which our Company acquired the entire issued and paid-up share capital of Gaylin International. Please refer to the section entitled “Restructuring Exercise” of this Prospectus for further details;
(b) The novation agreement dated 28 February 2011 entered into between our Company, Keh Swee, Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo, pursuant to which Keh Swee assumed the obligations in respect of the remainder of the consideration payable pursuant to the acquisition of Gaylin International by our Company. Please refer to the section entitled “Restructuring Exercise” of this Prospectus for further details;
165
(c) The sale and purchase agreement dated 30 September 2011 entered into between our Company as purchaser and Mr Teo Bee Kheng and Mr Teo Bee Hoe, collectively as vendors, pursuant to which our Company acquired the entire issued and paid-up share capital of Bridge Testing. Please refer to the section entitled “Restructuring Exercise” of this Prospectus for further details;
(d) The Call Option Agreement dated 26 September 2012 entered into between our Company and our controlling shareholder, Keh Swee pursuant to which our Company was granted the Call Option. Please refer to the section entitled “Interested Person Transactions – Potential Acquisition of OTH” of this Prospectus;
(e) The Service Agreements of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo, each dated 26 September 2012. Please refer to the section entitled “Directors, Executive Offi cers and Employees – Service Agreements” of this Prospectus for further details;
(f) The Covenantors Non-Competition Deed dated 26 September 2012 entered into between our Company and Mr Teo Bee Yen, Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Steven Teo and Keh Swee. Please refer to the section entitled “Potential Confl icts of Interest” of this Prospectus for further details;
(g) The Halo Non-Competition Deed dated 26 September 2012 entered into between our Company and Halo Wire Rope. Please refer to the section entitled “Potential Confl icts of Interest” of this Prospectus for further details; and
(h) The letter of undertaking dated 26 September 2012 from Keh Swee to our Company. Please refer to the section entitled “Potential Confl icts of Interest” of this Prospectus for further details.
MISCELLANEOUS
21. There has not been any public takeover offer by a third party in respect of our Shares, or by our Company in respect of shares of another corporation or units of a business trust, which has occurred during the period between 1 April 2011 and the Latest Practicable Date.
22. Save as disclosed in this Prospectus, our Directors are not aware of any relevant material information including trading factors or risks which are unlikely to be known or anticipated by the general public and which could materially affect the profi ts of our Company and our subsidiaries.
23. Save as disclosed in this Prospectus, the fi nancial condition and operations of our Group are not likely to be affected by any of the following:
(a) known trends or demands, commitments, events or uncertainties that will result in or are reasonably likely to result in our Group’s liquidity increasing or decreasing in any material way;
(b) material commitments for capital expenditure;
(c) unusual or infrequent events or transactions or any signifi cant economic changes that will materially affect the amount of reported income from operations; and
(d) known trends or uncertainties that have had or that we reasonably expect to have a material favourable or unfavourable impact on revenues or operating income.
24. Save as disclosed in this Prospectus, our Directors are not aware of any event which has occurred since 1 April 2012, which may have a material effect on the fi nancial position and results provided in the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus.
166
25. We currently have no intention of changing the auditors of the companies in our Group after the listing of our Company on the SGX-ST.
Details including the names, addresses and professional qualifi cations (including membership in a professional body) of the auditors of our Company for the Period under Review are as follows:
Partner in charge
Name and Address
Professional Body
Professional qualifi cation
Ong Bee Yen Deloitte & Touche LLP6 Shenton WayDBS Building Tower Two #32-00 Singapore 068809
Institute of Certifi ed Public Accountants of Singapore
CPA
CONSENTS
26. The Independent Auditors and Reporting Accountants have given and have not withdrawn their written consent to the issue of this Prospectus with the inclusion herein of the “Independent Auditors’ Report on the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus in the form and context in which it is included and references to their name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.
27. The Issue Manager has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of its name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.
28. The Underwriter and Placement Agent has given and has not withdrawn its written consent to the issue of this Prospectus with the conclusion herein of its name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.
29. The Independent Market Researcher has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of its name and reference to its name and Industry Report entitled “The Offshore Oil and Gas Industry - Singapore” set out under the section entitled “Industry Overview” and Appendix E of this Prospectus in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.
30. Each of the solicitors to the Offering and Legal Advisers to the Company on Singapore Laws, Solicitors to the Issue Manager and the Underwriter and Placement Agent, Legal Adviser to the Company in respect of Vietnam laws, Legal Adviser to the Company in respect of Malaysian laws, the Share Registrar, the Principal Banker and the Receiving Bank does not make, or purport to make, any statement in this Prospectus or any statement upon which a statement in this Prospectus is based and, to the maximum extent permitted by law, expressly disclaim and take no responsibility for any liability to any person which is based on, or arises out of, the statements, information or opinions in this Prospectus.
STATEMENT BY DIRECTORS OF OUR COMPANY
31. Our Directors have seen and approved this Prospectus and individually and collectively accept the full responsibility for the accuracy of the information given in this Prospectus and confi rm, having made all reasonable enquiries, that to the best of their knowledge and belief, this Prospectus constitutes full and true disclosure of all material facts about the Offering, our Company and our subsidiaries, and our Directors are not aware of any facts the omission of which would make any statement in this Prospectus materially misleading. Where information in this Prospectus has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of our Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Prospectus in its proper form and context.
167
DOCUMENTS AVAILABLE FOR INSPECTION
32. The following documents or copies thereof may be inspected at our registered offi ce at 7 Gul Avenue Singapore 629651 during normal business hours for a period of six (6) months from the date of registration of this Prospectus:
(a) the Memorandum and Articles of Association of our Company;
(b) the “Independent Auditors’ Report and the Combined Financial Statements for the Years Ended 31 March 2010, 2011 and 2012” as set out in Appendix A to this Prospectus;
(c) the material contracts referred to in paragraph 20 of the section entitled “General and Statutory Information” in this Prospectus;
(d) the letters of consent referred to in paragraphs 26 to 29 of the section entitled “General and Statutory Information” in this Prospectus;
(e) the Service Agreements referred to in the section entitled “Directors, Executive Offi cers and Employes - Service Agreements” in this Prospectus;
(f) the industry report entitled “The Offshore Oil and Gas Industry - Singapore” by the Independent Market Researcher as set out in Appendix E in this Prospectus; and
(g) the audited fi nancial statements of all companies within our Group for FY2010, FY2011 and FY2012.
A-1
APPENDIX A
INDEPENDENT AUDITORS’ REPORT AND THE COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 MARCH 2010, 2011 and 2012
INDEPENDENT AUDITORS’ REPORT ON THE COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 MARCH 2010, 2011 and 2012
17 October 2012
The Board of DirectorsGaylin Holdings Limited7 Gul AvenueSingapore 629651
Dear Sirs
Report on the Combined Financial Statements
We have audited the accompanying combined financial statements of Gaylin Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”). The combined fi nancial statements comprise the combined statements of fi nancial position as at 31 March 2010, 2011 and 2012 and the related combined income statements, combined statements of comprehensive income, combined statements of changes in equity and combined statements of cash fl ows of the Group for the years ended 31 March 2010, 2011 and 2012 (the “Relevant Periods”), and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages A-3 to A-42.
Management’s Responsibility for the Combined Financial Statements
Management is responsible for the preparation of these combined fi nancial statements that give a true and fair view in accordance with the Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls suffi cient to provide reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to maintain accountability of assets.
Auditors’ Responsibility
Our responsibility is to express an opinion on these combined fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the combined fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the combined fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of combined fi nancial statements that give a true and fair view in order to design audit 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the combined fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
A-2
Opinion
In our opinion, the combined fi nancial statements of the Group are properly drawn up in accordance with the Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group as at 31 March 2010, 2011 and 2012 and of the results, changes in equity and cash fl ows of the Group for the Relevant Periods.
Other Matters
This report has been prepared solely to you for inclusion in the prospectus in connection with the proposed Offering and Listing of Gaylin Holdings Limited on the Singapore Exchange Securities Trading Limited and for no other purposes.
Yours faithfully
Public Accountants andCertifi ed Public AccountantsSingapore
Ong Bee YenPartner
A-3
COMBINED STATEMENTS OF FINANCIAL POSITIONAs at 31 March 2010, 2011 and 2012
Cash (used in) generated from operations (1,800,289) 10,569,021 5,270,942
Interest received 25,847 1,449 1,472
Income tax paid (2,837,948) (1,773,964) (2,161,284)
Net cash (used in) from operating activities (4,612,390) 8,796,506 3,111,130
Investing activities
Proceeds on disposal of property, plant and equipment 363,285 142,995 501,899
Purchases of property, plant and equipment (Note A) (567,982) (390,890) (1,721,545)
Purchase of a subsidiary from directors (Note 25) – – (74,872)
Disposal of available-for-sale investment – 516,158 –
Net cash (used in) from investing activities (204,697) 268,263 (1,294,518)
A-8
2010 2011 2012
$ $ $
Financing activities
Proceeds from loan from immediate holding company – 7,250,000 –
Repayment of loan to immediate holding company – – (10,750,000)
Payments to former shareholder under the Restructuring Exercise – (1,500,000) –
Proceeds from issuance of shares of the Company 1 – 2,999,999
Interest paid (1,580,096) (1,609,417) (1,518,489)
Dividends paid (3,585,000) – (25,300,000)
Repayment of obligations under fi nance leases (1,242,652) (1,095,390) (1,262,562)
New bank loans obtained 4,000,000 3,909,100 34,000,000
Repayment of bank loans (1,282,447) (1,714,471) (2,068,443)
Increase in (Repayment of) bank bills - net 7,426,809 (13,872,952) 9,773,836
Net cash from (used in) fi nancing activities 3,736,615 (8,633,130) 5,874,341
Net (decrease) increase in cash and cash equivalents (1,080,472) 431,639 7,690,953
Effect of exchange rate changes on cash and cash equivalents (5,922) (8,677) 5,359
Cash and cash equivalents (overdrawn) at beginning of the year (2,833,165) (3,919,559) (3,496,597)
Cash and cash equivalents (overdrawn) at end of the year (3,919,559) (3,496,597) 4,199,715
For the purpose of the combined statements of cash fl ows, cash and cash equivalents comprise the following:
Note 2010 2011 2012
$ $ $
Cash and bank balances 6 74,903 271,031 4,199,715
Bank overdraft 15 (3,994,462) (3,767,628) –
(3,919,559) (3,496,597) 4,199,715
Note A
During the year, the Group purchased property, plant and equipment with an aggregate cost of $3,143,543 (2011 : $406,890; 2010 : $1,153,982) of which $1,421,998 (2011 : $16,000; 2010 : $586,000) was acquired under fi nance lease agreements.
See accompanying notes to combined fi nancial statements.
A-9
NOTES TO COMBINED FINANCIAL STATEMENTSAs at 31 March 2010, 2011 and 2012
1 GENERAL
The Company (Registration No. 201004068M) was incorporated in the Republic of Singapore on 25 February 2010 with its principal place of business and registered offi ce at 7 Gul Avenue, Singapore 629651. The combined fi nancial statements are expressed in Singapore dollars, which is the Company’s functional currency.
The combined fi nancial statements have been prepared solely in connection with the proposed listing of Gaylin Holdings Limited on the Singapore Exchange Securities Trading Limited.
The directors have considered the Group’s cash fl ow and future estimates and projections taking into account possible fl uctuations arising from the principal risks and uncertainties and other factors, and in particular the current and expected debt leverage, liquidity and funding position of the Group and the ability to meet fi nance charges, scheduled debt repayments and fi nancial covenant reporting requirements.
After making enquiries, and in consideration of the foregoing, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis has been adopted in preparing the combined fi nancial statements.
The Company is engaged in investment holding and the provision of management services to its subsidiaries.
The principal activities of the subsidiaries are described below.
Restructuring Exercise
The Group was formed through the Restructuring Exercise which involved acquisition and the rationalisation of our corporate and shareholding structure in preparation for the proposed listing of the Company on the Singapore Exchange Securities Trading Limited. Pursuant to the Restructuring Exercise, the Company became the holding company of the Group.
The Restructuring Exercise involved the following:
1. Incorporation of the Company
The Company was incorporated on 25 February 2010 in the Republic of Singapore in accordance with the Companies Act as a private limited company with an issued and paid-up share capital of $1.00 comprising one share. On 14 September 2011, the Company allotted and issued 2,999,999 shares for the consideration of $2,999,999 to its existing shareholder, Keh Swee Investment Pte Ltd (“Keh Swee”), for cash.
Keh Swee has issued and paid-up share capital of $5 comprising 5 shares held by Mr Teo Bee Chiong (referred hereafter as “Mr Desmond Teo”), Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Teo Bee Hua (referred hereafter as “Mr Steven Teo”).
2. Incorporation of Gaylin Malaysia Sdn Bhd (“Gaylin Malaysia”)
On 22 January 2010, Gaylin Malaysia was incorporated in Malaysia with Mr Teo Bee Hoe and Gaylin International Pte Ltd as subscribers with each holding one ordinary share in Gaylin Malaysia. The subscribers transferred the two ordinary shares in Gaylin Malaysia to the Company on 15 April 2011. 999,998 ordinary shares in the issued and paid-up share capital of Gaylin Malaysia have been issued and allotted to the Company on 19 August 2011.
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3. Acquisition of Gaylin International Pte Ltd (“GIPL”) and its subsidiary Gaylin Vietnam Pte Ltd (“Gaylin Vietnam”)
Pursuant to a sale and purchase agreement dated 28 February 2011, the Company acquired from Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe, directors of the company, and Mr Steven Teo (brother of the directors) and Ms Lew Siew Poh (the wife of Mr Teo Bee Yen, brother of the directors), the entire issued and paid-up capital of 5,000,000 ordinary shares of GIPL at an aggregate consideration of $5,000,000 (the “Purchase Consideration”) which was determined based on the issued and paid-up shares capital of GIPL. GIPL owns 100% of the equity interest in Gaylin Vietnam at the date of the sale and purchase agreement.
The consideration was payable to the vendors based on their respective shareholdings in GIPL as follows:
Number of shares
(as a percentage of total number of shares)
Aggregate consideration in
respect of such share sale
Mr Desmond Teo 1,000,000 $1,000,000
(20.0%)
Mr Teo Bee Kheng 1,000,000 $1,000,000
(20.0%)
Mr Teo Bee Hoe 750,000 $750,000
(15.0%)
Mr Steven Teo 750,000 $750,000
(15.0%)
Ms Lew Siew Poh 1,500,000 $1,500,000
(30.0%)
Total 5,000,000 $5,000,000
(100.0%)
Upon completion of the acquisition, GIPL became a wholly-owned subsidiary of the Company.
A portion of the Purchase Consideration amounting to an aggregate of $1,500,000 was paid by the Company to Ms Lew Siew Poh by way of cash payment. The balance of $3,500,000 payable by the Company to Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo, amounting to an aggregate of $3,500,000 (the “Acquisition Debt”) was not satisfi ed in cash.
Pursuant to a novation agreement dated 28 February 2011, Keh Swee assumed the obligations in respect of the Acquisition Debt. Keh Swee effected full settlement of the Acquisition Debt by way of the allotment and issuance of an aggregate of 3,500,000 new ordinary shares at $1 per share, credited as fully paid, to Mr Desmond Teo (1,000,000 Shares), Mr Teo Bee Kheng (1,000,000 Shares), Mr Teo Bee Hoe (750,000 Shares) and Mr Steven Teo (750,000 Shares).
Further, on 28 Feburary 2011, each of Mr Teo Bee Hoe, Mr Steven Teo and Mr Teo Bee Yen subscribed for 250,000 shares, 250,000 shares and 1,000,000 shares respectively in Keh Swee. As a result, each of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe, Mr Teo Bee Yen and Mr Steven Teo owns 1,000,001 ordinary shares representing 20.0% of the issued share capital of Keh Swee.
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4. Incorporation of Gaylin Power Pte. Ltd. (“Gaylin Power”)
Following the acquisition of GIPL by the Company, Gaylin Power was incorporated as a wholly owned subsidiary of GIPL on 25 July 2011.
5. Acquisition of Bridge Testing Centre (Pte) Ltd (“Bridge Testing”)
Pursuant to a sale and purchase agreement dated 30 September 2011, the Company acquired from Mr Teo Bee Kheng and Mr Teo Bee Hoe, the entire issued and paid-up share capital of two ordinary shares of Bridge Testing at an aggregate consideration of $81,841, which was determined based on the unaudited net asset value of Bridge Testing as at 30 September 2011. Management has estimated that the net asset value approximates the fair value as the net assets and liabilities assumed mainly relate to fi nancial assets and liabilities with relatively short-term maturity as disclosed in Note 25 to the combined fi nancial statements. The consideration was paid to Mr Teo Bee Kheng and Mr Teo Bee Hoe in equal proportions.
Upon completion, Bridge Testing became a wholly-owned subsidiary of the Company.
Upon the completion of the Restructuring Exercise, the Company has the following subsidiaries:
Name of subsidiaries
Country ofincorporation
and operations
Attributableequity interest of the Group Principal Activities
Gaylin International Pte Ltd Singapore 100% Supply and manufactureof rigging and lifting equipment and provisionof related services, andship supply.
Gaylin Vietnam Pte Ltd Vietnam 100% Supply and manufactureof rigging and liftingequipment and provision of related services.
Gaylin Malaysia Sdn Bhd Malaysia 100% Dormant(A)
Bridge Testing Centre (Pte) Ltd. Singapore 100% Provision of testing, inspection and certifi cation services for rigging and liftingequipment.
Gaylin Power Pte. Ltd. Singapore 100% Supply of rigging and liftingequipment.
(A) The subsidiary is expected to commence operations in December 2012. The principal activities of the subsidiary are the supply and manufacture of rigging and lifting equipment and provision of related services.
The combined fi nancial statements of the Group for the years ended 31 March 2010, 2011 and 2012 were authorised for issue by the Board of Directors on 17 October 2012.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The combined fi nancial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Financial Reporting Standards (“FRS”).
ADOPTION OF NEW AND REVISED STANDARDS - The Group has adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) issued and amendments to FRS that are relevant to the Group since the beginning of the Relevant Periods. The adoption of these new/revised FRS does not result in changes to the Group’s accounting policies and has no material impact on the amounts reported for the current or prior years as disclosed below:
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FRS 24 (Revised) Related Party Disclosures
FRS 24 (Revised) Related Party Disclosures has been adopted beginning 1 April 2011 and has been applied retrospectively. The revised Standard clarifi es the defi nition of a related party.
In addition, the Group is required to disclose commitments between itself and its related parties.
At the date of authorisation of these fi nancial statements, the following FRSs and amendments to FRS that are relevant to the Group were issued but not effective:
FRS 27 (Revised) Separate Financial Statements FRS 110 Consolidated Financial Statements FRS 113 Fair Value Measurement
Consequential amendments were also made to various standards as a result of these new/revised standards.
Management anticipates that the adoption of the above FRSs and amendments to FRS in future periods will not have a material impact on the fi nancial statements of the Group in the period of their initial application except for the following:
FRS 110 Consolidated Financial Statements and FRS 27 Separate Financial Statements
FRS 110 replaces the control assessment criteria and consolidation requirements currently in FRS 27 and INT FRS 12 Consolidation - Special Purpose Entities.
FRS 110 defi nes the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated fi nancial statements. It also provides more extensive application guidance on assessing control based on voting rights or other contractual rights. Under FRS 110, control assessment will be based on whether an investor has (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the returns. FRS 27 remains as a standard applicable only to separate fi nancial statements.
FRS 110 will take effect from fi nancial years beginning on or after 1 January 2014 with full retrospective application.
When the Group adopts FRS 110, entities it currently consolidates may not qualify for consolidation, and entities it currently does not consolidate may qualify for consolidation. The Group is currently estimating the effects of FRS 110 on its investments in the period of initial adoption.
FRS 113 Fair Value Measurement
FRS 113 is a single new Standard that applies to both fi nancial and non-fi nancial items. It replaces the guidance on fair value measurement and related disclosure in other Standards, with the exception of measurement dealt with under FRS 102 Share-based Payment, FRS 17 Leases, net realisable value in FRS 2 Inventories and value-in-use in FRS 36 Impairment of Assets.
FRS 113 provides a common fair value defi nition and hierarchy applicable to the fair value measurement of assets, liabilities, and an entity’s own equity instruments within its scope, but does not change the requirements in other. Standards regarding which items should be measured or disclosed at fair value.
