Incorporated in the Cayman Islands with limited liability
LISTING BY WAY OF PLACING
Stock Code : 8027
Sole Sponsor
GRAND VINCO CAPITAL LIMITED(A wholly-owned subsidiary of Vinco Financial Group Limited)
以 配 售 方 式
獨 家 保 薦 人
大唐域高融資有限公司( 域 高 金 融 集 團 有 限 公 司 之 全 資 附 屬 公 司 )
於開曼群島註冊成立的有限公司
股份代號: 8027
KPM H
OLD
ING
LIMITED
吉輝控股有限公司
Sole Sponsor 獨家保薦人
KPM HOLDING LIMITED吉 輝 控 股 有 限 公 司
KPM HOLDING LIMITED吉 輝 控 股 有 限 公 司
If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
KPM HOLDING LIMITED
吉輝控股有限公司*(Incorporated in the Cayman Islands with limited liability)
LISTING ON THE GROWTH ENTERPRISE MARKET OF
THE STOCK EXCHANGE OF HONG KONG LIMITED
BY WAY OF PLACING
Number of Placing Shares : 100,000,000 Placing Shares comprising
80,000,000 New Shares and 20,000,000
Sale Shares
Placing Price : HK$0.50 per Placing Share, plus brokerage
of 1%, SFC transaction levy of 0.0027%
and Stock Exchange trading fee of
0.005% (payable in full on application in
Hong Kong dollars)
Nominal value : HK$0.01 per Share
Stock code : 8027
Sole Sponsor
Grand Vinco Capital Limited
(A wholly-owned subsidiary of Vinco Financial Group Limited)
Joint Lead Managers
Grand Vinco Capital Limited
(A wholly-owned subsidiary of Vinco Financial Group Limited)
Sinomax Securities Limited
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited and Hong KongSecurities Clearing Company Limited take no responsibility for the contents of this prospectus, make norepresentation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the paragraph headed ‘‘Documentsdelivered to the Registrar of Companies’’ in Appendix V to this prospectus, has been registered by the Registrar ofCompanies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions)Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and theRegistrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any of the otherdocuments referred to above.
The Placing Price is currently fixed at HK$0.50 unless otherwise announced. Investors applying for Placing Sharesmust pay, on application, the Placing Price of HK$0.50 for each Placing Share together with brokerage of 1%, SFCtransaction levy of 0.0027% and Stock Exchange trading fee of 0.005%.
Prior to making an investment decision, prospective investors should carefully consider all the information set out inthis prospectus, including the risk factors set out in the section headed ‘‘Risk factors’’ in this prospectus. Pursuant tothe termination provisions contained in the Underwriting Agreement, Vinco Capital (for itself and on behalf of theUnderwriters) has the right in certain circumstances, in its sole and absolute discretion, to terminate the obligations ofthe Underwriters pursuant to the Underwriting Agreement at any time prior to 8 : 00 a.m. (Hong Kong time) on theListing Date. Further details of the terms of the termination provisions are set out in the section headed ‘‘Underwriting— Grounds for termination’’ in this prospectus. It is important that you refer to the said section for further details.
* For identification purpose only
IMPORTANT
30 June 2015
CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (‘‘GEM’’)
GEM has been positioned as a market designed to accommodate companies to which a
higher investment risk may be attached than other companies listed on the Stock Exchange.
Prospective investors should be aware of the potential risks of investing in such companies
and should make the decision to invest only after due and careful consideration. The greater
risk profile and other characteristics of GEM mean that it is a market more suited to
professional and other sophisticated investors.
Given the emerging nature of companies listed on GEM, there is a risk that securities
traded on GEM may be more susceptible to higher market volatility than securities traded
on the Main Board and no assurance is given that there will be a liquid market in the
securities traded on GEM.
The principal means of information dissemination on GEM is publication on the
Internet website operated by the Stock Exchange. Listed companies are not generally
required to issue paid announcements in gazetted newspaper. Accordingly, prospective
investors should note that they need to have access to the Stock Exchange’s website at
www.hkexnews.hk in order to obtain up-to-date information on GEM-listed issuers.
CHARACTERISTICS OF GEM
– i –
2015
(Note 1)
Announcement of the level of indication of
interest in the Placing to be published on
the Stock Exchange’s website
at www.hkexnews.hk and our Company’s website
at www.kpmholding.com on or before . . . . . . . . . . . . . . . . . . . . . . . Thursday, 9 July
Allocation/transfer of Placing Shares to placees on or before . . . . . . . Thursday, 9 July
Deposit of share certificates for the Placing Shares into
CCASS on or before (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 9 July
Dealings in the Shares on GEM to commence at 9 : 00 a.m. on . . . . . . . Friday, 10 July
Notes:
1. All times and dates refer to Hong Kong local times and dates.
2. Share certificates for the Placing Shares allocated and issued/transferred to the placees are expected to be
deposited directly into CCASS on or before Thursday, 9 July 2015 for credit to the respective CCASS
Participants’ or the CCASS Investor Participants’ stock accounts designated by the Underwriters, the
placees or their agents (as the case may be). No temporary documents or evidence of title will be issued.
3. All share certificates will only become valid certificates of title when the Placing has become unconditional
in all respects and the Underwriting Agreement has not been terminated in accordance with its terms at
any time prior to 8 : 00 a.m. Hong Kong time on the Listing Date.
4. If there is any change to the above expected timetable, our Company will make an appropriate
announcement to inform investors accordingly on the Stock Exchange’s website at www.hkexnews.hk and
on our Company’s website at www.kpmholding.com.
Details of the structure of the Placing, including the conditions and grounds for
termination thereto, are set out in the section headed ‘‘Structure and conditions of the
Placing’’ in this prospectus.
EXPECTED TIMETABLE
– ii –
IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by our Company solely in connection with the Placing and
does not constitute an offer to sell or a solicitation of an offer to buy any security other than
the Placing Shares offered by this prospectus. This prospectus may not be used for the
purpose of and does not constitute an offer to sell or a solicitation of an offer in any other
jurisdiction or in any other circumstances.
You should rely only on the information contained in this prospectus to make your
investment decision. Our Company, the Selling Shareholder, the Sole Sponsor, the Joint
Bookrunners, the Joint Lead Managers and the Underwriters have not authorised anyone to
provide you with information that is different from what is contained in this prospectus. Any
information or representation not made or contained in this prospectus must not be relied on
by you as having been authorised by our Company, the Selling Shareholder, the Sole
Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of their
respective directors or affiliates or any other persons or parties involved in the Placing.
Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Summary and highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Forward-looking statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Information about this prospectus and the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Directors and parties involved in the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Corporate information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Regulatory overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
History, reorganisation and group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
CONTENTS
– iii –
Page
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Connected transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Future plans and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Directors, senior management and staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Relationship with Controlling Shareholders and non-competition undertakings . . . . . . 166
Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Structure and conditions of the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Appendices
I — Accountants’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
II — Unaudited pro forma financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
III — Summary of the constitution of our Company and Cayman Islands
company law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
IV — Statutory and general information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
V — Documents delivered to the Registrar of Companies and available
for inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
CONTENTS
– iv –
This summary aims to give you an overview of the information contained in this
prospectus and should be read in conjunction with the full text of this prospectus. As the
following is only a summary, it does not contain all the information that may be important to
you. You should read this prospectus in its entirety before you decide to invest in the Placing
Shares.
There are risks associated with any investment. Some of the particular risks involved in
investing in the Placing Shares are set out in the section headed ‘‘Risk factors’’ in this
prospectus (pages 23 to 35). You should read that section carefully before making any
decision to invest in the Placing Shares. Various expressions used in this summary are
defined in the sections headed ‘‘Definitions’’ and ‘‘Glossary’’ in this prospectus (pages 13 to
20).
OVERVIEW
Our business model
We have been principally engaged in the design, fabrication, installation and
maintenance of signage and related products in both the public and private sectors in
Singapore since 1997. We are one of the established companies offering road signage in
Singapore and have the capability to offer our products across public and private sectors.
Both our public and private sector projects are typically non-recurring in nature.
Approximately 66.7% and 80.7% of our revenue during the two years ended 31
December 2014 was derived from the public sector. Public sector includes road signage,
signage and related products for education institutions, public housing flats/compounds
and national parks. Private sector includes signage and related products for commercial
buildings and fast food chains.
Our competitive advantage lies in our ability to provide reliable products in a timely
manner. Our established track record and experienced management team have built a
strong reputation in the industry over the years. Our Group did not apply for listing on the
Singapore Exchange Limited or any other exchange.
The business model is mostly the same for both public sector and private sector
projects. All our projects undergo the following stages (1) tendering, (2) project
implementation and (3) post-project review. However, there are some minor differences
in the above stages between public and private sector projects:
(a) During the tendering stage, the tender documents for private sector projects are
relatively less complex than that for public sector projects.
(b) During the implementation stage, there are (i) more project team members
involved in public sector projects than private sector projects, (ii) broader scope of
value-adding works involved in public sector projects, (iii) usually a stricter and
defined time frame for public projects whilst the installation schedules for private
SUMMARY AND HIGHLIGHTS
– 1 –
projects are more flexible, (iv) more project management required for public
sector projects due to more work steps than private sector projects and (v) stricter
requirements set by the LTA of Singapore for road signage public sector projects.
(c) Subsequent to the delivery and completion of the signage installation, customers
in public sector projects typically undertake a more detailed process for reviewing
the signage works done to ensure specifications are met in accordance with LTA’s
requirements.
As such, there is higher barrier of entry into the public sector projects where reputable
track record and experienced management team take time to build. Given that we have been
in this industry for more than 15 years, our Directors believe that we are in a better position
to get public sector projects as compared to smaller companies in the market. Moreover, as
explained above, there is generally higher complexity, requirement for more resources,
experience and project management capability involved in public sector projects, therefore
leading to a higher margin for this sector.
Year ended 31 December 2013 Year ended 31 December 2014
Number of
contracts
and orders
From private
invitation/
representing
approximate
% of
contracts
Success
rate
From open
tender/
representing
approximate
% of
contracts
Success
rate
Number of
contracts
and orders
From private
invitation/
representing
approximate
% of
contracts
Success
rate
From open
tender/
representing
approximate
% of
contracts
Success
rate
(%) (%) (%) (%)
Public sector 1,041 1,029/98.8% 68 12/1.2% 28 1,170 1,167/99.7% 82 3/0.3% 33
Private sector 1,170 1,170/100.0% 30 — — 1,108 1,108/100.0% 35 — —
Total 2,211 2,199 30–68 12 28 2,278 2,275 35–82 3 33
Our principal business activities
Our principal business activity is the design, fabrication, installation and maintenance
of signage and related products in both the public and private sectors in Singapore. Our
signage and related products include, but are not limited to, indoor signage, outdoor
signage, road signage, steel works, railings and hoarding signage.
Key milestones
— From 2008 to 2014, Signmechanic Singapore was awarded the temporary signage
projects required for Formula 1 Singapore Grand Prix, providing road diversion
signage for the past seven years.
— In 2009, Signmechanic Singapore obtained its first major road signage contract of
value of approximately S$4.0 million, for the upgrading of directional and traffic
signs in the west sector of Singapore.
— In 2010, Signmechanic Singapore was awarded the road directional signage
required for Youth Olympics held in Singapore.
SUMMARY AND HIGHLIGHTS
– 2 –
— From 2011 to 2013, Signmechanic Singapore obtained various contracts for the
supply of labour and machinery for the construction of precast facade wall, lane
marking and road/directional signage along the Marinal Coastal Expressway, the
widest undersea road tunnel in Singapore.
— In 2013, Signmechanic Singapore was awarded Singapore Business Quality Award
for its commitment towards quality, environment, health and safety management
system.
We will continue to focus on the public sector in Singapore, while seeking
opportunities to expand our business portfolio and product offering. Accordingly, we do
not expect such continued focus to materially alter our operations and financial position in
the future.
Customers
Our customers comprise mainly main contractors of civil engineering projects in the
public sector in Singapore, who will subcontract the signage works of their projects to us.
We are one of the established companies offering road signage in Singapore and we also
have contracts in relation to signage and related products in the public sector for education
institutions, public housing flats/compounds, defence compound, airport and national
parks, amongst others. We also have customers in the private sector for signage and related
products for commercial buildings, industrial buildings, private residential buildings,
hospital and fast food chains. We had 310 and 317 customers for the two years ended 31
December 2014 respectively, of which revenue from the public sector comprised
approximately 66.7% and 80.7% of our total revenue for the two years ended 31
December 2014, respectively. During the Track Record Period, we have recognised revenue
from 2,211 and 2,278 contracts and orders respectively.
Our signage works for our contracts typically align with the project duration of our
customers’ main contractor project, which can span from approximately 1 month to 4 years.
Over the years, we have built a solid track record for providing reliable and timely products
for road signage works in Singapore, and have a good reputation with our customers. There
is no long-term agreement with any of our customers and contracts are signed on a case by
case basis.
All open tender projects are competitive in nature; for private invitation projects, we
understand from our customers that they typically require more than one quotation from
their suppliers, and therefore with more than one quotation, these projects will also be
competitive in nature. Please refer to the section headed ‘‘Business — Project Management’’
on pages 108 to 114 of this prospectus for details.
For the two years ended 31 December 2014, revenue from our five largest customers
amounted to approximately S$2.1 million and S$5.1 million, and accounted for
approximately 26.6% and 43.1% of our total revenue, respectively. Revenue from our
largest customer for the same periods amounted to approximately S$0.7 million and S$1.4
SUMMARY AND HIGHLIGHTS
– 3 –
million and accounted for approximately 8.9% and 12.1% of our total revenue,
respectively. Please refer to the section headed ‘‘Business — Customers’’ on pages 116 to
120 of this prospectus for details.
Main qualifications and licences
Our Group holds a BCA L5 grading in the work head category of ‘‘Signcraft
Installation’’ which would enable us to tender for Singapore public sector projects of up to
S$14 million, amongst other gradings in other categories. For details of our qualifications
and licences, please refer to the section headed ‘‘Business — Main qualifications and
licences’’ on pages 101 to 102 of this prospectus.
Suppliers
We mainly engage suppliers in Singapore and our main suppliers supply steel and
aluminium products, micro prismatic reflective sheeting and road safety products. There is
no long term contract with our suppliers, and we make our purchases based on the
requirements of each particular contract and for the customer orders we have on hand. Our
Group has good relationships with our suppliers and has over the years established strong
rapport with them. For the two years ended 31 December 2014, purchases from our five
largest suppliers amounted to approximately S$1.0 million and S$1.4 million, and
accounted for approximately 39.9% and 40.4% of our total purchases, respectively.
Purchases from our largest supplier for the same periods amounted to approximately S$0.5
million and S$0.5 million, and accounted for approximately 19.7% and 14.4% of our total
purchases, respectively. Please refer to the section headed ‘‘Business — Suppliers’’ on pages
121 to 123 of this prospectus for details.
Subcontractors
We may engage subcontractors for part of certain contracts secured by us, for instance,
to provide certain services such as laying of road markings, installation of precast blocks,
bulky metal works or excavation works which we do not typically provide in-house. Our
Group has good relationships with our subcontractors and has over the years established
strong rapport with them. Total amount paid for subcontracting works during the Track
Record Period amounted to approximately S$1.4 million and S$1.7 million and accounted
for approximately 29.2% and 27.1% of our total cost of sales, respectively. Please refer to
the section headed ‘‘Business — Subcontractors’’ on pages 123 to 125 of this prospectus for
details.
Sales and marketing
Our customers typically come to know us by word-of-mouth or are repeat customers.
We also rely on our Executive Directors, Mr. Kelvin Tan and Mr. Peter Tan, and our
general manager, Mr. Soh Chiau Kim, to build and foster relationships with our key
customers. We also monitor the GeBIZ system for opportunities in public sector contracts
related to signage. We do not have a dedicated sales and marketing team.
SUMMARY AND HIGHLIGHTS
– 4 –
Competitive landscape
The infrastructure in Singapore is central to socio-economic development and
advancement. Major infrastructure projects continue to dominate the construction
industry and public projects are projected to sustain Singapore’s construction demand for
2015. Thus, the opportunities in this industry remain positive as construction demand in
Singapore is expected to sustain at S$26 billion to S$37 billion per annum from year 2016 to
2019. This is in view with major public sector civil engineering projects such as new
expressways and railways extensions underway, thus requiring more deployment and
placement of road signage in the near future.
In 2014, Singapore’s total signage manufacturing industry is worth approximately
S$304 million with at least 300 establishments in the market. The total value grew by 2.7%
from 2012 to 2014. The market size for CR11 signcraft segment is estimated to be
approximately 10% of the total industry in 2014 (which is approximately S$30.4 million in
value). Based on our Group’s sales of approximately S$11.9 million in 2014, our Group’s
market share in the CR11 signcraft segment is approximately 39.1%.
The market for the signage industry in Singapore is serviced by approximately 300
manufacturers with 71 CR11 registered construction agencies in Singapore (that are all
private limited firms). In terms of competitors, our Group competes mainly with two other
companies for the road signage segment and about twenty others for the commercial
signage segment in the market. While our Group operates in a fairly competitive space, we
did a competent job distinguishing ourselves from other suppliers. Our Group is one of the
main players in the market focusing on civil projects thus far and is able to work on an
expanded scope of work that includes railing; therefore making this one of the primary
drivers for our Group’s good relationship with our customers. Some unique selling points
that differentiates our Group from our competitor include our L5 grade certification in
signcraft installation and trusted supplier for civil projects in Singapore.
Barriers for entry in this industry are not high and projects often vary in value. In
addition, operational productivity is another core requirement for companies competing in
this sector. Hence, as well as achieving the right levels of experience and financial backing
for registration under the Contractor Registration Scheme (CRS), companies also need to
meet government standards for productivity.
Although there are some barriers to entry for this industry as mentioned, the prospects
for our Group however remains fair as long as there is a continued demand for more
deployment and placement of road signage in the near future.
Please refer to the section headed ‘‘Industry overview’’ on pages 45 to 60 of this
prospectus for details.
SUMMARY AND HIGHLIGHTS
– 5 –
Competitive strengths
— We have a reputation as an established signage provider, particularly for road signage
works in Singapore
— We have a solid track record of providing reliable and timely products for our
customers
— Our rapport with our suppliers enable us to obtain competitive pricing and fast
delivery turnaround time
— We have an experienced and dedicated management team and each of our Executive
Directors has over 15 years of experience in the signage installation industry in
Singapore
Please refer to the section headed ‘‘Business — Competitive strengths’’ on pages 93 to
95 of this prospectus for further details.
Business strategies
Our corporate objective is to achieve sustainable growth in our business and financial
performance so as to create long-term Shareholders’ value. We intend to achieve this by
implementing the following corporate strategies:
— Expand and strengthen our market position in the public sector in Singapore
— Expand our business portfolio through the formation of new companies and/or
acquisitions
— Expand our range of product offering to target and secure more non-road
infrastructure related projects
Please refer to the section headed ‘‘Business — Business objectives and strategies’’ on
pages 96 to 100 and the section headed ‘‘Future plans and use of proceeds’’ on page 145 to
151 in this prospectus for a detailed discussion of these strategies.
SUMMARY AND HIGHLIGHTS
– 6 –
USE OF PROCEEDS
Based on the Placing Price of HK$0.50 per Placing Share, the net proceeds of the
Placing after deduction of underwriting fees and estimated expenses payable by us in
connection with the Placing upon Listing, are estimated to be approximately HK$23.4
million. Our Company currently intends to use the net proceeds from the Placing as follows:
Approximate amount of net
proceeds/utilised by year
ending Intended applications
HK$8.2 million or 35%/31
December 2017
Purchase of materials and/or equipment in relation to
the expansion of existing sector and to target and
secure more non-road infrastructure related projects
HK$8.2 million or 35%/31
December 2017
Capital contribution for the formation of new
companies and/or acquisitions
HK$4.7 million or 20%/31
December 2017
Expand and enhance our workforce to support our
expansion of the existing sector and to target and
secure more non-road infrastructure related projects
HK$2.3 million or 10%/31
December 2017
Working capital
For further details, please refer to the section headed ‘‘Future plans and use of
proceeds’’ on pages 145 to 151 in this prospectus.
SUMMARY OF FINANCIAL INFORMATION
The tables below summarise our financial information for the two years ended 31
December 2014 respectively, and should be read in conjunction with our financial
information included in the Accountants’ Report set forth in Appendix I to this
prospectus, including the notes thereto.
Highlight of statements of comprehensive income
For the year ended
S$
31 December
2013
31 December
2014
Revenue 7,827,042 11,850,088
Gross profit 2,874,950 5,542,812
Profit before tax 815,419 2,828,211
Profit for the year 611,481 2,565,215
Total comprehensive income for the year 633,684 2,543,012
SUMMARY AND HIGHLIGHTS
– 7 –
Highlight of statements of financial position
As at
S$
31 December
2013
31 December
2014
Non-current assets 578,600 679,373
Current assets 14,468,073 8,783,427
Current liabilities 7,068,628 4,293,783
Net current assets 7,399,445 4,489,644
Non-current liabilities 135,605 155,170
Net assets 7,842,440 5,013,867
Revenue
We derive our revenue mainly from the design, fabrication, installation and
maintenance of signage and related products in both the public and private sectors in
Singapore. The increase in our revenue for the year ended 31 December 2014 as compared
to the year ended 31 December 2013, was mainly due to the fulfillment of several higher
value contracts in the year ended 31 December 2014. For details, please refer to the section
headed ‘‘Financial information — Period to period comparison of results of operations’’ on
pages 187 to 191 in this prospectus.
Key financial ratios
As at
(times)
31 December
2013
31 December
2014
Current ratio(1) 1.5 2.0
Gearing ratio(2) 0.51 0.23
For the year ended
(%)
31 December
2013
31 December
2014
Gross profit margin(3) 36.7 46.8
Profit before tax margin(4) 10.4 23.9
Net profit margin(5) 7.8 21.6
Return on total assets(6) 9.9 27.1
Return on equity(7) 7.8 51.2
Notes:
(1) Current ratio is calculated by dividing current assets by current liabilities as at the respective year end,
excluding asset classified as held for sale and liability directly associated with asset held for sale.
SUMMARY AND HIGHLIGHTS
– 8 –
(2) Gearing ratio is calculated by dividing total borrowings (namely, bills payables, obligations under finance
lease and liability directly associated with asset held for sale) by total equity as at the respective year end.
(3) Gross profit margin is calculated by dividing gross profit by the revenue for the financial year.
(4) Profit before tax margin is calculated by dividing profit before tax by the revenue for the year.
(5) Net profit margin is calculated by dividing profit for the year by the revenue for the year.
(6) Return on total assets is calculated by dividing profit for the year by the total assets (excluding asset
classified as held for sale) as at the respective year end.
(7) Return on equity is calculated by dividing profit for the year by the total equity as at the respective year
end.
Gross profit margin and net profit margin
Our gross profit margin increased from the year ended 31 December 2013 to the year
ended 31 December 2014, from approximately 36.7% to approximately 46.8%. Gross profit
amount also increased from approximately S$2.9 million in the year ended 31 December
2013 to approximately S$5.5 million in the year ended 31 December 2014. These
improvements were mainly attributable to higher revenue, higher selling price and labour
optimisation for certain contracts whose revenue was recognised in the year ended 31
December 2014. Please refer to the section headed ‘‘Financial information — Period to
period comparison of results of operations — Gross profit and gross profit margin’’ on
pages 188 to 190 in this prospectus.
Our net profit margin increased from the year ended 31 December 2013 to the year
ended 31 December 2014, from approximately 7.8% to 21.6%. This was mainly attributable
to the increase in gross profit margin mentioned above. Please refer to the section headed
‘‘Financial information — Period to period comparison of results of operations — Net
profit before tax and net profit before tax margin’’ on pages 190 to 191 in this prospectus.
During the Track Record Period, we recorded gross profits and gross profit margins as
below for public and private sector projects.
Year ended 31 December 2013 Year ended 31 December 2014
Revenue
recognised Gross Profit
Gross profit
margin
Revenue
recognised Gross Profit
Gross profit
margin
S$’000 S$’000
Approximate
% S$’000 S$’000
Approximate
%
Public sector 5,220 1,953 37.4 9,562 4,595 48.1
Private sector 2,607 921 35.3 2,288 948 41.4
7,827 2,875 36.7 11,850 5,543 46.8
SUMMARY AND HIGHLIGHTS
– 9 –
During the Track Record Period, we recorded net profit before tax and net profit
before tax margins as below for public and private sector projects.
Year ended 31 December 2013 Year ended 31 December 2014
Revenue
recognised
Net profit
before tax
Net profit
before tax
margin
Revenue
recognised
Net profit
before tax
Net profit
before tax
margin
S$’000 S$’000
Approximate
% S$’000 S$’000
Approximate
%
Public sector 5,220 580 11.1 9,562 2,405 25.1
Private sector 2,607 235 9.0 2,288 423 18.5
7,827 815 10.4 11,850 2,828 23.9
Impact of listing expenses on the financial performance of our Group for the year ending 31
December 2015
During the Track Record Period, we had not incurred listing-related expenses in the
profit and loss account. The total estimated expenses in relation to the Listing are
approximately HK$17.4 million, of which approximately HK$16.6 million and HK$0.8
million is directly attributable to the issue of New Shares to be borne by our Group and
placing of Sales Shares to be borne by the Selling Shareholder, respectively. Out of the
estimated listing expenses of approximately HK$16.6 million to be borne by us,
approximately HK$12.1 million and HK$4.5 million are expected to be charged to the
profit or loss and reserve of our Group for the year ending 31 December 2015 respectively.
The recognition of the listing expenses is expected to materially affect our financial results for
the year ending 31 December 2015. The estimated listing-related expenses of our Group are
subject to adjustments based on the actual amount of expenses incurred/to be incurred by
our Company upon the completion of the Listing.
Our latest development subsequent to the Track Record Period
We have continued to focus on strengthening our market position for our signage and
related products in the public sector in Singapore. The following is a summary of our
selected unaudited financial information for the four months ended 30 April 2015 which
was prepared on the same basis as our audited financial information in Appendix I to this
prospectus. As far as we are aware, our industry remained relatively stable after the Track
Record Period. There was no material adverse change in the general economic and market
conditions in the country or the signage industry in which we operate that had affected or
would affect our business operations or financial condition materially and adversely.
Based on our unaudited financial information for the four months ended 30 April
2015, our revenue increased by approximately 12.4%, as compared to that for the four
months ended 30 April 2014. The increase was primarily due to new higher value contracts
whose revenue was recognised in the four months ended 30 April 2015. From 1 January
2015 up to the Latest Practicable Date, we did not experience any significant drop in
SUMMARY AND HIGHLIGHTS
– 10 –
revenue or increase in cost of sales or other costs (apart from listing expenses incurred) as
there were no significant changes to the general business model of our Group and economic
environment.
No material adverse change
Our Directors confirm that, up to the date of this prospectus, there has been no
material adverse change in our financial or trading position or prospects since 31 December
2014 and there is no event since 31 December 2014 which would materially affect the
information shown in our financial statements included in the Accountants’ Report set
forth in Appendix I to this prospectus.
PLACING STATISTICS
Based on the
Placing Price of
HK$0.50
Market capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$200,000,000
Unaudited pro forma adjusted net tangible assets per Share . . 2.28 (Singapore cents),
or 12.99 (Hong Kong cents)
Notes:
(1) The calculation of the market capitalisation of our Company is based on 400,000,000 Shares in issue
immediately following the completion of the Placing and the Capitalisation Issue and the Placing Price of
HK$0.50 per Placing Share.
(2) The unaudited pro forma adjusted net tangible assets per Share is arrived at after the adjustments set forth
in Appendix II to this prospectus and on the basis that 400,000,000 Shares were in issue immediately
following the completion of the Placing and the Capitalisation Issue.
DIVIDENDS AND DIVIDEND POLICY
For each of the two years ended 31 December 2014, Signmechanic Singapore declared
dividends of S$0.1 million and approximately S$5.4 million respectively, out of the
distributable profits, and all these dividends had been paid as at the Latest Practicable
Date. Dividends declared and paid in the past should not be regarded as an indication of the
dividend policy to be adopted by our Company following Listing. We do not have any
predetermined dividend payout ratio. For details of our dividend policy, please refer to the
section headed ‘‘Financial information — Dividend policy’’ on page 209 in this prospectus.
RISK FACTORS
There are risks associated with any investment. Some of the particular risks in
investing in the Placing Shares are set out in the section headed ‘‘Risk factors’’ on pages 23
to 35 in this prospectus. You should read that section carefully before you decide to invest
in the Shares.
SUMMARY AND HIGHLIGHTS
– 11 –
The material risks relating to our Group relate to (i) our listing expenses will materially
affect our financial results for the year ending 31 December 2015, (ii) a failure to obtain new
contracts given the non-recurring nature of our contracts, (iii) short-term revenue and
profitability not indicative of long-term results and (iv) loss of key management and
inability to attract and retain technical and management staff. The material risks relating to
our industry are (i) non-renewal or suspension of our qualifications, licences and permits,
(ii) low barriers of entry and (iii) reduction in the pipeline of public sector contracts.
REGULATORY OVERVIEW
The signage industry in Singapore is regulated by the BCA and registration in the
Contractors Registration System maintained by the BCA is a pre-requisite to tendering for
projects in the Singapore public sector. Our Group has a L5 grading in a construction-
related workhead CR11, under signcraft installation. As such, we are able to tender for
public sector projects in Singapore of up to S$14 million. The requirements for L5 grading
in signcraft installation workhead CR11 are; (i) a minimum paid-up capital and minimum
net worth of S$500,000; and (ii) the employment of at least a professional or two technicians
with at least one of them with minimum eight years of relevant experience. For further
information, please refer to section headed ‘‘Regulatory Overview’’ to this prospectus from
pages 61 to 86.
REGULATORY COMPLIANCE
As at the Latest Practicable Date, our business operations are not subject to any
special legislation or regulatory controls other than those generally applicable to companies
and businesses incorporated and/or operating in Singapore, apart from those in relation to
the registration system for contractors, the security of payments applicable for the
Singapore’s building and construction industry, the employment of foreign workers in
Singapore, man-year entitlements, workplace safety and health laws and regulations,
workmen’s compensation. For further details of the abovementioned regulations, please
refer to the section headed ‘‘Regulatory overview’’ on pages 61 to 86 in this prospectus.
CONTROLLING SHAREHOLDERS’ INFORMATION
Immediately following the completion of the Placing and the Capitalisation Issue,
Absolute Truth (a company jointly owned by Mr. Kelvin Tan and Mr. Peter Tan as to 50%
each) will hold 300,000,000 Shares, representing 75% of the enlarged issued share capital of
our Company.
There is no other person who will, immediately following the completion of the Placing
and the Capitalisation Issue, be directly or indirectly interested in 30% or more of the
Shares then in issue or have a direct or indirect equity interest in any member of our Group
representing 30% or more of the equity in such entity.
SUMMARY AND HIGHLIGHTS
– 12 –
In this prospectus, unless the context otherwise requires, the following expressions have
the following meanings:
‘‘Absolute Truth’’ Absolute Truth Investments Limited, a private limited company
incorporated in the British Virgin Islands on 2 January 2015,
which is beneficially owned as to 50% of its equity interests by
each of Mr. Kelvin Tan and Mr. Peter Tan, and is the
Controlling Shareholder interested in 75% of the entire issued
share capital of our Company immediately following completion
of the Placing and the Capitalisation Issue
‘‘Articles’’ or ‘‘Articles
of Association’’
the articles of association of our Company, conditionally
adopted on 10 March 2015 and as amended from time to time,
a summary of which is contained in Appendix III to this
prospectus
‘‘associate(s)’’ having the meaning ascribed thereto under Chapter 20 of the
GEM Listing Rules
‘‘BCA’’ Building and Construction Authority of Singapore
‘‘BCA Academy’’ the education and research arm of BCA
‘‘bizSafe’’ bizSafe is a five-step programme to assist companies build up
their workplace safety and health capabilities in order to achieve
quantum improvements in safety and health standards at the
workplace, and organised under the Workplace Safety and
Health Council of Singapore
‘‘Board of Directors’’ or
‘‘Board’’
our board of Directors
‘‘Business Day’’ any day (other than a Saturday or a Sunday) on which banks in
Hong Kong are generally open for normal banking business
‘‘C.K. Toh
Construction’’
C.K. Toh Construction Pte. Ltd., a company incorporated in
Singapore with limited liability on 16 June 2004 and is
principally engaged in the business of building construction
and general trading in Singapore which was owned as to 21.25%
by each of Mr. Kelvin Tan and Mr. Peter Tan, our Executive
Directors and the Controlling Shareholders. Mr. Kelvin Tan and
Mr. Peter Tan ceased to have any shareholding interest in C.K.
Toh Construction as at the Latest Practicable Date
DEFINITIONS
– 13 –
‘‘Capitalisation Issue’’ the issue of Shares (of which 20,000,000 Shares are Sale Shares)
to Absolute Truth to be made upon capitalisation of certain sums
standing to the credit of the share premium account of our
Company as referred to in the paragraph headed ‘‘A. Further
information about our Company — 3. Written resolutions of the
sole Shareholder passed on 23 June 2015’’ in Appendix IV to this
prospectus
‘‘Cayman Share
Registrar’’
Appleby Trust (Cayman) Ltd., the Cayman Islands share
registrar of our Company
‘‘CCASS’’ the Central Clearing and Settlement System established and
operated by HKSCC
‘‘CCASS Broker
Participant(s)’’
a person admitted to participate in CCASS as a broker
participant
‘‘CCASS Clearing
Participant(s)’’
a person admitted to participate in CCASS as a direct clearing
participant or general clearing participant
‘‘CCASS Custodian
Participant’’
a person admitted to participate in CCASS as a custodian
participant
‘‘CCASS Investor
Participant’’
a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals or a
corporation
‘‘CCASS Participant’’ a CCASS Clearing Participant or a CCASS Custodian
Participant or a CCASS Investor Participant
‘‘close associate(s)’’ has the meaning ascribed to it under Chapter 1 of the GEM
Listing Rules
‘‘Companies Law’’ the Companies Law (as revised) of the Cayman Islands as
amended, supplemented or otherwise modified from time to time
‘‘Companies (Winding
Up and
Miscellaneous
Provisions)
Ordinance (Cap 32)’’
the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong) as amended,
supplemented or otherwise modified from time to time
‘‘Companies Ordinance
(Cap 622)’’
the Companies Ordinance (Chapter 622 of the Laws of Hong
Kong) as amended, supplemented or otherwise modified from
time to time
‘‘Company’’ KPM Holding Limited (吉輝控股有限公司*), a company
incorporated in the Cayman Islands on 10 March 2015 with
limited liability
* for identification purpose only
DEFINITIONS
– 14 –
‘‘connected persons’’ has the meaning ascribed thereto under the GEM Listing Rules
‘‘Controlling
Shareholder(s)’’
has the meaning ascribed thereto under the GEM Listing Rules.
As at the date of this prospectus, the Controlling Shareholders of
our Company are Absolute Truth, Mr. Kelvin Tan and Mr. Peter
Tan
‘‘cm’’ centimetre
‘‘Deed of Indemnity’’ the deed of indemnity dated 23 June 2015 entered into by the
Controlling Shareholders in favour of our Company (on our own
behalf and as trustee for our subsidiaries), particulars of which
are set out in the section headed ‘‘D. Other information — 1.
Estate duty, tax and other indemnities’’ in Appendix IV to this
prospectus
‘‘Deed of Non-
competition’’
the deed of non-competition dated 23 June 2015 entered into by
the Controlling Shareholders in favour of our Company (for
ourselves and as trustee of our subsidiaries) as further described
in the section headed ‘‘Relationship with our Controlling
Shareholders and non-competition undertakings’’ in this
prospectus
‘‘Director(s)’’ the director(s) of our Company
‘‘Executive Director(s)’’ the executive Director(s) of our Company
‘‘FWL’’ Foreign Worker Levy
‘‘GEM’’ the Growth Enterprise Market operated by the Stock Exchange
‘‘GEM Listing Rules’’ the Rules Governing the Listing of Securities on GEM, as
amended, supplemented or otherwise modified from time to time
‘‘Group’’, ‘‘our Group’’,
‘‘we’’, ‘‘our’’ or ‘‘us’’
our Company or, where the context otherwise requires, in respect
of the period before our Company becoming the holding
company of our present such subsidiary and the businesses
carried on by them or their predecessors (as the case may be)
‘‘HK$’’ or ‘‘HK dollars’’ Hong Kong dollars, the lawful currency of Hong Kong
‘‘HKAS’’ Hong Kong Accounting Standards
‘‘HKFRS’’ Hong Kong Financial Reporting Standards issued by the
HKICPA
‘‘HKICPA’’ Hong Kong Institute of Certified Public Accountants
DEFINITIONS
– 15 –
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited
‘‘HKSCC Nominees’’ HKSCC Nominees Limited, a wholly owned subsidiary of
HKSCC
‘‘Hong Kong’’ or ‘‘HK’’ the Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Branch
Share Registrar’’
Union Registrars Limited, the Hong Kong branch share registrar
and transfer office of our Company
‘‘Ipsos’’ Ipsos Business Consulting, a global market research and
consulting agency
‘‘Ipsos Report’’ the industry report prepared by Ipsos and commissioned by our
Company
‘‘Independent Non-
Executive
Director(s)’’
our independent non-executive Director(s)
‘‘Independent Third
Party(ies)’’
party(ies) which is/are independent of and not connected (within
the meaning ascribed to it in the GEM Listing Rules) with any of
our Directors, Substantial Shareholders or chief executive of our
Company or any of our subsidiaries or any of their respective
associates and is not otherwise a connected person
‘‘Joint Bookrunners’’
or ‘‘Joint Lead
Managers’’
Grand Vinco Capital Limited and Sinomax Securities Limited
‘‘km’’ kilometre
‘‘Latest Practicable
Date’’
22 June 2015, being the latest practicable date prior to the
printing of this prospectus for ascertaining certain information
referred to in this prospectus
‘‘Listing’’ the listing of the Shares on GEM
‘‘Listing Date’’ the date on which dealings in the Shares first commence trading
on GEM
‘‘Listing Division’’ the listing division of the Stock Exchange
‘‘LTA’’ Land Transport Authority
‘‘Main Board’’ the main board of the Stock Exchange
DEFINITIONS
– 16 –
‘‘Memorandum’’ or
‘‘Memorandum of
Association’’
the memorandum of association of our Company adopted on 23
June 2015, as amended from time to time
‘‘Ministry of Foreign
Affairs’’
Ministry of Foreign Affairs of Singapore
‘‘MOM’’ Ministry of Manpower of Singapore
‘‘Mr. Kelvin Tan’’ Mr. Tan Thiam Kiat Kelvin, a co-founder, an Executive Director
and the chairman of our Group and a Controlling Shareholder
‘‘Mr. Peter Tan’’ Mr. Tan Kwang Hwee Peter, a co-founder, an Executive Director
and the chief executive officer of our Group and a Controlling
Shareholder
‘‘New Shares’’ 80,000,000 new Shares being offered by our Company for
subscription under the Placing
‘‘NTA’’ the net tangible assets
‘‘OHSAS 18001’’ the requirements for occupational health and safety management
system developed for managing the occupational health and
safety risks associated with a business
‘‘per cent’’ or ‘‘%’’ per centum or percentage
‘‘Placing’’ the conditional placing by the Underwriters on behalf of our
Company of the Placing Shares for cash at the Placing Price,
details of which are described under the section headed
‘‘Structure and conditions of the Placing’’ in this prospectus
‘‘Placing Price’’ HK$0.50 per Placing Share (excluding brokerage fee of 1%, SFC
transaction levy of 0.0027% and Stock Exchange trading fee of
0.005%)
‘‘Placing Shares’’ 100,000,000 Shares, comprising 80,000,000 New Shares and
20,000,000 Sale Shares offered by the Selling Shareholder at
the Placing Price under the Placing subject to the terms and
conditions as described in the section headed ‘‘Structure and
conditions of the Placing’’ in this prospectus
‘‘PRC’’ or ‘‘China’’ the People’s Republic of China which, for the purposes of this
prospectus and for geographical reference only, excludes Hong
Kong, Macau and Taiwan
DEFINITIONS
– 17 –
‘‘Predecessor
Companies
Ordinance’’
the Companies Ordinance (Chapter 32 of the Laws of Hong
Kong) as in force from time to time prior to 3 March 2014
‘‘Reorganisation’’ the pre-listing reorganisation of our Group, further details of
which are described under the section headed ‘‘History,
reorganisation and group structure — Reorganisation’’ in this
prospectus
‘‘S$’’ Singapore dollars, the lawful currency of Singapore
‘‘Sale Shares’’ 20,000,000 existing Shares to be allotted and issued to the Selling
Shareholder under the Capitalisation Issue, being offered for sale
by the Selling Shareholder at the Placing Price under the Placing
‘‘Selling Shareholder’’ Absolute Truth, further particulars of which are set out in the
section headed ‘‘D. Other information — 8. Selling Shareholder’’
in Appendix IV to this prospectus
‘‘SFC’’ the Securities and Futures Commission in Hong Kong
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong)
‘‘Share(s)’’ ordinary share(s) of HK$0.01 each in the share capital of our
Company
‘‘Shareholder(s)’’ holder(s) of the issued Share(s)
‘‘Signmechanic
Singapore’’
Signmechanic Pte Ltd, a private limited company incorporated in
Singapore on 2 September 1997 and a wholly-owned subsidiary
of our Company
‘‘Sino Promise’’ Sino Promise Investments Limited, a private limited company
incorporated in the British Virgin Islands on 12 January 2015
and a wholly-owned subsidiary of our Company
‘‘Sinomax Securities’’ Sinomax Securities Limited, a corporation licensed to carry on
Type 1 (dealing in securities) regulated activities under the SFO
‘‘Sole Sponsor’’ or
‘‘Vinco Capital’’
Grand Vinco Capital Limited, a wholly-owned subsidiary of
Vinco Financial Group Limited (stock code: 8340), a
corporation licensed to carry on Type 1 (dealing in securities)
and Type 6 (advising on corporate finance) regulated activities
under the SFO, being the sole sponsor to the Placing
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
DEFINITIONS
– 18 –
‘‘subsidiaries’’ has the meaning ascribed thereto under the Companies
Ordinance (Cap 622)
‘‘Substantial
Shareholder’’
has the meaning ascribed thereto under the GEM Listing Rules
‘‘T3 Holdings’’ T3 Holdings Pte. Ltd., a company incorporated in Singapore
with limited liability on 5 November 2012 and is principally
engaged in the business of building construction and the general
wholesale trade (including general importers and exporters) in
Singapore which was owned as to 21.0% by each of Mr. Kelvin
Tan and Mr. Peter Tan, our Executive Directors and the
Controlling Shareholders. Mr. Peter Tan and Mr. Kelvin Tan
ceased to hold any shareholding interest in T3 Holdings as at the
Latest Practicable Date
‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers, as amended,
supplemented or otherwise modified from time to time
‘‘Track Record Period’’ the two years ended 31 December 2014
‘‘Underwriters’’ the underwriters of the Placing whose names are set out in the
paragraph headed ‘‘Underwriters’’ in the section headed
‘‘Underwriting’’ in this prospectus
‘‘Underwriting
Agreement’’
the underwriting agreement dated 29 June 2015 entered into
between our Company, our Executive Directors, the Selling
Shareholder, our Controlling Shareholders, the Sole Sponsor, the
Joint Bookrunners, the Joint Lead Managers and the
Underwriters relating to the Placing, brief particulars of which
are summarised in the section headed ‘‘Underwriting’’ in this
prospectus
‘‘US’’ or ‘‘United
States’’
the United States of America
Unless otherwise stated, the conversion of S$ into HK$ in this prospectus is based on the
approximate exchange rate of S$1.00 to HK$5.6963.
Such conversions shall not be construed as representations that amounts in HK$ will be or
may have been converted into S$ at such rates or any other exchange rates, or vice versa.
Any discrepancies in any table between the total shown and the sum of the amount
(including the percentage) listed are due to rounding.
DEFINITIONS
– 19 –
This glossary of technical terms contains explanations and definitions of certain terms
used in this prospectus in connection with our Group and our business. The terms and their
meanings may not correspond to standard industry meanings or usage of these terms.
‘‘A&A’’ Alteration & Additions works
‘‘cutting plotter’’ equipment that cuts a piece of material lying on a surface
through the use of specialised cutting knife, connected to
computerised design software
‘‘GeBIZ’’ refers to the Singapore government’s one-stop e-procurement
portal where all public sector’s invitations for quotations and
tenders are posted
‘‘ISO’’ International Organisation for Standardisation
‘‘micro prismatic
reflective sheeting’’
sheeting that ensures long distance visibility at dawn, dusk, in the
work zone, on the roadway, at sea or in any environment where
visibility is compromised
GLOSSARY
– 20 –
We have included in this prospectus forward-looking statements that are not historical
facts, but relate to our intentions, beliefs, expectations or predictions for future event.
These forward-looking statements are contained principally in the sections headed
‘‘Summary’’, ‘‘Risk factors’’, ‘‘Industry overview’’, ‘‘Business’’, and ‘‘Financial
information’’, which are, by their nature, subject to risks and uncertainties.
In some cases, we use the words ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘continue’’, ‘‘could’’,
‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘might’’, ‘‘ought’’, ‘‘plan’’, ‘‘potential’’, ‘‘predict’’,
‘‘project’’, ‘‘propose’’, ‘‘seek’’, ‘‘should’’, ‘‘will’’, ‘‘would’’ and similar expressions or
statements to identify forward-looking statements. These forward-looking statements
include, without limitation, statements relating to:
‧ our business strategies and plan of operation;
‧ our capital expenditure plans;
‧ the amount and nature of, potential for and future development of our business;
‧ our operations and business prospects, including new locations of expansion;
‧ our dividend policy;
‧ our overall financial condition;
‧ our planned projects;
‧ the regulatory environment of our industry in general;
‧ general industry outlook and future development in our industry;
‧ general economic trends in Singapore; and
‧ other statements in this prospectus that are not historical facts.
Our Directors confirm that these forward-looking statements are made after due and
careful consideration.
These forward-looking statements are subject to risks, uncertainties and assumptions,
some of which are beyond our control. In addition, these forward-looking statements reflect
the current views of our Company with respect to future events and are not a guarantee of
future performance.
Additional factors that could cause actual performance or achievements to differ
materially include, but are not limited to, those discussed under the section headed ‘‘Risk
factors’’ on pages 23 to 35 in this prospectus.
These forward-looking statements are based on current plans and estimates, and speak
only as of the date they are made. Our Company undertakes no obligations to update or
revise any forward-looking statement in light of new information, future events or
FORWARD-LOOKING STATEMENTS
– 21 –
otherwise. Forward-looking statements involve inherent risks and uncertainties and are
subject to assumptions, some of which are beyond our control. Our Company cautions you
that a number of important factors could cause actual outcomes to differ, or to differ
materially, from those expressed in any forward-looking statements.
Due to these risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this prospectus might not occur in the way we expect, or at all.
Accordingly, you should not place undue reliance on any forward-looking information. All
forward-looking statements contained in this prospectus are qualified by reference to these
cautionary statements.
FORWARD-LOOKING STATEMENTS
– 22 –
Potential investors of the Placing Shares should carefully consider all of the
information set out in this prospectus and, in particular, the following risks and special
considerations associated with an investment in our Company before making any investment
decisions in relation to our Company. If any of the possible events as described below
materialises, our Group’s business, financial position and prospects could be materially and
adversely affected and the market price of the Placing Shares could fall significantly.
This prospectus contains certain forward-looking statements relating to our Group’s
plans, objectives, expectations and intentions which involve risks and uncertainties. Our
Group’s actual results may differ materially from those as discussed in this prospectus.
Factors that could contribute to such differences are set out below as well as in other parts in
this prospectus.
RISKS RELATING TO OUR GROUP
Approximately HK$12.1 million of listing expenses will be recognised upon Listing and will
materially affect our financial results for the year ending 31 December 2015
Our Directors are of the view that there would be a negative impact on the financial
results, including the net profit of our Group, for the year ending 31 December 2015 due to
the non-recurring listing expenses. The total estimated expenses in relation to the Listing
are approximately HK$17.4 million, of which approximately HK$16.6 million and HK$0.8
million is directly attributable to the issue of New Shares to be borne by our Group and
placing of Sales Shares to be borne by the Selling Shareholder, respectively. Out of the
estimated listing expenses of approximately HK$16.6 million to be borne by us,
approximately HK$12.1 million and HK$4.5 million are expected to be charged to the
profit or loss and reserve of our Group for the year ending 31 December 2015 respectively.
Such listing expenses had not been incurred during the Track Record Period and will be
recognised upon Listing. Our Directors would like to emphasise that such listing expenses is
a current estimate for reference only and the final amount to be charged to the profit and
loss account of our Group for the year ending 31 December 2015 is subject to adjustment
based on audit and the then changes in variables and assumptions.
A failure to obtain new contracts (given the non-recurring nature of our contracts) could
materially affect our financial performance
The higher value orders that we receive are mainly on a non-recurring contract basis,
relating to road signage works in the public sector in Singapore. Our signage works for our
contracts typically align with the project duration of our customers’ main contractor
project, which can span from approximately 1 month to 4 years. The majority of our
revenue is non recurring in nature and we cannot guarantee that we will continue to secure
new contracts from our customers after the completion of the existing awarded contracts.
Our Group generally has to go through a competitive tendering or quotation process to
secure new contracts. In the event we are unable to maintain business relationship with
existing customers or unable to price our tender or quotation competitively, our business
RISK FACTORS
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and hence our revenue will be adversely affected. It is critical to our Group to secure new
contracts of similar or larger value on a continuous basis, and should we fail to do so, the
financial performance of our Group will be adversely affected.
Our short-term revenue and profitability may not be indicative of the long-term results of
operations
The duration of our signage works vary, typically span approximately from 1 month
(for short-term installation of signage) to 2 years (for signage works contract where we
provided new and replacement of directional and traffic signs) and 4 years (for a supply and
installation of signage contract). Revenue from some ongoing contracts is recognised across
financial years. The revenue and profitability for different contracts vary and should the
approved monthly payments be higher for a certain financial year, that particular financial
year will record a better short-term results. There is, therefore, no assurance that our short-
term results of operations are indicative of our long-term results of operations.
Loss of our key management and inability to attract and retain technical and management
staff will adversely affect our operations and financial performance
Our Group’s success and growth depends on our ability to identify, hire, train and
retain suitable, skilled and qualified employees, including management personnel with the
requisite industry expertise. Our Group’s growth is dependent on many factors, and one of
which is the contribution by our key personnel. Mr. Kelvin Tan and Mr. Peter Tan are
responsible for our Group’s overall business strategy and development, while Mr. Soh
Chiau Kim, our general manager, is responsible for the overall management of operations,
with a focus on the execution of contracts. Our business also requires technical expertise
and thus managers and supervisors in our project and production teams are important to
us.
If any of these Executive Directors or senior management ceases to be involved in the
management of our Group in the future and our Group is unable to find suitable
replacements in a timely manner, there could be an adverse impact on the business and
results of operations of our Group. The loss of service of any of the abovementioned
personnel without a suitable and timely replacement or the inability to attract and retain
other staff could adversely affect our Group’s operation, and hence, our Group’s revenue
and results of operations.
We may experience delays or defaults in receiving our receivables, and a failure to receive
payment on time and in full, or that delay in the release of retention monies or that retention
monies are not fully released to us after expiry of the defect liability period may affect our
liquidity position
We typically receive payments subsequent to our customers’ approval, based on the
agreed pricing, the due supply and/or installation of signage and the approved delivery
orders. A portion of each payment, normally up to maximum of 10% is withheld by our
customers as retention money, half of this retention sum shall be released upon completion
of works under the main (our customer’s) contract and the balance to be released at the end
of 12 to 18 months defect liability period. As at 31 December 2013 and 31 December 2014,
RISK FACTORS
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our trade receivables were approximately S$1.3 million and S$1.5 million respectively. For
the two years ended 31 December 2013 and 31 December 2014, the allowance for doubtful
debts were S$23,210 and S$129,608 respectively, accounting for approximately 1.8% and
8.0% of our trade receivables for the corresponding period respectively. As of 31 December
2013 and 31 December 2014, retention money of approximately S$0.2 million and S$0.2
million respectively, was retained by our customers. If a client delays payment, or fails to
release our retention monies as scheduled, our cash flow and working capital may be
materially and adversely affected. Even where we are able to recover any losses incurred
pursuant to the terms of the contract, the process of such recovery is usually time-
consuming and requires financial and other resources to settle the disputes. Furthermore,
there can be no assurance that any outcome will be in our favour or that any dispute will be
resolved in a timely manner. Failure to secure adequate payments in time or to manage past
due debts effectively could have a material and adverse effect on our business, financial
position, results of operations and prospects.
During the Track Record Period, we have not encountered any material delay in
payment and release of retention money by our customers. However, there can be no
assurance that such payment will be made on time by our customers in the future. Any
failure by our customers to make payment to us on a timely manner may have an adverse
effect on our future liquidity position.
Our cash flows may fluctuate due to the payment practice applied to our projects
Our signage works normally incur net cash outflows at the early stage of carrying out
our works when we are required to pay for the supplies and labour for the fabrication of
signage, prior to receiving payment from our customers. Our contracts typically do not
have deposit from customers prior to starting work, although we will request if deposit can
be made for higher value contracts. Our customers will make payment based on approved
payment requests, which will be after the completion of parts of the signage works.
Accordingly the cash flows will turn from net outflows at the early stage into accumulative
net inflows gradually as the works progress. We undertake a number of contracts at any
given period, and the cash outflow of a particular contract could be compensated by the
cash inflows of other contracts. Should the mix of the contracts be such that more are at the
initial stage, our corresponding cash flow position may be adversely affected.
Cost overruns in our signage works will affect our costs and materially affect our financial
performance
The duration of our signage works typically span from approximately 1 month to 4
years during the Track Record Period. For higher value orders, we are typically awarded
the contracts after a tendering or quotation process, during which we will provide a
quotation for the supply or supply and installation of our signage products. However, the
time period from the quotation to our purchase of materials and engagement of labour can
range from approximately 1 month to 2 years.
We currently generate, and expect to continue to generate, a substantial portion of our
revenue from contracts where the unit selling prices are agreed upon quotation. Our
quotations are subject to a number of assumptions, including future economic conditions,
RISK FACTORS
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estimated cost and availability of labour and raw materials and subcontractors’
performance. These assumptions may prove to be substantially different from our
original estimates. Cost overruns can result in lower profit or a loss, and therefore may
have a material adverse effect on our business, financial position, results of operations and
prospects.
Our operations may subject us to litigation, arbitration, administrative proceedings or other
disputes which may be time consuming and expose us to significant liability claims
We may from time to time encounter disputes arising from contracts with customers,
subcontractors, suppliers or other third parties, which may involve claims against them or
us. Claims against us may involve defective work products or unfinished work, casualties,
property damages, breach of warranties, delay of payment to subcontractors or suppliers,
or delays in the completion of contracts.
Claims involving us could result in time-consuming and costly litigations, arbitration,
administrative proceedings or other legal procedures. Expenses we incur in legal
proceedings or arising from claims brought by or against us could have a material and
adverse effect on our business, financial position, results of operations and prospects.
Moreover, legal proceedings resulting in unfavourable judgment or findings may harm our
reputation, cause financial losses and damage our prospects of winning future contracts,
thereby materially and adversely affecting our business, financial position, results of
operations and prospects.
We rely on third parties, including subcontractors, to complete certain projects and are subject
to risk arising from the non-compliance, late performance or poor performance by such third
parties
We may engage subcontractors for part of certain contracts secured by us, for instance,
to provide certain services such as laying of road marking, installation of precast blocks,
bulky metal works or excavation works which we do not typically provide in-house. The
engagement of subcontractors is subject to certain risks, including difficulties in overseeing
the performance of such subcontractors in a direct and effective manner, failure to complete
the contracted scope of works, inability to hire suitable subcontractors, or losses as a result
of unexpected subcontracting cost overrun. As the subcontractors have no direct
contractual relationships with our customers, we are subject to risks associated with non-
performance, late performance or poor performance by our subcontractors. As a result, we
may experience deterioration in the quality of our signage and related works, incur
additional costs, or be exposed to liability in relation to the performance of subcontractors
under the relevant contracts, which may have impact on our profitability, financial
performance and reputation, and may result in litigation or damages claims.
In addition, we are also subject to claims arising from defective work performed by
subcontractors. While we may attempt to seek compensation from the relevant
subcontractors, who may be unable to perform or perform their obligations in a timely
manner, we may be required to compensate our customers before receiving compensation
from the subcontractors. If no corresponding claim can be asserted against a subcontractor,
or the amounts of the claim cannot be recovered in full or at all from the subcontractors, we
RISK FACTORS
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may be required to bear some or all the costs of the claims, in which case our business,
financial position, results of operations and prospects could be materially and adversely
affected.
Approximately 70% of our workforce is made up of foreign labour and inability to obtain
foreign labour could materially affect our operations and financial performance
Our business is highly dependent on skilled, semi-skilled and unskilled foreign worker
as the local construction and manufacturing labour force is limited and more costly. Any
shortage in the supply of foreign workers or increase in FWL for foreign workers, or any
restriction on the number of foreign workers that we can employ for our signage works, will
adversely affect our operations and financial performance. As at the Latest Practicable
Date, approximately 70% of our workforce is made up of foreign workers. On this basis,
our operations and financial performance may be adversely affected due to any shortage in
the supply of foreign workers and any increase in the cost of foreign labour. The supply of
foreign labour in Singapore is subject to the policies and regulations imposed by the MOM.
For example, the MOM imposes a quota on the number of foreign workers that the main
contractor and its subcontractors (including our Group and our subcontractors) can
employ in respect of each construction project and in manufacturing. Depending on the
requirements of our projects, the tightening of such quota on the number of foreign workers
that the main contractors and its subcontractors can employ could affect our operations
and accordingly our business and financial performance could be adversely affected. Any
changes in the policies of the foreign workers’ countries of origin may affect the supply of
foreign labour and cause disruptions to our operations which may result in a delay in the
completion of our projects. The MOM also imposes FWL for foreign workers. For instance,
in the budget for Singapore announced on 23 February 2015, the FWL for basic skilled
workers under the construction sector will increase to S$650 from 1 July 2016 and to S$700
from 1 July 2017. Any increase in FWL will increase our operating expenses and will affect
our financial performance.
Our business plan may not be implemented successfully which may adversely affect our
prospects
Our Directors are of the view that our Group’s future plan has been prepared after due
enquiry by reference to, among other matters, the expected future prospects of the signage
industry in Singapore and the continuation of our competitive advantages and other factors
considered relevant. Some of our future business plans are based on certain assumptions.
The successful implementation of our business plan may be affected by a number of factors
including the availability of sufficient funds, government policies relevant for our industry,
the economic conditions, our ability to maintain our existing competitive advantages and
the threat of substitutes and new market entrants. There is no assurance that our business
plan can be successfully implemented. Should there be any material adverse change in our
operating environment which results in our failure to implement any part of our business
plan, our prospects may be adversely affected.
RISK FACTORS
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Our insurance coverage may not be sufficient to cover all losses or potential claims from our
customers which would affect our business, financial condition and results of operations
We have purchased third party public liability insurance to cover claims in connection
with personal injuries or damage to property due to accidents at our premises or from
negligence in connection with our business operations. However, we may become subject to
liabilities against which we are not insured adequately or at all or liabilities against which
cannot be insured. Should any significant property damage or personal injury occur in our
facilities or to our employees due to accidents, natural disasters, or similar events which are
not covered or inadequately covered by our insurance, our business may be adversely
affected, potentially leading to a loss of assets, lawsuits, employee compensation
obligations, or other form of economic loss. In addition, we have not maintained
insurance policies against losses arising from our environmental liabilities, business
interruption, industrial accidents, work stoppages, civil unrest or other activities.
Pursuant to Singapore laws and regulations, purchasing such insurance is not
compulsory. If we purchase such additional insurance, we would incur additional costs
for our business operations.
Although we believe our insurance coverage is sufficient for the needs of our
operations and appropriate for our current risk profile, we cannot guarantee that our
current levels of insurance are sufficient to cover all potential risks and losses. If we face
any operating risks resulting from any of the aforesaid events in relation to the failure to
purchase insurance, we may bear a substantial cost and experience a loss. In addition, our
insurers will review our policies each year and we cannot guarantee that we can renew our
policies or can renew our policies on similar or other acceptable terms. If we suffer from
severe unexpected losses or losses that far exceed the policy limits, it could have a material
and adverse effect on our business, financial position, results of operations and prospects.
For example, insurance covering losses from acts of war, terrorism, or natural catastrophes
is either unavailable or cost prohibitive. Any losses that we may incur which we are not
insured against may adversely affect our business, financial condition and results of
operations.
Our business involves inherent industrial risks and occupational hazards and the
materialisation of such risks will affect our business operations and financial results
Our business involves inherent industrial risks and occupational hazards, which may
not be eliminated through implementing safety measures. We participate in certain activities
presenting risks and dangers, among which are fabrication, installation and maintenance of
signage works on the road, at construction sites and commercial locations. Thus we are
exposed to risks related to such activities, such as equipment failure, industrial accidents
and fire. We cannot ensure that such risks will not cause a material and adverse impact to us
in the future. The materialisation of any of the risks mentioned above in the worst case
scenario may disrupt our business and damage our reputation, which may also affect the
validity of our relevant qualifications, business operations and results of operations. Our
insurance coverage, such as builders’ risk and third party liability, may not be sufficient,
and it may not be possible to obtain adequate insurance (or any insurance at all) to cover
certain risks on commercially reasonable terms.
RISK FACTORS
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To the extent we are not adequately covered by insurance, we may incur losses that
cannot be compensated by third parties.
RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE
Inability to renew our existing qualifications, licences and permits or the existing
qualifications or licences are cancelled or suspended could materially affect our operations and
financial performance
Our business and construction activities in Singapore are regulated by the BCA and
various other regulatory bodies. These regulatory bodies stipulate the criteria that must be
satisfied by us before permits and licences are granted to, and/or renewed for, our business.
The renewal of our permits and licences is subject to compliance with the relevant
regulations. In particular, our Group has to meet the various requirements laid down by the
BCA in order to maintain our BCA workhead categories. The requirements to maintain our
workhead categories include (i) a minimum paid-up capital and net worth; (ii) qualified
personnel with the necessary professional or technical qualifications and experience; (iii) the
necessary performance track records and (iv) contracts’ profile.
If we fail to comply with the applicable requirements or any required conditions to
keep the qualifications and licences, then our qualifications and licences may be
downgraded, suspended or cancelled. Delay or refusal may occur when renewing such
qualifications and licences upon expiry. Failure to keep or renew our existing BCA
workhead categories could result in suspension of our business operations, restriction or
prohibition of certain business activities, or commencement of new business, thereby
materially and adversely affecting our business, financial position, results of operations and
prospects. For details please refer to the section headed ‘‘Business — Main qualifications
and licences’’ in this prospectus.
Low barriers of entry could increase competition in our industry that may affect our financial
performance
Our business is not capital intensive nor involve areas of high technology and therefore
has relatively low barriers of entry for new entrants, particularly in sectors other than road
signage. It is also relatively easy for customers to switch to our competitors as the product
differentiation is low. The overall signage sector in Singapore is also fragmented. Therefore,
if we fail to compete effectively or maintain our competitiveness in the market, our business,
financial condition and results of operations will be adversely affected.
A reduction in the pipeline of public sector contracts could materially affect our financial
performance
Approximately 66.7% and 80.7% of our contracts relate to public sector during the
Track Record Period. Therefore, we are dependent on the Singapore government’s decision
in relation to the building of new roads or the alteration of existing roads and on public
sector spending. Any significant reduction in particular road signage works will have a
material adverse effect on our business. Moreover, the level of Singapore government’s
spending budget on public sector may change from year to year and any change or
RISK FACTORS
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significant delay in the level of spending may affect the business and operation results of
our Group. In the event that the level of spending on public sector is reduced and our
Group fails to secure business from other sectors, the business and profitability of our
Group could be adversely affected.
Cost controls in the public sector or reduction in government spending could adversely affect
our profitability and financial performance
Our Group secures our contracts either through private invitation to quote or through
open tender. For private invitation to quote, our quotations are typically made to main
contractors who, our Directors understand, will have submitted their own quotations
through the GeBIZ system for public sector projects. For open tenders, these are directly
submitted by us via the GeBIZ system. Approximately 66.7% and 80.7% of our revenue
were derived from the public sector for the two years ended 31 December 2014. Typically,
cost is a key consideration for public sector projects. Approximately S$462,000 and
S$100,000, representing approximately 5.9% and 0.8% of our revenue for the two years
ended 31 December 2014 was derived directly from contracts awarded via the GeBIZ
system. The majority of our revenue was thus generated from public sector projects that was
quoted directly to main contractors. Our success rates were approximately 68% and 82% of
the public sector contracts that we had quoted for to our customers (main contractors)
during the Track Record Period. As we are one of the established companies offering road
signage in Singapore, it is common that we will receive invitations to quote from more than
one main contractor for the same project as these main contractors are individually
tendering for the same project. Our success rate is therefore based on us securing the
contract for road signage for the particular project, regardless of which main contractor
being awarded the project. Given that our revenue was mainly generated from the public
sector, should there be cost control by the relevant government authority or reduction of
government spending, our profitability and financial performance will be adversely
affected.
We are required to comply with various environmental, labour, safety and health laws and
regulations that may increase the compliance costs
Our business is subject to various environmental, labour, safety and health laws and
regulations promulgated by the Singapore government authorities. Given the complexity
and continuous amendments to these laws and regulations, compliance therewith may
involve substantial financial and other resources to establish efficient compliance and
monitoring systems which may adversely affect our operating results. There is no assurance
that any new or changes to the government legislation, regulations and policies will not
have an adverse effect on our financial performance and financial position. Please see the
section headed ‘‘Regulatory overview’’ in this prospectus for further details.
When we serve as a contractor or subcontractor, we are responsible for the quality of
the works, including the breach of environmental, labour, safety and health laws and
regulations. If our business operations or our execution of contracts cause damage to the
RISK FACTORS
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environment and natural resources or cause loss of assets or casualties in violation of
environmental, safety and health laws and regulations, we may be required to rectify or be
responsible for the harm, loss of assets or casualties.
In addition, due to the nature of our business, we cannot guarantee that parties at the
worksites would comply with safety measure and procedures during execution of works. In
the event of non-compliance, there may be occurrences of serious personal injuries or fatal
accidents, which may lead to interruption of our operations and adversely affect our
financial conditions and results of operations to the extent not covered by our insurance
policies.
RISKS RELATING TO THE PLACING
Investors should not place undue reliance on facts, statistics and data contained in this
prospectus with respect to the economies and our industry
Certain facts, statistics and data in this prospectus are derived from various sources
including various official government sources that we believe to be reliable and appropriate
for such information. However, we cannot guarantee the quality or reliability of such
source materials. We have no reason to believe that such information is false or misleading
or that any fact has been omitted that would render such information false or misleading.
Whilst our Directors have taken reasonable care in extracting and reproducing the
information, they have not been prepared or verified by us, the Selling Shareholder, the Sole
Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwriters or any of their
respective directors, affiliates or advisers. Therefore none of them makes any representation
as to the accuracy or completeness of such facts, statistics and data. Due to possibly flawed
or ineffective collection methods or discrepancies between published information, market
practice and other problems, the statistics in this prospectus may be inaccurate or may not
be comparable to statistics produced for other publications or purposes and you should not
place undue reliance on them. Furthermore, there is no assurance that they are stated or
compiled on the same basis or with the same degree of accuracy as similar statistics
presented elsewhere. In all cases, investors should give consideration as to how much weight
or importance they should attach to, or place on, such information or statistics.
There has not been any prior public market for the Shares and an active trading market may
not develop
An active trading market for the Shares may not develop and the trading price of the
Shares may fluctuate significantly. Prior to the Placing, there has been no public market for
the Shares. The Placing Price has been determined through negotiation between our
Company (for ourselves and on behalf of the Selling Shareholder) and the Joint Lead
Managers (for themselves and on behalf of the Underwriters) and the Placing Price may not
be indicative of the price at which the Shares will be traded following the completion of the
Placing. In addition, there is no assurance that an active trading market for the Shares will
develop, or, if it does develop, that it will be sustained following completion of the Placing,
or that the trading price of the Shares will not decline below the Placing Price.