FRS 113 will be effective prospectively from annual periods beginning on or after 1 January 2013. Comparative information is not required for periods before initial application.
The Group is currently estimating the effects of FRS 113 in the period of initial adoption.
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BASIS OF COMBINATION - The Group resulting from the Restructuring Exercise as disclosed above, is one involving entities under common control. Accordingly, the combined fi nancial statements have been accounted for using the principles of merger accounting where fi nancial statement items of the merged entities for the reporting periods in which the common control combination occurs are included in the combined fi nancial statements of the Group as if the combination had occurred from the date when the merged entities fi rst came under the control of the same shareholders.
All signifi cant intercompany transactions and balances between Group entities are eliminated on combination.
BUSINESS COMBINATIONS - Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profi t or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classifi ed. Contingent consideration that is classifi ed as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classifi ed as an asset or a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments: Recognition and Measurement, or FRS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profi t or loss.
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profi t or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassifi ed to profi t or loss, where such treatment would be appropriate if that interest were disposed of.
The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under the FRS are recognised at their fair value at the acquisition date, except that:
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefi ts respectively;
liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in FRS 102 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classifi ed as held for sale in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to refl ect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
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The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year from acquisition date.
The policy described above is applied to all business combinations that take place on or after 1 April 2010.
FINANCIAL INSTRUMENTS - Financial assets and fi nancial liabilities are recognised on the Group’s statements of fi nancial position when the Group becomes a party to the contractual provisions of the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a fi nancial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on 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 fi nancial instrument, or where appropriate, a shorter period. Income and expense are recognised on an effective interest rate basis for debt instruments.
Financial assets
All fi nancial assets are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those fi nancial assets classifi ed as at fair value through profi t and loss which are initially measured at fair value.
Financial assets are classifi ed into the following specifi ed categories: “available-for-sale” fi nancial assets and “loan and receivables”. The classifi cation depends on the nature and purpose of fi nancial assets and is determined at the time of initial recognition.
Available-for-sale fi nancial assets
Certain debt securities held by the Group are classifi ed as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Gains and losses arising from changes in fair value are recognised in other comprehensive income with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profi t or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income and accumulated in revaluation reserve is reclassifi ed to profi t or loss.
Loans and receivables
Trade receivables, loans and other receivables that have fi xed or determinable payments that are not quoted in an active market are classifi ed as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.
Impairment of fi nancial assets
Financial assets, other than those at fair value through profi t or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the fi nancial asset have been impacted.
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For all fi nancial assets, objective evidence of impairment could include:
signifi cant fi nancial diffi culty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or fi nancial re-organisation.
For certain categories of fi nancial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. 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 of 30 to 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For fi nancial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the original effective interest rate.
The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of trade and other receivables where the carrying amount is reduced through the use of an allowance account. When a trade and other receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profi t or loss.
When an available-for-sale fi nancial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassifi ed to profi t or loss.
With the exception of available-for-sale instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the profi t or loss to the extent the carrying amount of the fi nancial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale equity instruments, impairment losses previously recognised in profi t or loss are not reversed through profi t or loss. Any subsequent increase in fair value after an impairment loss is recognised directly in other comprehensive income. In respect of available-for-sale debt instruments, impairment losses are subsequently reversed through profi t or loss if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss.
Derecognition of fi nancial assets
The Group derecognises a fi nancial asset only when the contractual rights to the cash fl ows from the asset expire, or it transfers the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred fi nancial asset, the Group continues to recognise the fi nancial asset and also recognises a collateralised borrowing for the proceeds received.
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Financial liabilities and equity instruments
Classifi cation as debt or equity
Financial liabilities and equity instruments issued by the Group are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Trade and other payables are initially measured at fair value net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).
Derecognition of fi nancial liabilities
The Group derecognises fi nancial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired.
LEASES - Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.
Assets held under fi nance 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 statement of fi nancial position as a fi nance lease obligation. Lease payments are apportioned between fi nance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profi t or loss unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see below).
Rental payable under operating leases are charged to profi t or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefi t of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.
INVENTORIES – Inventories comprise of wire ropes and accessories. Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the fi rst-in, fi rst-out method for accessories and specifi c identifi cation method for wire ropes. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
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PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost, less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets, other than construction-in-progress, over their estimated useful lives, using the straight-line method, on the following bases:
Leasehold land and buildings - 30 years (additions over the remaining life of the lease) Plant, machinery and equipment - 4 to 10 years Cranes - 5 years Motor vehicles - 5 to 9 years Furniture and fi ttings - 3 to 10 years Offi ce equipment - 3 to 10 years
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.
Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.
The 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 profi t or loss.
Fully depreciated assets still in use are retained in the combined fi nancial statements.
Construction-in-progress are not depreciated until they are ready for effective use.
IMPAIRMENT OF NON-FINANCIAL ASSETS - At the end of each reporting period, the Group reviews the carrying amounts of its 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 asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimate of future cash fl ows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profi t or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profi t or loss.
ASSOCIATE - An associate is an entity over which the Group has signifi cant infl uence and that is neither a subsidiary nor an interest in a joint venture. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee but is not joint control over those policies.
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The results and assets and liabilities of associates are incorporated in these fi nancial statements using the equity method of accounting, except when the investment is classifi ed as held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in an associate is carried in the combined statement of fi nancial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are not recognised, unless the Group has incurred a legal or constructive obligation or made payments on behalf of the associate.
Where a Group entity transacts with an associate of the Group, profi ts and losses are eliminated to the extent of the Group’s interest in the relevant associate.
PROVISIONS - Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.
When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
GOVERNMENT GRANTS – Government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis.
REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfi ed:
the Group has transferred to the buyer the signifi cant risks and rewards of ownership of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefi ts associated with the transaction will fl ow to the Group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue from the rendering of services is recognised upon the completion of the services rendered and acceptance by customers.
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Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
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 profi t or loss in the period in which they are incurred.
RETIREMENT BENEFIT COSTS - Payments to defi ned contribution retirement benefi t plans are charged as an expense when employees have rendered the services entitling them to the contributions. Payments made to state-managed retirement benefi t schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defi ned contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defi ned contribution retirement benefi t plan.
EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.
INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the company and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the combined fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interest are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.
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 suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group expects at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profi t or loss, except when they relate to items credited or debited outside profi t or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profi t or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities over cost.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The combined fi nancial statements of the Group are presented in Singapore dollars, which is the functional currency of the Company.
In preparing the fi nancial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. 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 retranslation of monetary items are included in profi t or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profi t or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.
For the purpose of presenting combined financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in Singapore dollars using exchange rates prevailing on the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fl uctuated signifi cantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation accumulated in the Group’s translation reserve, shall be reclassifi ed from equity to profi t or loss (as a reclassifi cation adjustment) when the gain or loss on disposal is recognised.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve.
CASH AND CASH EQUIVALENTS – Cash and cash equivalents in the statement of cash fl ows comprise cash on hand, bank balances, bank overdrafts and other short-term highly liquid assets and are subject to an insignifi cant risk of changes in value and are readily convertible to a known amount of cash.
A-21
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2, management is 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 ongoing 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.
Critical judgements in applying the entity’s accounting policies
There are no critical judgements, apart from those involving estimation (see below) that the management has made in the process of applying the accounting policy for the amounts recognised in the combined fi nancial statements.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed below:
Valuation of inventories
Management reviews the inventory listing on a periodic basis. This review involves a comparison of the carrying value of the inventory items with the respective net realisable value as well as assessing factors such as the shelf lives of the inventory and customer preferences and purchasing trends. The purpose is to ascertain whether an allowance is required to be made in the combined fi nancial statements for any obsolete and slow-moving items. The net realisable value of inventory items is estimated with reference to prices of similar inventory items transacted around the year end date, adjusted for fl uctuation in steel prices from publicly available sources, infl ation rates, foreign exchange rates and age and condition of inventory items. Management also engages an independent valuation specialist to perform a desk-top valuation on the open market value of the inventories to assess their net realisable value. Management is satisfi ed that adequate write down for inventories has been made in the combined fi nancial statements. The carrying amount of the Group’s inventories is disclosed in Note 9 to the combined fi nancial statements.
Allowances for receivables
The Group makes allowances for bad and doubtful debts based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identifi cation of bad and doubtful debts requires the use of judgement and estimates. Judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness, past collection history of each customer and on-going dealings with them. Where the expectation is different from the original estimate, such difference will impact the carrying value of trade and other receivables and doubtful debts expenses in the period in which such estimate has been changed. The carrying amounts of the Group’s trade and other receivables are disclosed in Notes 7 and 8 respectively.
Useful lives of property, plant and equipment
As described in Note 2, the Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. Changes in the expected level and future usage can impact the economic useful lives of these assets with consequential impact on the future depreciation charge. The carrying amounts of property, plant and equipment are disclosed in Note 10 to the combined fi nancial statements.
A-22
Impairment of property, plant and equipment
The Group assesses annually whether property, plant and equipment exhibit any indication of impairment. In instances where there are indications of impairment, the recoverable amounts of property, plant and equipment will be based on value-in-use calculations. These calculations require the use of management’s judgement and estimates. The carrying amounts of the Group’s property, plant and equipment are disclosed in Note 10 to the combined fi nancial statements.
4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT
(a) Categories of fi nancial instruments
The following table sets out the fi nancial instruments as at the end of the Relevant Periods:
2010 2011 2012
$ $ $
Financial assets
Loans and receivables (including cash and cash equivalents) 16,444,682 21,272,655 23,071,348
Available-for-sale fi nancial asset 515,000 – –
Financial liabilities
Borrowings and payables, at amortised cost 63,180,033 57,570,790 80,819,443
(b) Financial risk management policies and objectives
The Group’s overall fi nancial risk management policies and objectives seek to minimise potential adverse effects on the fi nancial performance of the Group. Risk management is carried out by the Board of Directors and periodic reviews are undertaken to ensure that the Group’s policy guidelines are complied with. There has been no change to the Group’s exposure to these fi nancial risks or the manner in which it manages and measures the risk.
(i) Foreign exchange risk management
The Group transacts business in other foreign currencies including the United States dollar and Euro and therefore is exposed to foreign exchange risk. The Group does not hedge against foreign exchange exposure as the currency risk is not expected to be signifi cant.
At the end of the reporting period, the carrying amounts of signifi cant monetary assets and monetary liabilities denominated in currencies other than the respective Group entities’ functional currencies are as follows:
Liabilities Assets
2010 2011 2012 2010 2011 2012
$ $ $ $ $ $
United States dollar 12,236,524 8,960,462 9,995,834 2,711,746 5,302,566 4,215,299
Euro 1,053,683 1,610,280 846,196 475,567 2,536,364 66,095
Foreign currency sensitivity
The following table details the sensitivity to a 5% increase and decrease in United States dollar and Euro against the respective functional currencies of the entities in the Group. The sensitivity analysis below includes only outstanding United States dollar and Euro denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. The sensitivity analysis includes external balances as well as balances to foreign operations within the group where they give rise to an impact on the group’s profi ts before tax.
A-23
If the relevant foreign currencies weaken by 5% against the functional currency of each Group entity, the Group’s profi ts before tax will increase (decrease) by:
2010 2011 2012
$ $ $
United States dollar 476,239 182,895 289,027
Euro 28,906 (46,304) 39,005
If the relevant foreign currencies strengthens by 5%, there would be an equal and opposite impact on the Group’s profi ts before tax.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not refl ect the exposure during the year. The foreign currency denominated sales and purchases are seasonal and can vary over time subject to the demands of the market.
(ii) Interest rate risk management
The primary source of the Group’s interest rate risk relates to interest bearing bank deposits and its borrowings from banks and fi nancial institutions. The interest bearing bank borrowings of the Group are disclosed in Note 15 to the combined fi nancial statements. As the rate of interest for certain bank deposits and borrowings are based on interbank offer rates, the Group is exposed to risks arising from changes in interest rate. This risk is not hedged.
Summary quantitative data of the Group’s interest bearing fi nancial instruments can be found in Note 15 to the combined fi nancial statements.
The Group has borrowings at variable rates totalling $67,617,426 (2011 : $28,331,219; 2010 : $38,880,801) respectively and is therefore exposed to interest rate risks arising from the variability of cash fl ows.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for bank borrowings at the end of the reporting period and the stipulated change taking place at the beginning of the fi nancial year and held constant throughout the reporting period in the case of instruments that have fl oating rates. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the profi t for the year ended 31 March 2012 of the Group would decrease/increase by $676,000 (2011 : $283,000; 2010 : $389,000) respectively.
(iii) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a fi nancial loss to the Group. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by the counterparty limits that are reviewed and approved by the management periodically.
The Group’s bank balances are held with creditworthy fi nancial institutions.
A-24
Concentration of credit risk exists when economic, industry or geographical factors similarly affect the Group’s counterparties whose aggregate credit exposure is signifi cant in relation to the Group’s total credit exposure. There is no concentration of credit risk as the Group does not have any significant credit risk exposure to any single counterparty or any company of counterparties having similar characteristics. The Group defi nes counterparties as having similar characteristics if they are related entities.
The carrying amount of financial assets recorded in the combined financial statements, grossed up for any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.
Further details of credit risks on trade and other receivables are disclosed in Notes 7 and 8 to the combined fi nancial statements respectively.
(iv) Liquidity risk management
Management is of the view that there is minimal liquidity risk as the Group maintains suffi cient cash and cash equivalents and internally generated cash fl ows to fi nance their activities. If required, fi nancing can be obtained from its existing lines of banking facilities. As at the end of the reporting period, the Group’s maximum available credit from its banking facilities excluding term loans is $60,570,000 (2011 : $51,470,000; 2010 : $50,420,000). The Group’s unutilised available credit from its banking facilities excluding term loans is $24,583,056 (2011 : $25,449,277; 2010 : $13,334,132).
Liquidity and interest risk analyses
Non-derivative fi nancial liabilities
The following tables detail the remaining contractual maturity for non-derivative fi nancial liabilities. The tables have been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group can be required to pay. The adjustment column represents future cash fl ow attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the fi nancial liability on the combined statements of fi nancial position.
Weightedaverage
interest rate
On demandor within 1 year
Within 2to 5 years
Over 5 years
Adjustment Total
% $ $ $ $ $
2010
Trade and other payables – 17,866,502 – – – 17,866,502
Other than the available-for-sale investment and insurance contracts receivables in 2010, all fi nancial assets in 2010, 2011 and 2012 are repayable on demand or due within 1 year from the end of the reporting period.
(v) Fair value of fi nancial assets and fi nancial liabilities
The carrying amounts of cash and bank balances, trade and other current receivables and payables approximate their respective fair values due to the relatively short-term maturity of these fi nancial instruments. The fair values of other classes of fi nancial assets and liabilities are disclosed in the respective notes to the combined fi nancial statements.
The fair values of fi nancial assets and fi nancial liabilities are determined as follows:
(i) the fair value of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and
(ii) the fair value of other fi nancial assets and fi nancial liabilities are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis.
The Group classifi es fair value measurements using a fair value hierarchy that refl ects the signifi cance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability; either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
(c) Capital risk management policies and objectives
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance, and to ensure that all externally imposed capital requirements are complied with.
The capital structure of the Group consists of debt, which includes bank loans, fi nance leases and equity, comprising issued capital, reserves and retained earnings. The Group’s overall strategy remains unchanged during the Relevant Periods.
A-26
5 HOLDING COMPANY AND RELATED PARTY TRANSACTIONS
Pursuant to the Restructuring exercise, Keh Swee Investment Pte Ltd, a company incorporated in Singapore, becomes the immediate holding company of the Company. Keh Swee Investment Pte Ltd is owned by Mr Teo Bee Yen, Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo. Related companies in these fi nancial statements refer to members of the immediate holding company’s group of companies.
Some of the Group’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is refl ected in these combined fi nancial statements. The balances are unsecured, interest-free and repayable on demand.
Details of transactions between the Group and related parties are disclosed below:
2010 2011 2012
$ $ $
Purchase from a company which the directors have interest in – – 113,254
Services rendered by a company which the directors have interest in 76,350 81,715 47,155
Sales to a company in which the directors have interest in – (17,705) (372,081)
Purchase of shares of a subsidiary from directors – – 81,841
Sundry income earned from a company in which the directors have interest in (7,200) (7,200) (3,600)
As disclosed in Notes 14 and 15, the directors and a shareholder of the immediate holding company issued personal guarantees for the Group’s borrowings.
Compensation of directors and key management personnel
The remuneration of directors and other members of key management are as follows:
Fixed deposits bear an average effective interest rate of 0.2% (2011 and 2010 : Nil%) per annum and for a tenure of approximately 3 months (2011 and 2010 : Nil).
A-27
7 TRADE RECEIVABLES
2010 2011 2012
$ $ $
Outside parties 15,138,394 21,183,999 19,099,378
Less: Allowance for doubtful trade receivables (532,546) (474,625) (398,813)
14,605,848 20,709,374 18,700,565
Related party (Note 5) 21,828 – –
Goods and Services Tax receivable 369,230 99,382 72,238
14,996,906 20,808,756 18,772,803
The average credit period on sales of goods is 30 to 90 days (2011 and 2010 : 30 to 90 days). No interest is charged on the outstanding balances.
As at the end of the reporting period, an allowance has been made for estimated irrecoverable amounts from the sales of goods to outside parties of $398,813 (2011 : $474,625; 2010 : $532,546). This allowance has been determined based on management’s evaluation of the collectability of specifi c customer accounts.
Included in the Group’s trade receivables balance are debtors with a carrying amount of $11,594,732 (2011 : $11,925,741; 2010 : $10,290,136) which are past due at the reporting date for which the Group has not provided as there has not been a signifi cant change in credit quality and the amounts are still considered recoverable.
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. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believes that there is no further provision required in excess of the allowance for doubtful trade receivables.
The table below is an analysis of the Group’s trade receivables as at the end of the reporting period:
2010 2011 2012
$ $ $
Not past due and not impaired 4,706,770 8,883,015 7,178,071
Past due but not impaired 10,290,136 11,925,741 11,594,732
Trade receivables not impaired 14,996,906 20,808,756 18,772,803
Impaired receivables 532,546 474,625 398,813
Less: Allowance for doubtful trade receivables (532,546) (474,625) (398,813)
Total trade receivables, net 14,996,906 20,808,756 18,772,803
A-28
Aging profi le of receivables that are past due but not impaired:
2010 2011 2012
$ $ $
Past due for:
< 1 month 3,980,594 6,956,070 5,828,908
1 months to 2 months 4,019,411 1,959,411 1,112,636
2 months to 3 months 1,244,133 1,171,295 1,338,748
3 months to 6 months 647,592 1,148,605 1,742,391
6 months to 12 months 328,344 612,790 1,250,387
> 12 months 70,062 77,570 321,662
10,290,136 11,925,741 11,594,732
Movement in the allowance for doubtful trade receivables:
2010 2011 2012
$ $ $
At beginning of year 319,018 532,546 474,625
Charged to profi t or loss 213,528 35,756 –
Write off against provisions – – (57,002)
Doubtful debts recovered – (73,315) (18,810)
Foreign exchange alignment – (20,362) –
At end of year 532,546 474,625 398,813
8 OTHER RECEIVABLES AND PREPAYMENTS
2010 2011 2012
$ $ $
Due from related parties (Note 5) 4,237 – –
Advance payments to suppliers – – 12,938
Advances to staff 31,540 85,050 –
Insurance contract receivables 1,245,417 – –
Deposits 89,160 85,759 94,154
Prepayments 152,436 138,381 382,710
Others 2,519 22,059 4,676
1,525,309 331,249 494,478
Less: Non-current insurance
contract receivables (1,245,417) – –
279,892 331,249 494,478
Insurance contract receivables represent the estimated cash surrender value of life insurance policies that covered certain key management of the Group for which the Group acts as the policy contract benefi ciary. During 2011, the policies were surrendered and cash proceeds of approximately $1.25 million were received.
Included in prepayments is expenses capitalised for the Group’s proposed listing of $77,000 (2011 : $Nil; 2010: $Nil).
A-29
9 INVENTORIES
2010 2011 2012
$ $ $
Raw materials and products 73,204,591 74,512,341 85,520,119
Goods-in-transit 1,612,162 1,304,070 1,453,463
74,816,753 75,816,411 86,973,582
The cost of inventories recognised as an expense included $1,050,603 in respect of reversal of prior write-downs of inventory to net realisable value (2011 : reversal of write-downs of $832,772; 2010 : write-downs of $11,511,752). Previous write-downs have been reversed in 2011 and 2012 as a result of the higher market values of certain inventories as determined in the paragraph below.
The net realisable value of the Group’s inventories as at 31 March 2010, 2011 and 2012 are based on management’s estimations, which are made with reference to a desk-top valuation on the open market value of the inventories carried out by an independent valuation specialist.
The Group has pledged inventories with carrying amount of $36,000,431 (2011 : $Nil; 2010 : $Nil) to secure banking facilities available to the Group.
A-30
10
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A-31
Certain of the Group’s plant and equipment with total carrying amount of $2,703,850 (2011 : $2,207,022; 2010 : $3,366,764) are under fi nance lease obligations (Note 16).
The Group has pledged leasehold land and buildings with carrying amount of $3,520,616 (2011 : $3,744,992; 2010 : $3,535,750) to secure banking facilities granted to the Group (Note 15).
The fair values of the Group’s leasehold land and buildings have been determined to be at $23.5 million in August 2012 by an independent valuer not connected to the Group by reference to market evidence of recent transactions for similar properties as of August 2012. The leasehold land and buildings are carried at cost less accumulated depreciation in the combined statements of fi nancial position in accordance with the Group’s accounting policy.
11 INVESTMENT IN AN ASSOCIATED COMPANY
2010 2011 2012
$ $ $
Unquoted shares - at cost:
At beginning of year 1 – –
Disposal during the year (1) – –
At end of year – – –
Share of post-acquisition results – – –
– – –
Particulars of the associated company are:
Company Principal activitiesBusiness
carried on inCost of
investmentPercentage of
equity interest held
2010 2011 2012 2010 2011 2012
$ $ $
Gaylin-SWGOffshore Pte.Ltd.(Singapore)
Provide engineering,fabrication, constructionand mobilisation service to offshore industry
Singapore – – – – – –
The associated company, Gaylin-SWG Offshore Pte. Ltd. has been struck off the Register of Business on 15 January 2010.
12 AVAILABLE-FOR-SALE INVESTMENT
2010 2011 2012
$ $ $
Quoted debt securities, at fair value 515,000 – –
The quoted debt securities relate to non-convertible preference shares issued by a local fi nancial institution.
The fair value of the available-for-sale fi nancial asset is determined based on the quoted closing market price on the last market day of the fi nancial year. The debt securities were disposed in 2011.
A-32
13 TRADE PAYABLES
2010 2011 2012
$ $ $
Outside parties 15,549,251 12,640,913 9,895,703
Due to a company which
the directors have interest in (Note 5) 1,258,375 1,300,558 –
16,807,626 13,941,471 9,895,703
The average credit period of trade payables is 30 days to 90 days (2011 and 2010 : 30 days to 90 days). No interest is charged on the outstanding balances.
14 OTHER PAYABLES
2010 2011 2012
$ $ $
Outside parties 658,100 196,490 349,187
Due to immediate holding company (Note 5) – 10,750,000 –
of the immediate holding company (Note 5) 80,140 – –
Amount owing to directors (Note 5) 120,211 2,000 –
1,058,876 11,265,694 502,901
Amounts payable to directors and shareholders are unsecured, repayable on demand and interest free.
Amounts due to the immediate holding company related to a loan from Keh Swee Investment Pte Ltd for the purpose of the Restructuring Exercise and for working capital purposes. The loan was unsecured, repayable on demand and interest free and was repaid in full in 2012.
15 BANK BORROWINGS
2010 2011 2012
$ $ $
Bank overdraft 3,994,462 3,767,628 –
Term loan I 1,721,423 1,577,423 1,426,055
Term loan II 73,510 – –
Term loan III 2,948,407 1,627,473 239,044
Term loan IV – 733,073 537,357
Term loan V – – 9,667,070
Term loan VI – – 20,000,000
Money market loan – 3,000,000 3,000,000
Time loans – – 4,000,000
Bank bills payable 33,091,406 19,253,095 28,986,944
41,829,208 29,958,692 67,856,470
Due within 12 months (38,582,436) (27,761,271) (47,163,495)
Due after 12 months 3,246,772 2,197,421 20,692,975
A-33
The average effective interest rates paid were as follows:
2010 2011 2012
Bank overdraft 5.3% 5.6% 5.0%
Term loans 5.0% 4.7% 2.4%
Money market loan – 2.9% 2.8%
Time loans – – 2.1%
Bank bills payable 3.2% 4.3% 2.8%
Bank overdraft
The bank overdrafts of the Group are secured in the following manner:
2010 2011 2012
$ $ $
Category 1 2,472,731 2,334,029 –
Category 2 1,521,731 1,433,599 –
Total bank overdrafts 3,994,462 3,767,628 –
The bank overdraft facility classifi ed as category 1 is repayable on demand and is secured by a legal mortgage over the Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore 628948 and 7 Gul Avenue, Singapore 629651. It is also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe. The bank overdraft facilities classifi ed as category 2 are guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
Interest is levied at 0% to 1.5% (2011 : 0% to 1.5%; 2010 : 0.5% to 1.8%) per annum above prime rate, calculated on daily balances with monthly resets.
Term loans
For term loan I, interest is fi xed at 4.0% per annum for the fi rst two years and thereafter at the bank’s prime rate per annum with monthly resets. The 15-year term loan is repayable by equal monthly instalments and is expected to mature in November 2019.
For term loan II, interest was levied at the bank’s prime rate with monthly resets. The 5 year term loan was repayable by equal monthly instalments and matured in November 2010.
For term loan III, interest is levied at 5.0% fi xed per annum. The 3 year Bridging Loan is repayable by equal monthly instalments and is expected to mature in May 2012.
For term loan IV, interest is levied at 1.7% and 1.5% in the fi rst and second year respectively below the bank’s commercial fi nancing rate and thereafter at 0.8% over the bank’s commercial fi nancing rate per annum. The 5 year term loan is repayable by equal monthly instalments and is expected to mature in September 2014.
For term loan V, interest is levied at 1.8% above bank’s commercial fi nancing rate per annum. The 15 year term loan is repayable by equal monthly instalments and is expected to mature in August 2026.
The term loans I, II, IV and V of the Group are secured by a legal mortgage over the Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore 628948 and 7 Gul Avenue, Singapore 629651. The term loans I to V of the Group are also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
For term loan V, it is also guaranteed by a corporate guarantee by the company.
A-34
For term loan VI, interest is levied at 2% per annum above bank’s commercial fi nancing rate. The term loan is to be repaid by yearly principal instalments beginning from $10,000,000 in October 2012, $5,000,000 in October 2013 and $5,000,000 in October 2014.
Term loan VI is secured by a fl oating charge over certain inventories of the Group and a corporate guarantee by GIPL. It is also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
Money market loan
The money market loan is secured by a legal mortgage over the Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore 628948 and 7 Gul Avenue, Singapore 629651. It is also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe.
The money market loan bears interest at 2.3% (2011 : 2.3%) per annum above the bank’s swap offer rate and is expected to mature within the next 12 months.
Time loans
The time loans are guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo, a shareholder of the immediate holding company.
The time loans bear interest at average rate of 2.1% and are expected to mature within the next 12 months.
The estimated fair values of the term loans, money market loan and time loans approximate their carrying values as the loans are expected to be repriced on a timely basis depending on movements in the market lending rates.
Bank bills payable
The bank bills payable of the Group, with maturity ranging from approximately 1 to 6 months (2011 and 2010 : 1 to 6 months) from the end of the fi nancial year, are secured in the following manner:
2010 2011 2012
$ $ $
Category 1 12,552,768 4,657,909 10,552,473
Category 2 20,538,638 13,671,518 15,389,661
Category 3 – 923,668 3,044,810
Total bank bills payable 33,091,406 19,253,095 28,986,944
The bank bills payable classifi ed as category 1 are secured by a legal mortgage over the Group’s leasehold land and buildings at 17 Joo Koon Way, Singapore 628948 and 7 Gul Avenue, Singapore 629651. It is also guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe. The bank bills payable classifi ed as Category 2 is guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng and Mr Teo Bee Hoe. The bank bills payable classifi ed as category 3 are guaranteed by the joint and several personal guarantees of Mr Desmond Teo, Mr Teo Bee Kheng, Mr Teo Bee Hoe and Mr Steven Teo.
Interest is levied at the bank’s cost of funds at 1.9% to 6% (2011 : 1.7% to 7.0%; 2010 : 2.5% to 7.0%) per annum for local currency bills and at 3.5% (2011 : 1.8%; 2010 : Nil%) per annum for foreign currency bills.
A-35
16 FINANCE LEASES
Minimum lease paymentsPresent value of
minimum lease payments
2010 2011 2012 2010 2011 2012
$ $ $ $ $ $
Amounts payable under fi nance leases:
Within one year 1,055,270 853,667 1,037,923 896,259 750,222 936,787
In the second to fi fth years inclusive 2,581,767 1,707,984 1,724,783 2,317,175 1,572,888 1,627,582
After fi ve years 286,742 84,239 – 270,889 81,823 –
Present value of lease obligations 3,484,323 2,404,933 2,564,369 3,484,323 2,404,933 2,564,369
Less: Amount due for settlement within 12 months (shown under current liabilities) (896,259) (750,222) (936,787)
Amount due for settlement after 12 months 2,588,064 1,654,711 1,627,582
The effective interest rate ranged from 3.7% to 13.1% (2011 : 4.4% to 13.1%; 2010 : 4.4% to 7.5%) per annum, with a remaining lease term of approximately 2 months to 5 years (2011 : 3 months to 6 years; 2010 : 2 months to 7 years). Interest rates are fi xed at the contract date, and thus expose the Group to fair value interest rate risk.
The carrying amount of the hire purchase obligations approximates their fair values which are determined using discounted cash fl ows analysis based on average incremental market lending rates.
The Group’s obligations under fi nance leases are secured by the lessor’s title to the leased assets (Note 10). Certain leases are guaranteed by joint and several personal guarantees of one or more directors of the Company and a certain lease is also guaranteed by a shareholder of the immediate holding company.
17 DEFERRED TAX LIABILITY
The following is the deferred tax liability recognised by the Group, and the movements thereon, during the Relevant Periods:
Accelerated
tax depreciation
$
At 1 April 2009 131,449
Credited to profi t or loss (9,384)
At 31 March 2010 122,065
Credited to profi t or loss (51)
At 31 March 2011 122,014
Charged to profi t or loss 7,153
At 31 March 2012 129,167
A-36
18 SHARE CAPITAL
Group and Company
2010 2011 2012 2010 2011 2012
Number of ordinary shares $ $ $
Issued and paid-up:
At beginning of year 5,000,000 5,000,001 1 5,000,000 5,000,001 1
Issue of shares of the
Company on incorporation 1 – – 1 – –
Adjustment pursuant to the Restructuring Exercise – (5,000,000) – – (5,000,000) –
Issue of shares – – 2,999,999 – – 2,999,999
At end of year 5,000,001 1 3,000,000 5,000,001 1 3,000,000
Fully paid ordinary shares which have no par value, carry one vote per share and carry a right to dividends as and when declared by the Company.
The Company was incorporated on 25 February 2010 with a share capital of $1. Accordingly, the
share capital as at 31 March 2010 represents the share of the paid up capital of the Company and its subsidiary. As part of the Restructuring Exercise, the share capital of the Group is then adjusted in 2011 to present the issued capital of the Company.
During the fi nancial year ended 31 March 2012, the Company issued 2,999,999 ordinary shares at $1 each to the immediate holding company for cash.
19 REVENUE
Revenue comprises income earned from the following, excluding applicable goods and services tax.
2010 2011 2012
$ $ $
Supply and manufacture of rigging & lifting equipment and provision of related services 65,414,244 67,602,409 68,923,704
Ship supplies 3,203,941 2,516,111 2,523,403
68,618,185 70,118,520 71,447,107
20 OTHER INCOME
2010 2011 2012
$ $ $
Interest income 25,847 1,449 1,472
Doubtful debts recovered (trade) – 73,315 18,810
Jobs credit grant received 155,958 11,737 –
Trade payables written back 71,709 – 43,149
Sundry income 39,682 13,222 61,438
Gain on disposal of property, plant and equipment 138,236 71,557 350,146
Gain on disposal of available-for-sale investment – 16,158 –
Foreign exchange gain, net 663,450 219,319 –
Others 39,187 – –
1,134,069 406,757 475,015
A-37
21 OTHER OPERATING EXPENSES
2010 2011 2012
$ $ $
Trade receivables written off 107,187 1,827 11,540
Other receivables written off 128,937 1,500 919
Allowance for doubtful trade receivables 213,528 35,756 –
Foreign exchange losses, net – – 199,089
449,652 39,083 211,548
22 INCOME TAX EXPENSE
2010 2011 2012
$ $ $
Current year 1,579,138 2,925,352 2,518,377
Underprovision in prior years 32,173 570 137,368
Deferred tax (Note 17) (9,384) (51) 7,153
1,601,927 2,925,871 2,662,898
Domestic income tax is calculated at 17% (2011 and 2010 : 17%) of the estimated assessable profi t for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
A reconciliation of the of the domestic statutory tax rate to the Group’s effective tax rate applicable to the results from operations for the year is as follows:
2010 2011 2012
$ $ $
Profi t before income tax 8,471,896 16,310,997 15,633,416
Tax at the domestic income tax rate of 17% 1,440,222 2,772,869 2,657,681
Effect of different tax rate of overseas operations (12,831) (11,813) 11,711
Deferred tax benefi ts not recognised 26,890 25,079 61,887
Utilised loss carryforward – – (37,550)
Underprovision in prior years 32,173 570 137,368
Others (29,214) 226 (46,035)
1,601,927 2,925,871 2,662,898
The tax loss carryforwards mainly arise from a foreign subsidiary of the Group which has tax losses amounting to approximately $223,155 (2011 : $373,993; 2010 : $300,532) available for offsetting against future taxable income.
A-38
The total tax loss carryforwards of the foreign subsidiary for the year can be reconciled as follows:
Tax losscarryforwardsnot recognised
$
At 1 April 2009 178,373
Arising during the year 122,159
At 31 March 2010 300,532
Arising during the year 73,461
At 31 March 2011 373,993
Utilised during the year (150,838)
At 31 March 2012 223,155
The realisation of the future income tax benefi ts from these tax loss carryforwards is available for a maximum of fi ve years subject to agreement with the Inland Revenue Board of the country in which the foreign subsidiary company operates. Future tax benefi ts arising from these tax loss carryforwards have not been recognised in the combined fi nancial statements as there is no reasonable certainty of their recovery in future periods.
- paid to auditors of the company 23,000 65,000 80,000
- paid to other auditors 2,992 10,554 2,627
Total audit fees 25,992 75,554 82,627
Non-audit fees:
- paid to auditors of the company 8,610 – 101,500
- paid to other auditors – – –
Total non-audit fees 8,610 – 101,500
Aggregate amount of fees paid to auditor 34,602 75,554 184,127
A-39
24 DIVIDENDS PAID
In 2010, a fi rst interim tax-exempt dividend of $0.10 per share (total dividend $500,000) and a second interim tax-exempt dividend of $0.617 per share (total dividend $3,085,000) have been declared and paid by the subsidiary, GIPL.
In 2012, the Company declared a fi rst interim tax-exempt dividend of $1.10 per share (total dividend $3,300,000), a second interim tax-exempt dividend of $6.67 per share (total dividend $20,000,000) and a third interim tax-exempt dividend of $0.67 per share (total dividend $2,000,000) were paid to the shareholders of the Company.
25 ACQUISITION OF SUBSIDIARY
On 30 September 2011, the Group acquired 100% of the issued share capital of Bridge Testing for a cash consideration of $81,841. This transaction has been accounted for by the acquisition method of accounting and fair values of assets and liabilities have been disclosed below.
The results of Bridge Testing acquired during the year are included in the combined statement of comprehensive income from the effective date of acquisition.
2011
$
Cash and cash equivalents 6,969
Trade receivables 79,960
Other receivables 180
Trade and other payables (3,852)
Income tax payable (1,416)
81,841
Consideration transferred 81,841
Less: cash and cash equivalents acquired (6,969)
Net cash outfl ow on acquisition of subsidiary 74,872
Included in the profi t for the year are expenses amounting to $12,580 attributable to the subsidiary acquired. Revenue for the period from the subsidiary amounted to zero after eliminating for intercompany sales.
Had the business combination during the year been effected at 1 April 2011, the revenue of the Group would have been unchanged and the profi t for the year would have been $12,963,356.
26 EARNINGS PER SHARE
Earnings per share for the Relevant Periods have been calculated based on the profi t attributable to the owners of the Group of $12,970,518 (2011 : $13,385,126; 2010 : $6,869,969) and pre-Offering share capital of 300,000,000 shares on the basis that the pre-Offering share capital was in place since 1 April 2009.
A-40
27 SEGMENT INFORMATION
The Group operates and manages its business primarily as a single operating segment in the supply and manufacture of rigging and lifting equipment and provision of related services. The Group’s chief operating decision maker reviews the combined results prepared based on Group’s accounting policy when making decisions, including the allocation of resources and assessment of performance of the Group.
The accounting policies of the reportable segments are the same as the Group’s accounting policies.
Geographical information
The Group operates mainly in the geographical areas of Singapore, Malaysia, Asia (including Vietnam), Europe and Others. The Group’s revenue from external customers and information about its segment assets (non-current assets excluding available-for-sale investment) by geographical location are detailed below:
2010 2011 2012
$ $ $
Revenue from external customers (based on location of customer)
Singapore 36,084,872 33,759,356 37,079,550
Malaysia 5,681,928 7,413,617 5,634,884
Asia (1) 6,177,851 5,772,518 9,935,374
Europe (1) 10,865,281 13,036,756 9,170,491
Others (1) 9,808,253 10,136,273 9,626,808
68,618,185 70,118,520 71,447,107
Non-current assets(based on location of assets)
Singapore 10,031,307 7,472,584 8,456,610
Asia 322,419 231,313 419,236
10,353,726 7,703,897 8,875,846
(1) Revenue from countries in “Asia”, “Europe” and “Others” include revenue from customers in countries that individually account for less than 10% of the Group’s revenue.
Information about major customers
There are no revenues from transactions with any single external customer that amounts to 10 per cent or more of the Group’s revenue.
28 COMMITMENTS
(a) Capital commitments
2010 2011 2012
$ $ $
Commitment for the development of computer software 145,800 – –
Commitment for the addition and the alteration to leasehold property 95,300 – –
Commitment for the development of factory – – 372,813
241,100 – 372,813
A-41
(b) Operating lease commitments
2010 2011 2012
$ $ $
Minimum lease payments under non-cancellable operating leases recognised as an expense in the year 471,606 656,632 659,383
At the end of the reporting period, the Group has outstanding commitments under non-cancellable operating leases which fall due as follows:
2010 2011 2012
$ $ $
Within 1 year 624,662 484,914 691,803
Within 2 to 5 years 1,585,281 1,625,572 1,735,429
After 5 years 4,519,771 5,871,537 5,715,785
6,729,714 7,982,023 8,143,017
Operating lease payments represent rentals payable by the Group for rental of land, offi ce space, warehouse and dormitory. These leases have varying terms and are subject to revisions to refl ect current market rental and value. The operating lease commitments estimated above were determined assuming the same rental expense fi xed as at end of the reporting period till the end of the lease.
(c) Other commitments
As at 31 March 2012, the Group had commitments amounting to $1,004,666 (2011 : $598,842; 2010 : $1,977,474) in respect of letters of credit. These commitments were secured in the manner similar to bank borrowings (Note 15).