RISK FACTORS
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The trading price of the Shares may fluctuate
The trading price of the Shares may fluctuate in response to a number of events
including variations in our operating results, new sectors or locations for our business, our
direct competitors, general performance of the GEM, the Main Board or other equity
capital markets, changes in recommendations or financial estimates by analysts and
investors’ general perception on our future prospects. In addition, there is no guarantee that
there will be a liquid market in the Shares.
Investors may experience difficulties in enforcing their shareholders’ rights as the laws of
Cayman Islands may differ from those of Hong Kong or other jurisdictions where investors
may be located
Our Company is incorporated in the Cayman Islands and our affairs are governed by
the Articles, the Companies Law and common law applicable in the Cayman Islands. The
laws of Cayman Islands may differ from those of Hong Kong or other jurisdictions where
investors may be located. As a result, minority Shareholders may not enjoy the same rights
as pursuant to the laws of Hong Kong or such other jurisdictions. A summary of the
Cayman Islands company law on protection of minorities is set out in the paragraph headed
‘‘Protection of minorities and shareholders’ suits’’ in Appendix III to this prospectus.
Historical dividends are not indicative of our Group’s future dividends
Signmechanic Singapore declared a dividend of S$0.1 million during the year ended 31
December 2013 and approximately S$5.4 million during the year ended 31 December 2014
to the shareholders of Signmechanic Singapore respectively. The value of dividends
declared and paid in previous years should not be relied on by potential investors as a guide
to the future dividend policy of our Group or as a reference or basis to determine the
amount of dividends payable in the future. There is no assurance that dividends will be
declared or paid in the future, at a similar level or at all. The amount of any dividends to be
declared in the future will be subject to, among other factors, our Directors’ discretion,
having taken into account the substantial capital requirements of our Group in the
foreseeable future, the availability of distributable profits, our Group’s earnings, working
capital, financial position, capital and funding requirements, the applicable laws and other
relevant factors.
In any event, there is no assurance that our Company will receive sufficient
distribution from our subsidiaries to support any future profit distribution to our
Shareholders, or that the amounts of any dividends declared by our Company in the
future, if any, will be of a level comparable to dividends declared and paid by us in the past,
or by other listed companies in the same industry as our Group.
RISK FACTORS
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No assurance of liquidity and possible price and trading volume volatility of our Shares
Prior to the Listing, there has been no public market for the Shares. The Placing Price
is the result of negotiations between our Company (for ourselves and on behalf of the
Selling Shareholder), the Joint Lead Managers (for themselves and on behalf of the
Underwriters), and may differ from the market price for the Shares after the Listing.
However, there is no assurance that the Listing will result in the development of an active
and liquid public trading market for the Shares. The pricing and trading volume of the
Shares may be volatile. The market price of the Shares may fluctuate significantly and
rapidly as a result of the following factors, among others, some of which are beyond control
of our Group:
1. variations in the results of our Group’s operations;
2. changes in securities analysts’ analysis of our Group’s financial performance;
3. announcement by our Group of significant acquisitions, disposals, strategic
alliances or joint ventures;
4. addition or departure of key management personnel;
5. fluctuations in market prices and trading volume of the Shares;
6. involvement in litigation; and
7. general economic and stock market conditions in Singapore and Hong Kong.
These broad market and industry fluctuations may adversely affect the market price of
the Shares.
Termination of the Underwriting Agreement
Prospective investors of the Placing Shares should note that the Underwriters are
entitled to terminate their obligations under the Underwriting Agreement by the Vinco
Capital (for itself and on behalf of the Underwriters) by giving written notice to our
Company (for ourselves and on behalf of the Selling Shareholder) upon the occurrence of
any of the events stated in the paragraph headed ‘‘Grounds for termination’’ under the
‘‘Underwriting’’ section of this prospectus at any time prior to 8 : 00 a.m. (Hong Kong time)
on the Listing Date. Such events include, without limitation, any act of God, war, riot,
public disorder, civil commotion, fire, flood, tsunami, explosion, epidemic, pandemic, act of
terrorism, earthquake, strike or lock-out.
Additional equity fund raising may lead to dilution of shareholders’ interests and decrease in
market price of the Shares and additional debt financing may restrict future dividend
declaration and/or fund raising exercises of our Group
We may find opportunities to grow through acquisitions that cannot currently be
anticipated. Secondary issue(s) of securities after the Placing may be necessary to raise the
required capital to capture these growth opportunities. If additional funds are raised by
RISK FACTORS
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issuing new equity securities in the future to new and/or existing Shareholders after the
Listing, such new Shares may be priced at a discount to the then prevailing market price. If
existing Shareholders are not offered an opportunity to participate, their shareholding
interest in our Company will be diluted. Also, if our Company fails to utilise the additional
funds to generate the expected earnings, our financial results may be adversely affected and
in turn exert pressure on the market price of the Shares. If additional funds are raised
through debt financing, any additional debt financing may, apart from increasing interest
expense and gearing, may contain restrictive covenants with respect to dividends, future
fund raising exercises and other financial and operational matters.
Future sale of Shares or major divestment of Shares by our Controlling Shareholders may
cause the market price of the Shares to fall
The sale of a significant number of Shares in the public market after the Placing, or the
perception that these sales may occur, could adversely affect the market price of the Shares.
Except as otherwise described in the section headed ‘‘Underwriting’’ in this prospectus and
the restrictions set out by the GEM Listing Rules, there are no restrictions imposed on our
Controlling Shareholders or Substantial Shareholders to dispose of their shareholdings.
Any major disposal of Shares by any of our Controlling Shareholders or Substantial
Shareholders may cause the market price of the Shares to fall. In addition, these disposals
may make it more difficult for our Group to issue new Shares, thereby limiting our Group’s
ability to raise capital.
Investors should not place any reliance on any information contained in press articles or other
media regarding our Group and the Placing
There may have been press and media coverage regarding our Group and the Placing,
which may contain references to certain events, or information such as financial
information, financial projections, and other information about us that do not appear in
this prospectus. Potential investors should only rely on the information contained in this
prospectus, and any formal announcements made by us in Hong Kong when making any
investment decision regarding our Shares. We do not accept any responsibility for the
accuracy or completeness of any information reported by the press or other media, the
fairness, appropriateness or reliability of any forecasts, or the views or opinions expressed
by the press or other media regarding our Shares, the Placing, or our Group. We make no
representation as to the appropriateness, accuracy, completeness or reliability of any such
information or publication by the press or media. To the extent that any such information
appearing in publications other than this prospectus is inconsistent with, or conflicts with,
the information contained in this prospectus, our Group disclaims it. Accordingly,
prospective investors are cautioned against making their investment decisions in reliance on
any other information, reports, or publications other than this prospectus.
RISK FACTORS
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RISKS RELATING TO INFORMATION CONTAINED IN THIS PROSPECTUS
Statistics and facts from governmental source in this prospectus have not been independently
verified
This prospectus includes certain statistics and facts that have been extracted from
official sources and publications. Our Company believes that the sources of these statistics
and facts are appropriate and we have taken reasonable care in extracting and reproducing
such statistics and facts. Our Company has no reason to believe that such statistics and
facts are false or misleading or that any fact has been omitted that would render such
statistics and facts false or misleading. These statistics and facts from these sources have not
been independently verified by our Company, the Selling Shareholder, the Sole Sponsor, the
Joint Lead Managers, the Underwriters or any of their respective directors or any other
party involved in the Placing and therefore, our Company makes no representation as to the
accuracy or completeness of these statistics and facts, as such these statistics and facts
should not be unduly relied upon.
Forward-looking statements contained in this prospectus are subject to risks and uncertainties
This prospectus contains certain statements and information that are ‘‘forward-
looking’’ and uses forward-looking terminology such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’,
‘‘estimate’’, ‘‘expect’’, ‘‘may’’, ‘‘ought to’’, ‘‘should’’ or ‘‘will’’ or similar terms. Those
statements include, among other things, the discussion of our Group’s growth strategy and
expectations concerning our future operations, liquidity and capital resources. Investors of
the Shares are cautioned that reliance on any forward-looking statements involves risks and
uncertainties and that any or all of those assumptions could prove to be inaccurate and as a
result, the forward-looking statements based on those assumptions could also be incorrect.
The uncertainties in this regard include, but are not limited to, those identified in this
section, many of which are not within our Group’s control. In light of these and other
uncertainties, the inclusion of forward-looking statements in this prospectus should not be
regarded as representations by our Company that our plans or objectives will be achieved
and investors should not place undue reliance on such forward-looking statements. Our
Company does not undertake any obligation to update publicly or release any revisions of
any forward-looking statements, whether as a result of new information, future events or
otherwise. Please refer to the section headed ‘‘Forward-looking statements’’ in this
prospectus for further details.
RISK FACTORS
– 35 –
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Companies (Winding Up
and Miscellaneous Provisions) Ordinance (Cap 32), the Securities and Futures (Stock
Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the GEM Listing
Rules for the purpose of giving information with regard to our Company. Our Directors,
having made all reasonable enquiries, confirm that to the best of their knowledge and belief
the information contained in this prospectus is accurate and complete in all material
respects and not misleading or deceptive, and there are no other matters the omission of
which would make any statement herein or this prospectus misleading.
Copies of this prospectus are available, for information purpose only, at the respective
offices of the Underwriters during normal office hours from 9 : 00 a.m. to 5 : 00 p.m. from
Tuesday, 30 June 2015 to Monday, 6 July 2015 (both dates inclusive).
INFORMATION ON THE PLACING
The Placing Shares are offered solely on the basis of the information contained and
representations made in this prospectus, on the terms and subject to the conditions set out
herein. No person in connection with the Placing is authorised to give any information, or
to make any representation not contained in this prospectus, and any information or
representation not contained herein must not be relied upon as having been authorised by
our Company, the Selling Shareholder, the Sole Sponsor, the Joint Lead Managers, the
Underwriters, and any of their respective directors, agents, employees or advisers or any
other party involved in the Placing. It is expected that, pursuant to the Placing, the
Underwriter will conditionally place the Placing Shares on behalf of our Company with
investors.
SELLING SHAREHOLDER
The Placing consists of 20,000,000 Sale Shares being sold by the Selling Shareholder.
We estimate that the net proceeds to the Selling Shareholder from the Sale Shares (after
deduction of proportional underwriting fees and estimated expenses payable by our Selling
Shareholder in relation to the Placing), and assuming the Placing Price of HK$0.50 per
Share will be approximately HK$9.2 million. We will not receive any of the proceeds from
the sale of the Sale Shares.
Details of the Selling Shareholder is set out in the section headed ‘‘D. Other
information — 8. Selling Shareholder’’ in Appendix IV to this prospectus.
PLACING SHARES ARE FULLY UNDERWRITTEN
This prospectus sets out the terms and conditions of the Placing.
INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING
– 36 –
This prospectus is published solely in connection with the Placing, which is sponsored
by the Sole Sponsor and managed by the Joint Lead Managers and to be fully underwritten
by the Underwriters (subject to the terms and conditions of the Underwriting Agreement).
Further information about the Underwriters and the underwriting arrangements is
contained in the section headed ‘‘Underwriting’’ of this prospectus.
RESTRICTIONS ON OFFER AND SALE OF PLACING SHARES
Each person acquiring the Placing Shares will be required to confirm or by his/her/its
acquisition of the Placing Shares will be deemed to confirm that he/she/it is aware of the
restrictions on the Placing of the Placing Shares described in this prospectus. Save as
mentioned above, no action has been taken in any jurisdiction other than Hong Kong to
permit a placing or the general distribution of this prospectus. Accordingly, this prospectus
may not be used for the purpose of, and does not constitute, an offer or invitation in
relation to the Placing in any jurisdiction or, in any circumstance in which such an offer or
invitation is not authorised, or to any person to whom it is unlawful to make such an offer
or invitation. The distribution of this prospectus and the offering of the Placing Shares in
other jurisdictions are subject to restrictions and may not be made except as permitted
under any applicable laws, rules and regulations of such jurisdictions pursuant to
registration with or authorisation by the relevant regulatory authorities as an exemption
therefrom.
Prospective investors for the Placing Shares should consult their financial advisers and
take legal advice as appropriate, to inform themselves of, and to observe the applicable
laws, rules and regulations of any relevant jurisdictions.
The Placing Shares are offered for subscription solely on the basis of the information
contained and the representations made in this prospectus. No person is authorised in
connection with the Placing to give any information, or to make any representation, not
contained in this prospectus. Any information or representation not contained herein shall
not be relied upon as having been authorised by our Company, the Selling Shareholder, the
Sole Sponsor, the Joint Lead Managers, the Underwriters, any of their respective directors,
officers, employees, agents, representatives or any other person or party involved in the
Placing.
STRUCTURE AND CONDITIONS OF THE PLACING
Further details of the structure and conditions of the Placing are set out in the section
headed ‘‘Structure and conditions of the Placing’’ of this prospectus.
APPLICATION FOR LISTING ON GEM
Application has been made to the GEM Listing Division for the listing of, and
permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Cap 32), if the permission for the Shares offered under this prospectus to be
listed on GEM has been refused before the expiration of three weeks from the date of the
INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING
– 37 –
closing of the Placing or such longer period not exceeding six weeks as may, within the said
three weeks, be notified to our Company for permission by or on behalf of the GEM Listing
Division, then any allotment made on an application in pursuance of this prospectus shall,
whenever made, be void.
Pursuant to Rule 11.23(7) of the GEM Listing Rules, at all times after the Listing, our
Company must maintain the ‘‘minimum prescribed percentage’’ of 25% or such applicable
percentage of the issued share capital of our Company in the hands of the public (as defined
in the GEM Listing Rules).
No part of the Shares or the loan capital of our Company is listed, traded or dealt in on
any other stock exchange. At present, our Company is not seeking or proposing to seek
listing of, or permission to deal in, any part of the Shares or loan capital on any other stock
exchange. Only securities registered on the branch register of members of our Company
kept in Hong Kong may be traded on GEM unless the Stock Exchange otherwise agrees.
PROFESSIONAL TAX ADVICE RECOMMENDED
If investors are unsure about the taxation implications of the subscription for,
purchase, holding or disposal of, dealings in, or exercise of any rights in relation to the
Placing Shares, they should consult an expert. It is emphasised that none of our Company,
our Directors, the Selling Shareholder, the Sole Sponsor, the Joint Lead Managers, the
Underwriters or any of their respective directors, officers, employees, agents,
representatives or any other person or party involved in the Placing accepts responsibility
for any tax effects on or liabilities of any person resulting from the subscription for,
purchase, holding or disposal of, dealings in, or the exercise of any rights in relation to the
Placing Shares.
REGISTRATION AND STAMP DUTY
Our fully-paid Shares are freely transferable. The Shares may be registered on the
principal register of members in the Cayman Islands or on the branch register of members
of our Company in Hong Kong. Dealings in the Shares registered on our principal register
of members in the Cayman Islands will not be subject to Cayman Islands stamp duty unless
our Company holds an interest in land in the Cayman Islands.
Our Company’s principal register of members will be maintained in the Cayman
Islands by our Company’s principal share registrar, Appleby Trust (Cayman) Ltd., and our
Company’s branch register of members will be maintained in Hong Kong by our Hong
Kong Branch Share Registrar, Union Registrars Limited.
All the Shares will be registered on the branch register of members of our Company in
Hong Kong. Only Shares registered on our branch register of members maintained in Hong
Kong may be traded on GEM, unless the Stock Exchange otherwise agrees.
INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING
– 38 –
Unless our Company determines otherwise, dividends payable in HK$ in respect of the
Shares will be paid by cheque sent by ordinary post at the Shareholder’s risk to the
registered address of each Shareholder or, in the case of joint holders, the first-named
holder.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the approval of the listing of, and permission to deal in, the Shares on GEM
and the compliance with the stock admission requirements of HKSCC, the Shares will be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the Listing Date or, under contingent situation, any other date as
determined by HKSCC. Settlement of transactions between participants of the Stock
Exchange is required to take place in CCASS on the second Business Day after any trading
day. All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time. All necessary arrangements have been
made for the Shares to be admitted into CCASS. If investors are unsure about the details of
CCASS settlement arrangement and how such arrangements will affect their rights and
interests, they should seek the advice of their stockbroker or other professional advisers.
COMMENCEMENT OF DEALING IN THE SHARES
Dealings in the Shares on GEM are expected to commence at 9 : 00 a.m. on Friday, 10
July 2015. Shares will be traded in board lots of 5,000 each. The stock code for the Shares is
8027.
Our Company will not issue any temporary documents of title.
LANGUAGE
If there is any inconsistency between this prospectus and the Chinese translation of this
prospectus, this prospectus shall prevail. Names of any laws and regulations, governmental
authorities, institutions, natural persons or other entities which have been translated into
English and included in this prospectus and for which no official English translation exists
are unofficial translations for your reference only.
ROUNDING
Any discrepancies in any table between totals and sums of individual amounts listed in
any table are due to rounding.
Unless otherwise stated, the conversion of Singapore dollars into Hong Kong dollars
in this prospectus is based on the approximate exchange rate of S$1 to HK$5.6963.
Such conversions shall not be construed as representations that amounts in HK$ will
be or may have been converted into Singapore dollars at such rates or any other exchange
rates, or vice versa, or at all.
INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING
– 39 –
Name Address Nationality
Executive Directors
Mr. Tan Thiam Kiat Kelvin (陳添吉) Block 232, Pasir Ris Drive 4
#13-510
Singapore 510232
Singaporean
Mr. Tan Kwang Hwee Peter (陳光輝) 35 Jalan Mariam
Singapore 509313
Singaporean
Independent Non-Executive Directors
Mr. Oh Eng Bin (Hu Rongming)
(胡榮明)
11 Tanjong Rhu Road
#09-04 Singapore 436896
Singaporean
Mr. Tan Kiang Hua (陳建華) 1 Bukit Batok Street 25
#06-22, Singapore 658882
Singaporean
Mdm. Kow Yuen-Ting
(Gao Yun Ting) (郜韵婷)
20 Clover Close
Singapore 579261
Singaporean
Please refer to the section headed ‘‘Directors, senior management and staff’’ in this
prospectus for further information.
DIRECTORS AND PARTIES INVOLVED IN THE PLACING
– 40 –
Sole Sponsor Grand Vinco Capital Limited
Units 4909–4910, 49/F, The Center99 Queen’s Road CentralHong Kong
Joint Bookrunners and
Joint Lead Managers
Grand Vinco Capital Limited
Units 4909–4910, 49/F, The Center99 Queen’s Road CentralHong Kong
Sinomax Securities Limited
Unit 1601, Far East Financial Centre16 Harcourt RoadAdmiraltyHong Kong
Underwriters Grand Vinco Capital Limited
Units 4909–4910, 49/F, The Center99 Queen’s Road CentralHong Kong
Sinomax Securities Limited
Unit 1601, Far East Finance Centre16 Harcourt RoadAdmiraltyHong Kong
Legal advisers to our Company As to Hong Kong lawsMichael Li & Co.
Solicitors, Hong Kong19th Floor, Prosperity Tower39 Queen’s Road CentralCentralHong Kong
As to Singapore lawsLPP Law Corporation
Advocates & SolicitorsLevel 39 Marina Bay Financial Centre Tower 210 Marina BoulevardSingapore 018983
As to Cayman Islands lawsAppleby
2206–19 Jardine House1 Connaught PlaceCentralHong Kong
DIRECTORS AND PARTIES INVOLVED IN THE PLACING
– 41 –
Legal advisers to the Sole Sponsor
and the Underwriters
As to Hong Kong lawsRobertsons
57/F, The Center99 Queen’s Road CentralHong Kong
Reporting accountants Deloitte Touche Tohmatsu
Certified Public Accountants35/F One Pacific Place88 QueenswayHong Kong
Auditor Deloitte & Touche LLP
6 Shenton Way, OUE Downtown 2#32-00Singapore 068809
Compliance adviser Grand Vinco Capital Limited
Units 4909–4910, 49/F, The Center99 Queen’s Road CentralHong Kong
DIRECTORS AND PARTIES INVOLVED IN THE PLACING
– 42 –
Registered office Clifton House
75 Fort Street
PO Box 1350
Grand Cayman KY1-1108
Cayman Islands
Principal place of business in Hong
Kong registered under Part 16 of
the Companies Ordinance
(Cap 622)
19th Floor, Prosperity Tower
39 Queen’s Road Central
Central
Hong Kong
Headquarters and principal place of
business
424 Tagore Industrial Avenue
Sindo Industrial Estate
Singapore 787807
Company website www.kpmholding.com
(Note: contents contained in this website do not form
part of this prospectus)
Compliance officer Mr. Kelvin Tan
Block 232, Pasir Ris Drive 4, #13-510
Singapore 510232
Company secretary Mr. Li Chi Chung, Solicitor, Hong Kong
19th Floor, Prosperity Tower
39 Queen’s Road Central
Central
Hong Kong
Authorised representatives (for the
purpose of the GEM Listing Rules)
Mr. Kelvin Tan
Block 232, Pasir Ris Drive 4, #13-510
Singapore 510232
Mr. Li Chi Chung, Solicitor, Hong Kong
Flat E, 1st Floor,
CNT Bisney, 28 Bisney Road
Pok Fu Lam, Hong Kong
Members of the audit committee Mdm. Kow Yuen-Ting
(Chairman of audit committee)
Mr. Tan Kiang Hua
Mr. Oh Eng Bin (Hu Rongming)
Members of the remuneration
committee
Mr. Tan Kiang Hua
(Chairman of remuneration committee)
Mr. Oh Eng Bin (Hu Rongming)
Mdm. Kow Yuen-Ting
CORPORATE INFORMATION
– 43 –
Members of the nomination
committee
Mr. Oh Eng Bin (Hu Rongming)
(Chairman of nomination committee)
Mr. Tan Kiang Hua
Mdm. Kow Yuen-Ting
Principal Share Registrar and
transfer office in Cayman Islands
Appleby Trust (Cayman) Ltd.
Clifton House
75 Fort Street
PO Box 1350
Grand Cayman KY1-1108
Cayman Islands
Hong Kong Branch Share Registrar
and transfer office
Union Registrars Limited
A18/F., Asia Orient Tower, Town Place
33 Lockhart Road
Wanchai
Hong Kong
Principal banker DBS Bank Ltd
12 Marina Boulevard
Marina Bay Financial Centre Tower 3
Singapore 018982
CORPORATE INFORMATION
– 44 –
Investors should note that IPSOS has been engaged by our Company to prepare the IPSOSReport to provide an overview of the signage industry in Singapore, China and Hong Kong and ananalysis of market demand, which will be used in whole or in part in this prospectus.
The information and statistics set out in this section have been extracted from the IPSOSReport and other publicly available sources. Our Group, the Selling Shareholder, the Sole Sponsor,the Joint Lead Managers, and the Underwriters believe that the sources of the information andstatistics are appropriate sources for such information and statistics and have taken reasonable carein extracting and reproducing such information. While our Group, the Selling Shareholder, the SoleSponsor, the Joint Lead Managers, and the Underwriters have exercised reasonable care inextracting and reproducing such information and statistics, our Group cannot ensure the accuracy ofsuch information and statistics and such information and statistics may not be consistent with otherinformation. Our Group, the Selling Shareholder, the Sole Sponsor, the Joint Lead Managers, andthe Underwriters have no reason to believe that such information and statistics are false or misleadingor that any fact has been omitted that would render such information and statistics false ormisleading. The information and statistics used in this section have not been independently verified byour Group, the Selling Shareholder, the Sole Sponsor, the Joint Lead Managers, the Underwritersand other parties involved in the Placing or their respective directors and advisers and norepresentation is given as to the accuracy of such information and statistics. You should not placeundue reliance on any of such information and statistics contained in this section.
So far as our Directors are aware of, there is no adverse change in the market information sincethe date of the IPSOS Report which may qualify contradict or have an impact on the information inthis section.
REPORT COMMISSIONED FROM IPSOS
We commissioned Ipsos, an Independent Third Party, to conduct an industry analysis ofsignage industry in Singapore and produce the Ipsos Report. A fee of approximately US$ 42,740(approximately S$58,850 and excluding any disbursements) is payable to Ipsos for the preparation ofthe Ipsos Report. We believe that the fees are reasonable for the preparation of an industry report byan independent third-party consultant. The information and statistics set forth in this section havebeen extracted from the Ipsos Report. The sources cited in this section are in the form provided inthe Ipsos Report, unless otherwise noted.
With 87 dedicated offices worldwide, Ipsos is a global research firm that helps leadingcorporations build, compete and grow using fact-based consulting. Since 1994, Ipsos has had a teamof professional business consultants leading businesses in different sectors such as agribusiness,automotive, construction, energy, healthcare, industrial and many other sectors. Ipsos BusinessConsulting (the ‘‘IBC’’), a leader in fact-based business consulting, is trusted by top businesses,government sectors, and institutions worldwide. IBC support domestic and internationalorganisations or businesses using our fact-based market analysis as they endeavour to build,compete, and grow in emerging and developed markets globally. The areas of specialisation includemarket opportunity assessment, competitive analysis, new product development, distributionchannel and value chain analysis, market entry strategy, and partner diligence.
Our Directors confirm that Ipsos, including all of its subsidiaries, divisions and units, areindependent of and not connected with us (within the meaning of the GEM Listing Rules) in anyway. Ipsos has given its consent for us to quote from the Ipsos Report and to use informationcontained in the Ipsos Report in this prospectus.
INDUSTRY OVERVIEW
– 45 –
Sources of information in the Ipsos Report
The information contained in the Ipsos Report is derived by means of fact-based analysis andinformation sourcing which include:
. Conducting both primary and secondary research obtained from numerous sources withinthe global and Singapore signage industry.
. Primary research involved interviewing leading industry participants and secondaryresearch involved reviewing publicly available documents, company reports, independentresearch reports and Ipsos’s proprietary database built up over the past decades.
. Forecast data was obtained from historical data analyses plotted against macroeconomicdata as well as specific industry-related drivers, such as, amongst others, economic growthand construction demand in Singapore.
The following parameters and assumptions were considered when analysing the market in thepreparation of the Ipsos Report:
. Projection and plans from Singapore government agencies, such as Building andConstruction Authority (BCA)
. Published awarded tenders from the Government Electronic Business (GeBIZ) website
. Published awarded tenders from Land Transport Authority, Singapore (LTA)
. Total signage industry defined by the US Census Categories (Code NAICS 339955)
Reliability of information in the Ipsos Report
Our Directors are of the view that sources of information used in this section are reliable as theinformation was extracted from the Ipsos Report. Our Directors believe the Ipsos Report is reliableand not misleading as Ipsos is an independent professional research agency with extensive experiencein their profession.
Future forecast in the Ipsos Report
Analyses, projections and data relating to future periods in the Ipsos Report are based on thefollowing bases and assumptions:
. The social, economic and political environments of Singapore being examined remainstable during the forecast period, which ensures the sustained and steady development ofthe construction industry and signage market.
. Industry trend is expected to rise rapidly as construction demand is expected to sustain athigh level
. With the increase of civil engineering projects, there will be demand for the deploymentand placement of signage (e.g. road signage and road directions).
The research may be affected by the accuracy of these assumptions and the choice of theseparameters.
In the preparation of the projections relating to future periods and factor affecting growths,Ipsos has considered various growth drivers and/or barriers including, among others:
. New technologies that may impact the development of the signage industry in Singapore
INDUSTRY OVERVIEW
– 46 –
. Trend of published tenders being awarded to tenderers (e.g. low price, higherqualification)
. New requirements or regulation for registered builders and/or signage installers inSingapore.
Some of the analytical conclusions extracted from the Ipsos Report cover future forecasts. OurDirectors and the Sole Sponsor consider such information to be reliable and not misleading aftertaking into account the following factors:
a) Ipsos is an independent professional research agency with extensive experience in theirprofession; and
b) although the Ipsos Report contains forecast of the development of the signage industry inSingapore, it does not contain future performance forecast of our Group.
SINGAPORE CONSTRUCTION INDUSTRY OVERVIEW
The Singapore construction sector’s contribution to its GDP has remained stable from 2011through 2014(1). The average contribution has been close to approximately 4.6% (ranging fromapproximately 4.3% to approximately 4.9%) every year which is in tandem with Singapore’s GDPgrowth rate of between 3 to 8%(2). The chart below illustrates the contribution of the constructionsector to the Singapore economy’s overall GDP from 2011 to 2014(3).
Contribution of construction sector to the Singapore economy’s overall GDP
Total GDP of the economy
GDP from construction
Contribution percentage (%)
(S$ million)
segment (S$ million)
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
5.0%4.9%4.8%4.7%4.6%4.5%4.4%4.3%4.2%4.1%4.0%
2011
346,354 362,333 378,200 390,089
14,885 16,437 17,702 18,961
4.3% 4.5% 4.7% 4.9%
2012 2013 2014
Source: Ministry of Trade and Industry, Singapore Statistics
For 2015(4), construction contracts are expected to reach between S$29 billion to S$36 billion.This follows solid performance in 2014 where total construction demand was at S$37.7 billion, whichis powered by higher volume of both institutional and civil engineering works. Major projectsbacking to such high demand include the construction of Tampines Town Hub project, communityhospitals, construction of Thomson-East Coast MRT Line as well as land preparation works for theupcoming Changi Airport Development. The chart below shows the total construction activities inSingapore from 2010 to 2014(5).
Notes:(1) Provisional information(2) Economic Intelligence Unit Statistics(3) Provisional information(4) Forecasted information(5) Provisional information
INDUSTRY OVERVIEW
– 47 –
Building and construction activities in Singapore, 2010–2014(6)
By value, S$(7)
2010 2011 2012 2013 2014Million Singapore dollars (S$)
Contracts awarded 27,564.6 35,487.9 30,761.4 35,803.6 37,732.8Public 8,546.5 15,279.7 9,524.8 14,888.5 19,071.6Private 19,018.1 20,208.2 21,236.7 20,915.3 18,661.2Certified payments 27,427.8 28,861.4 31,638.8 33,666.3 35,752.2Public 10,975.7 11,652.9 12,316.1 12,566.9 14,762.1Private 16,452.2 17,208.5 19,322.7 21,099.5 20,990.1
Source: BCA
PUBLIC SECTOR
Public sector construction has been the driving force behind the construction industry inSingapore. The value of public sector contracts awarded has increased with an average growth of22.2% per annum from 2010, to reach approximately S$19.1 billion (approximately HK$ 107.2billion) in 2014(8),(9). The chart below illustrates the development of contracts awarded for bothpublic and private sector from 2010 to 2014(10).
Public and private contracts awarded, 2010–2014(11)
by value, S$ billion
2010
8.5
19.015.3
20.2
9.5
21.2
14.9
20.9 19.118.7
Public Private
2011 2012 2013 2014
Source: BCA; CAGR for public sector: 22.2% and private sector: –0.5% for the period of 2010 to 2014.
In 2014(12), construction output (or certified payments) increased by approximately 6.2% to
reach approximately S$35.8 billion, surpassing the previous industry high of approximately S$33.7
billion in 2013. The growth was powered by strong on-site construction activities for public and
private residential, private industrial and civil engineering developments. The chart below depicts
total construction output and certified payments for year 2010 to 2014.
Notes:(6) Ibid(7) Figures in the chart may not be equal due to rounding up of decimals.(8) S$1 = HK$5.62 (Xe.com, 23rd March 2015); Figures in may not be equal due to rounding up of decimals(9) Provisional information(10) Ibid(11) Ibid(12) Ibid
INDUSTRY OVERVIEW
– 48 –
Total construction output (certified payments), 2010–2014(13)
by value, S$ billion
2010
Public
11.0
16.5
11.7
17.2
12.3
19.3
12.6
21.1
14.8
21.0
Private
2011 2012 2013 2014
Source: BCA; CAGR for public sector: 7.7% and private sector: 6.3% for the period of 2010 to 2014
In 2015(14), public sector projects are expected to contribute to the industry’s total demand atapproximately 60% (between S$18 to S$21 billion in value). This expansion is expected to bepowered by the anticipated higher volume of contracts to be awarded for civil engineering andinstitutional construction works. The following charts below illustrate the review and future outlookfor the construction demand and output of Singapore’s construction industry; and the breakdown ofpublic construction demand in 2014 and 2015(15).
Review and future outlook for construction demand and outputby value, S$
2014p 2015f 20116–2017f 2018–2019fContracts awarded Singapore dollars (S$)
Public $19.7 billion $18–21 billion $16–20 billion(60% from building projects and
40% from civil engineeringprojects)
Private $18.0 billion $11–15 billionTotal $37.7 billion $29–36 billion $27–36 billion $26–37 billion
Source: BCA; Ipsos Analysis; p denotes provisional information; f denotes forecast information
Breakdown of projected public construction demand in 2014 and 2015by value, S$ billion
Breakdown 2014p 2015f
Building construction 10.94 10.5–12.7Residential 4.99 3.4–3.8Commercial 0.13 0.1–0.1Industrial 0.63 2.1–2.8Institutional and others 5.2 4.9–5.9
Civil engineering 8.8 7.5–8.3Total public sector 19.74 18.0–21.0
Source: BCA; Ipsos Analysis; p denotes provisional information; f denotes forecast information
Notes:(13) Ibid(14) Forecast information(15) Latest available data
INDUSTRY OVERVIEW
– 49 –
As the government continues to focus on the infrastructure needs and demand, the outlook forthe construction industry remain positive. Some factors impacting the growth of this segmentinclude:
. Singapore has invested heavily in rail and road infrastructure, and has a strong pipeline ofvarious rail transit projects nationwide. With increases in the population and demands ontransportation, Singapore’s road infrastructure is in a constant state of development. Thegovernment aims to develop a high-performance rail network and plans to increase thecountry’s MRT network from 178km in 2014 to 360 km by 2030.
. Jewel Changi Airport Trustee Pte Ltd started building a mixed-use complex, called JewelChangi Airport, which will be developed in front of the Changi Airport’s Terminal 1 inSingapore (end of 2014). The project will comprise hotel, retail offerings and facilities forairport operations and is a joint venture between Changi Airport Group and CapitaMallsAsia.