29 SUBSEQUENT EVENTS
At an Extraordinary General Meeting held on 24 September 2012, the Shareholders approved, inter alia, the following:
(a) the sub-division of each Share in the existing issued share capital of the Company into 100 Shares;
(b) conversion of the Company into a public limited company and the change of the name to “Gaylin Holdings Limited”;
(c) the adoption of the new Articles;
(d) the issue of the New Shares which are the subject of the Offering. The New Shares, when allotted, issued and fully paid-up, will rank pari passu in all respects with the existing issued Shares in the capital of the Company;
(e) the adoption of the Gaylin Employee Share Option Scheme (the “ESOS”), and the authorisation of the Directors, pursuant to Section 161 of the Companies Act, to allot and issue Shares upon the exercise of Options granted under the ESOS and that authority be given to the Directors to grant Options at a discount up to a maximum discount of 20.0% to the market price; and
A-42
(f) that authority be given to the Directors, pursuant to Section 161 of the Companies Act, to:
(i) allot and issue Shares whether by way of rights, bonus or otherwise (including Shares as may be issued pursuant to any Instrument (as defi ned below) made or granted by the Directors while this resolution is in force notwithstanding that the authority conferred by this resolution may have ceased to be in force at the time of issue of such Shares); and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue (as well as adjustments to) of warrants, debentures or other instruments convertible into Shares, at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fi t,
Provided that the aggregate number of Shares issued pursuant to such authority (including Shares issued pursuant to any Instrument), shall not exceed 50.0% of the Post-Offering Issued Share Capital, and provided further that the aggregate number of such Shares to be offered other than on a pro rata basis in pursuance to such authority (including Shares issued pursuant to any Instrument) to the existing Shareholders shall not exceed 20.0% of the Post-Offering Issued Share Capital (as defi ned below).
Unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, except that the Directors shall be authorised to allot and issue Shares pursuant to any Instrument notwithstanding that such authority has ceased.
For the purposes of this resolution, the “Post-Offering Issued Share Capital” shall mean the enlarged issued share capital of the Company (excluding treasury shares, as applicable) immediately after the Offering, after adjusting for: (i) new Shares arising from the conversion or exercise of any convertible securities; (ii) new Shares arising from exercising share options, provided the options were granted in compliance with the Listing Manual; and (iii) any subsequent bonus issue, consolidation or sub-division of Shares.
At an Extraordinary General Meeting held on 15 October 2012, the Shareholders approved the allotment and issue of 110,000,000 New Shares and up to 22,000,000 Additional Shares; such New Shares and Additional Shares when allotted, issued and fully paid-up, shall rank pari passu in all respects with the existing issued Shares.
A-43
STATEMENT OF DIRECTORS
In the opinion of the directors, the accompanying combined fi nancial statements as set out on pages A-3 to A-42 are drawn up so as to give a true and fair view of the state of affairs of the Group as at 31 March 2010, 2011 and 2012, and of the results, changes in equity and cash fl ows of the Group for the years ended 31 March 2010, 2011 and 2012 and at the date of this statement, there are reasonable grounds to believe that the Group will be able to pay its debts when they fall due.
ON BEHALF OF THE DIRECTORS
Desmond Teo
Teo Bee Kheng
17 October 2012
B-1
APPENDIX B
SUMMARY OF SELECTED ARTICLES OF ASSOCIATION OF OUR COMPANY
The discussion below provides a summary of the principal objects of our Company as set out in our Memorandum of Association and certain provisions of our Articles of Association and the laws of Singapore. This discussion is only a summary and is qualifi ed by reference to Singapore law and our Memorandum and Articles of Association.
Memorandum of Association and Registration Number
We are registered in Singapore with the Accounting and Corporate Regulatory Authority of Singapore. Our company registration number is 201004068M. Our Memorandum of Association provides that our Company has full capacity, rights, powers and privileges to carry on or undertake any business or activity, do any act or enter into any transaction.
Summary of our Articles Of Association
Directors
(a) Ability of interested directors to vote
Every Director shall observe the provisions of Section 156 of the Companies Act relating to the disclosure of the interests of our Directors in contracts or proposed contracts with our Company or of any offi ce or property held by a Director which might create duties or interests in confl ict with his duties or interests as a Director. Notwithstanding such disclosure, a Director shall not vote in regard to any contract or proposed contract or arrangement in which he has directly or indirectly a personal material interest although he shall be taken into account in ascertaining whether a quorum is present.
(b) Remuneration
The remuneration in the case of a Director other than an Executive Director shall comprise: (i) fees which shall be a fi xed sum and/or (ii) such fi xed number of shares in the capital of our Company, and shall not at any time be by commission on, or percentage of, the profi ts or turnover, and no Director whether an Executive Director or otherwise shall be remunerated by a commission on, or percentage of turnover.
Any Director who is appointed to any executive offi ce or serves on any committee or who otherwise performs or renders services, which in the opinion of our Directors are outside his ordinary duties as a Director, may, subject to Section 169 of the Companies Act, be paid such extra remuneration as our Directors may determine.
Our Directors may procure the establishment and maintenance of or participate in or contribute to any non-contributory or contributory pension or superannuation fund or life assurance scheme or any other scheme whatsoever for the benefi t of and pay, provide for or procure the grant of donations, gratuities, pensions, allowances, benefi ts or emoluments to any persons (including Directors and Executive Offi cers) who are or shall have been at any time in the employment or service of our Company or of the predecessors in business of our Company or of any subsidiary company, and the wives, widows, families or dependants of any such persons. Our Directors may also procure the establishment and subsidy of, or subscription and support to, any institutions, associations, clubs, funds or trusts calculated to be for the benefi t of any such persons as aforesaid or otherwise to advance the interests and well-being of our Company or of any such other company as aforesaid or of our members and payment for or towards the insurance of any such persons as aforesaid, and subscriptions or guarantees of money for charitable or benevolent objects or for any exhibition or for any public, general or useful object.
B-2
(c) Borrowing
Our Directors may at their discretion exercise every borrowing power vested in our Company by our Memorandum of Association or permitted by law and may borrow or raise money from time to time for the benefi t of our Company and secure the payment of such sums by mortgage, charge or hypothecation of all or any of the property or assets of our Company including any uncalled or called but unpaid capital or by the issue of debentures or otherwise as they may think fi t.
(d) Retirement Age Limit
There is no retirement age limit for Directors under our Articles of Association. Section 153(1) of the Companies Act however, provides that no person of or over the age of 70 years shall be appointed a director of a public company, unless he is appointed or re-appointed as a director of the company or authorised to continue in offi ce as a director of the company by way of an ordinary resolution passed at an annual general meeting of the company.
(e) Shareholding Qualifi cation
There is no shareholding qualifi cation for Directors in the Memorandum and Articles of Association of our Company.
Share rights and restrictions
Our Company currently has one (1) class of shares, namely, ordinary shares. Only persons who are registered on our register of members and in cases in which the person so registered is CDP, the persons named as the depositors in the depository register maintained by CDP for the ordinary shares, are recognised as our shareholders.
(a) Dividends and distribution
We may, by ordinary resolution of our shareholders, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Board of Directors. We must pay all dividends out of our profi ts. All dividends are paid pro rata amongst our shareholders in proportion to the amount paid up on each shareholder’s ordinary shares, unless the rights attaching to an issue of any ordinary share provide otherwise. Unless otherwise directed, dividends are paid by check or warrant sent through the post to each shareholder at his registered address. Notwithstanding the foregoing, the payment by us to CDP of any dividend payable to a shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge us from any liability to that shareholder in respect of that payment.
The payment by our Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute our Company a trustee in respect thereof. All dividends unclaimed after being declared may be invested or otherwise made use of by our Directors for the benefi t of our Company and any dividend unclaimed after a period of six (6) years from the date of declaration of such dividend may be forfeited and if so shall revert to our Company. However, our Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture. If the Depository returns any such dividend or moneys to our Company, the relevant Depositor shall not have any right or claim in respect of such dividend or moneys against our Company if a period of six (6) years has elapsed from the date of the declaration of such dividend or the date on which such other moneys are fi rst payable. For the avoidance of doubt no member shall be entitled to any interest, share of revenue or other benefi t arising from any unclaimed dividends, howsoever and whatsoever.
Our Directors may retain any dividends or other moneys payable on or in respect of a share on which our Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.
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(b) Voting rights
A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting, in person or by proxy. Proxies need not be a shareholder. A person who holds ordinary shares through the SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting. Except as otherwise provided in our Articles of Association, two (2)or more shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under our Articles of Association, on a show of hands, every shareholder present in person and by proxy shall have one (1) vote, and on a poll, every shareholder present in person or by proxy shall have one (1) vote for each ordinary share which he holds or represents. A poll may be demanded in certain circumstances, including by the Chairman of the meeting or by any shareholder present in person or by proxy and representing not less than one-tenth of the total voting rights of all shareholders having the right to attend and vote at the meeting or by any two (2)shareholders present in person or by proxy and entitled to vote. In the case of a tie vote, whether on a show of hands or a poll, the Chairman of the meeting shall be entitled to a casting vote.
Change in capital
Changes in the capital structure of our Company (for example, an increase, consolidation, cancellation, sub-division or conversion of our share capital) require shareholders to pass an ordinary resolution. Ordinary resolutions generally require at least 14 clear days’ notice in writing. The notice must be given to each of our shareholders who have supplied us with an address in Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting. Our Company may reduce its share capital or any undistributable reserve in any manner, subject to any requirements and consents required by law.
Variation of rights of existing shares or classes of shares
If at any time the share capital is divided into different classes, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Companies Act, whether or not our Company is being wound up, be varied or abrogated either with the consent in writing of the holders of three-quarters of the issued shares of the class or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the class and to every such special resolution the provisions of Section 184 of the Companies Act shall with such adaptations as are necessary apply. To every such separate general meeting, the provisions of these Articles relating to general meetings shall mutatis mutandis apply.
Provided always that:
(a) the necessary quorum shall be two (2) persons at least holding or representing by proxy or by attorney one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy or by attorney may demand a poll, but where the necessary majority for such a special resolution is not obtained at the meeting, consent in writing if obtained from the holders of three-fourths of the issued shares of the class concerned within two (2) months of the meeting shall be as valid and effectual as a special resolution carried at the meeting; and
(b) where all the issued shares of the class are held by one (1) person, the necessary quorum shall be one (1) person and such holder of shares of the class present in person or by proxy or by attorney may demand a poll.
The repayment of preference capital other than redeemable preference capital or any other alteration of preference shareholders’ rights may only be made pursuant to a special resolution of the preference shareholders concerned, Provided Always That where the necessary majority for such a special resolution is not obtained at a meeting, consent in writing if obtained from the holders of three-fourths of the preference shares concerned within two (2) months of the meeting, shall be as valid and effectual as a special resolution carried at the meeting.
Limitations on foreign or non-resident shareholders
There are no limitations imposed by Singapore law or by our Articles of Association on the rights of our shareholders who are regarded as non-residents of Singapore, to hold or vote their shares.
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APPENDIX C
RULES OF THE GAYLIN EMPLOYEE SHARE OPTION SCHEME
1. NAME OF THE ESOS
The ESOS shall be called the “Gaylin Employee Share Option Scheme’’.
2. DEFINITIONS
2.1 In the ESOS, unless the context otherwise requires, the following words and expressions shall have the following meanings:
“Act” The Companies Act, Chapter 50 of Singapore as amended, modifi ed or supplemented from time to time;
“Articles” The Articles of Association of the Company, as amended from time to
time; “Auditors” The auditors of the Company for the time being; “Board” The board of directors of the Company; “CDP” The Central Depository (Pte) Limited; “Committee” The remuneration committee of the Company, or such other committee
comprising directors of the Company duly authorised and appointed by the Board to administer this ESOS;
“Company” Gaylin Holdings Limited; “control” The capacity to dominate decision-making, directly or indirectly, in
relation to the fi nancial and operating policies of the Company; “Controlling A person who: Shareholder” (a) has an interest in the voting shares of the Company and who
exercises control over the Company; or
(b) has an interest of 15.0% or more of the aggregate voting shares in the Company, unless he does not exercise control over the Company;
“CPF” Central Provident Fund; “Date of Grant” In relation to an Option, the date on which the Option is granted to a
Participant pursuant to Rule 7; “Director” A person holding offi ce as a director for the time being of the Company
and/or its Subsidiaries, as the case may be; “ESOS” The Gaylin Employee Share Option Scheme, as the same may be
modifi ed or altered from time to time; “Executive Director” A director of the Company and/or its Subsidiaries, as the case may be,
who performs an executive function within the Company or the relevant Subsidiary, as the case may be;
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“Exercise Price” The price at which a Participant shall subscribe for each Share upon the exercise of an Option which shall be the price as determined in accordance with Rule 9, as adjusted in accordance with Rule 10;
“Grantee” A person to whom an offer of an Option is made; “Group” The Company and its Subsidiaries; “Group Employee” Any confi rmed employee of the Group (including any Executive Director)
selected by the Committee to participate in the ESOS in accordance with Rule 4;
“Market Day” A day on which the SGX-ST is open for trading in securities; “Market Price” A price equal to the average of the last dealt prices for the Shares on the
SGX-ST over the fi ve consecutive Trading Days immediately preceding the Date of Grant of that Option, as determined by the Committee by reference to the daily offi cial list or any other publication published by the SGX-ST, rounded to the nearest whole cent in the event of fractional prices;
“Non-Executive A director of the Company and/or its Subsidiaries, as the case may be, Director” other than an Executive Director but including the independent Directors
of the Company; “Offer Date” The date on which an offer to grant an Option is made pursuant to the
ESOS; “Offeree” The person to whom an offer of an Option is made; “Option” The right to subscribe for Shares granted or to be granted to a Group
Employee pursuant to the ESOS and for the time being subsisting; “Participant” The holder of an Option; “Record Date” The date as at the close of business on which the Shareholders must be
registered in order to participate in any dividends, rights, allotments or other distributions;
“Rules” Rules of the Gaylin Employee Share Option Scheme; “S$” Singapore Dollars; “Securities Account” The securities account maintained by a Depositor with CDP; “Shareholders” Registered holders of Shares, except where the registered holder is
CDP, the term “Shareholders” shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares;
“Shares” Ordinary shares in the capital of the Company; “Subsidiaries” Companies which are for the time being subsidiaries of the Company as
defi ned by Section 5 of the Act; and “Subsidiary” means each of them; “SGX-ST” Singapore Exchange Securities Trading Limited; “Trading Day” A day on which the Shares are traded on the SGX-ST; and
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2.2 The term “Depositor”, “Depository Register” and “Depository Agent” shall have the meanings ascribed to it by Section 130A of the Act and the term “associate” shall have the meaning ascribed to it by the Listing Manual or any other publication prescribing rules or regulations for corporations admitted to the Offi cial List of the SGX-ST (as modifi ed, supplemented or amended from time to time).
2.3 Words importing the singular number shall, where applicable, include the plural number and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter gender.
2.4 Any reference to a time of a day in the ESOS is a reference to Singapore time.
2.5 Any reference in the ESOS to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defi ned under the Companies Act or any statutory modifi cation thereof and used in the ESOS shall have the meaning assigned to it under the Companies Act.
3. OBJECTIVES OF THE ESOS
The ESOS will provide an opportunity for Group Employees who have contributed signifi cantly to the growth and performance of the Group (including Executive and Non-Executive Directors) and who satisfy the eligibility criteria as set out in Rule 4 of the ESOS, to participate in the equity of the Company.
The ESOS is primarily a share incentive scheme. It recognises the fact that the services of such Group Employees are important to the success and continued well-being of the Group. Implementation of the ESOS will enable the Company to give recognition to the contributions made by such Group Employees. At the same time, it will give such Group Employees an opportunity to have a direct interest in the Company at no direct cost to its profi tability and will also help to achieve the following positive objectives:
(a) the motivation of each Participant to optimise his performance standards and effi ciency and to maintain a high level of contribution to the Group;
(b) the retention of key employees and Executive Directors of the Group whose contributions are essential to the long-term growth and profi tability of the Group;
(c) to instill loyalty to, and a stronger identifi cation by the Participants with the long-term prosperity of, the Company;
(d) to attract potential employees with relevant skills to contribute to the Group and to create value for the Shareholders; and
(e) to align the interests of the Participants with the interests of the Shareholders.
4. ELIGIBILITY
4.1 Confi rmed Group Employees (including Executive and Non-Executive Directors) who have attained the age of 21 years on or prior to the relevant Offer Date and are not undischarged bankrupts and have not entered into a composition with their respective creditors, shall be eligible to participate in the ESOS at the absolute discretion of the Committee.
4.2 Confi rmed Group Employees (including Executive and Non-Executive Directors) who are also Controlling Shareholders or associates of a Controlling Shareholder shall also be eligible to participate in the ESOS, provided that the terms of each grant under the ESOS to such eligible Controlling Shareholders or associates of a Controlling Shareholder shall be approved by the independent Shareholders in a separate resolution.
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4.3 The participation of such eligible Controlling Shareholders or associates of a Controlling Shareholder is subject to the following:
(1) the aggregate of the number of Shares comprised in Options granted to Controlling Shareholders or associate(s) of a Controlling Shareholders under the ESOS shall not exceed 25.0% of the aggregate of the total number of Shares (comprised in Options) which may be granted under the ESOS; and
(2) the aggregate of the number of Shares in respect of Options granted to each Controlling Shareholder or associate(s) of a Controlling Shareholder shall not exceed ten per cent.(10.0%) of the total number of Shares (comprised in Options) which may be granted under the ESOS.
In addition, Controlling Shareholders or their associates shall not participate in the ESOS unless:
(3) written justification have been provided to Shareholders for their participation at the introduction of the ESOS or prior to the fi rst grant of Options to them;
(4) the actual number and terms of any Options to be granted to them have been specifi cally approved by independent Shareholders who are not recipients of the Options in a general meeting in separate resolutions for each such Controlling Shareholder or his associates; and
(5) all conditions for their participation in the ESOS as may be required by the regulation of the SGX-ST from time to time are satisfi ed.
4.4 There will be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented by any other companies within the Group.
4.5 Subject to the Act and any requirement of the SGX-ST, the terms of eligibility for participation in the ESOS may be amended from time to time at the absolute discretion of the Committee, which would be exercised judiciously.
5. MAXIMUM ENTITLEMENT
Subject to RuIe 4 and Rule 10, the aggregate number of Shares in respect of which Options may be offered to a Grantee for subscription in accordance with the ESOS shall be determined at the discretion of the Committee who shall take into account criteria such as rank, past performance, years of service and potential development of the Participant.
6. LIMITATION ON SIZE OF THE ESOS
The aggregate nominal amount of Shares over which the Committee may grant Options on any date, when added to the nominal amount of Shares issued and issuable in respect of all Options granted under the ESOS shall not exceed 15.0% of the issued share capital of the Company on the day immediately preceding the Offer Date of the Option.
7. OFFER DATE
7.1 The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to such Grantees as it may select in its absolute discretion at any time during the period when the ESOS is in force, except that no Option shall be granted during the period of 30 days immediately preceding the date of announcement of the Company’s interim and/or fi nal results (whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made on or after the second Market Day on which such announcement is released.
7.2 An offer to grant the Option to a Grantee shall be made by way of a letter (the “Letter of Offer’’) in the form or substantially in the form set out in Schedule A, subject to such amendments as the Committee may determine from time to time.
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8. ACCEPTANCE OF OFFER
8.1 An Option offered to a Grantee pursuant to Rule 7 may only be accepted by the Grantee within thirty 30 days after the relevant Offer Date and not later than 5.00 p.m. on the 30th day from such Offer Date (a) by completing, signing and returning to the Company the Acceptance Form in or substantially in the form set out in Schedule B, subject to such modifi cation as the Committee may from time to time determine, accompanied by payment of S$1.00 as consideration and (b) if, at the date on which the Company receives from the Grantee the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate in the ESOS in accordance with these Rules.
8.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 8, such offer shall, upon the expiry of the 30 day period, automatically lapse and shall forthwith be deemed to be null and void and be of no effect.
8.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option made pursuant to this Rule 8 or Exercise Notice given pursuant to Rule 12 which does not strictly comply with the terms of the ESOS.
8.4 Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever without the Committee’s prior written approval, but may be exercised by the Grantee’s duly appointed personal representative as provided in Rule 11.6 in the event of the death of such Grantee.
8.5 The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is accepted, the Grantee shall accept the offer in multiples of 1,000 Shares.
8.6 In the event that a grant of an Option results in a contravention of any applicable law or regulation, such grant shall be null and void and be of no effect and the relevant Participant shall have no claim whatsoever against the Company.
8.7 Unless the Committee determines otherwise, an Option shall automatically lapse and become null, void and of no effect and shall not be capable of acceptance if:
(a) it is not accepted in the manner as provided in Rule 8.1 within the 30 day period; or
(b) the Grantee dies prior to his acceptance of the Option; or
(c) the Grantee is adjudicated a bankrupt or enters into composition with his creditors prior to his acceptance of the Option; or
(d) the Grantee being a Group Employee ceases to be in the employment of the Group or (being a Director) ceases to be a Director of the Company, in each case, for any reason whatsoever prior to his acceptance of the Option; or
(e) the Company is liquidated or wound-up prior to the Grantee’s acceptance of the Option.
9. EXERCISE PRICE
9.1 Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee, in its absolute discretion, on the Date of Grant, at:
(a) a price equal to the Market Price; or
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(b) a price which is set at a discount to the Market Price, provided that:
(i) the maximum discount shall not exceed 20.0% of the Market Price (or such other percentage or amount as may be determined by the Committee and permitted by the SGX-ST); and
(ii) the Shareholders in general meeting shall have authorised, in a separate resolution, the making of offers and grants of Options under the ESOS at a discount not exceeding the maximum discount as aforesaid.
9.2 In making any determination under Rule 9.1(b) on whether to give a discount and the quantum of such discount, the Committee shall be at liberty to take into consideration such criteria as the Committee may, at its absolute discretion, deem appropriate, including but not limited to:
(a) the performance of the Company and/or its Subsidiaries, as the case may be;
(b) the years of service and individual performance of the eligible Group Employee or Director;
(c) the contribution of the eligible Group Employee or Director to the success and development of the Company and/or the Group; and
(d) the prevailing market conditions.
10. ALTERATION OF CAPITAL
10.1 If a variation in the issued share capital of the Company (whether by way of a capitalisation of profi ts or reserves or rights issue or reduction (including any reduction arising by reason of the Company purchasing or acquiring its issued Shares), subdivision, consolidation or distribution, or otherwise howsoever) should take place, then:
(a) the Exercise Price in respect of the Shares, class and/or number of Shares comprised in the Options to the extent unexercised and the rights attached thereto; and/or
(b) the class and/or number of Shares in respect of which additional Options may be granted to Participants,
may, be adjusted in such manner as the Committee may determine to be appropriate including retrospective adjustments where such variation occurs after the date of exercise of an Option but the Record Date relating to such variation precedes such date of exercise and, except in relation to a capitalisation issue, upon the written confi rmation of the Auditors (acting only as experts and not as arbitrators), that in their opinion, such adjustment is fair and reasonable.
10.2 Notwithstanding the provisions of Rule 10.1 above, no such adjustment shall be made (a) if as a result, the Participant receives a benefi t that a Shareholder does not receive; and (b) unless the Committee after considering all relevant circumstances considers it equitable to do so.
10.3 The issue of securities as consideration for an acquisition of any assets by the Company will not be regarded as a circumstance requiring adjustment under the provisions of this Rule 10.
10.4 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shall not apply to the number of additional Shares or Options over additional Shares issued by virtue of any adjustment to the number of Shares and/or Options pursuant to this Rule 10.
10.5 Upon any adjustment required to be made, the Company shall notify each Participant (or his duly appointed personal representative(s)) in writing and deliver to him (or, where applicable, his duly appointed personal representative(s)) a statement setting forth the new Exercise Price thereafter in effect, class and/or number of Shares thereafter comprised in the Option so far as unexercised. Any adjustment shall take effect upon such written notifi cation being given.
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11. OPTION PERIOD
11.1 Options granted with the Exercise Price set at Market Price shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the fi rst anniversary of the Offer Date of that Option, provided always that the Options shall be exercised before the tenth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company.
11.2 Options granted with the Exercise Price set at a discount to Market Price shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the second anniversary from the Offer Date of that Option, provided always that the Options shall be exercised before the tenth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company.
11.3 An Option shall, to the extent unexercised, immediately lapse and become null and void and a Participant shall have no claim against the Company:
(a) subject to Rules 11.4, 11.5 and 11.6, upon the Participant ceasing to be in the employment of the Company or any of the companies within the Group for any reason whatsoever; or
(b) upon the bankruptcy of the Participant or the happening of any other event which result in his being deprived of the legal or benefi cial ownership of such Option; or
(c) in the event of misconduct on the part of the Participant, as determined by the Committee in its absolute discretion.
For the purpose of Rule 11.4(a), a Participant shall be deemed to have ceased to be so employed as of the date the notice of termination of employment is tendered by or is given to him, unless such notice shall be withdrawn prior to its effective date.
11.4 If a Participant ceases to be employed by the Group by reason of his:
(a) ill health, injury or disability, in each case, as certifi ed by a medical practitioner approved by the Committee;
(b) redundancy;
(c) retirement at or after a normal retirement age; or
(d) retirement before that age with the consent of the Committee,
or for any other reason approved in writing by the Committee, he may, at the absolute discretion of the Committee exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.
11.5 If a Participant ceases to be employed by a Subsidiary:
(a) by reason of the Subsidiary, by which he is principally employed ceasing to be a company within the Group or the undertaking or part of the undertaking of such Subsidiary, being transferred otherwise than to another company within the Group; or
(b) for any other reason, provided the Committee gives its consent in writing, he may, at the absolute discretion of the Committee, exercise any unexercised Options within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.
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11.6 If a Participant dies and at the date of his death holds any unexercised Option, such Option may, at the absolute discretion of the Committee, be exercised by the duly appointed legal personal representatives of the Participant within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.
11.7 If a Participant, who is also an Executive Director, ceases to be a Director for any reason whatsoever, he may, at the absolute discretion of the Committee, exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.
12. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES
12.1 An Option may be exercised, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice in writing to the Company in or substantially in the form set out in Schedule C (the “Exercise Notice”), subject to such amendments as the Committee may from time to time determine. Every Exercise Notice must be accompanied by a remittance for the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option, the relevant CDP charges (if any) and any other documentation the Committee may require. All payments shall be made by cheque, cashier’s order, bank draft or postal order made out in favour of the Company. An Option shall be deemed to be exercised upon the receipt by the Company of the abovementioned Notice duly completed and the receipt by the Company of the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option.
12.2 Subject to:
(a) such consents or other actions required by any competent authority under any regulations or enactments for the time being in force as may be necessary (including any approvals required from the SGX-ST); and
(b) compliance with the Rules, the Memorandum and Articles of Association of the Company, the Company shall, as soon as practicable after the exercise of an Option by a Participant but in any event within ten (10) Market Days after the date of the exercise of the Option in accordance with Rule 12.1, allot the Shares in respect of which such Option has been exercised by the Participant and within fi ve (5) Market Days from the date of such allotment, despatch the relevant share certifi cates to CDP for the credit of the securities account of that Participant by ordinary post or such other mode of delivery as the Committee may deem fi t.
12.3 The Company shall, if necessary, as soon as practicable after the exercise of an Option, apply to the SGX-ST or any other stock exchange on which the Shares are quoted or listed for permission to deal in and for quotation of the Shares which may be issued upon exercise of the Option and the Shares (if any) which may be issued to the Participant pursuant to any adjustments made in accordance with Rule 10.
12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as the Participant may elect, in the name of CDP to the credit of the securities account of the Participant maintained with CDP or the Participant’s securities sub-account with a CDP Depository Agent.
12.5 Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the Record Date for which is prior to the date such Option is exercised.
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12.6 The Company shall keep available suffi cient unissued Shares to satisfy the full exercise of all Options for the time being remaining capable of being exercised.
13. MODIFICATIONS TO THE ESOS
13.1 Any or all the provisions of the ESOS may be modifi ed and/or altered at any time and from time to time by resolution of the Committee, except that:
(a) any modifi cation or alteration which shall alter adversely the rights attaching to any Option granted prior to such modifi cation or alteration and which in the opinion of the Committee, materially alters the rights attaching to any Option granted prior to such modifi cation or alteration may only be made with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than three-quarters in nominal amount of all the Shares which would fall to be allotted upon exercise in full of all outstanding Options;
(b) any modifi cation or alteration which would be to the advantage of Participants under the ESOS shall be subject to the prior approval of the Shareholders in general meeting; and
(c) no modifi cation or alteration shall be made without the prior approval of the SGX-ST or (if required) any other stock exchange on which the Shares are quoted and listed, and such other regulatory authorities as may be necessary.
For the purposes of Rule 13.1(a), the opinion of the Committee as to whether any modifi cation or alteration would alter adversely the rights attaching to any Option shall be fi nal and conclusive.
13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any time by resolution (and without other formality, save for the prior approval of the SGX-ST) amend or alter the ESOS in any way to the extent necessary to cause the ESOS to comply with any statutory provision or the provision or the regulations of any regulatory or other relevant authority or body (including the SGX-ST).
13.3 Written notice of any modifi cation or alteration made in accordance with this Rule 13 shall be given to all Participants.
14. DURATION OF THE ESOS
14.1 The ESOS shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten (10) years, commencing on the date on which the ESOS is adopted by Shareholders. Subject to compliance with any applicable laws and regulations in Singapore, the ESOS may be continued beyond the above stipulated period with the approval of the Shareholders by ordinary resolution at a general meeting and of any relevant authorities which may then be required.
14.2 The ESOS may be terminated at any time by the Committee or by resolution of the Shareholders at a general meeting subject to all other relevant approvals which may be required and if the ESOS is so terminated, no further Options shall be offered by the Company hereunder.
14.3 The termination, discontinuance or expiry of the ESOS shall be without prejudice to the rights accrued to Options which have been granted and accepted as provided in Rule 8, whether such Options have been exercised (whether fully or partially) or not.
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15. TAKE-OVER AND WINDING UP OF THE COMPANY
15.1 In the event of a take-over offer being made for the Company, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rules 11.1 and 11.2) holding Options as yet unexercised shall, notwithstanding Rules 11 and 12 but subject to Rule 15.5, be entitled to exercise such Options in full or in part in the period commencing on the date on which such offer is made or, if such offer is conditional, the date on which the offer becomes or is declared unconditional, as the case may be, and ending on the earlier of:
(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) month period, at the recommendation of the offeror and with the approvals of the Committee and the SGX-ST, such expiry date is extended to a later date (being a date falling not later than the date of expiry of the Option Period relating thereto); or
(b) the date of the expiry of the Option Period relating thereto,
whereupon any Option then remaining unexercised shall immediately lapse and become null and void.
Provided always that if during such period the offeror becomes entitled or bound to exercise the rights of compulsory acquisition of the Shares under the provisions of the Act and, being entitled to do so, gives notice to the Participants that it intends to exercise such rights on a specifi ed date, the Option shall remain exercisable by the Participants until such specifi ed date or the expiry of the Option Period relating thereto, whichever is earlier. Any Option not so exercised by the said specifi ed date shall lapse and become null and void.
Provided that the rights of acquisition or obligation to acquire stated in the notice shall have been exercised or performed, as the case may be. If such rights of acquisition or obligations have not been exercised or performed, all Options shall, subject to Rule 11.3, remain exercisable until the expiry of the Option Period.
15.2 If, under any applicable laws, the court sanctions a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1 and 11.2) shall notwithstanding Rules 11 and 12 but subject to Rule 15.5, be entitled to exercise any Option then held by them during the period commencing on the date upon which the compromise or arrangement is sanctioned by the court and ending either on the expiry of 60 days thereafter or the date upon which the compromise or arrangement becomes effective, whichever is later (but not after the expiry of the Option Period relating thereto), whereupon any unexercised Option shall lapse and become null and void, Provided always that the date of exercise of any Option shall be before the tenth anniversary of the Offer Date.
15.3 If an order or an effective resolution is passed for the winding up of the Company on the basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null and void.
15.4 In the event a notice is given by the Company to its members to convene a general meeting for the purposes of considering and, if thought fi t, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it dispatches such notice to each member of the Company give notice thereof to all Grantees (together with a notice of the existence of the provision of this Rule 15.4) and thereupon, each Grantee (or his personal representative) shall be entitled to exercise all or any of his Options at any time not later than two (2) business days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the aggregate Exercise Price whereupon the Company shall as soon as possible and in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid.
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15.5 If in connection with the making of a general offer referred to in Rule 15.1 above or the scheme referred to in Rule 15.2 above or the winding up referred to in Rule 15.4 above, arrangements are made (which are confi rmed in writing by the Auditors, acting only as experts and not as arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the continuation of their Options or the payment of cash or the grant of other options or otherwise, a Participant holding an Option, which is not then exercisable, may not, at the discretion of the Committee, be permitted to exercise that Option as provided for in this Rule 15.
15.6 To the extent that an Option is not exercised within the periods referred to in this Rule 15, it shall lapse and become null and void.
16. ADMINISTRATION OF THE ESOS
16.1 The ESOS shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board.
16.2 The Committee shall have the power, from time to time, to make or vary such regulations (not being inconsistent with the ESOS) for the implementation and administration of the ESOS as it thinks fi t.
16.3 Any decision of the Committee, made pursuant to any provision of the ESOS (other than a matter to be certifi ed by the Auditors), shall be fi nal and binding (including any decisions pertaining to disputes as to the interpretation of the ESOS or any rule, regulation, or procedure thereunder or as to any rights under the ESOS).
16.4 A Director who is a member of the Committee shall not be involved in its deliberation in respect of Options to be granted to him.
17. NOTICES
17.1 Any notice given by a Participant to the Company shall be sent by post or delivered to the registered offi ce of the Company or such other address as may be notifi ed by the Company to the Participant in writing.
17.2 Any notice or documents given by the Company to a Participant shall be sent to the Participant by hand or sent to him at his home address stated in the records of the Company or the last known address of the Participant, and if sent by post shall be deemed to have been given on the day immediately following the date of posting.
18. TERMS OF EMPLOYMENT UNAFFECTED
18.1 The ESOS or any Option shall not form part of any contract of employment between the Company or any Subsidiary (as the case may be) and any Participant and the rights and obligations of any individual under the terms of the offi ce or employment with such company within the Group shall not be affected by his participation in the ESOS or any right which he may have to participate in it or any Option which he may hold and the ESOS or any Option shall afford such an individual no additional rights to compensation or damages in consequence of the termination of such offi ce or employment for any reason whatsoever.
18.2 The ESOS shall not confer on any person any legal or equitable rights (other than those constituting the Options themselves) against the Company and/or any Subsidiary directly or indirectly or give rise to any cause of action at law or in equity against the Company or any Subsidiary.
19. TAXES
All taxes (including income tax) arising from the exercise of any Option granted to any Participant under the ESOS shall be borne by that Participant.
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20. COSTS AND EXPENSES OF THE ESOS
20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the issue and allotment of any Shares pursuant to the exercise of any Option in CDP’s name, the deposit of share certifi cate(s) with CDP, the Participant’s securities account with CDP, or the Participant’s securities sub-account with a Depository Agent or CPF investment account with a CPF agent bank and all taxes referred to in Rule 19 which shall be payable by the relevant Participant.
20.2 Save for such costs and expenses expressly provided in the ESOS to be payable by the Participants, all fees, costs and expenses incurred by the Company in relation to the ESOS including but not limited to the fees, costs and expenses relating to the allotment and issue of Shares pursuant to the exercise of any Option shall be borne by the Company.
21. CONDITION OF OPTION
Every Option shall be subject to the condition that no Shares shall be issued pursuant to the exercise of an Option if such issue would be contrary to any law or enactment, or any rules or regulations of any legislative or non-legislative governing body for the time being in force in Singapore or any other relevant country.
22. DISCLAIMER OF LIABILITY
Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee and the Company shall not under any circumstances be held liable for any costs, losses, expenses and damages whatsoever and howsoever arising in respect of any matter under or in connection with the ESOS, including but not limited to the Company’s delay in allotting and issuing the Shares or in applying for or procuring the listing of the Shares on the SGX-ST.
23. DISCLOSURE IN ANNUAL REPORT
The Company shall make the following disclosure in its annual report:
(a) The names of the members of the Committee;
(b) The information required in the table below for the following Participants (which for the avoidance of doubt, shall include Participants who have exercised all their Options in any particular fi nancial year):
(i) participants who are Directors of the Company; and
(ii) participants who are Controlling Shareholders of the Company and their associates; and
(iii) participants, other than those in (i) and (ii) above who receive fi ve per cent. (5.0%) or more of the total number of Options available under the ESOS.
Name ofParticipant
Options grantedduring fi nancial year under review (including terms)
AggregateOptions granted since commencement of the ESOS toend of fi nancial year under review
Aggregate Options exercised since commencementof the ESOS to end of fi nancial year under review
Aggregate Optionsoutstandingas at end of fi nancial yearunder review
(c) (i) The names of and number and terms of options granted to each director or employee of the parent company and its subsidiaries who receives 5% or more of the total number of options available to all directors and employees of the parent company and its subsidiaries under the scheme, during the fi nancial year under review; and
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(ii) The aggregate number of options granted to the directors and employees of the parent company and its subsidiaries for the fi nancial year under review, and since the commencement of the scheme to the end of the fi nancial year under review.
(d) The number and proportion of Options granted at the following discounts to average market value of the Shares in the fi nancial year under review:
(i) Options granted at up to ten per cent. (10.0%) discount; and
(ii) Options granted at between ten per cent. (10.0%) but not more than 20.0% discount. If any of the requirements above is not applicable, an appropriate negative statement must be
included
24. ABSTENTION FROM VOTING
Grantees who are Shareholders are to abstain from voting on any Shareholders’ resolution relating to the ESOS.
25. DISPUTES
Any disputes or differences of any nature arising hereunder shall be referred to the Committee and its decision shall be fi nal and binding in all respects.
26. GOVERNING LAW
The ESOS shall be governed by, and construed in accordance with, the laws of the Republic of Singapore. The Participants, by accepting Options in accordance with the ESOS, and the Company submit to the exclusive jurisdiction of the courts of the Republic of Singapore.
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SCHEDULE A
GAYLIN EMPLOYEE SHARE OPTION SCHEME
LETTER OF OFFER
Serial No:
Date:
To: [Name] [Designation] [Address]
Private and Confi dential
Dear Sir/Madam,
1. We have the pleasure of informing you that, pursuant to the Gaylin Employee Share Option Scheme (“ESOS”), you have been nominated to participate in the ESOS by the Committee (the “Committee”) appointed by the Board of Directors of Gaylin Holdings Limited (the “Company”) to administer the ESOS. Terms as defi ned in the ESOS shall have the same meaning when used in this letter.
2. Accordingly, in consideration of the payment of a sum of S$1.00, an offer is hereby made to grant you an option (the “Option”), to subscribe for and be allotted Shares at the price of S$ for each Share.
3. The Option is personal, to you and shall not be transferred, charged, pledged, assigned or otherwise disposed of by you, in whole or in part, except with the prior approval of the Committee.
4. The Option shall be subject to the terms of the ESOS, a copy of which is available for inspection at the business address of the Company.
5. If you wish to accept the offer of the Option on the terms of this letter, please sign and return the enclosed Acceptance Form with a sum of S$1.00 not later than 5.00 p.m. on failing which this offer will lapse.
Yours faithfully,For and on behalf ofGaylin Holdings Limited
Name:
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SCHEDULE B
GAYLIN EMPLOYEE SHARE OPTION SCHEME
ACCEPTANCE FORM
Serial No:
Date:
To: The Committee, Gaylin Employee Share Option Scheme Gaylin Holdings Limited
Closing Date for Acceptance of Offer:
Number of Shares Offered:
Exercise Price for each Share: S$
Total Amount Payable: S$
I have read your Letter of Offer dated and agree to be bound by the terms of the Letter of Offer and ESOS referred to therein. Terms defi ned in your Letter of Offer shall have the same meanings when used in this Acceptance Form.
I hereby accept the Option to subscribe for Shares at S$ for each Share. I enclose cash for S$1.00 in payment for the purchase of the Option/I authorise my employer to deduct the sum of S$1.00 from my salary in payment for the purchase of the Option.
I understand that I am not obliged to exercise the Option.
I confi rm that my acceptance of the Option will not result in the contravention of any applicable law or regulation in relation to the ownership of shares in the Company or options to subscribe for such shares.
I agree to keep all information pertaining to the grant of the Option to me confi dential.
I further acknowledge that you have not made any representation to induce me to accept the offer and that the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to the offer.
Please print in block letters
Name in full :
Designation :
Address :
Nationality :
*NRIC/Passport No. :
Signature :
Date :
Note:
* Delete accordingly
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SCHEDULE C
GAYLIN EMPLOYEE SHARE OPTION SCHEME
FORM OF EXERCISE OF OPTION
Total number of ordinary shares (the “Shares”) offered at S$ for each Share (the “Exercise Price”) under the ESOS on
(Date of Grant)
:
Number of Shares previously allotted thereunder
:
Outstanding balance of Shares to be allotted thereunder
:
Number of Shares now to be subscribed :
To: The Committee, Gaylin Employee Share Option Scheme Gaylin Holdings Limited
1. Pursuant to your Letter of Offer dated and my acceptance thereof, I hereby exercise the Option to subscribe for Shares in Gaylin Holdings Limited (the “Company”) at S$ for each Share.