Number of construction tenders to be called by public sector agencies, 2015(16)
by value, S$
Construction costCategory Development type 2015
Up to S$14m Civil engineering (e.g. road and bridges, sewerage anddrainage, M&E, other works that include parks, waterway,earthworks, infrastructure works, utilities etc.)
109
Others (e.g. residential projects, education such as retrofittingof teaching facilities and upgrading of schools, other buildingproject such as community club upgrading, substations, businterchanges etc.)
80
S$14m–S$42m Civil engineering (e.g. road and bridges, sewerage anddrainage, M&E, other works that include parks, waterway,earthworks, infrastructure works, utilities etc.)
13
Others (e.g. residential projects, education such as retrofittingof teaching facilities and upgrading of schools, institution ofhigher learning, other building project such as community clubupgrading, substations, bus interchanges etc.)
32
Above S$42m Civil engineering (e.g. road and bridges, sewerage anddrainage, rail and rail related, M&E, other works that includeparks, waterway, earthworks, infrastructure works, utilitiesetc.)
25
Others (e.g. residential projects, education such as campusexpansion and upgrading facilities of institute of higherlearning and other building project such as community clubupgrading, substations, bus interchanges etc.)
54
Sub total Civil engineering 147
Others 166
Total 313
Source: BCA, 2015; Ipsos Analysis
Notes:(16) Provisional information
INDUSTRY OVERVIEW
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CIVIL ENGINEERING SEGMENT
In 2015, civil engineering projects are forecasted to account to approximately 40 to 42% orS$7.5 billion to S$8.3 billion of the total public sector demand. BCA estimates that the number oftenders for civil engineering works in the pipeline for the public sector is approximately 147 tendersin 2015. Although there is no change in the number of tenders compared to the previous year(17),more tenders valued at up to S$14 million will be called in 2015. The following chart compares thenumber of tenders for the civil engineering projects in 2014 and 2015.
Number of construction tenders by public sector agencies, 2014 and 2015by value, S$
96
24
2014 2015
1327 25
109
Up to S$14 million S$14 million - S$42 million Above S$42 million
Source: BCA; Ipsos Analysis
The following chart depicts the breakdown of civil engineering tenders to be called by thepublic sector agencies for 2015.
Number of construction tenders to be called by public sector agencies, 2015(18)
by value, S$
Construction cost Category Development type 2015
Up to S$14 million Roads and bridges 46M&E — Rails and roads 1Others 62
S$14 million–S$42 million Roads and bridges 4M&E — Rails and roads —Others 9
Above S$42 million Roads and bridges 4M&E — Rails and roads 5Others 16
Total 147
Source: BCA; Ipsos Analysis
Outlook for 2015
In 2015, public sector projects are forecasted to account for 60% or S$18 billion to S$21 billionof the total construction demand. BCA estimates that the number of tenders for road and bridgeworks in the pipeline for the public sector is approximately 54 tenders in 2015. This is an increase of31.7% of tenders from 2014, where 41 tenders were estimated for public sector road and bridge
Notes:(17) Number of construction tenders for the civil engineering sector for 2014 = 147(18) Provisional information
INDUSTRY OVERVIEW
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works in Singapore. With the increase in the number of tenders to be called on by public sectoragencies, there will be also increased projects that will involve the deployment and placement of roadsignage and road directions.
The pipeline tenders to be called on by public sector agencies vary in value and can cost up tomore than $$42 million. Majority of road and bridge work projects in 2015 will be focused on smallerprojects that are estimated to be valued up to S$14 million. The chart below compares the number oftenders, by value for road and bridge works in the public sector for both years 2014 and 2015.
Number of tenders, by value of road and bridge works in the public sector, 2014 and 2015by value, S$
25
46
9
Up to S$14 million
2014 2015
S$14 million - S$42 million Above S$42 million
47
4
Source: BCA
For rail networks(19), BCA estimates that the number of tenders in the pipeline for the publicsector is approximately 6 tenders in 2015. Although there is a slight decrease from 2014, where 8tenders were estimated for public sector rail networks in Singapore, majority of the projects in 2015will be focused on larger projects that are estimated to be valued above S$42 million. Thus thisprovides good grounds for the deployment and placement of signage and markings on rail networks.The chart below compares the number of tenders, by value for rail works in the public sector forboth years 2014 and 2015.
Number of tenders, by value of rail works in the public sector, 2014 and 2015by value, S$
Up to S$14 million
1
2014 2015
8
5
S$14 million - S$42 million Above S$42 million
Source: BCA
Notes:(19) LTA’s requirements to tender for works on rail networks (e.g. as supply, fabrication and installation of signage at MRT/
LRT Stations and trains, platform markings etc.) include being registered as a CR11 Signcraft installer. Thus, railnetworks projects are included as point of discussion in text.
INDUSTRY OVERVIEW
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OUTLOOK BEYOND 2015
The construction demand is expected to sustain at S$26 billion to S$37 billion per annum fromyear 2016 to 2019. This is in view of major public sector projects (i.e. new expressways and railwaystrack extensions) required to the growing population demand and infrastructure needs of Singapore.
Some of the key rail(20) and road projects are highlighted below:
Expansion of railnetworks
Double the length of the rail network to about 360km by buildingthe following lines from 2020 to 2030
Cross island line (CRL) . Connect residents in the east and northeast (e.g. Hougangand Serangoon) directly to the towns in the central (e.g. AngMo Kio) and western region (e.g. Tuas)
Jurong region line (JRL) . Connects the Jurong region, serving the future Tengah newtown, Nanyang Technological University, and JurongIndustrial Estate
Circle line stage 6 (CCL6) . Closes the loop for the Circle Line, between the central eastareas (e.g. Paya Lebar), and central and west areas (e.g. KentRidge)
North east line (NEL)extension
. This line will be extended northeast to serve PunggolDowntown and the northern part of Punggol toaccommodate the growing population in Punggol
Down town (DTL)extension
. Connects to the Eastern region line and enhances theconnectivity between the areas served by both lines
Future developments Possibility of adding a station between Sembawang (NS11) andYishun (NS13) on the North-south line, in anticipation of futuredevelopments in that area
Expansion of roadnetwork/system
Further expansion of road network will largely serve new areas,improve bus speeds and support the continued growth of oureconomy
North-south expressway(by 2020)
. Serves the expected increase in travel along the north-southcorridor
‘‘Reversible flow’’ system . The feasibility of a ‘reversible flow’ scheme along certainexpressways will be studied, where the traffic flow is heavy inone direction during the morning peak hours and in theopposite direction in the evening (This could optimise theuse of roads in Singapore).
Source: BCA, Secondary research.
Notes:(20) Ibid
INDUSTRY OVERVIEW
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CONTRACTORS REGISTRATION SYSTEM AND THE BUILDING LICENCE SYSTEM
The BCA classifies road, bridge and rail works as civil engineering, denoted as CW02. Signageor sign craft installations are classified as CR11. There are currently 71 CR11 registered constructionagencies in Singapore that are all private limited firms.
To qualify for doing construction work for public sector projects, the BCA mandates that thebidding company has the necessary levels of experience, and certifications and is financially sound.Contractors for private sector work are not bound by the same rules. One of the consequences of thisregulatory system is that contractors for public sector work need to maintain particularly highprofessional standards. This acts as a barrier to new entrants looking to take market share. A criticalpart of the licensing system that the BCA has put in place includes the Contractor RegistrationSystem or CRS. According to the BCA website:
‘‘CRS serves the construction and construction-related procurement needs of the public sector includinggovernment ministries and statutory boards. Companies only need to register if they wish to participate
in construction tenders or as sub-contractors for the public sector’’(21)
In order to qualify for CRS a company must prove its capabilities in number of different areas.They need to be financially stable, showing audited accounts with a suitable level of paid up capitaland net worth. The company needs to also ensure it has the right number of full time qualified staffwith the correct professional qualifications. As well as having a suitable track record of suitableexperience, it also needs management certifications such as SAC Accredited ISO9000, ISO14000,OHSAS 18000, etc.
Historical prices for raw materials and main products
Our Group typically uses metal, sticker and aluminium products for our products, and thesematerial specifications are typically included in the tender specifications.
The table and chart below stipulate the changes in the cost of material prices from year 2011 to2015.
Material cost 2011–2015(22)*by value, S$
Materials 2011 2012 2013 2014 2015
Metal 128 121 108 107 103Sticker 45 45 45 45 45Aluminium 61.3 58.5 55.3 55.0 55.0
Notes:(21) Please see the BCA website at http://www.bca.gov.sg/ContractorsRegistry/others/CRS_FAQ.pdf(22) Material cost is stipulated based on common materials used by Signmechanic Singapore for each material category:
(a) Example of metal price is stipulated based on one of Signmechanic Singapore’s metal products commonly used (e.g.hollow section of 100 mm x 100 mm x 6 mm in size)
(b) Example of sticker price is stipulated based on one of Signmechanic Singapore’s sticker products commonly used (e.g.any sticker of 600 x 600 mm in size)
(c) Example of aluminium price is stipulated based on one of Signmechanic Singapore’s aluminium products commonlyused (e.g. aluminium sheet of 4’ x 8’ x 2.0 mm thick in size)
INDUSTRY OVERVIEW
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Material cost 2011–2015*
Average cost for main materials only (2011–2015)
2011 2012 2013 2014 2015
Metal
Sticker
Aluminium
Ave
rage
Cos
t P
rice
(SG
D)
0
20
40
60
80
100
120
140
Source: Signmechanic Singapore; *Note: Material cost is stipulated based on common materials used by SignmechanicSingapore.
The prices of their products are quoted on a case-by-case basis, taking into account marketrates and their internal costing with no particular historical price trend. However changes in pricesmay also be influenced by inflation or other factors such as average wages in Singapore.
The table and chart below stipulates the percentage changes in average wages by industry fromyear 2000–2014.
Average wage change in percentage by industry, 2000–2014By percentage (%)
Industry Total Manufacturing Construction Services
2000 4.9 4.4 2.2 5.42001 2.9 2.4 0.6 3.42002 1.8 1.8 0.2 2.02003 1.2 1.3 0.2 1.32004 2.7 2.6 1.1 2.92005 3.1 2.9 1.7 3.32006 3.6 3.2 2.4 3.92007 4.3 3.7 3.9 4.62008 4.4 4.0 3.9 4.62009 1.3 0.7 1.5 1.52010 3.9 3.6 3.5 4.02011 4.4 4.0 3.9 4.52012 4.5 4.3 3.6 4.62013 5.1 4.6 5.2 5.22014 4.9 4.3 3.8 5.1
Source: Survey on Annual Wage Changes, Manpower Research and Statistics Department, MOM
INDUSTRY OVERVIEW
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Average wage change in percentage by industry, 2000–2014
Total Manufacturing Construction ServicesA
vera
ge W
age
Cha
nge
(%)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0
1.0
2.0
3.0
4.0
5.0
6.0
Source: Survey on Annual Wage Changes, Manpower Research and Statistics Department, MOM
Environmental impact of our Group’s production nature
Light industries are generally regarded as less invasive than heavy industries. It is believed tohave lesser environmental impact and these industries hardly operate with the need forenvironmental work approvals or licenses beforehand. Light industries include a variety of smallbusinesses such as manufacturing, fabrication, chemical formulation, trade and others such asautomotive repair shops, paint suppliers, signage suppliers, printers, food processors, servicestations and etc.(23)
Our Group’s nature of production can be classified as part of a light industry as its processescarried out or the machinery installed can be done with very minimum pollution impacts to theenvironment.
SINGAPORE SIGNAGE INDUSTRY
Market share analysis
The sign manufacturing industry is defined as an industry that comprise of establishmentsprimarily engaged in manufacturing signs and related displays of all materials (except printing paperand paperboard signs, notices, displays). This include sub-categories such as signs and advertisingspecialties; electric signs; neon signs; scoreboards and electric; advertising artwork; advertisingnovelties; displays, cut outs, window and lobby; displays and paint processes; letters for signs, metal;name plates (except engraved, etched etc.); and signs that are not made in custom sign paintingshops(24). In 2014(25), Singapore’s total signage manufacturing industry is worth approximatelyS$304 million with at least 300 establishments in the market. The total value grew by 2.7% from 2012to 2014(26). The following chart shows the growth of Singapore’s total signage industry from year2012 to 2016(27).
Notes:(23) Secondary research(24) US Census Categories (Code NAICS 339955)(25) Provisional information(26) Ibid(27) Forecasted information
INDUSTRY OVERVIEW
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Singapore total signage industry, 2012–2016by value, S$ million
340
330
320
310
300
290
2802012
Total Sales
% Change
2013 2014 2015 2016
296 297 304 314 328
0.3%— 2.4% 3.3% 4.5%
5.0%4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0%
Source: GeBIZ, LTA, Barnes reports, Ipsos Analysis
The market size for CR11 signcraft segment is estimated to be approximately 10%(28) of thetotal industry in 2014 (which is approximately S$30.4 million in value). Based on our Group’s salesof approximately S$11.9 million in 2014(29), our Group’s market share in the CR11 signcraft segmentis approximately 39.1%.
Source: GeBIZ, LTA, Barnes reports, Secondary Research, Ipsos Analysis; Value in S$ million. Figures in the chart may notbe equal due to rounding up of decimals.
COMPETITIVE LANDSCAPE
The market for the signage industry in Singapore is serviced by approximately 300manufacturers with 71 CR11 registered construction agencies in Singapore (that are all privatelimited firms). In terms of competitors, our Group competes with two other companies for the roadsignage segment and about twenty others for the commercial signage segment in the market(30).
Competitive advantage
While our Group operates in a fairly competitive space, they do a good job distinguishingthemselves against other suppliers. Primarily, our Group is one of the main players in the marketespecially for civil projects thus far and are able to work on an expended scope of work that includesrailing; therefore making this one of the primary drivers for our Group’s good relationship with theircustomers.
Our Group is also registered for General Building, Civil Engineering, Repairs andRedecoration, Asphalt Works & Road Marking and Minor Construction Works; and with theseadditional registrations, our Group is able to bid for related projects. For signcraft installation, ourGroup has L5 grade certification, of which enables our Group to bid for tenders up to S$14 millionin value(31).
This puts our Group in an elite category which new entrants would not be able to achievewithout getting substantial experience in the market. In order to attain Level 5 certification, thecompany needs to meet certain criteria. It has to have a track record with revenues of at least S$10million in the last 3 years, of which S$1 million needs to be from one single contract. It also needs tohave at least 2 professionally qualified full time managers, one with at least 8 years of relevantexperience including the Basic Concept in Construction Productivity and Enhancement (BCCPE)qualification for productivity. The only companies in Singapore that have BCA CR11 (SigncraftInstallation) certification to Grade L5 are our Group and Fuji Signcrafts Industries Pte Ltd.
Notes:(28) Best estimation(29) Source from Signmechanic Singapore(30) Ibid(31) Please see BCA’s homepage at http://www.bca.gov.sg/ContractorsRegistry/contractors_tendering_limits.html
INDUSTRY OVERVIEW
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Barriers of entry
. Barriers for entry in this industry are not high and projects often varies in value (i.e. canbe of very low to very high values, especially public tender projects).
. Road signs are mainly dominated by three main companies in Singapore which are ourGroup, Fuji Signcrafts Industries Pte Ltd and E Tech Construction Pte Ltd.(32)
* Fuji Signcrafts Industries Pte Ltd has over the years established good record insuccessfully implementing signage projects and these include projects such as islandupgrading exercise for the street name signs for LTA, new signs for Changi AirportTerminal 3 and Resort World Sentosa. They are also the term contractor for SentosaDevelopment Corporation, Changi Airport Terminals and LTA road signs.
* E Tech Construction Pte Ltd on the other hand has CR11 Grade L3 certificationonly which means they are unable to bid for projects with a contract value higherthan S$4.2 million.(33)
* Our Group is certified in other areas apart from signage enabling it to have a higherlevel of productivity by being able to bid for different jobs within a main contractbeyond just signage.
. Operational productivity is another core requirement for companies competing in thissector. Hence, as well as achieving the right levels of experience and financial backing forregistration under the CRS scheme, companies also need to meet government standardsfor productivity. This is to ensure that companies are working to the highest professionalstandards and are not relying just on low cost labour. Contractors that are registered withCRS are obliged to undertake BCCPE(34).
Opportunities and challenges in the industry
The opportunities in this industry remain positive as construction demand in Singapore isexpected to sustain at S$26 billion to S$37 billion per annum from year 2016 to 2019. This asmentioned is in view with major public sector civil engineering projects such as new expressways andrailways extensions underway, thus requiring more deployment and placement of road and/or railsignage in the near future(35).
Manufacturing road sign in particular is a specialised trade that requires relevant trade workersand skilled employees. Thus, getting the correct people in the industry has been a challenge not onlyfor our Group but with other market players as well. Labour costs have to be properly managed andsourcing of materials has to be extra prudent.
The requirements of the LTA to tender for works on rail networks (e.g. as supply, fabricationand installation of signage at MRT/LRT stations and trains, platform markings etc.) include beingregistered as a CR11 signcraft installer or other supply head titles defined by the governmentsupplier’s guidelines. Thus, any suppliers can submit their tender as long as they meet the criteria.However, tenders being issued have been of late observed to be awarded to tenderers with the‘lowest’ price given for the project. From year 2010 to 2014, there was approximately S$1.7 millionworth of tenders published for public reference by the LTA(36), of which majority of these tenders
Notes:(32) Sources from Signmechanic Singapore(33) BCA, Contractors’ Registry — Contractors Tendering Limits(34) According to the BCA website, BCCPE covers topics such as the definition and measurement of productivity; improving
construction productivity during planning, design and construction stage; site layout, deployment planning and sitecoordination; quality control and good management practices.
(35) Please also refer to key rail and road projects, page 53 for detailed information about growing projects(36) All projects that include rail and road works
INDUSTRY OVERVIEW
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were awarded to the lowest price tenderers. Between the stated years, our Group represents only 6%of total published tenders won. The following chart compares the percentage of published LTAtenders won by our Group with other qualifying contractors(37) from 2010 to 2014.
Published tenders, 2010–2014By value, S$
6%Our Group
94%Others
Source: LTA, Ipsos Analysis; Total published tenders from 2010–2014 : S$1.7 million; Note: Information extracted frompublished data, 18th March 2015.
Brief profiles of other signage manufacturers
The following table below depicts some examples of other signage manufacturer or companiesin Singapore (in brief profile).
BCA Level 3 (L3 companies)
Company Notes
CBD eVision Pte Ltd Business type:Distributor and wholesaler
Main markets:North America, South America, Western Europe, Eastern Europe
Product/services:. LED display system such as LED moving sign, LED video screen,
multiline display, VMS, trivision display, roller poster, trafficsign, architectural lighting for disco and building users.
Lin Keong Projects PteLtd
Business type:Manufacturer
Main markets:Singapore
Product/services:. Custom made acrylic accessories such as display trays, racks,
poster holder, brochure racks, voucher racks, voucher trays etc.. Fabrication of all types of signs such as reversed silkscreen signs,
brass, stainless steel etching signs, aluminium stainless steel,acrylic box up signage, self-adhesive stickers, glass panel graphics,large format full colour print.
. Neon or LED signs for indoor, outdoor building face, sky sign.
Notes:(37) All projects tendered in LTA States multiple qualifying criteria for submissions. Based on observation from published
records, as long as any contractor quality for either one of the criteria stated for the particular project, and has the‘lowest’ price, the tender is awarded to the party. Majority is also believed to be main contractors.
INDUSTRY OVERVIEW
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Company Notes
Seiho SignEngineering PteLtd
Business type:Manufacturer and consulting
Main markets:Malaysia, Indonesia, Philippines, Vietnam, Hong Kong
Product/services:. Professional sign services (e.g. corporate signage for banks, automobile
etc.; building sky signs, large billboard signs etc.). Engineering services (e.g. signs, advertising displays licensing to BCA). Stainless steel and metal works (e.g. stainless steel directional pole sign)
E Tech ConstructionPte Ltd
Business type:Manufacturer and consulting
Main markets:Singapore
Product/services:. Organisations, services and building contractors. Specialties include exterior signage, green products & services (signage)
BCA Level 4 (L4 companies)
Company Notes
Crimsign GraphicsPte Ltd
Business Type:Manufacturer
Main markets:
Product/services:. Alloy products (e.g. single, double or multi-sided signboard —
illuminated and non-illuminated; notice boards etc.). Clip-O products (e.g. directory boards, mandatory signs, informative
signs etc.). Simplex products (e.g. door signs, counter-top signs etc.)
Gleason AdvertisingPte Ltd
Business Type:Manufacturer
Main markets:China, Malaysia, Indonesia
Product/services:. Sign consulting, design and planning services. Sign engineering and manufacturing. Sign installation, maintenance and repair
BCA Level 5 (L5 companies)
Company Notes
Fuji SigncraftsIndustries Pte Ltd
Business Type:Manufacturer
Main markets:Singapore
Product/services:. Environmental signs,. Turnkey signage projects. Road signage projects (e.g. LTA road signs)
Source: Ipsos Analysis
INDUSTRY OVERVIEW
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This section of the prospectus contains a summary of certain laws and regulations
currently relevant to our Group’s operations and the signage industry. Having made all
reasonable enquiries and to their best knowledge, our Directors confirm that save as
disclosed in this section and the sections headed ‘‘Risk factors’’ and ‘‘Business’’ in this
prospectus, our Group has complied with all material applicable laws and regulations in
Singapore, where our Group operated during the Track Record Period and as at the Latest
Practicable Date and has obtained all necessary permits, licences and certificates for our
operations. Save as disclosed below, as at the Latest Practicable Date, our business
operations are not subject to any special legislation or regulatory controls other than those
generally applicable to companies and businesses incorporated and/or operating in
Singapore.
REGULATIONS AND SUPERVISION OF OUR BUSINESS IN SINGAPORE
Brief General Overview
The building and construction industry in Singapore is regulated by the BCA. There
are two regimes administered by the BCA, the Builders Licensing Scheme (‘‘BLS’’) and the
Contractors Registration System (‘‘CRS’’).
A General Builders’ (‘‘GB’’) Licence is issued under the BLS and such a licence is
required for companies which intend to carry out private sector building works or public
sector building works. A company which is only involved in private sector projects need not
register under CRS and will only need a licence under the BLS. A company would need to
have a licence issued under the BLS in order to be registered under the CRS.
Signmechanic Singapore is issued a GB 2 Licence by BCA under the BLS and is
registered by BCA under the CRS under, inter alia, the CR 11 workhead (for signcraft
installation) at the L5 Grade.
Accordingly Signmechanic Singapore is able to undertake:
(i) (in its capacity as the holder of a GB 2 Licence) contracts for building works of a
contract value not exceeding S$6 million for non-government agencies and private
sector customers;
(ii) (in its capacity as the holder of a CR 11 workhead L5 Grade registration) direct
tendering of contracts for building works for government agencies of a contract
value not exceeding S$14 million.
(iii) Other than the CR 11 workhead at the L5 Grade, Signmechanic Singapore is also
registered under other categories of workheads, further details of which are set
out below, each of which allows Signmechanic Singapore to undertake direct
tendering of government agency contracts for the relevant workheads and in
respect of the relevant contract values.
REGULATORY OVERVIEW
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Contractors registration system
Although business entities which are not registered with the BCA are not precluded
from conducting business as contractors or suppliers outside the Singapore public sector,
registration in the CRS maintained by the BCA is a pre-requisite to tendering for projects in
the Singapore public sector. At present, there are seven major categories of registration
under the CRS: (a) Construction (‘‘CW’’) (b) Construction-Related (‘‘CR’’) (c) Mechanical
and Electrical (‘‘ME’’) (d) Maintenance (‘‘MW’’) (e) Trade Heads for sub-contractors
(‘‘TR’’) (f) Regulatory Workhead and (g) Supply (‘‘SY’’). Under these seven major
categories, there is a further sub-classification of a total of 63 workheads. Each major
category of registration under the BCA CRS is also subject to six to seven grades
(‘‘Grades’’). In order to qualify for a particular Grade, companies must satisfy the
respective Grade requirements in terms of (i) financial capability (valid audited accounts,
paid-up capital, net worth, etc) (ii) relevant technical personnel (full-time employed,
recognised professional, technical qualifications, valid licenses, etc) (iii) management
certifications (iv) track record (valid projects with documentation proof, endorsed and
assessed by clients for the past 3 years).
The qualified Grade of registered companies corresponds with a tendering limit (valid
for one year) which, dependant on the economy of the construction industry in Singapore,
may be adjusted from year to year.
A contractor’s eligibility to qualify under the different BCA gradings is dependent on
inter alia, the company’s minimum net worth and paid-up capital, the professional and
technical expertise of its management and its track record in relation to previously
completed projects. The validity for a first time registration is for a period of three years.
Registration will thereafter lapse automatically unless a renewal (for a period of three
years) is filed and approved by BCA.
Signmechanic Singapore is currently licensed as a General Builder Class 2 (‘‘GB2
Licence’’) by the BCA under BLS and registered with the BCA under the following
workheads (CRS):
Workheads Title Scope of work Grade(1) Expiry date
CR11 Signcraft
Installation
Planning and installation of an
integrated signposting system for
complexes, airports, shopping centres.
It includes the setting up of exhibition
stands and signs along roads.
L5 1 April 2017
CR09 Repairs &
Redecoration
Repainting and minor non-structural
repair of buildings and existing
structures. These works should not
include addition & alteration works
involving structural changes
L1 1 April 2017
REGULATORY OVERVIEW
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Workheads Title Scope of work Grade(1) Expiry date
CR14 Asphalt Works &
Road Marking
Supply and laying of asphalt, marking
and painting of roads. Applicants are
required to have asphalt plant,
vibratory roller and bituminous
pavers.
L1 1 April 2017
CR01 Minor Construction
Works
Minor building and civil engineering
works that are not governed by the
Building Control Act such as
drainage, minor road works, aprons
and minor A&A
Single Grade 1 April 2017
CW01 General Building All types of building works in
connection with any structure, being
built or to be built, for the support,
shelter and enclosure of persons,
animals, chattels or movable property
of any kind, requiring in its
construction the use of more than two
unrelated building trades and crafts.
Such structure includes the
construction of multi-storey car-
parks, buildings for parks and
playgrounds and other recreational
works, industrial plants, and utility
plants. Scope of work includes the
addition and alteration works on
buildings involving structural changes
and installation of roofs.
C3 1 April 2017
REGULATORY OVERVIEW
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Workheads Title Scope of work Grade(1) Expiry date
CW02 Civil Engineering (a) Works involving concrete,
masonry and steel in bridges,
sewers, culverts, reservoirs,
retaining walls, canals, drainage
systems, underground
structures, cutting and filling of
embankment, river banks,
excavation of deep trenches,
scraping of sub-soil, surface
drainage works, flexible
pavement, rigid pavement or
laterite roads, bus bays, open
car-parks and related works
such as kerbs and footways.
(b) Works involving dredging in
canal, river and offshore for
the purpose of deepening and
extraction of mineral or
construction material. It also
includes reclamation works.
(c) Works involving marine piling
and the construction of marine
structures such as jetties,
wharves, sea and river walls.
The head does not cover the
construction and fabrication of
marine crafts, pontoons and
oilrigs or any floating platform.
C3 1 April 2017
Note:
(1) The differences in BCA Grades relate to the tendering limits for Singapore public sector projects and
may be adjusted on a yearly basis depending on the economy of the construction industry in
Singapore.
REGULATORY OVERVIEW
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Tendering limits for major categories of registration under the CRS are as summarised
below:
Construction Workheads (CW01 and CW02)
Tendering Limit
(S$) A1 A2 B1 B2 C1 C2 C3
1 July 2013 to
30 June 2014
Unlimited 85,000,000 40,000,000 13,000,000 4,000,000 1,300,000 650,000
1 July 2014 to
30 June 2015
Unlimited 90,000,000 42,000,000 14,000,000 4,200,000 1,400,000 700,000
Specialist Workheads (CR, MR, MW and SY)
Tendering Limit
(S$) Single Grade L6 L5 L4 L3 L2 L1
1 July 2013 to
30 June 2014
Unlimited Unlimited 13,000,000 6,500,000 4,000,000 1,300,000 650,000
1 July 2014 to
30 June 2015
Unlimited Unlimited 14,000,000 7,000,000 4,200,000 1,400,000 700,000
REGULATORY OVERVIEW
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To maintain the existing BCA gradings of Signmechanic Singapore, there are certain
requirements to be complied with, including but not limited to requirements relating to
minimum paid up capital and net worth, employment of personnel (including registered
professionals (‘‘RP’’)(2), professionals (‘‘P’’)(3) and technicians (‘‘T’’)(4), and track record of
past projects or contracts secured.
Some of the specific requirements for Signmechanic Singapore’s BCA gradings as at
the Latest Practicable Date are as follows:
Workhead/Title/Grade Requirements
CW01, CW02 General
Building/Civil Engineering
Grade C3
Minimum paid-up capital &
minimum net worth
S$25,000
Management To employ at least 1 RP, P or
T, with no requirement for
duration of relevant
experience, with BCCPE(5).
Track record (over a three-
year period)
To secure projects with an
aggregate contract value of
at least S$100,000(6).
To possess General Builder
Licence Class 1 or Class 2.
Notes:
(2) A registered professional (‘‘RP’’) must have a minimum professional qualification of a degree in
architecture, civil/structural engineering recognised by Professional Engineers Board (PEB) or equivalent
qualifications approved by BCA (for Resident Engineer) or Board of Architects Singapore (BOA).
(3) A professional (‘‘P’’) must have a minimum professional qualification of a recognised degree in
architecture, building, civil/structural engineering or equivalent.
(4) A technician (‘‘T’’) must have a minimum qualification of (i) a technical diploma in architecture, building,
civil/structural mechanical, electrical engineering, or equivalent awarded by BCA or any one of
Singapore’s 5 Polytechnics (ii) a National Certificate in Construction Supervision (NCCS) or Advance
National Building Qualification (NBQ) or a Specialist Diploma in M&E Coordination awarded by BCA
Academy (iii) such other diplomas or qualification as approved by the BCA from time to time.
(5) Basic Concept in Construction Productivity Enhancement (Certificate of Attendance) (‘‘BCCPE’’). This
certificate is obtained after having attended a course conducted by the BCA Academy. Should the director
of a company be the only person in the company possessing a BCCPE, he cannot utilise the same BCCPE
to satisfy the requirements for another company of which he is also part of.
(6) Percentage of sub-contract value taken into consideration shall be 50% for CW01 and 75% for CW02.
REGULATORY OVERVIEW
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Workhead/Title/Grade Requirements
CR01 Minor Construction
Works Single Grade
Minimum paid-up capital &
Minimum net worth
S$10,000
Management To employ at least 1T with
BCCPE, with no
requirement for duration of
relevant experience.
Track record (over a three-
year period)
To secure projects with an
aggregate contract value of
at least S$100,000
CR09, CR 14 Repairs &
Redecoration/Asphalt
Works & Road Marking
Grade L1
Minimum paid-up capital &
minimum net worth
S$10,000
Management To employ at least 1T with
BCCPE
Track record (over a three-
year period)
To secure projects with an
aggregate contract value of
at least S$100,000
CR11 Signcraft Installation
Grade L5
Minimum paid-up capital &
Minimum net worth
S$500,000
Management To employ at least 1P or 2T,
one with at least 8 years of
relevant experience
Track record (over a three-
year period)
To secure projects with an
aggregate contract value of
at least S$10.0 million, with
a minimum size single
project (main/sub-contract)
of at least S$1.0 million
executed entirely by the
licensee
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As the holder of a GB2 Licence, Signmechanic Singapore can undertake contracts of
estimated final prices of not more than S$6 million each. This estimated final prices refers to
the total fee chargeable at practical completion for the building works, including any GST
payable in relation to the supply of works.
The company’s work scope under a GB2 Licence includes all general building works as
well as the following minor specialist building works:
(i) all specialist building works associated with minor specialist building works;
(ii) structural steelwork comprising fabrication and erection work for structures with
a cantilever length of not more than 3 metres, a clear span of less than 6 metres
and a plan area not exceeding 150 square metres; and
(iii) pre-cast concrete work comprising casting of pre-cast reinforced concrete slabs or
planks on site
In addition to the above minor specialist building works, a company with a GB2
Licence may conduct all types of construction works, including all forms of specialist works
if the project does not require checks from an accredited checker, but cannot undertake
works that have been designated as specialist works to be carried out only by companies
possessing a specialist builder class of builders’ licence.
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To qualify for the General Builder Class 2 Licence, the following conditions must be
met by Signmechanic Singapore:
Class of
Builders’
License
Financial
(Minimum
paid up
capital)
Approved person(7) Technical controller(8)
Course Practical experience Course Practical experience
General Builder
Class 2
S$25,000 A course leading to a
diploma in a
construction and
construction-related
field(9), or a Bachelor’s
degree or post-
graduate degree in any
field
At least 3 years (in
aggregate) of practical
experience in the
execution of
construction projects
(whether in Singapore
or elsewhere) after
attaining the
corresponding
qualification
A course leading to a
diploma, or a
Bachelor’s degree or
post graduate degree
in a construction and
construction related
field
At least 5 years (in
aggregate) of practical
experience in the
execution of
construction projects
(whether in Singapore
or elsewhere) after
attaining the
corresponding
qualification
OR
A course conducted by
BCA known as
Essential Knowledge
in Construction
Regulations &
Management for
Licensed Builders
At least 8 years (in
aggregate) of practical
experience in the
execution of
construction projects
in Singapore
Notes:
(7) The approved person is the appointed key personnel under whose charge and direction the management of
the business of the Licensee, in so far it relates to general building works or specialist building works in
Singapore, is to be at all times. The approved personnel shall be the sole-proprietor, partner, director or
member of the board of management of the Licensee. If an employee of the Licensee is appointed as the
approved person, he shall be employed in such a manner and with such similar duties and responsibilities
as a director or member of its board of management. The approved person shall not have acted as an
approved person or the technical controller of a Licensee whose licence has been revoked in the 12 months
preceding the date of application for the licence by the Licensee. The approved person must not be acting,
for so long as he is the approved person for the Licensee, as a technical controller for any company with or
applying for a licence. The approved person must give his consent for carrying out the duties of an
approved person for the Licensee.