2. I enclose a *cheque/cashiers order/banker’s draft/postal order no. for S$ by way of subscription for the total number of the said Shares.
3. I agree to subscribe for the said Shares subject to the terms of the Letter of Offer, the Gaylin Employee Share Option Scheme and the Memorandum and Articles of Association of the Company.
4. I declare that I am subscribing for the said Shares for myself and not as a nominee for any other person.
5. I request the Company to allot and issue the Shares in the name of The Central Depository (Pte) Limited (“CDP”) for credit of my *Securities Account with CDP/Sub-Account with the Depository Agent/CPF investment account with my Agent Bank specifi ed below and I hereby agree to bear such fees or other charges as may be imposed by CDP in respect thereof.
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Please print in block letters
Name in full :
Designation : Address : Nationality : *NRIC/Passport No : *Direct Securities Account No. : OR
*Sub Account No. : Name of Depository Agent : OR
*CPF Investment Account No. : Name of Agent Bank : Signature : Date :
Note:
* Delete accordingly
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APPENDIX D
TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE
You are invited to apply and subscribe for and/or purchase the New Shares at the Issue Price for each New Share subject to the following terms and conditions set out below and in the relevant printed application forms to be used for the purpose of this Offering and which forms part of the Prospectus (the “Application Forms”) or, as the case may be, the Electronic Applications (as defi ned herein):
1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES AND INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARES WILL BE REJECTED.
2. Your application for the Offer Shares may be made by way of the printed WHITE Offer Shares Application Forms or by way of Electronic Applications through ATMs of the Participating Banks (“ATM Electronic Applications”) or through Internet Banking (“IB”) websites of the relevant Participating Banks (“Internet Electronic Applications”, which together with ATM Electronic Applications, shall be referred to as “Electronic Applications”). Your application for the Placement Shares may only be made by way of the printed BLUE Placement Shares Application Forms. YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE NEW SHARES.
3. You are allowed to submit only one (1) application in your own name for the Offer Shares or the Placement Shares. If you submit an application for Offer Shares by way of an Offer Shares Application Form, you MAY NOT submit another application for Offer Shares by way of an Electronic Application and vice versa. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company, except in the case of applications by approved nominee companies, where each application is made on behalf of a different benefi ciary.
If you submit an application for Offer Shares by way of an ATM Electronic Application, you MAY NOT submit another application for Offer Shares by way of an Internet Electronic Application and vice versa. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company.
If you, being other than an approved nominee company, have submitted an application for Offer Shares in your own name, you should not submit any other application for Offer Shares, whether by way of an Offer Shares Application Form or by way of an Electronic Application, for any other person. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company.
If you, being other than an approved nominee company, have submitted an application for Placement Shares in your own name, you should not submit any other application for Placement Shares for any other person. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company.
If you have made an application for Placement Shares, you should not make any application for Offer Shares either by way of an Offer Shares Application Form or by way of an Electronic Application and vice versa. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company.
Conversely, if you have made an application for Offer Shares either by way of an Electronic Application or by way of an Offer Shares Application Form, you may not make any application for Placement Shares. Such separate applications shall be deemed to be multiple applications and may be rejected at the discretion of our Company.
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Joint applications shall be rejected. Multiple applications for New Shares shall be liable to be rejected at the discretion of our Company. If you submit or procure submissions of multiple share applications for Offer Shares, Placement Shares or both Offer Shares and Placement Shares, you may be deemed to have committed an offence under the Penal Code, Chapter 224 of Singapore and the SFA, and your applications may be referred to the relevant authorities for investigation. Multiple applications or those appearing to be or suspected of being multiple applications will be liable to be rejected at the discretion of our Company.
4. Our Company will not accept applications from any person under the age of 18 years, undischarged bankrupts, sole-proprietorships, partnerships or non-corporate bodies, joint Securities Account holders of CDP and from applicants whose addresses (furnished in their Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Banks) bear post offi ce box numbers. No person acting or purporting to act on behalf of a deceased person is allowed to apply under the Securities Account with CDP in the name of the deceased at the time of the application.
5. Our Company will not recognise the existence of a trust. An application by a trustee or trustees must therefore be made in his/her/their own name(s) and without qualifi cation or, where the application is made by way of an Application Form by a nominee, in the name(s) of an approved nominee company or companies after complying with paragraph 6 below.
6. OUR COMPANY WILL ONLY ACCEPT APPLICATIONS FROM APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defi ned as banks, merchant banks, fi nance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by persons acting as nominees other than approved nominee companies shall be rejected.
7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do not have an existing Securities Account with CDP in your own name at the time of your application, your application will be rejected (if you apply by way of an Application Form), or you will not be able to complete your Electronic Application (if you apply by way of an Electronic Application). If you have an existing Securities Account with CDP but fail to provide your Securities Account number or provide an incorrect Securities Account number in Section B of the Application Form or in your Electronic Application, as the case may be, your application is liable to be rejected. Subject to paragraph 8 below, your application shall be rejected if your particulars such as name, NRIC/passport number, nationality and permanent residence status provided in your Application Form or in the records of the relevant Participating Bank at the time of your Electronic Application, as the case may be, differ from those particulars in your Securities Account as maintained with CDP. If you possess more than one (1) individual direct Securities Account with CDP, your application shall be rejected.
8. If your address as stated in the Application Form or, in the case of an Electronic Application, contained in the records of the relevant Participating Bank, as the case may be, is different from the address registered with CDP, you must inform CDP of your updated address promptly, failing which the notifi cation letter on successful allotment and other correspondence from CDP will be sent to your address last registered with CDP.
8A. This Prospectus and its accompanying documents have not been registered in any jurisdiction other than in Singapore. The distribution of this Prospectus and its accompanying documents may be prohibited or restricted (either absolutely or unless various securities requirements, whether legal or administrative, are complied with) in certain jurisdictions under the relevant securities laws of those jurisdictions. Without limiting the generality of the foregoing, neither this Prospectus and its accompanying documents nor any copy thereof may be taken, transmitted, published or distributed, directly or indirectly, in whole or in part, into or in the USA. Any failure to comply with this restriction may constitute a violation of securities laws in the USA and in other jurisdictions.
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This Prospectus and its accompanying documents are not an offer of, or invitation by or on behalf of our Company to purchase securities for sale in the USA nor are they an offer or invitation by or on behalf of our Company to purchase securities in any jurisdiction in which such offer is not authorised or to any person to whom it is unlawful to make such an offer or invitation. The New Shares may not be offered or sold in the USA absent registration or an exemption from registration under the US Securities Act. Our Company does not intend to register any portion of the Offering in the USA or conduct a public offering of the securities in the USA.
The New Shares have not been and will not be registered under the US Securities Act and, subject to certain exceptions, may not be offered or sold within the USA. The Offer Shares are being offered outside the USA in reliance on Regulation S.
Our Company reserve the right to reject any applications for Offer Shares where our Company believes or has reason to believe that such applications may violate the securities laws or any applicable legal or regulatory requirements of any jurisdiction.
No person in any jurisdiction outside Singapore receiving this Prospectus or its accompanying documents may treat the same as an offer or invitation to purchase any Offer Shares unless such an offer or invitation could lawfully be made without compliance with any regulatory or legal requirements in those jurisdictions.
9. Our Company, in consultation with the Issue Manager, Underwriter and Placement Agent reserves the right to reject any application which does not conform strictly to the instructions set out in the Application Form and in this Prospectus or which does not comply with the instructions for Electronic Applications or with the terms and conditions of this Prospectus or, in the case of an application by way of an Application Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn remittance or improper form of remittance.
Our Company further reserves the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the instructions set out in the Application Forms or the instructions for Electronic Applications or the terms and conditions of this Prospectus and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving from, such remittances or the processing thereof.
Without prejudice to the rights of the Company, the Issue Manager, Underwriter and Placement Agent, as agents of the Company, have been authorised to accept, for on behalf of the Company, such other forms of application as the Issue Manager, Underwriter and Placement Agent deem appropriate.
10. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or to ballot any application, without assigning any reason thereof, and no enquiry and/or correspondence on the decision of our Company will be entertained. This right applies to applications made by way of Application Forms and by way of Electronic Applications. In deciding the basis of allotment which shall be at our discretion, due consideration will be given to the desirability of allotting the New Shares to a reasonable number of applicants with a view to establishing an adequate market for the Shares.
11. Share certifi cates will be registered in the name of CDP and will be forwarded only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the close of the Application List, and subject to the submission of valid applications and payment for the New Shares, a statement of account stating that your Securities Account has been credited with the number of New Shares allotted to you, if your application is successful. This will be the only acknowledgement of application monies received and is not an acknowledgement by our Company. You irrevocably authorise CDP to complete and sign on your behalf, as transferee or renouncee, any instrument of transfer and/or other documents required for the issue or transfer of the New Shares allotted to you. This authorisation applies to applications made by way of Application Forms and by way of Electronic Applications.
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12. In the event that our Company lodges a supplementary or replacement prospectus (“Relevant Document”) pursuant to the SFA or any applicable legislation in force from time to time prior to the close of the Offering, and the New Shares have not been issued, our Company will (as required by law and subject to the SFA), at our Company’s sole and absolute discretion, either:
(a) within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of the lodgement of the Relevant Document, give you notice in writing of how to obtain, or arrange to receive, a copy of the same and provide you with an option to withdraw your application and take all reasonable steps to make available within a reasonable period the Relevant Document to you if you have indicated that you wish to obtain, or have arranged to receive, a copy of the Relevant Document;
(b) within seven (7) days of the lodgement of the Relevant Document give you a copy of the Relevant Document and provide you with an option to withdraw your application; or
(c) deem your application as withdrawn and cancelled and shall, within seven (7) days from the date of lodgement of the Relevant Document, return all monies paid in respect of any application, without interest or a share of revenue or benefi t arising therefrom.
Where you have notifi ed us within 14 days from the date of lodgement of the Relevant Document of your wish to exercise your option under Paragraph 12(a) and (b) above to withdraw your application, our Company shall pay to you all monies paid by you on account of your application for the New Shares without interest or any share of revenue or other benefi t arising therefrom and at your own risk, within seven (7) days from the receipt of such notifi cation.
In the event that at the time of the lodgement of the Relevant Document, the New Shares have already been issued but trading has not commenced, we will (as required by law and subject to the SFA), at our Company’s sole and absolute discretion, either:
(d) within two (2) days (excluding Saturday, Sunday or public holiday) from the date of the lodgement of the Relevant Document, give you notice in writing of how to obtain, or arrange to receive, a copy of the same and provide you with an option to return to our Company the New Shares which you do not wish to retain title in and take all reasonable steps to make available within a reasonable period the Relevant Document to you if you have indicated that you wish to obtain, or have arranged to receive, a copy of the Relevant Document;
(e) within seven (7) days from the lodgement of the Relevant Document give you a copy of the Relevant Document and provide you with an option to return the New Shares which you do not wish to retain title in; or
(f) deem the issue as void and refund your payment for the New Shares (without interest or any share of revenue or other benefi t arising therefrom) within seven (7) days from the lodgement of the Relevant Document.
Any applicant who wishes to exercise his option under paragraph 12(d) and (e) above to return the New Shares issued to him shall, within 14 days from the date of lodgement of the Relevant Document, notify our Company of this and return all documents, if any, purporting to be evidence of title of those New Shares, whereupon our Company shall, subject to compliance with applicable laws and the Articles of Association of our Company, within seven (7) days from the receipt of such notifi cation and documents, pay to him all monies paid by him for the New Shares without interest or any share of revenue or other benefi t arising therefrom and at his own risk, and the New Shares issued to him shall be void.
Additional terms and instructions applicable upon the lodgement of the Relevant Document, including instructions on how you can exercise the option to withdraw your application or return the New Shares allotted to you, may be found in such Relevant Document.
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13. In the event of an under-subscription for Offer Shares as at the close of the Application List, that number of Offer Shares under-subscribed shall be made available to satisfy applications for Placement Shares to the extent that there is an over-subscription for Placement Shares as at the close of the Application List.
In the event of an under-subscription for Placement Shares as at the close of the Application List, that number of Placement Shares under-subscribed shall be made available to satisfy applications for Offer Shares to the extent that there is an over-subscription for Offer Shares as at the close of the Application List.
In the event of an over-subscription for Offer Shares as at the close of the Application List and Placement Shares are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST.
In all the above instances, the basis of allotment of the New Shares as may be decided by our Directors in ensuring a reasonable spread of shareholders of our Company, shall be made public, as soon as practicable, via an announcement through the SGX-ST and by advertisement in a generally circulating daily press.
14. You consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, CPF Investment Account number (if applicable) and share application amount from your account with the relevant Participating Bank to the Share Registrar and Share Transfer Agent, SCCS, SGX-ST, CDP, our Company, the Issue Manager, Underwriter and Placement Agent. You irrevocably authorise CDP to disclose the outcome of your application, including the number of New Shares allotted to you pursuant to your application, to our Company, the Issue Manager, Underwriter and Placement Agent, and any other parties so authorised by the forgoing persons. CDP shall not be liable for any delays, failures or inaccuracies in the recording, storage or transmission or delivery of data relating to Electronic Applications.
15. Any reference to “you” or the “Applicant” in this section shall include an individual, a corporation, an approved nominee and trustee applying for the Offer Shares by way of an Offer Shares Application Form or by way of an Electronic Application, or apply for the Placement Shares through the Placement Agent by way of a Placement Shares Application form.
16. By completing and delivering an Application Form or by making and completing an Electronic Application by (in the case of an ATM Electronic Application) pressing the “Enter” or “OK” or “Confi rm” or “Yes” or any other relevant key on the ATM (as the case may be) or by (in the case of an Internet Electronic Application) clicking “Submit” or “Continue” or “Yes” or “Confi rm” or any other relevant button on the IB website screen (as the case may be) in accordance with the provisions of this Prospectus, you:
(a) irrevocably offer to subscribe for and/or purchase the number of New Shares specifi ed in your application (or such smaller number for which the application is accepted) at the Issue Price and agree that you will accept such New Shares as may be allotted to you, in each case on the terms of, and subject to the conditions set out in this Prospectus and the Memorandum and Articles of Association of our Company;
(b) agree that, in the event of any inconsistency between the terms and conditions for application set out in this Prospectus and those set out in the ATMs or IB websites of the Participating Banks, the terms and conditions set out in this Prospectus shall prevail;
(c) agree that the aggregate Issue Price for the New Shares applied for is due and payable to our Company upon application;
D-6
(d) warrant the truth and accuracy of the information contained, and representations and declarations made, provided in your application, and acknowledge and agree that such information, representations and declarations will be relied on by our Company in determining whether to accept your application and/or whether to allot any New Shares to you; and
(e) agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable to your application, you have complied with all such laws and none of our Company, the Issue Manager, Underwriter and Placement Agent will infringe any such laws as a result of the acceptance of your application.
17. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfi ed that:
(a) permission has been granted by the SGX-ST to deal in and for quotation for all our existing Shares and the New Shares on the Offi cial List of SGX-ST;
(b) the Management Agreement and the Underwriting and Placement Agreement referred to in the section entitled “General and Statutory Information – Management, Underwriting and Placement Arrangements” of this Prospectus have become unconditional and have not been terminated or cancelled prior to such date as our Company may determine; and
(c) the Authority has not served a stop order which directs that no or no further shares to which this Prospectus relates be allotted or issued.
18. In the event that a stop order in respect of the New Shares is served by the Authority or other competent authority, and
(a) in the case where the New Shares have not been issued, we shall (as required by law) deemed all applications for the New Shares pursuant to the Offering withdrawn and cancelled and our Company shall, within 14 days from the date of the stop order, refund the monies (without interest or any share of revenue or other benefi t arising therefrom and at your own risk) that the applicants have paid on account of their applications for the New Shares; or
(b) if the New Shares have already been issued but trading has not commenced, the issue will (as required by law) be deemed void and our Company shall, within 14 days from the date of the stop order; refund the monies (without interest or any share of revenue or other benefi t arising therefrom and at your own risk) that the applicants have paid on account of their applications for the New Shares.
This shall not apply where only an interim stop order has been served.
19. In the event that an interim stop order in respect of the New Shares is served by the Authority or other competent authority, no New Shares shall be issued to you until the Authority revokes the interim stop order.
20. The Authority is not able to serve a stop order in respect of the New Shares if the New Shares have been issued and listed on a securities exchange and trading in them has commenced.
21. In the event of any changes in the closure of the Application List or the time period during which the Offering is open, we will publicly announce the same through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com and through a paid advertisement in a local English newspaper.
22. We will not hold any application in reserve.
23. We will not allot Shares on the basis of this Prospectus later than six (6) months after the date of registration of this Prospectus.
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24. Additional terms and conditions for applications by way of Application Forms are set out on pages D-7 to D-10 of this Prospectus.
25. Additional terms and conditions for applications by way of Electronic Applications are set out on pages D-10 to D-15 of this Prospectus.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS
Applications by way of an Application Form shall be made on, and subject to, the terms and conditions of this Prospectus including but not limited to the terms and conditions appearing below as well as those set out under the section entitled “Terms, Conditions And Procedures For Application And Acceptance” of this Prospectus, as well as the Memorandum and Articles of Association of our Company.
1. Your application must be made using the WHITE Application Forms and WHITE offi cial envelopes “A” and “B” for Offer Shares, the BLUE Application Forms for Placement Shares accompanying and forming part of this Prospectus. We draw your attention to the detailed instructions contained in the respective Application Forms and this Prospectus for the completion of the Application Forms which must be carefully followed. Our Company, in consultation with the Issue Manager, Underwriter and Placement Agent, reserves the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus or to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances or improper form of remittance.
Without prejudice to the rights of our Company, the Issue Manager, Underwriter and Placement Agent, as agents of our Company, have been authorised to accept, for and on behalf of our Company.
2. Your Application Forms must be completed in English. Please type or write clearly in ink using BLOCK LETTERS.
3. All spaces in the Application Forms except those under the heading “FOR OFFICIAL USE ONLY” must be completed and the words “NOT APPLICABLE” or “N.A.” should be written in any space that is not applicable.
4. Individuals, corporations, approved nominee companies and trustees must give their names in full. If you are an individual, you must make your application using your full names as it appears in your identity cards (if you have such an identifi cation document) or in your passports and, in the case of a corporation, in your full name as registered with a competent authority. If you are not an individual, you must complete the Application Form under the hand of an offi cial who must state the name and capacity in which he signs the Application Form. If you are a corporation completing the Application Form, you are required to affi x your Common Seal (if any) in accordance with your Memorandum and Articles of Association or equivalent constitutive documents of the corporation. If you are a corporate applicant and your application is successful, a copy of your Memorandum and Articles of Association or equivalent constitutive documents must be lodged with our Company’s Share Registrar and Share Transfer Offi ce. Our Company reserve the right to require you to produce documentary proof of identifi cation for verifi cation purposes.
5. (a) You must complete Sections A and B and sign page 1 of the Application Form.
(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form. Where paragraph 7(a) is deleted, you must also complete Section C of the Application Form with particulars of the benefi cial owner(s).
(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, on page 1 of the Application Form, your application is liable to be rejected.
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6. You (whether you are an individual or corporate applicant, whether incorporated or unincorporated and wherever incorporated or constituted) will be required to declare whether you are a citizen or permanent resident of Singapore or a corporation in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore have an interest in the aggregate of more than 50.0% of the issued share capital of or interests in such corporations.
If you are an approved nominee company, you are required to declare whether the benefi cial
owner of the New Shares is a citizen or permanent resident of Singapore or a corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate whether incorporated or unincorporated and wherever incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50.0% of the issued share capital of or interests in such corporation.
7. Your application must be accompanied by a remittance in Singapore currency for the full amount payable, in respect of the number of New Shares applied for, in the form of a BANKER’S DRAFT or CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of “GAYLIN SHARE ISSUE ACCOUNT” crossed “A/C PAYEE ONLY”, and with your name and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. Our Company will reject remittances bearing “NOT TRANSFERABLE” or “NON TRANSFERABLE” crossings. No acknowledgement or receipt will be issued by our Company or the Issue Manager for applications and application monies received.