(8) The technical controller is the appointed key personnel under whose personal supervision the execution
and performance of any general building works or specialist building works in Singapore that the Licensee
undertakes is carried out. The technical controller(s) could be the sole proprietor, partner, director or
member of board of management of the Licensee or an employee (being a person employed in such a
manner and with such similar duties and responsibilities as a partner, director or member of its board of
management). The technical controller shall not have acted as an approved person or the technical
controller of a Licensee whose Licence has been revoked in the 12 months preceding the date of
application for the licence by the Licensee. The technical controller must not be acting, for so long as he is
the technical controller for the Licensee, as a technical controller for any company with or applying for a
licence. The technical controller must give his consent to carrying out the duties of a technical controller
for the applicant of the Licensee.
(9) ‘Construction and Construction related fields’ means the field of architecture, civil or structural
engineering, mechanical or electrical engineering, construction or project management, quantity surveying
or building science, facilities and estate management.
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Building and construction industry security of payments
Under the Building and Construction Industry Security of Payment Act, Chapter 30B
of Singapore (‘‘BCISPA’’), any person who has carried out any construction work or
supplied any goods or services under a contract is entitled to a progress payment. The
BCISPA also contains provisions relating to, amongst others, the amount of the progress
payment to which a person is entitled under a contract, the valuation of the construction
work carried out under a contract and the date on which a progress payment becomes due
and payable. In addition, the BCISPA, amongst others, endorses the following rights:
(i) the right of a claimant (being the person who is or claims to be entitled to a
progress payment) who, in relation to a construction contract, fails to receive
payment by the due date of an amount that is proposed to be paid by the
respondent (being the person who is or may be liable to make a progress payment
under a contract to a claimant) and accepted by the claimant, to make an
adjudication application in relation to the payment claim. The BCISPA has
established an adjudication process by which a person may claim payments due
under a contract and enforce payment of the adjudicated amount;
(ii) the right of a claimant to suspend the carrying out of construction work or supply
of goods or services, and to exercise a lien over goods supplied by the claimant to
the respondent that are unfixed and which have not been paid for, or to enforce
the adjudication determination as if it were a judgment debt, if, amongst others,
such claimant is not paid after the adjudicator has determined that the respondent
shall pay an adjudicated amount to the claimant; and
(iii) where the respondent fails to pay the whole or any part of the adjudicated amount
to a claimant, the right of a principal of the respondent (being the person who is
liable to make payment to the respondent for or in relation to the whole or part of
the construction work that is the subject of the contract between the respondent
and the claimant) to make direct payment of the outstanding amount of the
adjudicated amount to the claimant, together with the right for such principal to
recover such payment from the respondent.
Please refer to section headed ‘‘Business — Key contract terms’’ of this prospectus.
Employees
The Employment Act (Cap 91) (‘‘Employment Act’’) is the main legislation governing
employment in Singapore.
The Employment Act covers every employee who is under a contract of service with an
employer and includes a workman (as defined under the Employment Act) but does not
include, inter alia, any person employed in a managerial or executive position (subject to the
exceptions set out below).
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A workman is defined under the Employment Act as including, inter alia, (a) any
person, skilled or unskilled, who has entered into a contract of service with an employer in
pursuance of which he is engaged in manual labour, including any apprentice, (b) any
person employed partly for manual labour and partly for the purpose of supervising in
person any workman in and throughout the performance of his work.
Part IV of the Employment Act contains provisions relating to, inter alia, working
hours, overtime, rest days, holidays, annual leave, payment of retrenchment benefit,
priority of retirement benefit, annual wage supplement and other conditions of work or
service and apply to: (a) workmen earning not more than S$4,500 basic monthly salaries
and (b) employees (excluding workmen) earning not more than S$2,000 basic monthly
salaries.
Paid public holidays and sick leave apply to all employees who are covered by the
Employment Act regardless of salary levels.
Any person employed in a managerial or an executive position (who is generally not
regarded as an employee under the Employment Act) who is in receipt of a salary not
exceeding S$2,500 shall be regarded as an employee for the purposes of provisions in the
Employment Act relating to, inter alia, payment and computation of salaries, powers of the
Commissioner for Labour in relation to claims, complaints and investigations into offences
under the Employment Act and procedures and regulations governing claims and offences
under the Employment Act.
Employment of foreign workers in Singapore
The employment of foreign workers in Singapore is governed by the Employment of
Foreign Manpower Act, Chapter 91A of Singapore (the ‘‘EFMA’’) and regulated by the
MOM.
In Singapore, under Section 5(1) of the EFMA, no person shall employ a foreign
employee unless he has obtained in respect of the foreign employee a valid work pass from
the MOM, which allows the foreign employee to work for him. Any person who fails to
comply with or contravenes Section 5(1) of the EFMA shall be guilty of an offence and
shall:
. be liable on conviction to a fine of not less than S$5,000 and not more than
S$30,000 or to imprisonment for a term not exceeding 12 months or to both; and
. on a second or subsequent conviction:
. in the case of an individual, be punished with a fine of not less than S$10,000 and
not more than S$30,000 and with imprisonment for a term of not less than one
month and not more than 12 months; or
. in any other case, be punished with a fine not less than S$20,000 and not more
than S$60,000.
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The availability of the foreign workers to the construction and manufacturing industry
is also regulated by the MOM through the following policy instruments:
. approved source countries;
. the imposition of security bonds and levies;
. dependency ceilings based on the ratio of local to foreign workers; and
. quotas based on the man year entitlements (‘‘MYE’’) in respect of workers from
Non-Traditional Sources (‘‘NTS’’) and the PRC.
Please refer to section headed ‘‘Risk factors’’, and section headed ‘‘Directors, senior
management and staff — staff’’ in this prospectus.
MYE
The MYE allocation system is a work permit quota system relating to the employment
of construction workers from NTS and the PRC. MYEs represent the total number of such
workers that each main contractor is allocated for a specific construction project based on
the value of the project or contract awarded by the developer or owner. The allocation of
MYE is in the form of the number of ‘‘man-years’’ required to complete a project and only
main contractors may apply for MYE. One man-year is equivalent to one year’s
employment under a work permit. All levels of subcontractors are required to obtain
their MYE allocation from their main contractors. A main contractor’s MYE will expire on
the completion date of the relevant project. NTS or PRC construction workers who have
worked with any employer for a cumulative period of two or more years in the construction
industry, may be hired by main contractors without the need for MYE.
Employers are required to comply with the conditions of the work permits, such as the
requirement to provide acceptable accommodation for their foreign workers. Other
conditions of the work permits which employers of foreign construction workers are also
required to comply with include the following:
. that the foreign worker performs only those construction activities specified in the
conditions;
. ensuring that the foreign worker is not sent to work for any other person, except
as provided for in the conditions;
. providing safe working conditions for their foreign workers; and
. purchasing and maintaining medical insurance with coverage of at least S$15,000
per 12-month period of the foreign worker’s employment (or for such shorter
period where the worker’s period of employment is less than 12 months) for the
foreign worker’s in-patient care and day surgery except as the Controller of Work
Passes may otherwise provide by notification in writing. Where the employer
purchases group medical insurance policy for its foreign workers, the employer
REGULATORY OVERVIEW
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shall not be considered to have satisfied the obligation under this condition unless
the terms of the employer’s group medical insurance policy are such that each and
every individual foreign worker is concurrently covered to the extent as required
aforesaid.
Approved source countries
Construction
The approved source countries for construction workers are Malaysia, the PRC, NTS
and North Asian Sources (‘‘NAS’’). NTS countries include countries such as India, Sri
Lanka, Thailand, Bangladesh, Myanmar and the Philippines. NAS countries include Hong
Kong, Macau, South Korea and Taiwan.
Construction companies must have Prior Approval (‘‘PA’’) from the MOM to employ
foreign workers from NTS countries and the PRC. The PA indicates the number of foreign
workers a company is allowed to bring in from NTS countries and the PRC. It also
determines the number of workers who can have their work permits renewed, or who can be
transferred from another company in Singapore. PAs are given based on: (i) the duration of
the work permits applied for; (ii) the number of full-time local workers employed by the
company over the past three months as reflected in the company’s CPF contribution
statements; (iii) the number of man-years allocated to the company (for main contractors)
or the man-years directly allocated from the company’s main contractor (for
subcontractors); and (iv) the remaining number of company’s quota available.
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Foreign construction workers would be required to obtain the following before they
are allowed to work in Singapore:
Requirements Type of workers
Skills Evaluation Certificate (‘‘SEC’’)
or Skills Evaluation Certificate
(Knowledge) (‘‘SEC(K)’’)(10), issued
or accepted by the Building and
Construction Authority (‘‘BCA’’)
NTS countries and the PRC under the PA
(Type: New); NAS countries
Secondary 4 education or its
equivalent, the SEC or SEC(K)
Malaysia
Attend and pass full day Construction
Safety Orientation Course(11)NTS counties, NAS countries, the PRC and
Malaysia (All)
Pass medical examination by doctor
registered in Singapore
NTS countries, NAS countries, the PRC and
Malaysia (All)
With respect to NTS and PRC construction workers, basic skilled workers are allowed
to work up to a maximum of 10 years, while higher skilled workers would be allowed to
work up to 22 years. There is no maximum employment period for all other foreign workers
(from NAS and Malaysia). The maximum age limit for all foreign workers to work in
Singapore, regardless of country of origin, is up to 60 years old.
In addition, for each individual’s work permit, in-principle approvals have to be
sought. Upon receipt of approval, the foreign construction worker is required to undergo a
medical examination by a doctor registered in Singapore and must pass such medical
examination before a work permit can be issued to him.
All foreign workers in the construction sector must attend the Construction Safety
Orientation Course (‘‘CSOC’’), a full-day course conducted by various training centres
accredited by MOM and obtain a valid CSOC Pass. The CSOC is to (i) ensure that
construction workers are familiar with common safety requirements and health hazards in
the industry, (ii) educate them on the required measures to prevent accidents and diseases,
and (iii) ensure that they are aware of their rights and responsibilities under employment
law. Employers must ensure that the foreign workers attend the course within two weeks of
their arrival in Singapore before their work permits can be issued. At the end of the course,
the workers will receive a safety orientation pass if they pass its requirement/assessment.
Foreign workers who have failed the CSOC must retake the CSOC as soon as possible.
Notes:
(10) Both the SEC and SEC(K) schemes are initiatives by the BCA to raise the skill levels and productivity of
the construction project as well as to enhance safety in the construction sector.
(11) Employers who fail to ensure that their workers take and pass the Construction Safety Orientation Course
will be barred from applying for new work permits for three months while the affected workers will have
their work permits revoked.
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Employers who fail to ensure that their workers take and pass the CSOC will be barred
from applying for any new work permits for three months, while the affected workers will
have their work permits revoked.
Manufacturing
The approved source countries for manufacturing workers are Malaysia, the PRC and
NAS.
With respect to NAS and PRC manufacturing workers, basic skilled workers are
allowed to work up to a maximum of 10 years, while higher skilled workers would be
allowed to work up to 18 years. There is no maximum employment period for all other
foreign workers from NAS and Malaysia. The maximum age limit for all foreign workers to
work in Singapore, regardless of country of origin, is up to 60 years old.
Security bonds and levies
In both the construction and manufacturing sectors, for each NAS, NTS or PRC
worker whom were successfully granted with a work permit, a security bond of S$5,000 in
the form of a banker’s guarantee or insurance guarantee is required to be furnished to the
Controller of Work Passes. The security bond must be furnished prior to the foreign
worker’s arrival in Singapore, failing which entry into Singapore will not be allowed.
Malaysian workers are exempt from the above requirement of furnishing a security
bond.
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For the construction sector, employers pay the requisite levy according to the
qualification of the foreign workers employed.
Worker category
Monthly
levy ($)
(current)
Monthly
levy ($)
(from 1 July
2015)
Monthly
levy ($)
(from 1 July
2016)
Monthly
levy ($)
(from 1 July
2017)
Higher skilled and on Man-
year entitlements
(‘‘MYE’’) (see below for
more details on MYE) 300 300 300 300
Basic skilled and on MYE 550 550 650 700
Higher skilled, experienced
and exempted from
MYE(12) 700 600 600 600
Basic skilled, experienced
and exempted from MYE 950 950 950 950
Manufacturing
For the manufacturing sector, employers pay the requisite levy according to the
percentage of the foreign workers employed out of the total workforce of the company. The
current levies payable are as follows:
Pass Type Tiers Percentage
Worker
category
Monthly
levy rate
($)
(current)
Monthly
levy rate
($) (1 July
2015)
Monthly
levy rate
($) (1 July
2016)
S-Pass
Quota:
20%
Basic/Tier 1 Up to 10% of total
workforce
Skilled 315 315 330
Tier 2 Above 10% and up
to 20% of
workforce
Unskilled 550 550 650
Work Permit
Quota:
60%
Basic/Tier 1 Up to 25% of the
total workforce
Skilled 250 250 250
Unskilled 370 370 370
Tier 2 Above 25% to 50%
of the total
workforce
Skilled 350 350 350
Unskilled 470 470 470
Tier 3 Above 50% to 60%
of the total
workforce
Skilled 550 550 550
Unskilled 650 650 650
Notes:
(12) To be exempted from MYE, the foreign workers must have at least two years of working experience in
Singapore which is relevant to the construction sector.
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The calculation of the total levy bill for the manufacturing sector is as follows:
Levy tier Levy bill for each tier Total levy bill
Tier 1 T1 x Tier 1 levy rate = Levy for
tier 1
Total levy bill = Levy for tier 1
+ Levy for tier 2 + Levy for
tier 3
Tier 2 T2 x Tier 2 levy rate= Levy for
tier 2
Tier 3 T3 x Tier 3 levy rate= Levy for
tier 3
Dependency ceilings
Construction
The dependency ceiling for the construction industry is currently set at a ratio of one
full-time local worker to seven foreign workers. This means that for every full-time
Singapore Citizen or Singapore Permanent Resident employed by a company in the
construction sector with regular full month CPF contributions made by the employer, the
company can employ seven foreign workers. However, the quota may not apply to higher-
skilled foreign employees.
Manufacturing
The dependency ceiling for the manufacturing industry is currently set at 1 local full
time employee to 1.5 foreign workers. Therefore for every 2 local employees in the
manufacturing sector, the company may hire a maximum of 3 foreign employees.
However the manufacturing industry is further subject to different sub-quotas: (i) sub-
quota for foreign workers from the PRC (ii) sub-quota for foreign workers under each
different levy tier:
(i) Sub-quota for foreign workers from the PRC
a. For workers from the PRC the sub-quota is calculated using the following
formula: 25% x (company’s total workforce amount + 1)
(ii) Foreign workers under each different levy tier (see below for levy tier details)
Levy Tiers
Tier 1 T1 = 25% x total workforce
Tier 2 T2 = (50% x total workforce) — T1
Tier 3 T3 = (Actual total number of foreign workers) — T1 — T2
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Apart from the EFMA, an employer of foreign workers is also subject to, amongst
others, the provisions set out in:
. the Employment Act, as further discussed above.; and
. the Immigration Act, Chapter 133 of Singapore (‘‘Immigration Act’’) and the
regulations issued pursuant to the Immigration Act.
Female employees
The Children Development Co-Savings Act (Cap 38A) (‘‘CDCSA’’) provides that every
female employee is legally entitled to 16 weeks of paid maternity leave regardless of her
occupation if: (1) her child is a Singapore Citizen, (2) she is lawfully married to the child’s
father at the time of the child’s birth; and (3) she has served the company for at least 90 days
before the birth of her child.
Workplace safety and health safety measures
Under the Workplace Safety and Health Act, Chapter 354A of Singapore (‘‘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 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.
The Workplace Safety and Health (Construction) Regulations 2007 sets out additional
specific duties on employers which include, inter alia, appointing a workplace safety and
health co-ordinator in respect of every worksite to assist and identify any unsafe condition
in the worksite or unsafe work practice which is carried out in the worksite and recommend
and assist in the implementation of reasonably practicable measures to remedy the unsafe
condition or unsafe work practice.
More specific duties imposed on employers are laid out in the Workplace Safety and
Health (General Provisions) Regulations (‘‘WSHR’’). Some of these duties include taking
effective measures to protect persons at work from the harmful effects of any exposure to
any bio-hazardous material which may constitute a risk to their health.
Pursuant to the WSHR, the following equipment are required to, amongst others, be
tested and examined by an authorised examiner (‘‘Authorised Examiner’’) before they can
be used and thereafter, at specified intervals:
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. hoists or lifts
. lifting gears
. lifting appliances and lifting machines
Upon examination, the Authorised Examiner will issue and sign a certificate of test
and examination, specifying the safe working load of the equipment. Such certificate of test
and examination shall be kept available for inspection. Under the WSHR, it is the duty of
the occupier of a workspace in which the equipment is used to comply with the foregoing
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 Commissioner
for Workplace Safety and Health (‘‘CWSH’’) may, among others, enter, inspect and
examine any workplace, to inspect and examine 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, to take
samples of any material or substance found in a workplace or being discharged from any
workplace for the purpose of analysis or test, to assess the levels of noise, illumination, heat
or harmful or hazardous substances in any workplace and the exposure levels of persons at
work therein and to take into custody any article in the workplace which is relevant to an
investigation or inquiry under the WSHA.
Under the WSHA, the CWSH may issue a stop-work order in respect of a workplace if
he is satisfied 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, amongst others, direct the person served
with the order to immediately cease to carry on any work indefinitely 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.
The MOM has also implemented a demerit points system for the construction sector.
All main contractors and subcontractors in the construction sector will be issued with
demerit points for breaches under the WSHA and relevant subsidiary legislation. The
number of demerit points awarded depends on the severity of the infringement. A
contractor that has received more than 18 demerit points within a 12-month period will
receive a formal warning from the MOM, while the continued accumulation of demerit
points will result in more stringent corrective actions. If a contractor continues to commit
workplace safety and health offences, applications from the company for new and renewal
of all types of work passes for all foreign employees will be rejected by MOM. MOM
escalates warnings and penalties to main contractors as they commit repeated offences and
accumulate demerit points, as follows:
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First stage: A warning letter will be issued to the main contractor if the
total points accumulated by the company exceed 18 demerit
points within a 12-month rolling period.
Second stage: The following will apply to an individual worksite if the
total points accumulated by the worksite exceed 18 demerit
points:
. Six-month MYE freeze for first occurrence;
. 12-month MYE freeze for second occurrence (within 12
months of the first occurrence); and
. 24-month MYE freeze for third or subsequent
occurrences (within 12 months of the previous
occurrence).
A main contractor will have its records cleared when all its
worksites do not accumulate any demerit points for a rolling
period of 12 months.
Third stage: A 24-month MYE freeze will be extended to all worksites
under the company if three of its worksites have each
accumulated more than 18 demerit points within any 12-
month period i.e. the company’s MYE has been frozen three
times within a year.
Applications from the company for new and renewal of all types of work passes for all
foreign employees will also be rejected.
When the MYE allocated to a worksite is frozen, applications from the main-
contractor for new and renewal of all types of work permits, including sub-contractors’ use
of the worksite’s MYEs to employ or renew work permits holders will be rejected by MOM.
MOM escalates warnings and penalties to sub-contractors as they commit repeated
offences and accumulate demerit points, as follows:
First stage: A warning letter will be issued to the sub-contractor if the
total points accumulated by the company exceed 18 demerit
points within a 12-month rolling period.
Second stage: MOM will reject applications from the company for new
and renewal of all types of work passes for all foreign
employees if the total points accumulated by the sub-
contractor exceeds 18 demerit points:
. Six-month MYE freeze for first occurrence;
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. 12-month MYE freeze for second occurrence (within 12
months of the first occurrence); and
. 24-month MYE freeze for third or subsequent
occurrences (within 12 months of the previous
occurrence).
A sub-contractor will have its records cleared when it does not accumulate any demerit
points for a rolling period of 12 months.
Under the Workplace Safety and Health (Registration of Factories) Regulations 2008
(‘‘Factories Regulations’’), any person who desires to occupy or use any premises as a
factory falling within any of the classes prescribed under the First Schedule of the Factories
Regulations is required to register the premises as a factory with the Commissioner for
Workplace Safety and Health (‘‘Commissioner’’), while any person who desires to use or
occupy any premises as a factory not falling within such classes shall only be required to
submit a notification in the prescribed form to the Commissioner before the commencement
of operation of the factory. In the latter case, the occupier of the factory is required to
inform the Commissioner, inter alia, of any changes in any of the particulars of the factory,
type of work carried out in the factory or any cessation of occupation or use of the factory.
Pursuant to the Workplace Safety and Health (Risk Management) Regulations, the
employer in a workplace is supposed to, inter alia, conduct a risk assessment (at least once
every 3 years) in relation to the safety and health risks posed to any person who may be
affected by his undertaking in the workplace, take all reasonably practicable steps to
eliminate or minimise risks, implement measures/safety procedures to address the risks, and
to inform workers of the same, maintain records of such risk assessments and measures/
safety procedures for a period of not less than 3 years, and submit such records to the
Commissioner from time to time when required by the Commissioner.
Please refer to section headed ‘‘Business — Workplace safety and health policy’’ in this
prospectus.
Workmen’s compensation
The Work Injury Compensation Act (Chapter 354) (‘‘WICA’’), which is regulated by
the Ministry of Manpower (‘‘MOM’’), applies to employees who are engaged under a
contract of service or apprenticeship, regardless of their level of earnings. The WICA does
not cover self-employed persons or independent contractors. However, as the WICA
provides that, where any person (referred to as the principal) in the course of or for the
purpose of his trade or business contracts with any other person (referred to as the sub-
contractor employer), the principal shall be liable to compensate those employees of the
sub-contractor employer who were injured while employed in the execution of work for the
principal.
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The WICA provides that if an employee dies or sustains injuries in a work-related
accident or contracted occupational diseases in the course of the employment, the employer
shall be liable to pay compensation in accordance with the provisions of the WICA. An
injured employee is entitled to claim medical leave wages, medical expenses and lump sum
compensation for permanent incapacity or death, subject to certain limits stipulated in the
WICA.
An employee who has suffered an injury arising out of and in the course of his
employment can choose to either:
(a) submit a claim for compensation through the MOM without needing to prove
negligence or breach of statutory duty by employer. There is a fixed formula in the
WICA on amount of compensation to be awarded; or
(b) commence legal proceedings to claim damages under common law against the
employer for breach of duty or negligence.
Damages under a common law claim are usually more than an award under WCIA and
may include compensation for pain and suffering, loss of wages, medical expenses and any
future loss of earnings. However the employee must show that the employer has failed to
provide a safe system of work, or breached a duty required by law or that the employer’s
negligence caused the injury.
Under the WICA, every employer is required to insure and maintain insurance under
approved policies with an insurer against all liabilities which he may incur under the
provisions of the WICA in respect of all employees employed him, unless specifically
exempted.
Personal Data Protection Act (2012) (the ‘‘PDPA’’)
The PDPA came into full effect on 2 July 2014. The PDPA governs the collection, use
and disclosure of personal data by organisations in a manner that recognises both the right
of individuals to protect their personal data and the need of organisations to collect, use or
disclose the same for purposes that a reasonable person would consider appropriate in the
circumstances. Under the PDPA, personal data is defined as data, whether true or not,
about an individual (whether living or deceased) who can be identified (a) from that data; or
(b) from that data and other information to which the organisation has, or is likely to have
access. Generally, the PDPA imposes the following obligations on organisations collecting,
using or disclosing personal data of individuals (‘‘relevant persons’’): obligations of
obtaining consent, giving notification and access and correction rights to the relevant
persons, purpose limitation in respect of use of, and retention limitation and transfer
limitation in respect of personal data collected, ensuring accuracy and protection of data
collected and openness in making information available on its privacy policies and
procedures relating to protection of personal data.
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Company laws and regulations
Companies Act
Signmechanic Singapore, which is a wholly-owned subsidiary of KPM Holding
Limited, is a private company limited by shares, incorporated and governed under the
provisions of the Companies Act (Cap 50) (the ‘‘Companies Act’’) and its regulations.
The Companies Act generally governs, amongst others, matters relating to the status,
power and capacity of a company, shares and share capital of a company (including
issuances of new shares (including preference shares), treasury shares, share buybacks,
redemption, share capital reduction, declaration of dividends, financial assistance, directors
and officers and shareholders of a company (including meetings and proceedings of
directors and shareholders, dealings between such persons and the company), protection of
minority shareholders’ rights, accounts, arrangements, reconstructions and amalgamations,
winding up and dissolution.
In addition, members of a company are subject to, and bound by the provisions of the
memorandum and articles of association of the company. The memorandum of association
of a company provides for, inter alia, the objects of the company while the articles of
association of the company contains, inter alia, provisions relating to some of the matters in
the foregoing paragraph, transfers of shares as well as sets out the rights and privileges
attached to the different classes of shares of the company (if applicable).
The legal advisers to our Company as to Cayman Islands law and Singapore law have
confirmed that apart from ad valorem stamp duty payable in Singapore in connection with
the transfer of shares of Signmechanic Singapore pursuant to the Reorganisation (which
has been duly paid), the change of shareholdings in Signmechanic Singapore under the
Reorganisation did not require any approval or permit from any relevant government
authorities in the Cayman Islands and Singapore respectively. Details of the Reorganisation
are also set out in the section headed ‘‘History, Reorganisation and group structure’’ of this
prospectus. Save for the Capitalisation Issue and Placing, no further changes in
shareholding of our Company and its subsidiary will take place after the Reorganisation
and at the time of Listing.
Singapore taxation
The following is a discussion of certain tax matters relating to Singapore corporate tax,
capital gains tax, stamp duty and estate duty consequences in relation to the purchase,
ownership and disposal of our Shares. The discussion is limited to a general description of
certain tax consequences in Singapore with respect to ownership of our Shares, and does
not purport to be a comprehensive nor exhaustive description of all of the tax
considerations that may be relevant to a decision to purchase our Shares or apply to all
categories of prospective subscriber, some of whom may be subject to special rules either in
Singapore or in the tax jurisdictions where the subscribers are resident. The laws,
regulations rulings, decisions and interpretations, however, may change at any time, and
REGULATORY OVERVIEW
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any change could be retroactive to the date of issuance of our Placing Shares. These laws
and regulations 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.
You, as a prospective subscriber of our Shares, should consult your tax advisors
concerning the tax consequences of purchasing, owning and disposing our Shares. Neither
our Company, our Directors nor any other persons involved in this Listing accepts
responsibility for any tax effects or liabilities resulting from the subscription, purchase,
holding or disposal of our Shares.
CORPORATE TAX
The prevailing corporate tax rate in Singapore is 17% with effect from Year of
Assessment 2010. In addition, the partial tax exemption scheme applies on the first
S$300,000 of normal chargeable income; and specifically 75% of up to the first S$10,000 of
a company’s normal chargeable income, and 50% of up to the next S$290,000 is exempt
from corporate tax. The remaining chargeable income (after the partial tax exemption) will
be taxed at 17%. Further, companies will be granted a corporate income tax rebate of 30%
of the tax payable for the Years of Assessment 2013 to 2015, subject to a cap of S$30,000
per year of assessment. During the 2015 Singapore Budget Announcement, the Minister
proposed to extend this 30% rebate to the Years of Assessment 2016 and 2017, subject to a
cap of S$20,000 per year of assessment.
Dividend distributions
(i) One tier corporate taxation system
Singapore adopts the One-Tier Corporate Taxation System. Under such a system, the
tax collected from corporate profits is a final tax and the after-tax profits of the company
resident in Singapore can be distributed to the shareholders as tax-exempt (One-Tier)
dividends. Such dividends are tax-exempt in the hands of the shareholders, regardless of
whether the shareholder is a company or an individual and whether or not the shareholder
is a Singapore tax resident.
(ii) Withholding taxes
Singapore does not currently impose withholding tax on dividends paid to resident or
non-resident shareholders. Foreign shareholders are advised to consult their own tax
advisors to take into account the tax laws of their respective home countries/countries of
residence and the applicability of any double taxation agreement which the relevant tax
jurisdiction may have with Singapore.
Productivity and Innovation Credit Scheme
The Productivity and Innovation Credit Scheme (‘‘PIC Scheme’’) allows, amongst
others, companies with active business operations in Singapore to claim (i) tax deductions
and/or allowances and/or (ii) cash payouts, and/or (iii) cash bonuses (on a dollar for dollar
matching basis) in addition to (i) and/or (ii) above, in respect of certain qualifying activities
REGULATORY OVERVIEW
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undertaken by such companies, including the acquisition or leasing of certain qualifying
equipment and certain types of training of employees, subject to prescribed expenditure
caps. Further conditions apply before a company is eligible to make each of such claims,
including having to invest in relevant qualifying expenditure and (in the case of the cash
payouts and the cash bonuses) meeting the minimum 3 local employees requirement and (in
the case of cash bonuses) investing the minimum qualifying expenditure per year of
assessment over the course of 3 years from year of assessment 2013 to 2015. The PIC
Scheme has been extended for another 3 years from year of assessment 2016 to 2018, and
higher expenditure caps in relation to tax deductions and allowances apply for qualifying
small and medium enterprises, under the PIC+ scheme (for qualifying small and medium-
sized enterprises) which takes effect from year of assessment 2015. As announced in
Singapore Budget Announcement 2015, the PIC cash bonus will expire in year of assessment
2015.
CAPITAL GAINS TAX
There is no tax on capital gains in Singapore.
Thus any gains derived from the disposal of our Shares will not be taxable in
Singapore, if the gains are of a capital nature. For the gain to be considered as capital in
nature, the shares must be acquired for long-term investment purposes and primarily to
derive investment income. The Shares must not have been originally acquired as part of the
trading activities of the acquirer.
On the other hand, where the taxpayer is deemed by the IRAS to be carrying on a trade
or business of dealing in shares, gains from disposal of shares by such taxpayer are of an
income nature (rather than capital gains) and thus subject to Singapore income tax, if the
gains are considered to be accruing in or derived from Singapore or received or deemed
received in Singapore, unless exemptions apply.
Subject to certain conditions being met, with effect from 1 June 2012 and for a period
of five (5) years ending on or before 31 May 2017, gains derived from the disposal of
ordinary shares by companies will not be subjected to Singapore income tax, if the divesting
company holds a minimum shareholding of 20% of the ordinary shares in the company
whose shares are being disposed for a minimum continuous period of 24 months.
Other than the above, there are no specific laws or regulations which deal with the
characterisation of capital gains, and hence, gains may be construed to be of an income
nature and subject to tax especially if they arise from activities which the IRAS regards as
the carrying on of a trade or business in Singapore.
Foreign sellers are advised to consult their own tax advisors to take into account the
applicable tax laws of their respective home countries or countries of residence as well as the
provisions of any applicable double taxation agreement.
STAMP DUTY
No stamp duty is payable on the subscription for and issuance of our Shares.
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Where existing Shares evidenced in certificated form are acquired or executed in
Singapore, stamp duty is payable on the instrument of transfer of the Shares at the rate of
0.2% (if executed on or after 22 February 2014) of the consideration for, or market value of
the Shares, whichever is higher. The purchaser is liable for stamp duty, unless otherwise
agreed.
No stamp duty is payable if no instrument of transfer is executed (such as in the case of
scripless shares, the transfer of which does not require instruments of transfer to be
executed) or if the instrument of transfer is executed outside Singapore. However, stamp
duty is payable if the instrument of transfer which is executed outside Singapore is
subsequently received in Singapore. Stamp duty is also not applicable to electronic transfers
of shares through the Central Depository System.
ESTATE DUTY
Singapore estate duty has been abolished with effect from 15 February 2008.
GOODS AND SERVICES TAX (‘‘GST’’)
General
The sale of our Shares by a GST-registered investor belonging in Singapore to another
person belonging in Singapore is an exempt supply not subject to GST. Any GST (for
example, GST on brokerage) incurred by the investor in connection with the making of this
exempt supply will generally become an additional cost to the investor unless the investor
satisfies certain conditions.
Where our Shares are sold by a GST-registered investor to a person belonging to a
country other than Singapore, the sale is a zero-rated supply (i.e. subject to GST at zero
rate). Any GST (for example, GST on brokerage) incurred by him in the making of this
zero-rated supply for the purpose of his business will, subject to the provisions of the GST
legislation, be recoverable as an input tax credit in his GST returns.
Services such as brokerage, handling and clearing services rendered by a GST-
registered person to an investor belonging in Singapore in connection with the investor’s
purchase, sale or holding of our Shares will be subject to GST at the prevailing rate of
7.0%. Similar services rendered contractually to an investor belonging outside Singapore
should qualify for zero-rating (i.e. subject to GST at zero rate) provided that the investor is
the direct beneficiary of the services and is outside Singapore at the time the services are
performed.
Investors should seek their own tax advice on the recoverability of GST incurred on
expenses in connection with purchase and sale of our Shares.
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HISTORY AND DEVELOPMENT
Key milestones of our Group
The following table sets forth major development milestones of our Group:
Year Development milestones
1998 Signmechanic Singapore was acquired by Mr. Peter Tan and Mr.
Kelvin Tan. Started providing in-house signage fabrication.
2001 Signmechanic Singapore started providing maintenance works for
signage.
2008 to 2014 Signmechanic Singapore was awarded the temporary signage projects
required for Formula 1 Singapore Grand Prix, providing road
diversion signage from 2008 to 2014.
2009 Signmechanic Singapore obtained its first major road signage
contract of value of approximately S$4.0 million, for the upgrading
of directional and traffic signs in the west sector of Singapore.
2010 Signmechanic Singapore was awarded the road directional signage
required for Youth Olympics in Singapore.
2011 to 2013 Signmechanic Singapore obtained various contracts for the supply of
labour and machinery for the construction of precast facade wall, lane
marking and road/directional signage along the Marinal Coastal
Expressway, the widest undersea road tunnel in Singapore.
2013 Signmechanic Singapore was awarded Singapore Business Quality
Award for its commitment towards quality, environment, health and
safety management system.
Our corporate and business history
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability under the Companies Law on 10 March 2015 and became the holding
company of Signmechanic Singapore pursuant to the Reorganisation which was completed
on 23 June 2015. We decided on the name KPM Holding Limited as it is representative of
the names of our Executive Directors, Mr. Kelvin Tan and Mr. Peter Tan, and our general
manager, Mr. Soh Chiau Kim (who is also known as Mike). We decided against using
‘‘Signmechanic’’ in the name of our Company as we wanted a corporate name to signify new
horizons and challenges that the abovementioned parties will undertake together. Our
Group comprises our Company, Sino Promise and Signmechanic Singapore, both wholly-
owned subsidiaries. Our Group is founded by our Executive Directors, Mr. Kelvin Tan and
Mr. Peter Tan.
HISTORY, REORGANISATION AND GROUP STRUCTURE
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Our founders, Mr. Kelvin Tan and Mr. Peter Tan, acquired Sign Mechanic Pte Ltd,
then owned by two other Independent Third Parties, in July 1998. Sign Mechanic Pte Ltd
was incorporated on 2 September 1997 with a share capital of S$5,000. In July 1998, for
S$5,000 Mr. Kelvin Tan and Mr. Peter Tan bought all the shares in Sign Mechanic Pte Ltd
held by the Independent Third Parties, using their personal resources, resulting in their
holding of the entire beneficial ownership of 5,000 shares. On 17 December 1997, the
Registrar of Companies approved the name of the Company be changed to Signmechanic
Singapore and that it be substituted for Sign Mechanic Pte Ltd. From 9 July 1998 to 20
February 2011, Mr. Kelvin Tan and Mr. Peter Tan injected additional share capital into
Signmechanic Singapore, using their personal resources, resulting in an aggregate
additional 231,000 shares allotted and issued to each of Mr. Kelvin Tan and Mr. Peter
Tan at a cash payment of S$231,000 each. On 4 December 2003, an additional 10,000 shares
were allotted and issued to each of Ms. Khoo Ai Lin and Ms. Ong Siew Mui (the spouses of
Mr. Kelvin Tan and Mr. Peter Tan respectively), who held the shares on trust for Mr.
Kelvin Tan and Mr. Peter Tan, respectively. The shares were issued at a cash payment of
S$10,000 each. On 26 October 2009, an additional 6,500 shares were allotted and issued to
each of Ms. Khoo Ai Lin and Ms. Ong Siew Mui, who held the shares on trust for Mr.
Kelvin Tan and Mr. Peter Tan, respectively. The shares were issued at a cash payment of
S$6,500 each. On 7 April 2015, an additional 750,000 shares were allotted and issued to
each of Mr. Kelvin Tan and Mr. Peter Tan and the shares were issued at a cash payment of
S$750,000 each. The share capital of Signmechanic Singapore remained unchanged after the
aforesaid allotment and issue of shares. On 19 June 2015, Ms. Khoo Ai Lin and Ms. Ong
Siew Mui transferred their shares, held on trust for Mr. Kelvin Tan and Mr. Peter Tan back
to them. Signmechanic Singapore became our wholly-owned subsidiary pursuant to the
Reorganisation, details of which are also set out in the paragraph headed ‘‘Reorganisation’’
in this section of this prospectus. The abovementioned transfers had been properly and
legally completed.
At the onset in 1998, Mr. Kelvin Tan and Mr. Peter Tan started as a two-person
company and focused mainly on in-house fabrication of signage. Gradually, the scope of
services and products we provided increased to cover maintenance for signages in 2001.
From 2000 to 2010, we pursued business growth in terms of expanding business sectors to
include national parks, hospitality (hotels and resort), commercial buildings and retail
sectors (fast food and coffee retail chains).
In 2008, we were awarded the temporary signage projects required for Formula 1
Singapore Grand Prix, providing road diversion signage works. We were awarded such
project for each subsequent year, from 2008 to 2014. In 2009, we obtained our first major
road signage contract of value approximately S$4.0 million, providing directional and
traffic signs in the west sector in Singapore. In 2010, we were awarded the road directional
signage required for Youth Olympics held in Singapore. In 2011, Signmechanic Singapore
made a business strategic decision to focus on road signage in the public sector, expanding
its product portfolio to provide comprehensive product range of road signage, railings, bus
shelters, linkways and metal works in the public sector in Singapore. From 2011 to 2013,
Signmechanic Singapore obtained various contracts for the supply of labour and machinery
for the construction of precast facade wall, lane marking and road/directional signage along
the Marinal Coastal Expressway, the widest undersea road tunnel in Singapore.
HISTORY, REORGANISATION AND GROUP STRUCTURE
– 88 –
In 2013, Signmechanic Singapore was awarded Singapore Business Quality Award for
its commitment towards quality, environment, health and safety management system. As at
the Latest Practicable Date, our Group had a work force of 20 local staff and 46 foreign
workers.
Our Company was incorporated on 10 March 2015 and as a result of the
Reorganisation, thus becoming the investment holding company of our Group. The legal
advisers to our Company as to Cayman Islands law and Singapore law have confirmed that
the change of shareholdings in Signmechanic Singapore under the Reorganisation would
not require any approval or permit from any relevant government authorities in the
Cayman Islands or Singapore. Details of the Reorganisation are also set out in the
paragraph headed ‘‘Reorganisation’’ in this section of this prospectus. Save for the
Capitalisation Issue and the Placing, no further changes in shareholding of our Company
and our subsidiaries will take place after the Reorganisation and at the time of Listing.
The shareholding structure of our Group, immediately prior to the implementation of
the Reorganisation, is illustrated below:
Mr. Kelvin Tan Mr. Peter Tan
Signmechanic Singapore
50% 50%
Note:
As at the Latest Practicable Date, the issued and paid-up share capital of Signmechanic Singapore was
S$2,000,000 comprising 2,000,000 shares of S$1 each and the directors of Signmechanic Singapore are Mr.
Kelvin Tan, Mr. Peter Tan, Ms. Khoo Ai Lin and Ms. Ong Siew Mui. Signmechanic Singapore is the
principal operating entity of our Group which is principally engaged in the design, fabrication,
installation and maintenance of signage and related products.
REORGANISATION
In preparation for the Listing, our Group has undergone the Reorganisation and the
steps are as follows:
(i) Incorporation of Sino Promise and our Company
On 12 January 2015, Sino Promise was incorporated in the British Virgin Islands with
limited liability and is authorised to issue a maximum of 50,000 shares of a single class, each
with a par value of US$1.00, of which one fully paid share has been allotted and issued at
par to our Company on 10 March 2015.
HISTORY, REORGANISATION AND GROUP STRUCTURE
– 89 –
On 10 March 2015, our Company was incorporated as an exempted company in the
Cayman Islands under the Companies Law, with an authorised share capital of
HK$380,000 divided into 38,000,000 Shares of HK$0.01 each, of which one Share was
allotted and issued to the first subscriber, Reid Services Limited, as nil-paid Share, which
was transferred to Absolute Truth on 12 March 2015 at nil consideration.
(ii) Acquisition of Signmechanic Singapore
On 23 June 2015, Mr. Kelvin Tan and Mr. Peter Tan transferred the entire issued share
capital of Signmechanic Singapore to Sino Promise (as a nominee of our Company) in the
consideration of HK$38,106,550, which was satisfied by (i) our Company allotting and
issuing 999,999 new Shares to Absolute Truth (as a nominee of Mr. Kelvin Tan and Mr.
Peter Tan) credited as fully paid; and (ii) the crediting of the one nil-paid Share, which was
registered in the name of Absolute Truth, as fully paid. After completion of the above
transaction, Signmechanic Singapore was wholly-owned by Sino Promise.
On the same date, in consideration of our Company nominating Sino Promise to hold
the entire issued share capital of Signmechanic Singapore, Sino Promise allotted and issued
9 new shares of Sino Promise to our Company, credited as fully paid.
Based on the foregoing arrangements as agreed by the parties, the acquisition of
Signmechanic Singapore by our Company was properly and legally completed and settled.
HISTORY, REORGANISATION AND GROUP STRUCTURE
– 90 –
(iii) Increase of authorised share capital of our Company
On 23 June 2015, the authorised share capital of our Company was increased from
HK$380,000 divided into 38,000,000 Shares of HK$0.01 each to HK$50,000,000 divided
into 5,000,000,000 Shares of HK$0.01 each by the creation of an additional 4,962,000,000
Shares of HK$0.01 each to rank pari passu in all respects with the existing Shares.
The following chart illustrates the shareholding structure of our Group immediately
after the completion of the Reorganisation and prior to completion of the Placing and the
Capitalisation Issue:
50% 50%
100%
Our Company(Cayman Islands)
Absolute Truth(British Virgin Islands)
100%
100%
Signmechanic Singapore(Singapore)
Mr. Kelvin Tan Mr. Peter Tan
Sino Promise(British Virgin Islands)
HISTORY, REORGANISATION AND GROUP STRUCTURE
– 91 –
GROUP STRUCTURE
The following chart sets out the shareholding structure and corporate structure of our
Group immediately after completion of the Placing and the Capitalisation Issue:
50% 50%
Public
75% 25%
100%
100%
Our Company(Cayman Islands)
Sino Promise(British Virgin Islands)
Signmechanic Singapore(Singapore)
Mr. Peter TanMr. Kelvin Tan
Absolute Truth(British Virgin Islands)
HISTORY, REORGANISATION AND GROUP STRUCTURE
– 92 –
OVERVIEW
We have been principally engaged in the design, fabrication, installation and
maintenance of signage and related products in both the public and private sectors in
Singapore since 1997. We are one of the established companies offering road signage in
Singapore and have the capability to offer our products across public and private sectors.
Approximately 66.7% and 80.7% of our revenue during the two years ended 31 December
2014 was derived from the public sector. Public sector includes road signage, signage and
related products for education institutions, public housing flats/compounds and national
parks. Private sector includes signage and related products for commercial buildings and
fast food chains.
Our competitive advantage lies in our ability to provide reliable products in a timely
manner. Our established track record and experienced management team have built a
strong reputation in the industry over the years.
Our Group was founded by our Executive Directors, Mr. Kelvin Tan and Mr. Peter
Tan who are supported by our general manager, Mr. Soh Chiau Kim. Mr. Kelvin Tan and
Mr. Peter Tan are responsible for our Group’s overall management, strategic planning and
business development. Mr. Soh Chiau Kim is responsible for the overall management of
operations, with a focus on the execution of contracts.
Our total revenue for the two years ended 31 December 2014 was approximately S$7.8
million and S$11.9 million, respectively.
OUR BUSINESS MODEL
Our principal business activities
Our principal business activity is the design, fabrication, installation and maintenance
of signage and related products in both the public and private sectors in Singapore. Our
signage and related products include, but are not limited to, indoor signage, outdoor
signage, road signage, steel works, railings and hoarding signage.
Both our public and private sector projects are typically non-recurring in nature. All
open tender projects are competitive in nature; for private invitation projects, we
understand from our customers that they typically require more than one quotation from
their suppliers and therefore with more than one quotation, these projects will be
competitive in nature.
COMPETITIVE STRENGTHS
Our Directors believe that our Group’s competitive strengths set out below have driven
growth in our business and financial performance.
BUSINESS
– 93 –
We have a reputation as an established signage provider, particularly for road signage works
in Singapore
We are an established signage provider for road signage works in Singapore. Our track
record in road signage includes being awarded signage contract of value approximately
S$4.0 million, for the upgrading of directional and traffic signs directional and traffic signs
in the west sector of Singapore. We are reputable partly due to our ability to provide a
comprehensive set of products to our customers, including lane marking works and road
safety products where we work with suppliers and subcontractors to offer value-added
related products and works. We are also experienced in managing road signage projects as
these involve a series of work steps, ranging from removal of existing signage, re-directing
ongoing traffic, managing of road closure hours, managing of subcontractors in laying of
roads and lane marking, managing of equipment that can be deployed on the road site to
installation of the road signage.
We have a solid track record of providing reliable and timely products for our customers
For public sector projects, our Directors believe that a key factor that our customers
consider is the ability to provide reliable and timely installation of signage. Typically for
road signage works, there will be certain closure times during which the signage installation
has to be completed. We have consistently been completing the road installation on a timely
manner for our customers. Reliability is also a consideration for our customers as the road
signage has to meet both the aesthetics and technical requirements set by the LTA of
Singapore.
Our rapport with our suppliers enable us to obtain competitive pricing and fast delivery
turnaround time
Our Group has good relationships with our network of suppliers and subcontractors,
some of whom had known or worked with us for over 5 years. Our good relationships with
our suppliers are partly due to our prompt repayment of accounts payables which has
enabled our Group to make purchases at a competitive pricing. We also enjoy economies of
scale for certain purchases, in particular for metal products. We enjoy a close working
relationship with our suppliers whose supplies to us for our signage fabrication is able to
meet the technical specifications required of road signage and to do so, in a responsive and
timely manner. Our suppliers, together with our subcontractors, allow us to offer a
comprehensive set of products to our customers.
We have an experienced and dedicated management team and each of our Executive Directors
has over 15 years of experience in the signage installation industry in Singapore
Each of our Executive Directors has over 15 years of experience in the signage
installation industry, and our general manager has worked with us for 6 years and prior to
that, 7 years of project management experience. Our Directors believe that our team has a
strong knowledge of the industry and our execution team is competent to complete projects
reliably and timely, and dynamic to take on new business opportunities. Please refer to the
section headed ‘‘Directors, senior management and employees’’ for detailed work experience
of our Directors and senior management team.
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Other unique selling points for our Group include:
. Approximately 66.7% and 80.7% of our revenue for the two years ended 31
December 2014 was derived from public sector projects
Public sector projects include road infrastructure projects where the main
contractor is; (i) LTA, or Housing Development Board (the ‘‘HDB’’). When they
build new public housing, changes in road signs and metal installations would be
required; and (ii) Jurong Town Council (the ‘‘JTC’’) which is a government owned
developer of commercial property in Singapore.
National Parks (the ‘‘NParks’’) is another government agency that would often
raise tenders. Our Group either bid directly for these projects or through main
contractors who might be doing a project under infrastructure or which impacts the
infrastructure by requiring re-routing of roads (and hence new road signs).
. Productivity optimisation
Our Group is careful to only bid for projects where we can aim for several bids
(e.g. signage and metalwork). We can then have a supervisor or manual workers
working on 2 or 3 projects in a day for the same site.
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BUSINESS OBJECTIVES AND STRATEGIES
Our objectives
Our corporate objective is to achieve sustainable growth in our business and financial
performance so as to create long-term shareholder’s value. We intend to achieve this by
implementing the following corporate strategies:
Our strategies
Our Group intends to achieve our future expansion plans by pursuing the following
key strategies:
(a) Expand and strengthen our market position in the public sector in Singapore
Our revenue attributable to the public sector in Singapore was approximately
66.7% and 80.7% of our total revenue for the two years ended 31 December 2014,
respectively. Of the public sector in Singapore, the development of roads is one of the
key sectors. We intend to expand and strengthen our market position in this sector by
expanding our workforce, purchasing more materials and/or equipment to take on
more projects.
(b) Expand our business portfolio through the formation of new companies and/or
acquisitions
Apart from organic expansion, we will evaluate suitable external parties with
experience in signage and related industry for joint ventures or acquisitions.
Depending on discussions with the external parties, their current business and our
financial and legal due diligence, we may proceed with either capital contribution into
a new company (in the form of joint venture, jointly-controlled entities or subsidiaries)
or we may acquire a controlling stake in their companies. As at the Latest Practicable
Date, we have not identified any potential external party to expand our business
portfolio, but we will evaluate based on factors, including but not limited to, their
customer list, business contacts, track record, staff competencies and equipment. These
external parties may be companies in other sectors of civil engineering, such as
providing services such as lane marking or installation of precast blocks that we
currently do not provide in house but require the engagement of subcontractors. This
strategy serves to (i) increase our competitive edge by providing a wider range of
product offering which we consider to be an unique selling point and (ii) increase our
revenue or profits.
(c) Expand our range of product offering to target and secure more non-road
infrastructure related projects
Apart from strengthening our position in the road signage sector, we also intend
to expand our product offering to other non-road infrastructure related projects such
as in the Mass Rapid Transit (MRT) stations and covered linkways. This will require
us to strengthen our competencies to cater to different project specifications, such as
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working with suppliers/operators with advanced technologies (including but not
limited to environmentally friendly and energy-saving operators), training our workers
or hiring staff who have competencies in the technical and project needs of new
projects. Possible expansion of product offering include tactile guidance system (for
the visually impaired) and covered linkways (to promote connectivity between
transport points and schools, health care facilities, residential developments and
amenities, part of Singapore’s Walk2Ride Programme).
To serve increasing demands for signages, we expect to use approximately HK$6.5
million, representing approximately 27.8% of the net proceeds from the Placing, to
invest prudently to expand and penetrate signage markets as well as other high-growth
new business opportunities.
We currently have plans to expand our business horizontally into (i) Mass Rapid
Transit (the ‘‘MRT’’) stations and (ii) covered linkways projects, as we expect the
demand for our products would continue to grow and represent a good business
opportunity for our Group.
(i) With respect to expansion into MRT stations, there is a planned construction
of the 6th MRT line, the Thomson-East Coast Line, in Singapore which is
expected to add an additional 31 MRT stations with 7 interchange stations
with existing lines. We plan to focus on the design, supply and installation of
signages within the stations of this MRT line through the following planned
business expansion steps:
. Equipment — This new business opportunity can leverage on our
existing production facilities, as well as expertise in signage sector,
which accomplishes economy of scale by reducing the cost per unit
resulting from increased production, realised through operational
efficiencies.
. Supply — We intend to engage more third-party subcontractors for
fabrication of precision casing and electrical specialist who are selected
on the basis of competitive tenders. The subcontractors must be arm’s
length entities in which no staff member of our Group has any interest.
While subcontracts are awarded primarily on the basis of cost and fees,
we will also consider the overall experience, production schedule,
guarantees of completion quality, and insurance.
. Labour — We plan to engage additional skilled workers responsible for
the installation of signages. For further details, please see ‘‘Workforce
expertise’’ section below.
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. Marketing and Sales — We seek to engage an experienced sales
coordinator to follow up and increase communications with the main
contractor awarded with the new MRT station project through the
Internet, SMS and other platforms to strengthen and deepen the
relationship. We believe such collaborative relationships would not only
solidify our position with the main contractor but would also enhance
our competitiveness and accelerate our drive for deeper market
penetration.
(ii) With respect to expansion into covered linkways, the Walk2Ride programme
is expected to incur a government budget of approximately S$330 million
from 2014 to 2018. We intend to design, supply, fabricate and install
linkways for this Walk2Ride programme through the following planned
business expansion steps:
. Equipment — We expect to make purchase of an additional offsite
welding machine, to address this new business opportunity and offer a
comprehensive suite of cost-effective signage solutions.
. Material — We intend to purchase the necessary raw materials from
existing or new metal supplier. We expect that our consumption of some
major materials will be increased as we process more projects with
similar materials. Our raw material procurement policy is to select only
those suppliers who have demonstrated a high level of quality control
and reliability and have excellent record of on-time delivery as the
quality of the materials used is important since they effectively define
the limits of our signages. Nevertheless, our inventory management
would be more efficient as we expect a better inventory turnover days
will be achieved.
. Labour — We plan to employ additional skilled labour and practised
welder to handle fabrication and installation of covered linkways. For
further details, please see ‘‘Workforce expertise’’ section below.
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Other planning are:
. Capital expenditure — The capital expenditure for investments into
MRT stations and covered linkways projects is estimated at
approximately HK$3 million and HK$3.5 million respectively. The
estimated capital expenditure is made with reference to, among others,
the cost of materials, new machineries and tools, supervisors and
workers and facility operating fees. It is expected that the overall profit
margin will remain stable initially as potential working capital required
for operating new businesses will be increased but our Directors expect
the overall profit margin will be improved in the long run.
. Production facilities — Based on our historical turnover during the
Track Record Period, we do not expect that a dramatic change needs to
be made in our existing production facilities, and in case there is a need
for extra production space, we might consider to retain the sublet areas
for our own usage after the completion of current subleasing agreement.
. Workforce expertise — We expect that the expansion into the new
projects will need a workforce of about 15 workers with experiences of
about one to two years. Further, in order to supervise our expanded
workforce of 15 workers, we intend to employ 3 supervisors with at least
five years of experience in relevant operation and management in
Singapore on a comparable scale. As MRT stations projects and covered
linkways projects do not involve sophisticated technical skills and
knowledge, our Directors believe that our Group should not experience
any particular difficulty in recruiting suitable workers in Singapore with
the relevant experience and expertise. Our Directors and senior
management, with extensive experience in the signage industry, will
monitor and assist in the execution of the expansion plan from time to
time. Having worked in the signage industry in Singapore for more than
15 years, our Executive Directors and senior management have acquired
extensive experience in project management, operation management and
project implementation which will be responsible for supervision and
quality control of the production of the new business opportunities. We
also would delegate certain decision makings to project management
teams, so that they have the flexibility to respond quickly to market
demand and improve business performance.
. Risk profile of the new projects — As the MRT stations and covered
linkways businesses would be a horizontal expansion of our Group, our
Directors do not consider that our Group would be subject to a risk
profile completely different from that of our business model during the
Track Record Period.
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. Implementation and timing — In view of the new MRT stations and
covered linkways projects, our Group will carry out the following
measures: (i) identify equipment suppliers; (ii) identify material
suppliers; (iii) establish new communication channel with potential
customers; (iv) recruit experienced personnel to strengthen our team in
managing and operating the new projects; (v) recruit new workers or
provide adequate training to staff for the new projects; and (vi) regularly
review the market responses, revenue, turnover rate, costs of operations
and other relevant factors in relation to the new projects.
The above expansion strategy into MRT stations and covered linkways
projects, it will also allow us to enjoy more flexibility and quicker response time in
adjusting our production facilities in order to conform lead time to different
projects which in turn making our utilisation of resources more efficient and more
responsive to customers’ requests. We aim to streamline our existing business,
achieve better oversight over the dissemination of industry know-how within our
Group, achieve better quality control and inventory management, utilisation of
manpower, and enhance customer satisfaction. Our Directors believe that by
penetrating into the new projects, we will be able to provide more variety of
income sources in both public and private sectors. This will further strengthen our
competitive advantage and differentiate ourselves from other competitors in the
market which do not cover any non-road signage projects, hence making positive
contributions to our Group’s overall turnover and profit growth.
Given that (i) the new MRT stations and covered linkways project is not
unfamiliar to our Group as we have been working in the signage field for more
than fifteen years; (ii) the proposed new projects are not overly complex; (iii) our
Directors and senior management have adequate management experience; and (iv)
we have a team of experienced technical staff that possesses relevant expertise to
monitor the quality of our products, our Directors are of the view that our Group
has sufficient expertise to manage and operate the new projects.
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MAIN QUALIFICATIONS AND LICENCES
The following table sets out a summary of our main qualifications and licences that
Signmechanic Singapore has for the carrying out of our business and operations in
Singapore:
Relevant authority/
organisation Relevant category
Qualification/
license/grade(1)Date of first
grant/registration Expiry date
BCA CR11 Signcraft
Installation
L5 12 April 2011 1 April 2017
BCA CR09 Repairs &
Redecoration
L1 12 April 2012 1 April 2017
BCA CR14 Asphalt Works &
Road Marking
L1 12 April 2012 1 April 2017
BCA CR01
Minor Construction
Works
Single Grade 12 April 2012 1 April 2017
BCA CW01 General Building C3 12 April 2012 1 April 2017
BCA CW02
Civil Engineering
C3 12 April 2012 1 April 2017
DAS Certification,
by SN Registrars
(Holdings)
Limited
Occupational Health &
Safety Management
System, for the design,
fabrication and
installation of signages
BS OHSAS
18001 : 2007
11 October 2011 10 October 2017
Workplace and
Safety Health
Council
bizSAFE Level Star 1 December 2008 10 October 2017
BCA General Builder General Builder
Class 2
12 April 2012 17 April 2017
Note:
(1) The differences in BCA gradings relate to the tendering limits for Singapore public sector projects. L5
refers to S$14 million, C3 to S$700,000 and L1 to S$700,000.
Our Group principally relies on its CR11 work head category of signcraft installation,
and the other work head categories to take on particular projects where these categories are
required. Our Directors are of the view that our existing BCA gradings are adequate for our
business needs.
We will renew our licences before their respective expiry dates. Our Group had notexperienced any refusal of renewal of the licences necessary for our operations during theTrack Record Period. Our Directors confirm that our Group has as at the Latest
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Practicable Date has obtained all the necessary licences which are required to carry on ourprincipal business activities in Singapore. Our Directors confirm that our Group has been incompliance with all relevant laws and regulations during the Track Record Period and up tothe Latest Practicable Date.
The legal adviser to our Company as to Singapore law advised that SignmechanicSingapore has as at the Latest Practicable Date obtained all the necessary licences, permitsand certificates issued by the appropriate Singapore governmental or regulatory authoritieswhich are material to the business or operations of our Group in Singapore.
For details of the licensing requirements for signage installation companies, pleaserefer to the section headed ‘‘Regulatory overview’’, in this prospectus. In the absence of anynon-compliance, and provided that our Group meets the requirements for the specificgrading, there should not be any impediment for the renewal of our licences.
AWARDS
In 2013, Signmechanic Singapore was awarded Singapore Business Quality Award forits commitment towards quality, environment, health and safety management system.
OUR PRODUCTS
We deliver our products to both the public and private sectors in Singapore. Thefollowing table sets forth the number of contracts with corresponding revenue recognised inboth the public and private sectors during the Track Record Period and up to the LatestPracticable Date.
Year end 31 December 2013 Year end 31 December 2014
From 1 January 2015
to Latest Practicable date
Number of
contracts
and orders
Average
contract value
Revenue
recognised
Number of
contracts
and orders
Average
contract value
Revenue
recognised
Number of
contracts
and orders
Average
contract value
Revenue
recognised
Approximate
S$
S$’000 Approximate
S$
S$’000 Approximate
S$
S$’000
Public sector 1,041 5,000 5,220 66.7% 1,170 8,000 9,562 80.7% 671 7,000 4,703 89.3%
Private sector 1,170 2,000 2,607 33.3% 1,108 2,000 2,288 19.3% 364 1,500 563 10.7%
Total 2,211 7,827 100.0% 2,278 11,850 100.0% 1,035 5,266 100.0%
Approximately 66.7% and 80.7% of our revenue are generated from the public sectorfor the two years ended 31 December 2014 respectively. As at the Latest Practicable Date,we have aggregate contract value of approximately S$11.8 million, from 31 contracts withvalue of over S$18,000 each. Out of these contracts, approximately S$2.1 million wasdelivered and recognised as revenue during the Track Record Period.
The breakdown of revenue recognised/to be recognised for these contracts is presentedbelow:
Revenue estimated to be recognised for the year ended
Number of
contracts
During Track
Record Period
31 December
2015
31 December
2016
31 December
2017
31 December
2018 Total
S$’ million S$’ million S$’ million S$’ million S$’ million S$’ million
Public sector 22 2.1 6.1 1.3 1.0 0.8 (Note) 11.3Private sector 9 — 0.5 — — — 0.5
Total 31 2.1 6.6 1.3 1.0 0.8 11.8
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Note:This is in relation to two contracts which involve provision of new and replacement of directional
and traffic signs to customers. The actual revenue recognised in relation to actual signage installed
and replaced in each of the financial year may not be equivalent to the original contract value
awarded. As at the Latest Practicable Date, the expected time of delivery of signage is not confirmed
and it is not known if these contracts may be extended.
Public Sector
Some of our signage and related products are as follows:
(i) Road signage — Refers to road signage providing the road name road direction
and road, information. Road-related products include gantry signs, directional
signs, traffic signs, street name signs, tourism place signs and work zone signs
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(ii) Indoor signage — Refers to signage indoors including corporate logos, directional
signs to rest rooms or key areas within a building
(iii) Outdoor signage — Refers to signage that are located on the outside of buildings
including the building name and directional signs within the compounds of a
building
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(iv) Steel works — Refers to steel structure works products, bus shelters, linkways,
safety bollards and travel time display structures
(v) Railings — Refers to metal, aluminium and stainless steel railings
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(vi) Hoarding signage — Refers to signage outside of a compound, mainly of
temporary nature such as notification of ongoing development
Private Sector
Some of our signage and related products in private sector are mainly indoor signage,
outdoor signage and hoarding signage, which include directional signs, building names and
hoarding signage outside of a compound for notification purpose.
There is no fixed price range for our products as the supply and installation of our
products are agreed by our customers on a case-by-case basis. However, a common product
is our 60 cm by 60 cm road signage where the price can typically range from approximately
S$150 to S$250. The fluctuation in our pricing is mainly a strategic pricing choice, made
based on consideration of various factors as disclosed in the section headed ‘‘Business —
Pricing’’. For road signage that have micro prismatic reflective sheeting, we typically
provide a warranty of seven years for the sheeting which we obtained a back-to-back
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warranty from the suppliers. All other products will follow the defect liability period of 12
to 18 months, depending on the contract terms. We are not aware of any future price trends,
apart from general inflation, for our products.
We will continue to focus on the above products and on the public sector in Singapore,
while seeking opportunities to expand our business portfolio and product offering.
Accordingly, we do not expect such continued focus to materially alter our operations and
financial position in the future.
SEASONALITY
Our principal business activity is not subject to seasonal factors as public sector
contracts are not related to seasonal fluctuation.
PRICING
The pricing for our signage and related products are mainly based on market rates, our
internal costing with a mark-up to costs decided based upon (i) our past experience (if any)
with the customer (in relation to reputation, working relation, payment history and
pricing), (ii) our knowledge of competitors’ pricing, (iii) the competitive environment
surrounding the contract that our customer (if applicable, the main contractor) is pursuing,
(iv) opportunity to optimise the use of workers near to the site for this potential contract,
(v) the capacity and resources of our Group, and (vi) the value, scale, complexity, technical
and timing requirements for the contract.
When there is a request for quotation, our project department will have the primary
responsibility to prepare the quotation as they have the skills to analyse the project
requirements and are able to understand the required material, labour, subcontracting
service (if any) and time to complete the project. For quotations relating to public sector
contracts related to land transportation, reference of the unit selling prices can be made to a
schedule of rates that are published on the GeBIZ by the Singapore LTA. For contracts of
other nature, reference can be made to past quotations of similar nature or to prepare a cost
plus pricing sheet based on man-hours, materials and other contract requirements.
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PROJECT MANAGEMENT
The following diagram illustrates the general steps undertaken by us in assessing a
potential contract/order:
Request for quotation phase
Reject opportunityNo
Yes
Yes
No Reject opportunity
Request for quotations from suppliers and subcontractors
Project department evaluate the potentialorder based on capability and resources
Project manager will evaluate whether toprovide quotation
Project assistant will prepare the quotation
Request for quotations from customeron same contract (additional order)
Project manager will review the quotation
General manager or Executive Directorwill approve the quotation
Attend tender interview (typically for directtender or new customers)
Negotiate terms and secure customerorders/contracts
Private invitation Open tender
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Implementation phase
Project manager assign respectiveteam members to ensure that
quotation can be met profitably andproject completed timely and reliably
Confirm purchase orders to suppliersand contracts with subcontractors
(if applicable) The duration of our production processes varies from around1 day to 1 monthDesign and fabricate signage at
workshop
Install signage on-site
Quality checks on the signage worksby customer and LTA (if applicable)
Progress billings to customer andfrom suppliers and subcontractors
}
Post completion of works
Monitor return of retention sums (if applicable) and reworks during
defect liability period
Final progress statement
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Request for quotation phase
Our Group secures our contracts either through private invitation to quote or through
open tender. For private invitation for road signage contracts, LTA will generally award the
civil engineering contract to main contractors (typically civil engineering main contractors),
who will in turn subcontract to various subcontractors for different aspects of the contract
from LTA. We are invited by main contractors to provide our quotation for the signage
works which they will take into consideration in their submission of their quotation and
tender to LTA. For other public sector and private sector contracts, we will similarly submit
our quotation to our customers who are either the main contractors or direct customers.
We also participate directly in open tenders via the GeBIZ system, which is the
Singapore government’s one-stop procurement portal. The GeBIZ system is applicable
when we explore opportunities to submit our quotation for contracts that substantially
comprise signage works or maintenance contracts for road signages (with LTA). We can
tender for the signage projects as we have the BCA gradings in the relevant categories.
The tendering processes stated above are similar for both the public and private sector
projects. The revenue contributed by the public and private sectors were approximately
S$5.2 million and S$2.6 million for the year ended 31 December 2013, and approximately
S$9.6 million and S$2.3 million for the year ended 31 December 2014 respectively.
Public sector
As our customers, the main contractors, are typically required to fill in tender
documents according to the requirements of the relevant public sector organisation, we
would similarly have to prepare our section related to the supply and installation of signage
products to them. These tender documents will typically include various sections such as
pricing, detailed scope of works, track record, certifications, relevant corporate information
and ensure ability to fulfil the material specifications.
Private sector
Our customers in the private sector are typically the end customers who set their own
requirements or main contractors for the private sector projects. Generally, the documents
to be submitted during quotation for private sector projects are less complex and at times,
given the past working relationship, we may only need to submit a quotation for the specific
signage products requested with pricing and quantity stated.
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Set forth below are the number of contracts obtained from public and private sectors,
the number via private invitation or open tender, and their respective success rates during
the Track Record Period:
Year ended 31 December 2013 Year ended 31 December 2014
Number of
contracts
and orders
From private
invitation/
representing
approximate
% of
contracts
Success
rate
From open
tender/
representing
approximate
% of
contracts
Success
rate
Number of
contracts
and orders
From private
invitation/
representing
approximate
% of
contracts
Success
rate
From open
tender/
representing
approximate
% of
contracts
Success
rate
(%) (%) (%) (%)
Public sector 1,041 1,029/98.8% 68 12/1.2% 28 1,170 1,167/99.7% 82 3/0.3% 33
Private sector 1,170 1,170/100.0% 30 — — 1,108 1,108/100.0% 35 — —
Total 2,211 2,199 30–68 12 28 2,278 2,275 35–82 3 33
Our success rates for public sector projects from private invitation were approximately
68% and 82% in the two years ended 31 December 2014. Our success rates improved as we
continued to build on our track record and reputation. As we are one of the established
companies offering road signage in Singapore, it is common that we will receive invitations
to quote from more than one main contractor for the same project as these main contractors
are individually tendering for the same project. Our success rates were therefore based on us
securing the contract for road signage for the particular project, regardless of which main
contractor is being awarded the project. The success rates for open tender public sector
projects were approximately 28% and 33% in the two years ended 31 December 2014. The
lower success rates were due to costs being more of a consideration factor in these open
tender projects. For private sector projects, our success rates were approximately 30% and
35% in the two years ended 31 December 2014 and this was lower due to more signage
companies competing in these projects which generally have a lower barrier to entry.