8. Monies paid in respect of unsuccessful applications are expected to be returned (without interest or any share of revenue or other benefi t arising therefrom) to you by ordinary post within 24 hours of balloting of applications at your own risk. Where your application is rejected or accepted in part only, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefi t arising therefrom) to you by ordinary post at your own risk within 14 days after the close of the Application List. In the event that the Offering does not proceed for any reason, the full amount of the application monies received will be refunded (without interest or any share of revenue or other benefi t arising therefrom) to you by ordinary post at your own risk within fi ve (5) Market Days of the termination of the Offering. In the event that the Offering is cancelled by us following the issuance of a stop order by the Authority, the application monies received will be refunded (without interest or any share of revenue or other benefi t arising therefrom) to you by ordinary post at your own risk within 14 days from the date of the stop order.
9. Capitalised terms used in the Application Forms and defi ned in this Prospectus shall bear the meanings assigned to them in this Prospectus.
10. You irrevocably agree and acknowledge that your application is subject to risks of fi res, acts of God and other events beyond the control of the Participating Banks, our Company, the Issue Manager, Underwriter and Placement Agent and/or only other party involved in the Offering, and if, in any such event, our Company, the Issue Manager, Underwriter and Placement Agent and/or the relevant Participating Bank do not receive your Application Form, you shall have no claim whatsoever against our Company, the Issue Manager, Underwriter and Placement Agent, the relevant Participating Bank and/or any party involved in the Offering for New Shares applied for or for any compensation, loss or damage.
11. By completing and delivering the Application Form, you agree that:
(a) in consideration of our Company having distributed the Application Form to you and agreeing to close the Application List at 10.00 a.m. on 23 October 2012 or such other time or date as our Company may, in consultation with the Issue Manager, Underwriter and Placement Agent decide and by completing and delivering the Application Form:
(i) your application is irrevocable; and
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(ii) your remittance will be honoured on fi rst presentation and that any monies returnable may be held pending clearance of your payment without interest or any share of revenue or other benefi t arising therefrom;
(b) neither our Company, the Issue Manager, the Underwriter and Placement Agent, nor any other party involved in the Offering shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your application due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 10 above or to any cause beyond their respective controls;
(c) all applications, acceptances and contracts resulting therefrom under the Offering shall be governed by and construed in accordance with the laws of Singapore and that you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
(d) in respect of the New Shares for which your application has been received and not rejected, acceptance of your application shall be constituted by written notifi cation and not otherwise, notwithstanding any remittance being presented for payment by or on behalf of our Company;
(e) you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application;
(f) in making your application, reliance is placed solely on the information contained in this Prospectus and that none of our Company, the Issue Manager, Underwriter and Placement Agent or any other person involved in the Offering shall have any liability for any information not so contained;
(g) you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, and share application amount to our Share Registrar, CDP, SCCS, SGX-ST, our Company, the Issue Manager, Underwriter and Placement Agent or other authorised operators; and
(h) you will undertake to subscribe for the number of New Shares applied for as stated in the Application Form or any smaller number of such New Shares that may be allotted to you in respect of your application. In the event that our Company decides to allot a smaller number of New Shares or not to allot any New Shares to you, you agree to accept such decision as fi nal.
Applications for Offer Shares
1. Your application for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and WHITE offi cial envelopes “A” and “B”. ONLY ONE (1) APPLICATION should be enclosed in each envelope.
2. You must:
(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with the correct remittance in accordance with the terms and conditions of this Prospectus in the WHITE envelope “A” provided;
(b) in the appropriate spaces on WHITE envelope “A”:
(i) write your name and address;
(ii) state the number of Offer Shares applied for;
(iii) tick the relevant box to indicate the form of payment; and
(iv) affi x adequate Singapore postage;
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(c) SEAL WHITE ENVELOPE “A”;
(d) write, in the special box provided on the larger WHITE envelope “B” addressed to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place #32-01 Singapore Land Tower, Singapore 048623, the number of Offer Shares you have applied for; and
(e) insert WHITE envelope “A” into WHITE envelope “B”, seal WHITE envelope “B”, affi x adequate Singapore postage on the WHITE envelope “B” (if despatching by ordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND at your own risk to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffl es Place, #32-01, Singapore Land Tower, Singapore 048623, to arrive by 10.00 a.m. on 23 October 2012 or such other time as our Company may, in consultation with the Issue Manager, Underwriter and Placement Agent, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received.
3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or improper form of remittance or which are not honoured upon their fi rst presentation are liable to be rejected.
Applications for Placement Shares
1. Your application for Placement Shares MUST be made using the BLUE Placement Shares Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope.
2. The completed and signed BLUE Placement Shares Application Form and the correct remittance in full in respect of the number of Placement Shares applied for (in accordance with the terms and conditions of this Prospectus), with your name, Securities Account number and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. You must affi x adequate Singapore postage on the envelope (if despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffl es Place, #32-01, Singapore Land Tower, Singapore 048623, to arrive by 10.00 a.m. on 23 October 2012 or such other time as our Company may, in consultation with the Issue Manager, Underwriter and Placement Agent, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received.
3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or improper form of remittance or which are not honoured upon their fi rst presentation are liable to be rejected.
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS
The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM Electronic Applications) and the IB website screens (in the case of Internet Electronic Applications) of the relevant Participating Banks. For illustration purposes, the procedures for Electronic Applications through ATMs and the IB website of the UOB Group are set out respectively in the “Steps for an ATM Electronic Application through ATMs of the UOB Group” and the “Steps for an Internet Electronic Application through the IB website of the UOB Group” (collectively, the “Steps”) appearing on pages D-15 to D-19 of this Prospectus.
The Steps set out the actions that you must take at an ATM or the IB website of the UOB Group to complete an Electronic Application. Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set out below before making an Electronic Application. Any reference to “you” or the “applicant” in this section “Additional Terms and Conditions for Electronic Applications” and the Steps shall refer to you making an application for Offer Shares through an ATM or the IB website of a relevant Participating Bank.
D-11
You must have an existing bank account with and be an ATM cardholder of one (1) of the Participating Banks before you can make an Electronic Application at the ATMs. An ATM card issued by one (1) Participating Bank cannot be used to apply for Offer Shares at an ATM belonging to other Participating Banks. For an Internet Electronic Application, you must have an existing bank account with an IB User Identifi cation (“User ID”) and a Personal Identifi cation Number/Password (“PIN”) given by the relevant Participating Bank. The Steps set out the actions that you must take at ATMs or the IB website of the UOB Group to complete an Electronic Application. The actions that you must take at ATMs or the IB websites of other Participating Banks are set out on the ATM screens or the IB website screens of the relevant Participating Banks. Upon the completion of your ATM Electronic Application transaction, you will receive an ATM transaction slip (“Transaction Record”), confi rming the details of your Electronic Application. Upon completion of your Internet Electronic Application, there will be an on-screen confi rmation (“Confi rmation Screen”) of the application which can be printed for your record. The Transaction Record or your printed record of the Confi rmation Screen is for your retention and should not be submitted with any Application Form.
You must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. If you fail to use your own ATM card or if you do not key in your own Securities Account number, your application will be rejected. If you operate a joint bank account with any of the Participating Banks, you must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. Using your own Securities Account number with an ATM card which is not issued to you in your own name will render your ATM Electronic Application liable to be rejected.
You must ensure, when making an Internet Electronic Application, that your mailing address for the account selected for the application is in Singapore and the application is being made in Singapore and you will be asked to declare accordingly. Otherwise your application is liable to be rejected.
You shall make an Electronic Application in accordance with and subject to the terms and conditions of this Prospectus including but not limited to the terms and conditions appearing below and those set out under the section entitled “Terms, Conditions And Procedures For Application And Acceptance” of this Prospectus as well as the Memorandum and Articles of Association of our Company.
1. In connection with your Electronic Application for Offer Shares, you are required to confi rm statements to the following effect in the course of activating your Electronic Application:
(a) that you have received a copy of this Prospectus (in the case of an ATM Electronic Application only) and have read, understood and agreed to all the terms and conditions of application for Offer Shares and this Prospectus prior to effecting the Electronic Application and agree to be bound by the same;
(b) that you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent residence status, share application amount, CPF Investment Account number (if applicable) and CDP Securities Account number and application details (the “Relevant Particulars”) with the relevant Participating Bank to the CDP, CPF, SCCS, SGX-ST, Share Registrar, our Company and the Issue Manager, Underwriter and Placement Agent or other authorised operators (the “Relevant Parties”); and
(c) that this is your only application for Offer Shares and it is made in your own name and at your own risk.
Your application will not be successfully completed and cannot be recorded as a completed transaction in the ATM or on the IB website unless you press the “Enter” or “Confi rm” or “Yes” or “OK” or any other relevant key in the ATM or click “Confi rm” or “OK” or “Submit” or “Continue” or “Yes” or any other relevant button on the IB website screen. By doing so, you shall be treated as signifying your confi rmation of each of the above three (3) statements. In respect of statement 1(b) above, such confi rmation, shall signify and shall be treated as your written permission, given in accordance with the relevant laws of Singapore including Section 47(2) of the Banking Act (Chapter 19) of Singapore to the disclosure by the relevant Participating Bank of the Relevant Particulars to the Relevant Parties.
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2. BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT APPLYING FOR OFFER SHARES AS A NOMINEE OF ANY OTHER PERSON AND THAT ANY ELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY YOU AS THE BENEFICIAL OWNER.
YOU SHOULD MAKE ONLY ONE (1) ELECTRONIC APPLICATION FOR OFFER SHARES AND SHOULD NOT MAKE ANY OTHER APPLICATION FOR OFFER SHARES OR PLACEMENT SHARES, WHETHER AT THE ATMS OR THE IB WEBSITES (IF ANY) OF ANY PARTICIPATING BANK OR ON THE APPLICATION FORMS. IF YOU HAVE MADE AN APPLICATION FOR OFFER SHARES OR PLACEMENT SHARES ON AN APPLICATION FORM, YOU SHALL NOT MAKE AN ELECTRONIC APPLICATION FOR OFFER SHARES AND VICE VERSA.
3. You must have suffi cient funds in your bank account with your Participating Bank at the time you make your Electronic Application at the ATM or IB Website of the relevant participating bank, failing which your Electronic Application will not be completed or accepted. Any Electronic Application which does not conform strictly to the instructions set out in this Prospectus or on the screens of the ATM or the IB website of the relevant Participating Bank through which your Electronic Application is being made shall be rejected.
You may make an ATM Electronic Application at the ATM of any Participating Bank or an Internet Electronic Application at the IB website of the relevant Participating Bank for the Offer Shares using only cash by authorising such Participating Bank to deduct the full amount payable from your account with such Participating Bank.
4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Shares applied for as stated on the Transaction Record or the Confi rmation Screen or any lesser number of Offer Shares that may be allotted to you in respect of your Electronic Application.
In the event that our Company decides to allot any lesser number of such Offer Shares or not to allot any Offer Shares to you, you agree to accept such decision as fi nal. If your Electronic Application is successful, your confi rmation (by your action of pressing the “Enter” or “Confi rm” or “Yes” or “OK” or any other relevant key on the ATM or clicking “Confi rm” or “OK” or “Submit” or “Continue” or “Yes” or any other relevant button on the IB website screen) of the number of Offer Shares applied for shall signify and shall be treated as your acceptance of the number of Offer Shares that may be allotted to you and your agreement to be bound by the Memorandum and Articles of Association of our Company. You also irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other required for the transfer of the Offer Shares that may be allotted to you.
5. Our Company will not keep any applications in reserve. Where your Electronic Application is unsuccessful, the full amount of the application monies will be refunded in Singapore currency (without interest or any share of revenue or other benefi t arising therefrom) to you by being automatically credited to your account with your Participating Bank within 24 hours of balloting of the applications provided that the remittance in respect of such application which has been presented for payment or other processes have been honoured and the application monies have been received in the designated share issue account. Trading on a “WHEN ISSUED” basis, if applicable, is expected to commence after such refund has been made.
Where your Electronic Application is rejected or accepted in part only, the full amount or the balance of the application monies, as the case may be, will be refunded in Singapore currency (without interest or any share of revenue or other benefi t arising therefrom) to you by being automatically credited to your account with your Participating Bank within 14 days after the close of the Application List provided that the remittance in respect of such application which has been presented for payment or other processes have been honoured and the application monies have been received in the designated share issue account.
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Responsibility for timely refund of application monies arising from unsuccessful or partially successful Electronic Applications lies solely with the respective Participating Banks. Therefore, you are strongly advised to consult your Participating Bank as to the status of your Electronic Application and/or the refund of any monies to you from unsuccessful or partially successful Electronic Application, to determine the exact number of Offer Shares allotted to you before trading the Offer Shares on SGX-ST. You may also call CDP Phone at 6535 7511 to check the provisional results of your application by using your T-pin (issued by CDP upon your application for the service) and keying in the stock code (that will be made available together with the results of the allotment via an announcement through the SGX-ST and by advertisement in a generally circulating daily press). To sign up for the service, you may contact CDP customer service offi cers. Neither the SGX-ST, the CDP, the SCCS, the Participating Banks, our Company nor the Issue Manager, Underwriter and Placement Agent assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST.
6. If your Electronic Application is unsuccessful, no notification will be sent by the Participating Banks.
If you make Electronic Applications through the ATMs or the IB websites of the following Participating Banks, you may check the provisional results of your Electronic Applications as follows:
Bank Telephone ATM/Internet Operating hours Service expectedfrom
(1) If you have made your Electronic Application through the ATMs or IB website of the UOB Group, you may check the results of your application through UOB Personal Internet Banking, UOB Group ATMs or UOB Phone Banking Services.
(2) If you have made your Electronic Application through the ATMs or IB website of DBS Bank, you may check the results of your application through the channels listed above.
7. You irrevocably agree and acknowledge that your Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdowns, fi res, acts of God and other events beyond the control of the Participating Banks, our Company, the Issue Manager, Underwriter and Placement Agent and if, in any such event, our Company, the Issue Manager, Underwriter and Placement Agent and/or the relevant Participating Bank do not receive your Electronic Application, or data relating to your Electronic Application or the tape or any other devices containing such data is lost, corrupted or not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not to have made an Electronic Application and you shall have no claim whatsoever against our Company, the Issue Manager, Underwriter and Placement Agent and/or the relevant Participating Bank for Offer Shares applied for or for any compensation, loss or damage.
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8. Electronic Applications shall close at 10.00 a.m. on 23 October 2012 or such other time as our Company may, in consultation with the Issue Manager, Underwriter and the Placement Agent, decide. Subject to the paragraph above, an Internet Electronic Application is deemed to be received when it enters the designated information system of the relevant participating bank, that is, when there is an on-screen confi rmation of the application.
9. You are deemed to have irrevocably requested and authorised our Company to:
(a) register the Offer Shares allotted to you in the name of CDP for deposit into your Securities Account;
(b) send the relevant Share certifi cate(s) to CDP;
(c) return or refund (without interest or any share of revenue earned or other benefi t arising therefrom) the application monies, should your Electronic Application be unsuccessful, by automatically crediting your bank account with your Participating Bank with the relevant amount within 24 hours of the balloting of applications; and
(d) return or refund (without interest or any share of revenue or other benefi t arising therefrom) the balance of the application monies, should your Electronic Application be accepted in part only, by automatically crediting your bank account with your Participating Bank with the relevant amount within 14 days after the close of the Application List.
10. Our Company does not recognise the existence of a trust. Any Electronic Application by a trustee must be made in your own name and without qualifi cation. Our Company will reject any application by any person acting as nominee except those made by approved nominee companies only.
11. All your particulars in the records of your relevant Participating Bank at the time you make your Electronic Application shall be deemed to be true and correct and your relevant Participating Bank and the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in your particulars after the time of the making of your Electronic Application, you shall promptly notify your relevant Participating Bank.
12. You should ensure that your personal particulars as recorded by both CDP and the relevant Participating Bank are correct and identical, otherwise, your Electronic Application is liable to be rejected. You should promptly inform CDP of any change in address, failing which the notifi cation letter on successful allotment will be sent to your address last registered with CDP.
13. By making and completing an Electronic Application, you are deemed to have agreed that:
(a) in consideration of our Company making available the Electronic Application facility, through the Participating Banks as the agents of our Company, at the ATMs and IB websites (if any):
(i) your Electronic Application is irrevocable; and
(ii) your Electronic Application, our acceptance and the contract resulting therefrom under the Offering shall be governed by and construed in accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
(b) neither our Company, the Issue Manager, Underwriter and Placement Agent, CDP nor the Participating Banks shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your Electronic Application to our Company or CDP due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 7 above or to any cause beyond our respective controls;
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(c) in respect of Offer Shares for which your Electronic Application has been successfully completed and not rejected, acceptance of your Electronic Application shall be constituted by written notifi cation by or on behalf of our Company and not otherwise, notwithstanding any payment received by or on behalf of our Company;
(d) you will not be entitled to exercise any remedy of rescission or misrepresentation at any time after acceptance of your application;
(e) in making your application, reliance is placed solely on the information contained in this Prospectus and that none of our Company, the Issue Manager, Underwriter and Placement Agent or any other person involved in the Offering shall have any liability for any information not so contained.
(f) agree and confi rm that you are outside the USA (as defi ned under Regulation S of the US Securities Act); and
(g) understand that the Offer Shares have not been and will not be registered under the US Securities Act or the securities laws of any state of the USA and may not be offered or sold in the USA except pursuant to an exemption from or in a transaction not subject to the registration requirements of the US Securities Act and applicable state securities laws. There will be no public offer of the Offer Shares in the USA. Any failure to comply with this restriction may constitute a violation of the USA securities laws.
Steps for Electronic Applications through ATMs and the IB website of the UOB Group
The instructions for Electronic Applications will appear on the ATM screens and the IB website screens of the respective Participating Banks. For illustrative purposes, the steps for making an Electronic Application through ATMs or IB website of the UOB Group are shown below. Instructions for Electronic Applications appearing on the ATM screens and the IB website screens (if any) of the relevant Participating Banks (other than the UOB Group) may differ from that represented below.
Steps for an ATM Electronic Application through ATMs of the UOB Group
Owing to space constraints on the UOB Group’s ATM screens, the following terms will appear in abbreviated form:
‘‘&” : and
“CDP” : THE CENTRAL DEPOSITORY (PTE) LIMITED
“CPF” : THE CENTRAL PROVIDENT FUND
NRIC” or “IC” : NATIONAL REGISTRATION IDENTITY CARD
“PIN” : PERSONAL IDENTIFICATION NUMBER
“PR” : PERMANENT RESIDENT
“SCCS” : SECURITIES CLEARING AND COMPUTER SERVICES (PTE) LIMITED
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Step 1: Insert your personal Unicard, Uniplus card or UOB VISA/MASTER card and key in your personal identifi cation number.
2: Select “CASHCARD/OTHER TRANS”.
3: Select “SECURITIES APPLICATION”.
4: Select the share counter which you wish to apply for.
5: Read and understand the following statements which will appear on the screen:
– THIS OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED BY, A COPY OF THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR SUPPLEMENTARY DOCUMENTS. ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OF SECURITIES) WILL NEED TO MAKE AN APPLICATION IN THE MANNER SET OUT IN THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR SUPPLEMENTARY DOCUMENTS.
(Press “ENTER” to continue)
– PLEASE CALL 1800 222 2121 IF YOU WOULD LIKE TO FIND OUT WHERE YOU CAN OBTAIN A COPY OF THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR SUPPLEMENTARY DOCUMENT.
– WHERE APPLICABLE, A COPY OF THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR SUPPLEMENTARY DOCUMENT HAS BEEN LODGED WITH AND/OR REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT OR SUPPLEMENTARY DOCUMENT.
(Press “ENTER” key to continue)
6: Read and understand the following terms which will appear on the screen:
– YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THE PROSPECTUS/OFFER INFORMATION STATEMENT/DOCUMENT/SUPPLEMENTARY DOCUMENT AND THIS ELECTRONIC APPLICATION.
(Press “ENTER” to continue)
– YOU CONSENT TO DISCLOSE YOUR NAME, IC/PASSPORT, NATIONALITY, ADDRESS, APPLICATION AMOUNT, CPF INVESTMENT ACCOUNT NUMBER AND CDP ACCOUNT NUMBER FROM YOUR ACCOUNTS TO CDP, CPF, SCCS, SHARE REGISTRARS, SGX-ST AND ISSUER/VENDOR(S).