All open tender projects are competitive in nature; for private invitation projects, we
understand from our customers that they typically require more than one quotation from
their suppliers, and therefore, with more than one quotations, these projects will also be
competitive in nature.
For each potential contract, our project department will evaluate based on whether it
matches with our capability and resources. If the opportunity fits our scope of products, the
project manager will evaluate whether to proceed with the preparation of a quotation. The
project department has project manager, project coordinator and project assistant who will
oversee and assist in the preparation of the tender. Our project department will work with
our purchasing department to obtain the quotations from suppliers and/or subcontractors.
For quotations of value S$10,000 and above, approval of our general manager or an
Executive Director is required. Typically for direct tender or new customers, we may be
asked to attend tender interview. Further negotiation with customers may take place on the
contract terms, including but not limited to, the price. Our quotation is valid for a period of
30 days and once it is signed and accepted by our customer, generally no pricing adjustment
is allowed.
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In certain contracts, our customers may require additional signage and related
products if the scope of their contracts has been amended in the course of carrying out the
contract (‘‘additional order’’). We will provide our customer with a quotation to cover the
additional scope and typically, the unit pricing will be as per agreed in the earlier quotation
or contract.
Implementation phase
The duration of our signage works under a contract typically ranges between 1 month
to 4 years, depending on the schedule set up by our customer, the main contractor, who in
turn has to follow the timeline set by its customer. The project manager is the overall in-
charge of a project, assisted by the project coordinator, with the responsibility to meet both
the timing and product specification required for the contract. He will also decide on the
scope of supplies and subcontract services (if any) required for the fulfillment of the
contract. On-site inspection is conducted by qualified staff and engineers to ensure that
there is quality control for our signage works. Please refer to the section headed ‘‘Business
— Quality control’’ of this prospectus for further information.
Our project team will work with the purchasing department to ensure that materials
required for the signage works are sourced from a reliable supplier and arrive in time for the
planned fabrication of our signage. Typically, we will request for supplier quotation during
the preparation of our quotation, and should our quotation be accepted, we will follow-up
with the supplier who has provided us with the competitive pricing and also one who we
have worked with, or known to be reputable and reliable. We will typically obtain two order
quotations from other suppliers to ensure that our supplies are sourced competitively,
particularly if they are not on our approved supplier list. Our purchasing department will
negotiate on pricing and contract terms with the supplier, and once a purchase order is
issued, the supplier is obligated to fulfil the delivery at the agreed price and in accordance to
the schedule. For certain supplies such as micro prismatic reflective sheeting, we may order
in quantity for a few contracts we have on-hand. We maintain good working relationship
with our suppliers and do not foresee any material difficulties in sourcing materials in the
future. The project team also hold ad-hoc meetings to discuss progress and issues (if any)
encountered or anticipated in a project.
Our in-house production has both design and fabrication capabilities. Our design team
will design the signage, based on the specifications by the customer. The artwork will then
be sent to our customer for approval. After approval, we will fabricate the signage which
include the preparation of the metal works to the required dimension, adhesion of the
plastic sheeting and cleaning the signage to make sure it meets the full specifications of the
customer. As our signage are largely customised for a particular contract, our capacity is
limited by the availability of labour instead of machine utilisation (in the case of mass
production). At our production floor, key areas of the production area are segregated into
(i) design of signage, (ii) signage production area and, (iii) metal fabrication. Our signage
products of all dimension are not subject to any estimated monthly capacity, actual average
monthly output and the utilisation rate of our production facilities during the Track Record
Period as our production process are more labour-oriented. The machines we use for our
business are mainly (i) cutting plotters, (ii) rollers (for application of the sheeting to the
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metal) and (iii) forklifts. We own these machines, which typically have a life span of 5 years.
These machines are maintained regularly and are readily available in the market. As the
production process of our signage products consist of many different steps and time
required for processing each of the steps varies and depends on the nature of steps, our
employees normally work on the machineries allocated in our in-house production facilities
on an ad-hoc basis, and not by scheduled means. Our Directors are of the view that some of
the steps such as cutting, bending and attachment of stickers are not very time consuming
processes. Our Directors consider that the current arrangements in our production facilities
is efficient for our business. We do not have research and development department as it is
not applicable for our business.
Apart from the project and purchasing departments, our administrative department is
responsible for recording of accounts payables, receivables and preparation of payment
requests and invoices. We invoice our customers, and typically up to a maximum of 10% of
each approved payment will be retained by our customer. Upon receiving our payment
request, our Directors understand that our customer will have its own personnel to
acknowledge the delivery of the signage which earlier had been received at the work site. We
will then be requested to issue an invoice to our customer, for which, they will make
payment to us within the 30 to 60 days credit term. Similarly, we will make payment to our
suppliers and subcontractors within the credit term of 30 to 60 days; for subcontractors,
they will submit their payment request to us and we will ascertain the completion of their
works. Once ascertained, we will request for their invoice and make payment within the
credit term. In instances where our customers require performance bonds with an insurer
made in favour to them for a certain percentage of or the full amount stipulated in the
contract, our project department will coordinate with the insurer and ensure that it is
appropriately discharged at the end of the contract.
The tendering processes stated above are similar for both the public and private sector
projects. The revenue contributed by the public and private sectors were approximately
S$5.2 million and S$2.6 million for the year ended 31 December 2013, and approximately
S$9.6 million and S$2.3 million for the year ended 31 December 2014 respectively.
Public sector
The project team members involved in a public sector project may range from eight to
twelve members. Public sector projects typically require more workers both in the
fabrication of the signage products and the installation of the signage products.
Public sector project typically involve a broader scope of value-adding works such as
installation of road safety products and lane marking.
For installation of road signage, our project team will expend more effort in the
scheduling of the installation works to optimise our labour resource across various projects.
Timing is typically a key factor in the project management of road infrastructure projects as
road works have designated timing to conduct especially on current operating road
networks. For certain road infrastructure projects, additional safety team members and
workers may be deployed.
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For public sector projects in relation to road signage, more project management is
required as there are more work steps than private sector projects, ranging from removal of
existing signage, re-directing ongoing traffic, managing of road closure hours, managing of
subcontractors in laying of roads and lane marking, managing of equipment that can be
deployed on the road site to installation of the road signage. There are also stricter
requirements set by the LTA of Singapore, both in terms of aesthetics and technical
requirements.
Private sector
The project team members involved in a private sector project may range from four to
five members. Private sector projects typically require less workers both in the fabrication
and installation of the signage products. For private sector projects, the scope in more
limited to installation of signage.
For installation of signage products for private sector projects, there is typically
greater flexibility with regard to the installation as most of these installation can be
conducted either after operating hours or without the obstruction of the building or
business. Due to smaller scale of private sector projects, the fabrication of the signage will
take a shorter time and is also faster to install.
Post completion of works phase
Subsequent to the delivery and completion of the signage installation for road signage
public sector projects, there is typically a more detailed process for customers to review that
the signage installed is in accordance with specifications due to stricter requirements set by
the LTA. In certain instances, our project team members will be on-site to work with them.
Some of our contracts are subject to retention monies. Our retention monies are
typically released to us in two different phases, 1) from the date of practical completion,
which is when our customer has completed all the works that are needed to be conducted at
the work site as agreed with its customer and 2) at the end of the defect liability period.
From the date of practical completion, the defect liability period commences and we are
required to attend to matters brought to us during this 12 to 18 month period at our own
expense. We will, from time to time, also monitor our receipts and the returns of retention
monies. Upon practical completion, half the retention monies shall be released to us and the
balance upon expiry of the defect liability period. During the Track Record Period, no
deduction was made against the retention monies.
QUALITY CONTROL
We have an established track record and reputation in the public infrastructure (road
signage) sector and quality control is built into our implementation process. For each
contract, our project manager and project engineer are in charge of quality control. Our
general manager, Mr. Soh Chiau Kim, has over 12 years of industry experience and
graduated with a bachelor’s degree (first class honours) in civil engineering and has
completed numerous courses from the BCA Academy, as well as Awareness, Design and
Implementation Training on OHSAS 18001 : 2007 and Construction Safety Course for
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Project Managers. Our project manager, Mr.Tan Hock Sing, has over 9 years of industry
experience and graduated with a diploma in graphic design. Mr. Tan Hock Sing has a
Building Construction Supervisors Safety Course and a Work-at-Height Course for
Assessors. Our project engineer, Mr. Muralidharan Saraswathi Yogesh, has over 4 years
of industry experience and graduated with a bachelor’s degree (first class honours) in civil
engineering. Mr. Muralidharan Saraswathi Yogesh has completed an Analysis and Design
of Steel Structures Using STAAD-PRO course and a course for the development of risk
management implementation plan.
Currently, our signage works are closely monitored on site by the project manager,
who will ensure that (i) contractual and regulatory quality requirements are identified, (ii)
signage works performed and materials used are in compliance with the contract and
quality standards specified, and (iii) monitoring on-site is regularly carried out, and testing
is properly conducted. We conduct quality control checks in various stages of the signage
works through on-site regular inspection by qualified staff, and also before the handover of
the signage and related products by our project engineer, and each time complying with the
standards set by the end customer. Our project engineer and qualified staff assigned for on-
site inspection will also inspect the works of our subcontractors. For further information,
refer to the section headed ‘‘Business — Subcontractors’’ of this prospectus. Our Directors
understand that our customers will also conduct their own quality checks of our installed
signage prior to accepting our delivery order and making payment to us and also prior to
the issue of the final statement of accounts to us.
For our purchases, the materials must be purchased from suppliers we approve and
also in certain instance, by the end customer (typically LTA). The use of the materials must
be able to meet the end customer’s specifications. During our signage fabrication before
sending to the worksite, we will check that materials are of the right specifications and
therefore, any defective supplies are promptly reported. Our Group has the OHSAS
18001 : 2007 certification and bizSafe Level Star, for further information, please refer to the
section headed ‘‘Business — Workplace safety and health policy’’, of this prospectus.
Our Group has not experienced any material disputes on its contracts relating to the
quality of products provided nor significant delay in the installation of signage during the
Track Record Period and up to the Latest Practicable Date.
SALES AND MARKETING
For our industry, our sales leads come from word-of-mouth, reputation and
established track record rather than advertising and promotion. Our Group does not
spend on advertising and promotion but instead focus on the fulfillment of our delivery,
and relationships with our customers are maintained by our Executive Directors and our
General Manager. We will also monitor opportunities on the GeBIZ system relevant to our
signage business.
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CUSTOMERS
Our customers comprise mainly main contractors of civil engineering projects in the
public sector in Singapore, who will subcontract the signage works of their projects to us.
We are one of the established companies offering road signage in Singapore and we also
have contracts in relation to signage and related products in the public sector for education
institutions, public housing flats/compounds, defence compound, airport and national
parks, amongst others. We also have customers in the private sector for signage and related
products for commercial buildings, industrial buildings, private residential buildings,
hospital and fast food chains. We had 310 and 317 customers for the two years ended 31
December 2014 respectively, of which revenue from the public sector comprised
approximately 66.7% and 80.7% of our total revenue for the two years ended 31
December 2014, respectively. During the Track Record Period, we have recognised revenue
from 2,211 and 2,278 contracts and orders respectively.
Public sector projects are awarded by the relevant government authority in Singapore;
for instance, for roads, LTA will award the civil engineering contracts to main contractors
based on its own criteria of selection. The main contractors will in turn select their
subcontractors based on their criteria and for road signage works, we are one of the
established companies in Singapore. The duration and timing of our signage works typically
align with the timing requirements of our customers, which can span from 1 month to 4
years.
Over the years, we have built a solid track record for providing reliable and timely
signage products for road signage works in Singapore, and have a good reputation with our
customers. There is no long-term agreement with any of the customer and contracts are
signed on a case by case basis. For the two years ended 31 December 2014, revenue from our
five largest customers amounted to approximately S$2.1 million and S$5.1 million, and
accounted for approximately 26.6% and 43.1% of our total revenue, respectively. Revenue
from our largest customer for the same periods amounted to approximately S$0.7 million
and S$1.4 million, and accounted for approximately 8.9% and 12.1% of our total revenue,
respectively. None of our top five customers are our supplier or subcontractor, or our
connected person. During the Track Record Period, we have not had any material
disagreement nor dispute with any of our customers.
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The following table sets forth our five (5) largest customers for each of the two years
ended 31 December 2014, respectively:
For the year ended 31 December 2014
Revenue contribution
Background of customer
Years of
relationship
Scope of products
provided by our Group
Payment and
credit terms
Approximate
aggregate
amount
% of total
revenue of our
Group
(S$’ million)
Customer A More than 10 Scope of services:
Supply and
installation of
signage
Payable by cheque, 60
days due upon
issuance of invoice
1.4 12.1%
Customer B 5 Scope of services:
Supply and
installation of
signage
Payable by telegraphic
transfer, 35 days
due upon issuance
of invoice
1.3 11.4%
Customer C 2 Scope of services:
Supply and
installation of
signage
Payable by bank
transfer, 45 days
due upon issuance
of invoice
1.1 9.5%
Customer D 7 Scope of services:
Supply and
installation of
signage
Payable by telegraphic
transfer, 60 days
due upon issuance
of invoice
0.8 6.8%
Customer E 1 Scope of services:
Supply and
installation of
signage
Payable by cheque, 30
days due upon
issuance of invoice
0.5 3.3%
Total 5.1 43.1%
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For the year ended 31 December 2013
Revenue contribution
Background of customer
Years of
relationship
Scope of products
provided by our Group
Payment and
credit terms
Approximate
aggregate
amount
% of total
revenue of our
Group
(S$’ million)
Customer F 7 Scope of services:
Supply and
installation of
signage
Payable by telegraphic
transfer, 30 days
due upon issuance
of invoice
0.7 8.9%
Customer G 5 Scope of services:
Supply and
installation of
signage
Payable by cheque, 30
days due upon
issuance of invoice
0.6 7.9%
Customer H 7 Scope of services:
Supply and
installation of
signage
Payable by cheque or
cash on delivery, 45
days due upon
issuance of invoice
0.3 3.5%
Customer I More than 10 Scope of services:
Supply and
installation of
signage
Payable by cheque, at
30 days due upon
issuance of invoice
0.3 3.4%
Customer J 6 Scope of services:
Supply and
installation of
signage
Payable by cheque, at
30 days due upon
issuance of invoice
0.2 2.9%
Total 2.1 26.6%
Background information of our customers
Customer A, a private company incorporated in Singapore, is principally engaged in
the provision of civil engineering services, including manufacture of asphalt premix and
road maintenance. The company was founded in 1985, and is based in Singapore.
Customer B, a Korea listed company of market capitalisation of approximately
KRW10,044.8 billion as at the Latest Practicable Date, is principally engaged in the
provision of civil engineering services. The company was founded in 1990, and is based in
Korea. It has annual turnover of approximately US$25.97 billion for the year ended 31
December 2013.
Customer C, a subsidiary of a Singapore listed company of market capitalisation of
approximately S$10,138.3 million as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of end-to-end solutions in
electronic systems. The company was founded in 1986, and is based in Singapore. It has an
annual turnover of approximately S$335.18 million for the year ended 31 December 2013.
Customer D, a private company incorporated in Singapore, is principally engaged in
the provision of civil engineering services. The company was founded in 1990, and is based
in Singapore.
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Customer E, a subsidiary of a Singapore listed company of market capitalisation of
approximately S$1,810.7 million as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of investment holding
services such as real estate management and development services. The company was
founded in 1990, and is based in Singapore. It has an annual turnover of approximately
S$47.83 million for the year ended 31 December 2013.
Customer F, a subsidiary of a Singapore listed company of market capitalisation of
approximately S$229.5 million as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of civil engineering services.
The company was founded in 1969, and is based in Singapore. It has an annual turnover of
approximately S$96.1 million for the year ended 31 December 2013.
Customer G, a subsidiary of an Australia listed company of market capitalisation of
approximately AUD26.3 million and Singapore listed company of market capitalisation of
approximately S$26.3 million as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of civil engineering services.
The company was founded in 1979, and is based in Singapore. It has an annual turnover of
approximately S$137.98 million for the year ended 31 December 2013.
Customer H, a private company incorporated in Hong Kong and held by a Hong Kong
private company is principally engaged in the provision of construction services. The
company was founded in 1980, and is based in Singapore.
Customer I, a subsidiary of a U.S listed company of market capitalisation of
approximately US$92.9 billion as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of fast food. The company
was founded in 1976, and is based in Singapore. It has an annual turnover of approximately
S$526.81 million for the year ended 31 December 2013.
Customer J, a subsidiary of a Singapore listed company of market capitalisation of
approximately S$58 million as at the Latest Practicable Date, is a private company
incorporated in Singapore principally engaged in the provision of civil engineering services
such as earthwork, roadwork, drainage work, basement work, and structural works
involving demolition and underground infrastructure as well as other general building
works. The company was founded in 1981, and is based in Singapore. It has an annual
turnover of approximately S$29.79 million for the year ended 31 December 2013.
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None of our Directors, or any of their respective associates or any Shareholders which,
to the knowledge of our Directors, owns more than 5% of the issued share capital of our
Company immediately following the completion of the Placing and the Capitalisation Issue,
was connected with (within the meaning of the GEM Listing Rules) or has any interest in
any of our top five customers during the Track Record Period.
KEY CONTRACT TERMS
Generally the contracts with our customers contain terms relating to the contract price,
duration, the scope of work, the payment terms, retention money, defect liability period
provisions, performance bonds, liquidated damages and termination.
Duration
For certain contracts, the duration will be stated in the contract. Such duration
typically align with the duration of the main contractor’s civil engineering contract, or for a
duration for which the replacement and provision of new directional and traffic signs are
required. For other contracts or orders, the duration may not be expressly stated but
typically span approximately from 1 month (for short-term installation of signage) to 4
years (for a supply and installation of signage contract).
Payments
For certain contracts, payment requests to our customers are to be submitted regularly
in respect of the signage works performed since the last approved payment, for verification
by our customer. Subsequent to our customer’s confirmation, the credit terms are typically
30 to 60 days. Under the Building and Construction Industry Security of Payment Act,
Chapter 30B of Singapore (‘‘BCISPA’’), any person who has carried out any construction
work or supplied any goods or services under a contract is entitled to a payment. Therefore,
we have the right to the payment in relation to the work that we carried out and based on
the agreed contract terms with our customer. Please refer to the section headed ‘‘Regulatory
overview’’ in this prospectus for further details of the BCISPA.
Retention money
Our contracts typically provide for a retention sum of up to maximum of 10% with
each payment. Half of the retention sum shall be released upon the completion of works
under the main (our customer’s) contract and the balance amount released at the end of the
defect liability period.
Defect liability period
Our contracts typically include a defect liability period, during which we are
responsible to rectify works defects. The defect liability period is typically for a period of
12 to 18 months from the date of completion of the contracted scope of works. If the
materials used are defective, we will replace during the defect liability period or request our
suppliers or subcontractors to do so. There was no material claim which was brought
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against our Group by our customers during the Track Record Period. Cost incurred to
rectify defective works or products during the Track Record Period was immaterial. There
was no significant customer complaint during the Track Record Period.
Performance bonds
For certain of our contracts, we are required to have stipulated value of performance
bonds with an insurer made in favour to our customer, which will remain in effect until the
return of the performance bond or upon expiry of the bond, which is upon completion of
the project. The customer may utilise the performance bond to make good any loss or
damages sustained as a result of any breach of the contract with them due to us, including
any liquidated damages. There was no claim on the performance bonds during the Track
Record Period.
Illegal immigrant/Foreign workers
We are solely responsible for ensuring that our own workforce shall not have any
illegal immigrant, and similarly to ensure that our subcontractors comply. We are liable for
and shall indemnify our customer against any damage, expense, liability, loss, claim or
proceedings arising from our hiring of illegal immigrant. During the Track Record Period,
we did not hire any illegal immigrants and no action or notifications were taken against us
or issued to us in connection with hiring of illegal immigrants.
Liquidated damages
Our contracts typically include a liquidated damages clause where if we fail to
complete the work scope within the stipulated time and/or cause unnecessary delay to the
entire project that result in liquidated damages imposed on our customer, we are liable to
penalties calculated as a percentage of our contract sum relative to our customer’s contract
sum. There was no material liquidated damage paid by our Group during the Track Record
Period.
Termination
Our contracts can typically be terminated, inter alia, if we materially default or breach
the contract, or if we become bankrupt or insolvent.
SUPPLIERS
We mainly engage suppliers in Singapore and our main suppliers supply steel and
aluminium products, micro prismatic reflective sheeting and road safety products. In
selecting our suppliers, we take into account a number of criteria. For first-time suppliers
and suppliers we have worked with, we will review based on (as the case maybe) its (i) track
record in respect of timely delivery and ability to work with us on an urgent delivery basis,
(ii) quality of supplies, (iii) pricing and (iv) whether they are on our approved supplier list
or the approved list of suppliers by the main contractor or end customer (if applicable). We
will only engage suppliers who can satisfy all our criteria. There is no long term contract
with our suppliers, and we make our purchases based on the requirements of each customer
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contract and for the purchase orders we have on hand. Subsequent to the issue of purchase
order to our suppliers, they will supply the specified item in accordance with the delivery
time required at the contracted price. The prices that we pay to our suppliers are agreed at
the stage we place our purchase orders and should our actual costs be higher than
anticipated in our quotation to our customers, we cannot pass the price difference to our
customer if our customer has already accepted our quotation. We manage fluctuations in
material costs by (i) buffering for inflation and possible cost increase during the duration of
the contract and (ii) purchasing materials mainly based on the needs of specific contracts.
Please refer to the section ‘‘Risk factors’’ in this prospectus for further details.
Our Group has good relationships with our suppliers and has over the years
established strong rapport with them. During the Track Record Period, we have not had
any material disagreement nor dispute with any of our suppliers. For the two years ended 31
December 2014, purchases from our five largest suppliers amounted to approximately S$1.0
million and S$1.4 million, and accounted for approximately 39.9% and 40.4% of our total
purchases, respectively. Purchases from our largest supplier for the same periods amounted
to approximately S$0.5 million and S$0.5 million, and accounted for approximately 19.7%
and 14.4% of our total purchases, respectively.
The following table sets forth our five (5) largest suppliers for each of the two years
ended 31 December 2014, respectively:
For the year ended 31 December 2014
Ranking
Name of
supplier
Years of
relationship Principal business
Location of
business
operations
Payment and credit
terms Supply amount
Approximate
percentage
of our
Group’s
total
purchases
%
Approximate
S$’ million
1 Supplier A 9 Supplier of micro
prismatic reflective
sheeting and other
sheeting
Singapore Payable by telegraphic
transfer, 60 days
0.5 14.4%
2 Supplier B 2 Supplier of metal railings Singapore Payable by telegraphic
transfer, 60 days
0.3 8.0%
3 Supplier C 8 Supplier of micro
prismatic reflective
sheeting and other
sheeting
Singapore Payable by telegraphic
transfer, 60 days
0.2 7.0%
4 Supplier D 8 Supplier of aluminium
products
Singapore Payable by cash on
delivery or
telegraphic
transfer, 60 days
0.2 6.1%
5 Supplier E 8 Supplier of steel products Singapore Payable by telegraphic
transfer, 30 days
0.2 4.9%
Total 1.4 40.4%
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For the year ended 31 December 2013
Ranking
Name of
supplier
Years of
relationship Principal business
Location of
business
operations
Payment and credit
terms Supply amount
Approximate
percentage
of our
Group’s
total
purchases
%
Approximate
S$’ million
1 Supplier A 9 Supplier of micro
prismatic reflective
sheeting and other
sheeting
Singapore Payable by telegraphic
transfer, 60 days
0.5 19.7%
2 Supplier D 8 Supplier of aluminium
products
Singapore Payable by cash on
delivery or
telegraphic
transfer, 60 days
0.2 6.0%
3 Supplier C 8 Supplier of micro
prismatic reflective
sheeting and other
sheeting
Singapore Payable by telegraphic
transfer, 60 days
0.1 4.9%
4 Supplier F 2 Supplier of steel products China Payable by telegraphic
transfer, 30%
deposit and 70%
upon completion
0.1 4.9%
5 Supplier G 2 Supplier of labour and
logistics services
Singapore Payable by cheque or
cash on delivery, 30
days
0.1 4.4%
Total 1.0 39.9%
We are not reliant on any single supplier and have also not experienced any shortage of
materials during the Track Record Period. We have alternative suppliers for each major
category of supplies on our approved suppliers list, who we have evaluated to meet our
pricing, quality and timeliness requirements. Save for Supplier G, none of our Directors,
their respective associates or Shareholders who own more than 5% of the issued share
capital of our Company (immediately following completion of the Placing and the
Capitalisation Issue) had any interest in any of the five largest suppliers of our Group
during the Track Record Period.
Supplier G refers to T3 Holdings which is a company incorporated in Singapore with
limited liability, for which Mr. Kelvin Tan and Mr. Peter Tan each owned 21.0% of the
issued and paid-up capital of the company prior to 2 April 2015. T3 Holdings mainly rented
lorry cranes and truck mounted attenuators to our Group. Please see section headed
‘‘Connected transactions’’ of this prospectus for details.
None of our top five suppliers are our customer, subcontractor, or our connected
person.
SUBCONTRACTORS
We may engage subcontractors for part of certain contracts secured by us, for instance,
to provide certain services such as laying of road marking, installation of precast blocks,
bulky metal works or excavation works which we do not typically provide in-house. In
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general, we are liable to our customers for the performance of our subcontractors, including
but not limited, to defects, delay in the delivery schedule and violation of rules or
regulations. For first-time subcontractors and subcontractors we have worked with, we will
review based on (as the case may be) its (i) track record in respect of its timely supply of
subcontract works and ability to work with us on an urgent delivery basis, (ii) quality of
subcontract works and (iii) pricing. The subcontracting fees is determined based on the
estimate of market rate for comparable projects, taking into account their scope, size,
complexity and contract value. We do not sign separate subcontracting agreements for such
assignments but would engage our subcontractors based on our acceptance of their
quotations.
Our Group has good relationships with our subcontractors and has over the years
established strong rapport with them. During the Track Record Period, we have not had
any material disagreement nor dispute with any of our subcontractors. Total amount paid
for subcontracting works during the Track Record Period amounted to approximately
S$1.4 million and S$1.7 million and accounted for approximately 29.2% and 27.1% of our
total cost of sales respectively.
Five largest
subcontractors
Background of
subcontractor
For the year ended
(Approximate S$’million)
Years of
relationship
Whether
independent
from our
Group
31 December
2013
31 December
2014
Subcontractor A Subcontractor for
supply and/or
installation of
bulky metal
works
0.8 1.0 8 Independent
Subcontractor B Subcontractor for
installation of
precast blocks
and excavation
works
0.0 0.3 1 Independent
Subcontractor C Subcontractor for
installation of
precast blocks
and excavation
works
0.2 0.0 4 Independent
Subcontractor D(1) Subcontractor for
laying of road
markings
0.2 0.2 9 Connected
Subcontractor E(2) Subcontractor for
parts of signage
works
0.0 0.1 8 Independent
Total 1.2 1.6
Notes:
(1) Subcontractor D refers to C.K. Toh who is also our customer. Please refer to section headed
‘‘Connected transactions’’ for further information.
(2) Subcontractor E, an independent third party, is also our customer.
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Our main subcontractors are located in Singapore and do not work with us on an
exclusive basis. They will provide quotation for their subcontract works and upon our
acceptance of their quotation, they have the responsibility to ensure that all works
performed must satisfy the requirements of the contract. The duration of these subcontracts
vary depending on the nature of their subcontract works. For instance, for subcontractors
providing laying of road works, they will have to complete as per the project schedule and
thereafter, our signage can be installed. For those subcontractors who are required to
source for materials as part of their subcontract services, the specifications for these
materials are obtained from the main contractor, or specified by end customer (typically
LTA) and provided to our subcontractors.
Our subcontractors may either (i) submit monthly payment request to be approved by
us or for shorter subcontract works or (ii) submit a claim for the complete delivery of the
subcontract works. Our payment terms to our subcontractors are typically from 0 to 30
days upon invoice (backed by delivery order accepted by our on-site staff).
In order to monitor our subcontractors, we typically:
(i) Request that our subcontractors ensure that their workmen follow strictly to the
main contractor’s workplace safety enforcement on site, and have to use workers
who have safety orientation certificates. Safety equipment such as safety helmets/
safety boots and safety belts shall be provided by our subcontractor;
(ii) Communicate from time to time between our project team and our subcontractors
to ensure they understand our requirements and concerns; and
(iii) Inspect our subcontractors’ works.
To avoid over-reliance on a few subcontractors, our general manager will ensure that
we have at least more than one subcontractor for a particular expertise. During the Track
Record Period, none of the subcontractors had conducted a major non-performance that
resulted in default in payment by our customer to us or liquidated damages payable by us to
our customer. If our customer defaults in making payment, we remain liable to settle the
subcontractors fees should the subcontracting works had already been performed.
Subcontractor D refers to C.K. Toh which is a company incorporated in Singapore
with limited liability, for which Mr. Kelvin Tan and Mr. Peter Tan each owned 21.25% of
the issued and paid-up capital of the company prior to 2 April 2015. C.K. Toh Construction
had provided road marking services to our Group. Please see section headed ‘‘Connected
transactions’’ of this prospectus for details.
Save for disclosed above, none of our Directors, or any of their respective associates or
any Shareholders, which, to the knowledge of our Directors, own more than 5% of the
issued share capital of our Company immediately following the completion of the Placing
and the Capitalisation Issue, was connected with (within the meaning of the GEM Listing
Rules) any of our subcontractors during the Track Record Period.
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CREDIT MANAGEMENT
During the request for quotation phase, we will consider the credit worthiness of the
customer and the key contract terms, including payment terms and retention money. For
customers that we have previously worked with, we will also consider its past payment
history. Our Group generally extends a 30 to 60 days credit term to customers upon
issuance of invoice and during the Track Record Period, there was an allowance for
doubtful debts of S$23,210 and S$129,608 as at 31 December 2013 and 2014 respectively.
The credit terms typically granted by our suppliers vary from 30 to 60 days, and
payment to them is typically by cheque or telegraphic transfer. Our Group generally is
prompt in our payment and this has enabled us to secure competitive pricing. For our
subcontractors, we will typically pay their payment request (if applicable) within 30 days
upon receipt of their invoice, after verification of their invoice and ensuring that the
subcontracting works have been satisfactorily completed.
INVENTORY MANAGEMENT
It is our Group’s practice to maintain inventory based on (i) foreseeable material
requirements based on firm contracts or purchase orders and (ii) a certain level of inventory
for common items such as metal and aluminium products. For signage required to be ready
for installation, we will inform the production department by physically checking with them
to ensure that the signage can be ready for installation. The production department will
ensure that based on the required signage to be supplied and or installed, our purchases
from suppliers coupled with our inventory can meet the projects’ requirements. Purchase
orders issued to suppliers would indicate the different tentative delivery dates.
Every quarter, we will conduct a stock take. For the two years ended 31 December
2014, the inventory turnover day was approximately 9 days and 21 days and our inventory
(materials and finished goods) balance was S$60,516 and approximately S$0.2 million as at
31 December 2013 and 2014, respectively. Part of our inventory as at 31 December 2013 and
2014 related to work-in-progress. Please refer to the section headed ‘‘Financial information
— Certain balance sheet items’’ for further information.
WORKPLACE SAFETY AND HEALTH POLICY
Due to the nature of the signage industry, incidents at our plant or at the worksites
may have detrimental effects on the health and safety of our workers, and our workers are
valuable to our Group and to the successful execution of the contracts. Our customer, the
main contractor of the public sector contracts, will ensure that all their subcontractors,
including us and our subcontractors, comply with our workplace safety and health
procedures on-site. For every contract, our project supervisor will ensure that work place
safety procedures are adhered to by our employees and by the employees of our
subcontractors.
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We have established a set of occupational, health and safety (‘‘OHS’’) policies with the
objectives of:
(i) Ongoing identification of hazards, risk assessment and implementation of
necessary control measures;
(ii) Minimisation of incidents and management of hazards through ongoing OHS
inspection and training;
(iii) Compliance with practices governing OHS and other requirements; and
(iv) Continual improvement in our OHS management and performance.
Our OHS procedures comprise the following 8 key areas, and we have engaged an
approved external consultant to set up the OHS policy, and who will also audit our
compliance with the OHS procedures every three years.
(1) Planning for identification of hazards, risk assessment and controls, with the
objective to minimise or eliminate the hazards and risks. We conduct an activity-
based assessment to assess the hazards and risks relating to certain activities
(covering both routine and non-routine, including office operations). For each
activity identified, we will list the existing risk control and provide it with a risk
assessment level. For certain activities relating to safety at work, we will lay out
the procedure to ensure workplace safety in that aspect, including the control and
preventive measures, reporting and monitoring of non-compliance and training.
Training on OHS is provided to all employees annually.
(2) Identification of the applicable laws and regulations, with the objective to ensure
conformance to legal requirements. This is done through keeping track of
applicable regulatory requirements via a legal register and conducting training to
relevant staff on legal requirements. For our production, the main applicable
regulations are Workplace Safety and Health Regulations, Electricity Act,
Smoking (Prohibition in Certain Places) Act, Code of Practice for Working
Safely at Height and the Fire Safety Act.
(3) Monitoring of all work place incidents and implementation of controls and
preventive actions with the objective of achieving zero work place incident. We
also have safety inspection checklist to ensure that key items required for
workplace safety are monitored regularly and communicated. Training in various
aspects of workplace safety are conducted throughout the year, using a
competency matrix to identify training needs. There are also communication
channels to ensure that relevant employees and interested parties are aware of the
pertinent OHS information, for instance to our employees, to contractors and
visitors, to relevant parties and that they participate and be involved in a
consultation process.
BUSINESS
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(4) Conduct of regular noise monitoring by accredited laboratory, audiometric
examination for our staff and specific noise training for relevant staff with the
objective of ensuring compliance with requirements relating to noise and medical
examinations relating to manufacturing staff.