– THIS IS YOUR ONLY FIXED PRICE APPLICATION AND IS IN YOUR NAME AND AT YOUR RISK.
(Press “ENTER” to continue)
7: Screen will display:
NRIC/Passport No. XXXXXXXXXXXX
IF YOUR NRIC/PASSPORT NUMBER IS INCORRECT, PLEASE CANCEL THE TRANSACTION AND NOTIFY THE BRANCH PERSONALLY.
(Press “CANCEL” or “CONFIRM”)
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8: Select mode of payment i.e. “CASH ONLY”. You will be prompted to select Cash Account type to debit (i.e., “CURRENT ACCOUNT/I-ACCOUNT”, “CAMPUS ACCOUNT” OR “SAVINGS ACCOUNT/ TX-ACCOUNT”). Should you have a few accounts linked to your ATM card, a list of linked account numbers will be displayed for you to select.
9: After you have selected the account, your CDP Securities Account number will be displayed for you to confi rm or change (This screen with your CDP Securities Account number will be shown if your CDP Securities Account number is already stored in the ATM system of the UOB Group). If this is the fi rst time you are using UOB Group’s ATM to apply for securities, your CDP Securities Account number will not be stored in the ATM system of the UOB Group, and the following screen will be displayed for your input of your CDP Securities Account number.
10: Read and understand the following terms which will appear on the screen:
1. YOU ARE REQUIRED TO ENTER YOUR CDP ACCOUNT NUMBER FOR YOUR FIRST IPO/SECURITIES APPLICATION. THIS ACCOUNT NUMBER WOULD BE DISPLAYED FOR FUTURE APPLICATIONS.
2. DO NOT APPLY FOR JOINT ACCOUNT HOLDER OR THIRD PARTIES.
3. PLEASE ENTER YOUR OWN CDP ACCOUNT NUMBER (12 DIGITS) & PRESS ENTER.
If you wish to terminate the transaction, please press “CANCEL”.
11: Key in your CDP Securities Account number (12 digits) and select “CONFIRM-YES”.
12: Select your nationality status.
13: Key in the number of shares you wish to apply for and press the “ENTER” key.
14: Check the details of your Electronic Application on the screen and press “ENTER” key to confi rm your Electronic Application.
15: Select “NO” if you do not wish to make any further transactions and remove the Transaction Record. You should keep the Transaction Record for your own reference only.
Steps for an Internet Electronic Application through the IB website of the UOB Group
Owing to space constraints on the UOB Group’s IB website screens, the following terms will appear in abbreviated form:
“CDP” : The Central Depository (Pte) Limited
“CPF” : The Central Provident Fund
“NRIC” or “I/C” : National Registration Identity Card
“PR” : Permanent Resident
“SGD” : Singapore Dollars
“SCCS” : Securities Clearing and Computer Services (Pte) Limited
Step 1: Connect to the UOB Group website at http://www.uobgroup.com.
2: Locate the “UOB Online Services Login” icon on the top right hand side of the Home Page.
3: Point on “UOB Online Services Login” icon and at the drop list select “UOB Personal Internet Banking”.
4: Enter your Username and Password and click “Submit”.
5: Click on “Proceed” under the Full Access Mode.
6. You will receive a SMS One-Time Password. Enter the SMS One-Time Password and click “Proceed”.
7. Click on “EPS/Securities/CPFIS”, followed by “Securities”, followed by “Securities Application”.
8: Read the IMPORTANT notice and complete the declarations found on the bottom of the page by answering Yes/No to the questions.
9: Click “Continue”.
10: Select your country of residence (you must be residing in Singapore to apply), and click “Continue”.
11: Select the “Securities Counter” from the drop list (if there are concurrent IPOs) and click “Submit”.
12: Check the “Securities Counter”, select the mode of payment and account number to debit and click on “Submit”.
13: Read the important instructions and click on “Continue” to confi rm that:
1. You have read, understood and agreed to all the terms of this application and the Prospectus/Document or Supplementary Document.
2. You consent to disclose your name, I/C or passport number, address, nationality, CDP Securities Account number, CPF Investment Account number (if applicable), and application details to the Securities registrars, SGX, SCCS, CDP, CPF Board and issuer/vendor(s).
3. This application is made in your own name, for your own account and at your own risk.
4. For FIXED/MAX price Securities application, this is your only application. For TENDER price Securities application, this is your only application at the selected tender price.
5. For FOREIGN CURRENCY securities, subject to the terms of the issue, please note the following: The application monies will be debited from your bank account in SGD, based on the Bank’s exchange profi t or loss, or application monies may be debited and refunds credited in SGD at the same exchange rate.
6. For 1ST-COME-1ST-SERVE securities, the number of securities applied for may be reduced, subject to the availability at the point of application.
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14: Check your personal details, details of the share counter you wish to apply for and account to debit.
Select (a) Nationality;
Enter (b) your CDP Securities Account number; and
(c) the number of shares applied for.
Click “Submit”
15: Check your personal particulars (name, NRIC/Passport number and nationality), details of the share counter you wish to apply for, CDP Securities Account number, account to debit and number of securities applied for.
16: Click “Confi rm”, “Edit” or “Home”.
17: Print the Confi rmation Screen (optional) for your own reference and retention only.
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APPENDIX E
INDUSTRY REPORT
The following section is the Industry Report prepared by Converging Knowledge, which has been included in this Prospectus. Converging Knowledge had drawn its analysis from the offshore O&G industry, and has based the Industry Report on a combination of primary and desktop (published resources) research. Primary research involves discreet interviews tapping on the knowledge, experience and opinions of relevant companies, industry associations, technical institutions, government bodies and academic institutions. Desktop research includes, but is not limited to, a review of local newspapers and news wires/agencies, leading industry and trade publications, websites of regulatory authority as well as relevant government agencies and websites of companies. Converging Knowledge has advised that it has prepared the Industry Report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the Industry Report. Converging Knowledge has also advised us that the Industry Report represents a true and fair view of the industry within the boundaries and limitations of secondary statistics, primary research and continued industry movements. It notes that the opinions expressed are opinions of human sources and caution as to the subjective nature of such information. Converging Knowledge’s methodologies for identifying and collecting information and data, and therefore the information discussed in the Industry Report, may differ from those of other sources, including that of our Company.
While we believe that the information and data in the Industry Report are reliable, we cannot ensure the accuracy of the information or data, and none of our Company, the Issue Manager, Underwriter and Placement Agent, or any of our and their respective affi liates or advisors have independently verifi ed this information or data. You should not assume that the information and data contained in this section is accurate as of any date other than the date of this Prospectus, except as otherwise indicated. You should also be aware that since the date of this Prospectus, there may have been changes in the industry and the various sectors therein which could affect the accuracy or completeness of the information in this section.
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The Offshore Oil and Gas Industry – Singapore
Singapore Malaysia Hong Kong
This report is prepared for
Gaylin Holdings Pte. Ltd.4 June 2012
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Converging Knowledge has prepared this report in an independent and objective manner and has taken adequate care to ensure the accuracy and completeness of the report. We believe that this report represents a true and fair view of the industry within the boundaries and limitations of secondary statistics, primary research and continued industry movements. We note that the opinions expressed are opinions of human sources and caution as to the subjective nature of such information.
This material should not be construed as an offer to sell or the solicitation of an offer to buy in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Converging Knowledge. It does not take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice.
Converging Knowledge and/or any of its affiliates and/or any persons related thereto do not accept any liability whatsoever for direct or consequential losses or damages that may arise from the use of information contained in this report. No part of this material may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Converging Knowledge’s prior written consent.
Malaysia Tel: +603 2333 8950 Fax: +603 2333 8899 E-8-6 Megan Avenue 1, No. 189 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Email: [email protected]
Hong Kong Tel: +852 8197 8261 Fax: +852 3118 6161 Suite A, 12/F Ritz Plaza, 122 Austin Road, TST Kowloon, Hong Kong Email: [email protected]
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Converging Knowledge The Offshore Oil and Gas Industry – Singapore | Page 3
The Client wishes to conduct research on the rigging and lifting equipment used by the Offshore Oil and Gas Industry, for the purpose of an Initial Public Offering (“IPO”) in Singapore. Our objective is to assist the Client in conducting primary and secondary research to gain insights into the above focus areas and sector.
The research will be compiled in the form of a report, covering an overview of the Offshore Oil and Gas Industry in Singapore, with focus on rigging and lifting equipment. The report will also include a two-page Executive Summary.
The scope of research is as follows:
1. Overview of the Offshore Oil and Gas Industry, with focus on rigging and lifting equipment in Singapore
a. Overview of the Offshore Oil and Gas industry in Singapore b. Introduction on rigging and lifting equipment c. Industry structure
i. Description of different segments in the sector ii. Statistics will be based on reported figures from government and industry
associations d. Overview of rigging and lifting equipment market in Singapore
2. Major Trends and Drivers of the Industry
a. Global and Regional Trends i. Global and regional trends that will impact businesses in Singapore, with
focus on the rigging and lifting equipment market b. Global and Regional Drivers
i. Global and regional drivers that will impact businesses in Singapore, with focus on the rigging and lifting equipment market
c. Brief overview of Offshore Oil and Gas industry in the Asia Pacific, the Middle East and South America (including Brazil)i. This segment is compiled from desk research only
3. Competitive Landscape
a. Overview of the competitive landscape of rigging and lifting equipment market in Singapore
b. List of major competitors and their business segmentation c. Ranking of major players
i. Subject to availability of financial statements filed d. SWOT analysis
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4. Singapore Government’s Policies and Regulations
a. Relevant policies and regulations to the industry
5. Prospects of the Industry
The research will be conducted on a best effort basis through a combination of primary and desktop (published resources) research, to address the scope of research.
Primary research involves discreet interviews tapping on the knowledge, experience and opinions of relevant companies, industry associations, technical institutions, government bodies and academic institutions.
Desktop research includes, but is not limited to, a review of the following:
• Local newspapers and news wires/agencies; • Leading industry and trade publications; • Websites of regulatory authority as well as relevant government agencies; and • Websites of companies.
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2. OVERVIEW OF THE OFFSHORE OIL AND GAS INDUSTRY IN RELATION TO RIGGING AND LIFTING EQUIPMENT ................................................................................... 10
2.1 Introduction on Rigging and Lifting Equipment ............................................................... 102.2 Offshore O&G Industry Structure ................................................................................... 102.2.1 Description of Different Segments in the Sector ......................................................... 112.3 Relevant Statistics on the Offshore Oil and Gas Industry .............................................. 132.4 Overview of the Rigging and Lifting Equipment Market in Singapore ............................ 19
3. MAJOR TRENDS AND DRIVERS OF THE INDUSTRY ................................................. 22
3.1 Brief Overview of Offshore Oil and Gas Industry in the Asia Pacific, Middle East and South America ......................................................................................................................... 263.1.1 Asia Pacific .................................................................................................................. 263.1.2 Middle East .................................................................................................................. 273.1.3 South America ............................................................................................................. 28
4.1 Overview of the Competitive Landscape of Rigging and Lifting Equipment Market in Singapore ................................................................................................................................ 294.2 List of Major Competitors and Business Segmentation .................................................. 294.2.1 Franklin Offshore International Pte. Ltd. (“Franklin Offshore”) .................................... 294.2.2 KTL Global Pte. Ltd. (“KTL Global”) ............................................................................ 304.3 Ranking of Major Players ............................................................................................... 304.4 SWOT Analysis ............................................................................................................... 31
5. SINGAPORE GOVERNMENT POLICIES AND REGULATIONS ................................... 32
6. PROSPECTS OF THE INDUSTRY .................................................................................. 34
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Table 1: Total Oil Supply by Region (Thousand Barrels Per Day) .......................................... 14
Table 2: Offshore Rig Utilisation by Region ............................................................................ 15
Table 3: Rig Utilisation by Rig Type ........................................................................................ 16
Table 4: Floating Docks/ Shiplifts Capacity as at April 2011 ................................................... 19
Table 5: Examples of Rigging and Lifting Equipment .............................................................. 19
Table 6: Rankings of Major Rigging and Lifting Equipment Players ....................................... 30
Table 7: SWOT Analysis of the Offshore O&G Industry in Singapore .................................... 31
Table 8: Examples of Drilling Rigs Built in the 1970s .............................................................. 36
Figure 1: Structure of Singapore Offshore Oil and Gas Industry ............................................ 11
Figure 2: Oil Prices in the Last 10 Years (2001 – 2011) ......................................................... 13
Figure 3: Top 10 Oil Producing Countries in 2011 .................................................................. 15
Figure 4: Rigs under Construction, by Type ............................................................................ 17
Figure 5: Leading Shipyards by Rigs under Construction ....................................................... 18
Figure 6: Breakdown of Petroleum Consumption by Region, 2011 ........................................ 22
Converging Knowledge The Offshore Oil and Gas Industry – Singapore | Page 25
estimated that Malaysia’s undiscovered oil resources amount to 10 billion barrels or oil, where
65.0% is reportedly from deepwater discoveries.23
Demand for more FPSO’s and Larger Floating Vessels
Exploration efforts into deepwater fields have resulted in the demand for more Floating
Production Systems (“FPS”)24. In the beginning of 2011, South Korea, the world’s largest
shipbuilding nation25, reportedly took several orders for FPSOs, Floating Liquefied Natural
Gas (“FLNG”) and Fixed Platforms26. The leading shipbuilders in the country are reportedly
making fewer oil tankers and container vessels as they focus on more lucrative drillships and
offshore units that generally require less steel27.
Industry experts are seeing a growing trend towards larger floating vessels that can
accommodate bigger volumes28. For example, Shell Corporation’s Prelude floating liquefied
natural gas (“LNG”) vessel will be the world’s first and largest FPSO facility, and will be
permanently moored 200 kilometres off Australia. Once completed, the facility will be 488
metres in length. It is expected to withstand very high winds and giant waves.29
Technology, One of the Key Drivers in the Offshore O&G Industry Aided by technology advancements for deepwater exploration, oil companies that previously
had problems extracting oil thousands of metres below the ocean floor are now able to reach
these depths30.
Technology helps the marine and offshore industry to overcome the challenges in meeting the
increasing demand for energy sources, the need for more efficient vessel and logistics
services and adapting to new environment regulations. In 2011, Singapore rig builders
experienced an increasing demand for jack-up rigs, with high-specifications that can
accommodate deepwater drilling31.
23 http://www.offshore-technology.com/projects/gumusut-kakap-deepwater-oil-gas/ 24 http://www.sgmarineindustries.com/Indprof/SSOI/SSSOI_ED01.pdf 25 http://www.koreatimes.co.kr/www/news/biz/2012/01/123_102558.html 26 4 July 2011, The Oil and Gas Journal, HHI Offshore boasts a booming order book. 27 http://www.shipandoffshore.net/news/new-ships-weekly-report/new-ships-weekly-report-article/id/new-ships-weekly-report-51.html 28 4 July 2011, The Oil and Gas Journal, HHI Offshore boasts a booming order book. 29 27 May 2011, Upstream, World’s largest offshore floating unit. 30 http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9037387&contentId=7068780 31 http://www.sgmarineindustries.com/Indprof/SSOI/SSSOI_ED01.pdf
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3.1 Brief Overview of Offshore Oil and Gas Industry in the Asia Pacific, Middle East and South America
3.1.1 Asia Pacific
In the Asia Pacific region, the PRC takes the lead, producing 4.27 million barrels of oil per
day. This is approximately half of the Asia Pacific region’s total daily oil produced in 2011.
This is followed by Indonesia (11.48%), India (10.88%), Malaysia (7.12%) and Australia
(5.42%). Please refer to the figure below to view daily oil production of these countries for
2011.
Figure 8: Leading Oil Producing Countries in Asia Pacific, 2011
Source: U.S. Energy Information Administration
In terms of offshore developments, countries such as Indonesia, Thailand, the PRC, the
Philippines, Malaysia, India, Vietnam and Myanmar already have existing offshore
opportunities. These include the Abadi gas field located 3,221km² in the Masela block in the
Arafura Sea, Indonesia, the Dai Hung oilfield, located in block 05.1Ab 265km south of Ba Ria-
Vung Tau province in Vietnam, the Kebabangan gas field, which is located in the South China
Sea, 130km offshore Sabah, East Malaysia and the Galoc oil field, situated 60km north-west
Workplace Safety and Health (Registration of Factories) Regulations 2008 The WSH Factory Regulations is a subsidiary legislation under the WSH Act. Any person
who desires to occupy or use any premises as a factory, before the commencement of
operation of the factory, submit a notification to the Commissioner for Workplace Safety and
Health (“CWSH”) informing the Commissioner of his intention to occupy or use those 44 http://www.mom.gov.sg/legislation/occupational-safety-health/Pages/workplace-safety-health-act.aspx
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premises as such a factory. The occupier of a factory in respect of which a notification has
been submitted to CWSH, shall: (a) where any change takes place in any of the particulars of
the factory which have been notified to the Commissioner, furnish particulars of the change to
the Commissioner in such form and manner as the Commissioner may require, not later than
14 days of the change taking place; (b) if he intends to cease his occupation or use of the
factory, notify the Commissioner thereof in such form and manner as the Commissioner may
require, not less than 14 days before so ceasing; and (c) where any change is to be made to
the type of work carried out in the factory, inform the Commissioner of the proposed change
in writing and provide the Commissioner with the relevant documents pertaining to the change
and such other information as the Commissioner may require, not less than one month before
the change is made. 45
Employment of Foreign Manpower Act The Employment of Foreign Manpower Act relates to the employment of foreign manpower.
The Act stipulates that no person shall employ a foreign employee unless the foreign
employee has a valid work pass.46 Employers in the manufacturing sector can recruit workers
from the following countries/territories: (1) Malaysia, (2) the PRC, and (3) North Asian
Sources (“NAS”): Hong Kong, Macau, South Korea and Taiwan. 47
Detailed information on work pass permits, levies and quotas for hiring foreign workers for the
manufacturing sector are available in MOM’s website: http://www.mom.gov.sg/foreign-
Converging Knowledge The Offshore Oil and Gas Industry – Singapore | Page 35
oil production among its Southeast Asian neighbours54. Of recent, Vietnam has been opening
up offshore options on the Ham Rong and Gau Chua-Ca Cao oilfields55.
Increased interest in LNG as an alternative energy source will bring more focus to Myanmar.
Myanmar is expected to offer more onshore and offshore blocks off the Rakhine, Tanintharyi
and Moattama areas56.
Decommissioning of Oil Rigs and Ageing Offshore Fleet
Decommissioning of ageing offshore structures is reportedly a new business segment in the
Asia Pacific region that is showing great potential 57 . The decommissioning segment is
growing and industry experts predict that the market for decommissioning in Asia Pacific
could be as high as USD32.0 billion58.
In the Asia Pacific alone, it is estimated that there are approximately 600 to 800 platforms due
for decommissioning in 201259. Decommissioning is the process of dismantling and removing
oil rigs that have exhausted their production life 60 . The ageing offshore fleet and
decommissioning of platforms built especially in the 1970s61 presents a positive potential for
rigging and lifting market.
A review of some of the active deepsea drilling rigs in Southeast Asia shows their average
age to be 21 years, an age near the end of its useful life62. Based on industry estimates,
useful life should not exceed 20 to 30 years, to retain its efficiency. The table below shows
examples of active drilling rigs in Southeast Asia that were built in the 1970s.
54 http://www.unece.org/fileadmin/DAM/energy/se/pp/unfc_egrc/egrc3_may2012/4May/12_Ngyen.pdf 55 2 March 2012, Upstream, Petronas Carigali pushing for pair of Vietnam FPSOs. 56 PTT Production and Exploration PLC, January 2012 Presentation on Myanmar 57 http://www.offshoreenergytoday.com/iev-starts-decommissioning-project-offshore-malaysia/ 58 http://www.decomworld.com/asiapac/ 59 http://offshoredecommissioningasia.com/; http://www.decomworld.com/asiapac/ 60 http://www.spe.org/jpt/print/archives/2011/05/15SpecialSection.pdf 61 http://www.offshoreenergytoday.com/iev-starts-decommissioning-project-offshore-malaysia/ 62 Review of data obtained from Rigzone, Retrieved 29 May 2012.
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Table 8: Examples of Drilling Rigs Built in the 1970s