(5) Control of documents to ensure that they are stored and maintained to be readily
available and retrievable. Each document is to be accompanied by an amendment
history and a documentary master list will list all the controlled documentations
in the OHS policies. All documentation is to be initiative, controlled and
approved by authorised personnel. Obsolete documentation is to be removed
promptly.
(6) Preparation and readiness for emergency to ensure that emergency operating
system and fire protection and response plans are effective. Safety briefings and
fire drills are conducted.
(7) Measurement and monitoring of our OHS performance. This includes evaluation of
the measures taken, evaluation of compliances with applicable legal requirements
and incident investigation, corrective and preventive actions. Non-conformity are
recorded, investigation and analysis of preventive and corrective actions taken.
(8) Internal audit are planned and conducted; OHS audits are conducted at least
annually, and external audits are conducted once every three years. All audit
findings are properly documented and filed and any non-conformance are
followed up to ensure that appropriate corrective actions are taken.
Our subcontractors must also ensure that their workmen follow strictly to the main
contractor’s workplace safety enforcement on site, and have to employ workers who have
safety orientation certificates. Such safety orientation certificate is issued after the
attendance of safety courses. All foreign workers in the construction sector must attend
the Construction Safety Orientation Course (‘‘CSOC’’), a 2-day course conducted by
various training centres accredited by MOM and obtain a valid CSOC Pass. The CSOC is to
(i) ensure that construction workers are familiar with common safety requirements and
health hazards in the industry, (ii) educate them on the required measures to prevent
accidents and diseases, and (iii) ensure that they are aware of their rights and
responsibilities under employment law. Safety equipment such as safety helmets/safety
boots and safety belts shall be provided by the subcontractor, and workers who fail to
comply shall be removed from the worksite.
The above OHS policy will assist us to obtain our OHSAS 18001 : 2007 certification,
which is a requirement for bizSafe Level Star and for our BCA ‘‘L5’’ grading. Our
compliance to OHS policy assists us in obtaining a wider scope of projects by customers
who are focused on our workplace safety related certifications.
BUSINESS
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Our Group has also established procedures to provide our staff with a safe and healthy
working environment by providing work safety rules in the staff manual for the staff to
follow and also training in respect to workplace safety. All incidents are recorded as
required in our OHS policy and we also provide audiometric and medical examination for
our staff.
During the Track Record Period and up to the Latest Practicable Date, our Group did
not experience any significant incidents or accidents or claims in relation to work safety or
any non-compliance with the applicable laws and regulations relevant to the work safety
and health issues.
INSURANCE
We have a work injury compensation policy for all our manual workers, as stipulated
by MOM, renewed annually. We also have foreign worker medical insurance, as stipulated
by MOM, renewed annually. We also have security bonds for our foreign workers which are
required by MOM for new applications of their work permits. All employers of non-
Malaysian work permit holders are required to deposit a S$5,000 security bond with MOM,
which must be furnished prior to the foreign worker’s arrival in Singapore, failing which
entry into Singapore will not be allowed.
We have insured our Executive Directors against personal accident with the beneficiary
as Signmechanic Singapore. We also have public liability insurance to cover personal injury
and property damage at our premise and in Singapore, in connection with our operations.
In addition, we have an industrial all risks insurance to cover damage to our inventory,
machinery and office equipment.
Our Directors confirm that our Group has obtained adequate insurance coverage for
the operation of our business, and is in line with the industry norm. Our Directors believe
that there is no material risk in connection with our business which is not covered by the
abovementioned insurance. As at the Latest Practicable Date and during the Track Record
Period, we had not made nor been the subject of any material insurance claims.
EMPLOYEES
As at the Latest Practicable Date, our Group had a total of 66 full-time staff (including
our Executive Directors), of which 8 are in the project department, 10 in the design
department, 17 in the administrative and finance department and 31 in the production
department. There is no research and development required in our Group. Total local staff
strength is 20 and total foreign workers is 46 as at the Latest Practicable Date. All our staff
are located in Singapore.
Employee training
Our employees received training depending on their department and the scope of
works. Typically they are required to attend trainings relating to our OHS policies, risk
management systems, workplace safety and courses required by the BCA and MOM.
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Employee relations
Our Directors believe that we have a good relationship with our employees. During the
Track Record Period, we did not have any dispute with our employees. Our employees are
not members of any labour union. We have not experienced any significant problems with
our employees or disruption to our operation due to labour disputes nor have experienced
any material difficulties in recruiting or retaining experienced staff.
Recruitment policies
Our Executive Directors will assess the available human resources on a continuous
basis and will determine whether additional employees are required to cope with our
business development.
ENVIRONMENTAL IMPACT
The nature of our production is classified as light industry where the processes carried
out or the machinery installed can be done without polluting the area with noise, vibration,
odour, fumes, smoke, soot, ash, dust or grit. As such, there is minimal environmental
impact generated by our production and cost involved for compliance.
PROPERTY INTEREST
Our office and plant
We rent our office and factory premise from an Independent Third Party, the details is
as follows:
Address
Approximate
built-in
leased Area
Connected
transaction Rates Tenure Deposit
424 Tagore Industrial
Avenue Singapore
787807
1,259 square
metres
No Monthly rent
of S$28,000
Period of 3 years
commencing
from 1 March
2014 and
expiring on
28 February
2017
S$112,000
Of the above leased area, we have sublet:
— Approximate 360 square metres to Double-Trans Pte Ltd at a monthly rent of
S$5,000 from 1 March 2014 to 28 February 2017; and
— Approximate 432 square metres to Xin Bang Pte Ltd at a monthly rent of
S$11,000 from 16 July 2014 to 31 January 2017.
We maintain our office and factory premise separate from our sub-letted tenants.
BUSINESS
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No valuation report for our office and factory premise has been included in this
prospectus as it is exempted under section 6 of the Companies Ordinance (Exemption of
Companies and Prospectus from Compliance with Provisions) Notice (Chapter 32L of the
Laws of Hong Kong) and Rule 8.01A of the GEM Listing Rules is not applicable.
As at the Latest Practicable Date, our Directors (i) were not aware of any
investigations, notices, pending litigation, breaches of law or title defects; and (ii) had no
plan in relation to construction, renovation, improvement, development or change the use,
of the leased properties of our Group.
INTELLECTUAL PROPERTY RIGHTS
Our Company has made an application to register the following name and logo of our
Company as a trademark under class 37 in Singapore and under class 16 and class 37 in
Hong Kong in March 2015 :
PANTONE 285 BLACK WHITE
Class 37 covers the areas of construction of signs, erection of signs, painting of signs,
sign repair, installation and maintenance of signs, installation and maintenance of road
signs, installation and maintenance of traffic signs and advisory and consultancy services
relating to the aforesaid services.
Class 16 covers the areas of printed matter, printed publications, share certificates and
share certificate paper.
MARKET AND COMPETITION
The infrastructure in Singapore is the central to socio-economic development and
advancement. Major infrastructure projects continue to dominate the construction industry
and public projects are projected to sustain Singapore’s construction demand for 2015.
Thus, the opportunities in this industry remain positive as construction demand in
Singapore is expected to sustain at S$26 billion to S$37 billion per annum from year 2016 to
2019. This is in view with major public sector civil engineering projects such as new
expressways and railways extensions underway, thus requiring more deployment and
placement of road signage in the near future.
In 2014, Singapore’s total signage manufacturing industry is worth approximately
S$304 million with at least 300 establishments in the market. The total value grew by 2.7%
from 2012 to 2014. The market size for CR11 signcraft segment is estimated to be
approximately 10% of the total industry in 2014 (which is approximately S$30.4 million in
value). Based on our Group’s sales of approximately S$11.9 million in 2014, our Group’s
market share in the CR11 signcraft segment is approximately 39.1%.
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The market for the signage industry in Singapore is serviced by approximately 300
manufacturers with 71 CR11 registered construction agencies in Singapore (that are all
private limited firms). In terms of competitors, our Group competes with 2 other companies
for the road signage segment and about 20 others for the commercial signage segment in the
market. While our Group operates in a fairly competitive space, we did a competent job
distinguishing ourselves against other suppliers. Our Group is one of the main players in the
market especially for civil projects thus far and is able to work on an expanded scope of
work that includes railing; therefore making this one of the primary drivers for our Group’s
good relationship with our customers. Some unique selling points that differentiates our
Group from our competitor include being registered for general building civil engineering,
repairs and redecoration, asphalt works and road marking and minor construction works,
has L5 grade certification, strong financial setting and trusted supplier for civil projects in
Singapore.
Barriers for entry in this industry are not high and projects often vary in value. In
addition, operational productivity is another core requirement for companies competing in
this sector. Hence, as well as achieving the right levels of experience and financial backing
for registration under the CRS scheme, companies also need to meet government standards
for productivity.
Although there are some barriers to entry for this industry as mentioned, the prospects
for our Group however remains fair as long as there is a continued demand for more
deployment and placement of road signage in the near future.
Please refer to the section headed ‘‘Industry overview’’ of this prospectus for details.
ADEQUACY AND EFFECTIVENESS OF OUR INTERNAL CONTROL SYSTEMS
We strive to maintain the integrity of our business, results of operations and reputation
by strictly adhering to internal control system in respect of our signages. As such, we have
implemented an effective internal control system by developing and enhancing, from time to
time, different sets of internal control procedures and manuals covering a number of key
control areas such as financial management, tendering, budgeting, purchase and
procurement management, control over subcontractors, safety and environment
compliance management, with a view to ensuring compliance by our Group with
applicable laws and regulations.
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In preparation for the Listing and to further improve our internal control system, we
have engaged an independent third party internal control consultant to undertake a review
on the internal control system of our Group. The internal control consultant has
recommended measures to improve and rectify significant weakness of the internal
control systems identified during the review, and the following table summarised the
findings, recommended measures and the implementation of these measures. All issues
identified had been rectified:
Findings Recommended measures
Measures adopted and
implemented by our Group
Segregation of duties
can be enhanced.
Segregation of duties contributes to anorganisation’s system of checks and
balances.
Our Group’s cash book or summary (inexcel format) is held by General Manager
and this cash book or excel worksheet isreconciled on a bi-monthly basis, witheffect from March 2015.
The Finance Manager will monitor theFinance & Administrative (FA) staff’s
accounting entries before anymodification is being done on a monthlybasis.
Journal entries were prepared by theFinance Manager and approved by theExecutive Director.
Physical inventory count is performedquarterly and inventory reconciliation is
performed periodically.
. Employees who have the ability tomodify the accounts receivablebalance or record adjustments to
customer accounts should notreceive customer payments.
. The general ledger system
generates a report of all changes tothe chart of accounts at month-endfor review and approval by an
employee who does not haveresponsibility for modifying thegeneral ledger. All changes shouldbe reviewed to ensure that they
were properly approved by theappropriate party and have a validpurpose. In addition, journal
entries should be reviewed ortested for accuracy, completeness,supporting documentation and
appropriate account coding.Adequate supervision to theaccuracy of book-keeping isrequired.
. Physical inventory counts shouldbe performed by an employee whodoes not have day-to-day
responsibility for maintaining thephysical inventory or inventoryrecord-keeping and reconciliationresponsibilities.
. In 2013 and 2014, the Companyengaged an external accountant tohelp to prepare the accounts. There
is a risk of ineffective supervisionin the day-to-day financialcontrols, accounts book-keepingand financial reporting. The
Company hired a full time FinanceManager on 18 March 2015.
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Findings Recommended measures
Measures adopted and
implemented by our Group
Bank reconciliation
were performed
yearly in 2013 and
2014.
Bank reconciliation should be performedonce a month.
Our Group has conducted bankreconciliation on a monthly basis byFinance Manager, with effect from 31
March 2015.
No fixed asset tagging
or count performed in
2013 and 2014.
All fixed assets should be tagged andaccounted for.
Fixed asset count will need to beconducted on an annual basis. At leastone independent staff (who is not
accountable for the fixed asset/custodianof the fixed asset) to verify the count.
Our fixed assets have been tagged andaccounted by respective departmentheads. Fixed asset count will be
conducted on a yearly basis with thesupervision by the Finance Manager.
Inventory reconciliation
was not performed
periodically in 2013
and 2014.
Physical inventory count should be
conducted and reconciled to the generalledger periodically, with variancesreconciled on a timely basis.
Our Group has conducted inventory
count periodically and tied it to thegeneral ledger accounting books, witheffect from 1 March 2015.
No monitoring of
changes made to
vendor master file in
2013 and 2014.
Vendor master file changes should be
reviewed by a supervisory role, and allchanges should be supported.
Our Group has recorded manually
vendor master file changes, subjected toapproval from an Executive Director,with effect from 31 March 2015.
Our Executive Directors are responsible for the formulation and overseeing the
implementation of our internal control measures. We will engage legal advisers and a
compliance adviser upon Listing to provide us with updates on the changes in the applicable
laws and regulations from time to time to see if any change is required to be made to our
operation and internal control procedures. Upon Listing, we will also engage internal
control advisers to review our internal control systems on a regular basis and a compliance
adviser to advise us on matters relating to the GEM Listing Rules.
Our Directors are of the view that the internal control measures are adequate and
effective to enhance the internal control of our Group. The Sole Sponsor has reviewed the
internal control and follow-up reports prepared by the internal control consultant,
discussed with the internal control consultant on the areas reviewed together with the
findings and concurred with the Directors’ view that our Company’s enhanced internal
controls, when fully implemented, to be sufficient and effective.
RISK MANAGEMENT
In the course of conducting our business, we are exposed to various types of risks,
including project management risks and regulatory risks, which are further elaborated
below.
Save for establishing and implementing internal control procedures as mentioned
above, our Executive Director, Mr. Peter Tan, is responsible for overseeing and reviewing
the implementation of our Group’s internal control and risk management measures.
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Contract risk management
Contracts and customers
We recognise the continuous intake of new orders is vital for our financial performance
and business sustainability. In this regard, we maintain good working relationship with a
group of customers (main contractors) who regularly take on contracts from LTA or other
public sector contracts. We continually review the possibility of expanding the scope of
services for a contract, including expanding our range of value-added related products and
works. Should an opportunity to quote arises in road signage contracts and we can do so
profitably, we will dedicate resources for it so that our position as one of the established
road signage providers in Singapore is maintained. Furthermore, with the proceeds we
obtain from the Listing, our Group will increase our financial and operational capacities in
order to expand in the public sector.
We have also established procedures for assessing and monitoring contract risk. In our
preparation of quotations, our project team will consider and evaluate our customers’
financial conditions, past payment records and the adequacy of our internal resources and
capacity for the duration of the said contract before a decision is made. We are mindful of
not being over-reliant on any specific customer.
At any point in time, our ongoing contracts are likely to be in different stages, with
some at the beginning where costs are incurred but works not completed while others have
received payment for works completed. As such, our cash needs will unlikely exceed our
cash inflows as we take on contracts with unit selling prices we are confident of making a
profit. Furthermore, the 30 to 60 days credit terms granted to our customers will limit our
financial risks and our project team also monitors the payment pattern of our customers
regularly and closely. Our Executive Directors are aware of our Group’s contracts and
cashflows and monitor the financial health of our Group.
Suppliers and subcontractors
Our Group has adopted a policy of maintaining good working relationship with a
group of reliable suppliers and subcontractors with on-time payments. Having a good
working relationship with our suppliers and subcontractors, maintaining at least more than
one supplier or subcontractor in a given area of expertise and constantly sourcing for
reliable suppliers and subcontractors will reduce risk in this aspect of contract risk. We also
maintain an approved supplier list and evaluate our suppliers to ensure that our suppliers
can meet our contracts’ fulfillment needs. We do not engage in hedging for our supplies.
Loss of key personnel
Our Executive Directors will ensure that suitable and sufficient numbers of staff are
properly appointed and assigned to manage each project. We have also established a buddy
system where another staff is aware of the contracts or work scope handled by his/her
buddy. This will ensure that sufficient experience and technical knowledge are available
within the organisation and any loss of any team member will have limited impact on the
continuity of project implementation.
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Regulatory risk management
Our Group keeps abreast of any changes in government policies, regulations, licensing
requirement and permits and safety requirements and we are aware that any non-
compliance of the above may impact on our operation and business. We will ensure that all
changes in government policies, regulations, licensing requirement and permits and safety
requirements are closely monitored and communicated to our staff for proper
implementation and compliance.
Foreign labour
We believe that inability to employ foreign labour may materially affect our operation
and financial performance. In order to mitigate the impact of foreign labour shortages
arising from changes in relevant laws, rules and regulations in Singapore and/or other
countries where the foreign labour originated, our management has adopted a policy to
employ foreign labour from more than one countries including India, Bangladesh and
China.
Our Directors confirm that as at the Latest Practicable Date, they are not aware of any
impending changes in the relevant laws, rules and regulations that would affect our Group.
CORPORATE GOVERNANCE AND INTERNAL CONTROL MEASURES
We maintain corporate governance and internal control measures to ensure effective
and efficient management and operations of our business and to safeguard the interests of
our employees, stakeholders and Shareholders (as the case may be). These include:
. Confidentiality policy — this outlines the staff’s obligations to maintain
confidentiality with respect to information pertaining to our operations
. Conflict of interest — directors and employees are required to declare any conflict
of interest or connected persons
. Delegation of authority — different authority measures are in place to approve
purchases, credit term, sales quotation and credit note issuance
. Business continuity plan — this outlines the measures to be taken to minimise the
impact to business due to operational disruptions
. Whistle-blowing policy — this sets the framework to promote responsible and
secure whistle-blowing without the fear of adverse consequences
. Regulatory listing — list of regulations to monitor compliance and to minimise
over-sight
. Personal data protection policy — this outlines the measures for personal data
protection to be in compliance with the Personal Data Protection Act 2012
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. Revenue management measures — measures and approval in respect of areas in 1)
sales and credit approval and 2) sales quotation pricing
. Purchases management measures — processes established in respect of areas in 1)
purchases and expenditure, 2) approved suppliers, 3) inventory, 4) fixed assets and
5) petty cash to ensure effective and effective control and operation in these areas
. Human resources management — policies to provide clear guidelines on 1)
recruitment, termination and resignation of staff and 2) incentives
. Information technology policy — this outlines general controls on 1) hardware/
software and information control, 2) authority matrix of user access rights and 3)
information technology maintenance
LITIGATION
During the Track Record Period and as at the Latest Practicable Date, there was no
litigation or arbitration proceeding pending or threatened against our Group or any of our
Directors which could have a material adverse effect on our Group’s financial condition or
results of operations.
REGULATORY COMPLIANCE
Our Directors confirmed that, during the Track Record Period and up to the Latest
Practicable Date, our Group has complied with all applicable rules and regulations for our
business activities and operations in all material aspects.
The legal adviser to our Company as to Singapore law has confirmed that as at the
Latest Practicable Date, Signmechanic Singapore has conducted its business in Singapore in
compliance with all applicable Singapore laws and regulations in all material respects,
including obtaining all necessary permits and licences required in connection therewith,
relating to or material to the business.
Non-compliance incidents
During the Track Record Period and up to the Latest Practicable Date, we had no
material non-compliance incidents that would have a material adverse effect on our
business, financial condition and results of operations taken as a whole.
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Indemnity from our Controlling Shareholders
Our Controlling Shareholders have executed the Deed of Indemnity in favour of our
Group whereby they will jointly and severally indemnify each member of our Group
against, among others, all expenses, payments, sums, outgoings, fees, demands, claims,
damages, losses, costs (among others, but not limited to, legal and other professional costs),
charges, liabilities, fines, penalties and tax which any member of our Group may incur,
suffer or accrue, as a result of directly or indirectly or in connection with, or in consequence
of any non-compliance with or breach of any applicable laws, rules or regulations in any
jurisdiction by any member of our Group on or before the Listing. Please refer to the
section headed ‘‘D. Other information — 1. Estate duty, tax and other indemnities’’ in
Appendix IV to this prospectus for further details of the Deed of Indemnity.
BUSINESS
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CONNECTED TRANSACTIONS
Prior to the Listing, our Group has entered into transactions with its Connected
Persons during the Track Record Period. These transactions constituted discontinued
connected transactions on the part of our Company. Details of these transactions are as
follows:
CONNECTED PERSONS
Mr. Kelvin Tan is our Executive Director and hence is a connected person of our
Company.
Mr. Peter Tan is our Executive Director and hence is a connected person of our
Company.
Fusion Displays was a business firm registered in Singapore on 8 June 2007 and was
principally engaged in art and graphic design services and advertising activities. Prior to 16
March 2015, Fusion Displays was owned as to 50% by Mr. Kelvin Tan and as to 50% by
Mr. Peter Tan. On 16 March 2015, Fusion Displays was terminated and ceased to be a
business firm in Singapore. As Mr. Kelvin Tan and Mr. Peter Tan are our Executive
Directors, Fusion Displays was a connected person of our Company under the GEM
Listing Rules during the Track Record Period and prior to 16 March 2015.
C.K. Toh Construction is a company incorporated in Singapore with limited liability
on 16 June 2004 and is principally engaged in road marking and civil construction. C.K.
Toh Construction’s principal activities during the Track Record Period were mainly on the
provision of road marking services, laying of asphalt services and civil construction and
does not possess the relevant expertise and licenses in the signage sector. C.K. Toh
Construction does not conduct similar business activities to that of our Group as it does not
design, fabricate and supply signage products. As confirmed by C.K. Toh Construction,
C.K. Toh Construction is specialised in road marking and has recently expanded into civil
construction (but not signage fabrication). In addition, it is independently operated by a
third party. Prior to 2 April 2015, C.K. Toh Construction was owned as to 21.25% by Mr.
Kelvin Tan and as to 21.25% by Mr. Peter Tan. On 2 April 2015, Mr. Kelvin Tan and Mr.
Peter Tan disposed of their entire respective shareholding interests in C.K. Toh
Construction to Mr. Toh Chee Keong who is not related to our Group, the directors nor
shareholders of our Group. The decision to dispose of the shareholding interests was made
to avoid any future connected transactions between C.K. Toh Construction and our Group
after the Listing. The decision made was not in relation to the profitability of our Group
nor whether our Company can meet the minimum cash flow requirements under the GEM
Rule 11.12A(1). C.K. Toh Construction is independently managed by its director, Mr. Toh
Chee Keong who is not related to our Group, the directors nor shareholders of our Group.
Mr. Kelvin Tan and Mr. Peter Tan had not participated in the daily management of C.K.
Toh Construction, and collectively did not hold more than 50% of C.K. Toh Construction.
As Mr. Kelvin Tan and Mr. Peter Tan are our Executive Directors, C.K. Toh Construction
was deemed to be a connected person of our Company under the GEM Listing Rules during
CONNECTED TRANSACTIONS
– 139 –
the Track Record Period and prior to 2 April 2015. The total value of transactions with
C.K. Toh Construction was approximately S$0.2 million in each of the two years ended 31
December 2014.
T3 Holdings is a company incorporated in Singapore with limited liability on 5
November 2012 and is principally engaged in supply of labour and logistic services. Prior to
2 April 2015, T3 Holdings was owned as to 21% by Mr. Kelvin Tan and as to 21% by Mr.
Peter Tan. On 2 April 2015, Mr. Kelvin Tan and Mr. Peter Tan disposed of their entire
respective shareholding interests in T3 Holdings. As Mr. Kelvin Tan and Mr. Peter Tan are
our executive Directors, T3 Holdings was deemed to be a connected person of our Company
under the GEM Listing Rules during the Track Record Period and prior to 2 April 2015.
Signmechanic Sdn Bhd is a company incorporated in Malaysia with limited liability on
14 September 2007 and is principally engaged in the design, fabrication and supply of
aluminium-based commercial and retail advertisement signage in Malaysia. Signmechanic
Sdn Bhd does not conduct the similar business activities to our Group in Singapore.
Signmechanic Sdn Bhd focuses its business in Malaysia and does not have a place of
business in Singapore. In addition, it is independently operated by a third party. During the
Track Record Period, Signmechanic Sdn Bhd supplied signage to us with total value of
transactions of approximately S$74,000 and S$70,000 for the two years ended 31 December
2014. Prior to 12 January 2015, Signmechanic Sdn Bhd was owned as to approximately
33.33% by Mr. Kelvin Tan and as to approximately 33.33% by Mr. Peter Tan. On 12
January 2015, Mr. Kelvin Tan and Mr. Peter Tan disposed of their entire respective
shareholding interests in Signmechanic Sdn Bhd to Mr. Lo Ken On who is one of the
directors managing Signmechanic Sdn Bhd, is not related to our Group, the directors nor
shareholders of our Group. The decision to dispose of the shareholding interests was made
to avoid any future connected transactions between Signmechanic Sdn Bhd and our Group
after the Listing. The decision made was not in relation to the profitability of our Group
nor whether our Company can meet the minimum cash flow requirements under the GEM
Rule 11.12A(1). Mr. Kelvin Tan and Mr. Peter Tan had not participated in the daily
management of Signmechanic Sdn Bhd and our Group did not intend to expand further in
Malaysia. As Mr. Kelvin Tan and Mr. Peter Tan are our Executive Directors, Signmechanic
Sdn Bhd was a connected person of our Company under the GEM Listing Rules during the
Track Record Period and prior to 12 January 2015.
DISCONTINUED CONNECTED TRANSACTIONS
Personal Guarantees
During the Track Record Period, Mr. Kelvin Tan and Mr. Peter Tan had jointly and
severally provided a personal guarantee in favour of DBS Bank Ltd (‘‘DBS’’) in Singapore
in relation to various banking facilities granted by DBS to Signmechanic Singapore in the
maximum aggregate amount of S$4,927,000. On 17 March 2015, DBS has released the
above said personal guarantee and a revised facility letter has been granted by DBS to
Signmechanic Singapore.
CONNECTED TRANSACTIONS
– 140 –
In addition, Mr. Kelvin Tan and Mr. Peter Tan had jointly and severally provided a
personal guarantee in favour of Ethoz Capital Ltd (‘‘Ethoz Capital’’) to secure the
obligations and liabilities of Signmechanic Singapore under a loan agreement entered into
between Signmenchanic Singapore as the borrower and Ethoz Capital as the lender dated 31
October 2014 in relation to a loan facility of S$1,000,000 granted by Ethoz Capital to
Signmechanic Singapore. On or about 27 March 2015, Signmechanic Singapore has repaid
the above loan in full and by a letter dated 6 April 2015 issued by Ethoz Capital to
Signmechanic Singapore, Ethoz Capital has released the above said personal guarantee.
As the above provisions of personal guarantees were made on normal commercial
terms and they were not secured by the assets of our Group, the above provisions of
personal guarantees constitute connected transactions of our Company but are fully exempt
from Shareholders’ approval, annual review and all disclosure requirements pursuant to
Rule 20.88 of the GEM Listing Rules.
Sale of machinery
On 22 July 2014, Fusion Displays sold one unit of cutting plotter machine and one unit
of colour sign maker printer machine to Signmechanic Singapore at a consideration of
approximately S$10,000 and S$30,000. The consideration of the above transactions was
determined on arm’s length basis between Signmechanic Singapore and Fusion Displays
with reference to the market value of such machines.
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the acquisition of the cutting plotter machine and the colour sign maker printer
machine was conducted in the ordinary and usual course of business of our Group on
normal commercial terms. As such, our Directors considered that the entering into of the
above transaction is fair and reasonable and in the interests of our Group and our
Shareholders as a whole.
Our Group had bought machinery from unrelated independent third party suppliers,
who would also be able to supply our Group with similar cutting plotter machine and color
sign maker printer machine in the future.
Supply of lorry crane and truck mounted attenuator
During the Track Record Period, Signmechanic Singapore and T3 Holdings entered
into an arrangement pursuant to which T3 Holdings agreed to supply lorry crane and truck
mounted attenuator(s) to Signmechanic Singapore (the ‘‘T3 Services’’). The T3 Services
amounted to approximately S$109,000 and S$31,000 respectively for each of the two years
ended 31 December 2013 and 31 December 2014. Such transactions took place as and when
Signmechanic Singapore was in need of such lorry crane and truck mounted attenuator(s)
from time to time. The consideration of the T3 Services was determined on an arm’s length
basis between Signmechanic Singapore and T3 Holdings with reference to prevailing market
price.
CONNECTED TRANSACTIONS
– 141 –
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the supply of lorry crane and truck mounted attenuator(s) was conducted in the
ordinary and usual course of business of our Group on normal commercial terms. As such,
our Directors considered that the entering into of the above arrangement is fair and
reasonable and in the interests of our Group and our Shareholders as a whole.
Our Group has alternative unrelated independent third party suppliers for the supply
of lorry crane and truck mounted attenuator who are able to supply our Group should we
require in the future.
Provision of installation related services
During the Track Record Period, Signmechanic Singapore and C.K. Toh Construction
entered into an arrangement pursuant to which C.K. Toh Construction agreed to provide
installation related services to Signmechanic Singapore (the ‘‘C.K. Toh Services’’). The C.K.
Toh Services amounted to approximately S$18,000 and S$3,000 respectively for each of two
years ended 31 December 2013 and 31 December 2014. Such transactions took place as and
when Signmechanic Singapore was in need of installation related services from time to time.
The consideration of the above arrangement was determined on an arm’s length basis
between Signmechanic Singapore and C.K. Toh Construction.
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the C.K. Toh Services was conducted in the ordinary and usual course of business of
our Group on normal commercial terms. As such, our Directors considered that the
entering into of the above arrangement is fair and reasonable and in the interests of our
Group and the Shareholders as a whole.
Our Group has alternative unrelated independent third party suppliers for the
provision of installation related services, who would be able to supply our Group should we
require in the future. However, transactions of this nature would continue with C.K. Toh
Construction in the future should their quotation be more favourable compared to that of
unrelated third party suppliers. As C.K. Toh Construction ceased to be a connected person
on 2 April 2015, such transactions with C.K. Toh Construction would not constitute
connected transactions for our Company following the Listing.
Subcontracting arrangements with C.K. Toh Construction
During the Track Record Period, Signmechanic Singapore and C.K. Toh Construction
entered into an arrangement pursuant to which Signmechanic Singapore agreed to engage
C.K. Toh Construction as a subcontractor to conduct road marking works (the ‘‘C.K. Toh
Subcontracting’’). The C.K. Toh Subcontracting amounted to approximately S$164,000 and
S$174,000 for each of the two years ended 31 December 2013 and 31 December 2014
respectively. The C.K. Toh Subcontracting took place as and when Signmechanic Singapore
was in need of such services provided by C.K. Toh Construction from time to time. The
consideration of the above arrangements was determined based on an arm’s length basis
between Signmechanic Singapore and C.K. Toh Construction.
CONNECTED TRANSACTIONS
– 142 –
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the C.K. Toh Subcontracting was conducted in the ordinary and usual course of
business of our Group on normal commercial terms. As such, our Directors considered that
the entering into of the above arrangement is fair and reasonable and in the interests of our
Group and the Shareholders as a whole. Our Group does not have any ongoing contract
with C.K. Toh Construction.
Our Group can easily engage alternative unrelated independent third party suppliers
for the provision of road marking works, who would be able to supply our Group should we
require in the future. However, transactions of this nature would continue with C.K. Toh
Construction in the future should their quotation be more favourable compared to that of
unrelated third party suppliers. As C.K. Toh Construction ceased to be a connected person
on 2 April 2015, such transactions with C.K. Toh Construction would not constitute
connected transactions for our Company following the Listing.
Supply and installation of signage
During the Track Record Period, C.K. Toh Construction and Signmechanic Singapore
entered into an arrangement pursuant to which Signmechanic Singapore agreed to supply
and install signage to C.K. Toh Construction (the ‘‘Signmechanic Services’’). The
Signmechanic Services amounted to approximately S$42,000 and S$19,000 for each of the
two years ended 31 December 2013 and 31 December 2014 respectively. The Signmechanic
Services took place as and when C.K. Toh Construction was in need of such services
provided by Signmechanic Singapore from time to time. The consideration was determined
based on an arm’s length basis between Signmechanic Singapore and C.K. Toh
Construction.
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the Signmechanic Services was conducted in the ordinary and usual course of business
of our Group on normal commercial terms. As such, our Directors considered that the
entering into of the above arrangement is fair and reasonable and in the interests of our
Group and the Shareholders as a whole.
Supply of signage
During the Track Record Period, Signmechanic Sdn Bhd and Signmechanic Singapore
entered into an arrangement pursuant to which Signmechanic Sdn Bhd agreed to supply
signage to Signmechanic Singapore (the ‘‘Signmechanic Malaysia Services’’). The
Signmechanic Malaysia Services amounted approximately to S$74,000 and S$70,000 for
each of the two years ended 31 December 2013 and 31 December 2014 respectively. The
Signmechanic Malaysia Services took place as and when Signmechanic Singapore was in
need of supply of signage from time to time. The consideration was determined based on an
arm’s length basis between Signmechanic Singapore and Signmechanic Sdn Bhd.
CONNECTED TRANSACTIONS
– 143 –
Our Directors (including our Independent Non-Executive Directors) have confirmed
that the Signmechanic Malaysia Services was conducted in the ordinary and usual course of
business of our Group on normal commercial terms. As such, our Directors considered that
the entering into of the above arrangement is fair and reasonable and in the interests of our
Group and the Shareholders as a whole. Our Group does not have any ongoing contract
with Signmechanic Sdn Bhd.
RELATED PARTY TRANSACTION
Save for the discontinued connected transactions disclosed above, we did not enter into
any other related party transactions during the Track Record Period.
CONNECTED TRANSACTIONS
– 144 –
FUTURE PLANS AND PROSPECTS
Future plans
See the section headed ‘‘Business — Our objectives and business strategies’’ in this
prospectus for a detailed description of our business strategies and future plans.
Our business strategies are:
— expand and strengthen our market position in the public sector in Singapore;
— expand our business portfolio through the formation of new companies and/or
acquisitions; and
— expand our range of product offering to target and secure more non-road
infrastructure related projects
Implementation plans
In light of the business objectives and future plans of our Group, our Group will seek
to attain the milestones contained in the following paragraphs from the Latest Practicable
Date to the year ended 31 December 2017. Investors should note that the milestones and
their scheduled times for attainment are formulated on the bases and assumptions referred
to in the paragraph headed ‘‘Bases and key assumptions of the business plan’’ in this
section. These bases and assumptions are inherently subject to many uncertainties, variables
and unpredictable factors, in particular the risk factors set out in the section headed ‘‘Risk
factors’’ in this prospectus. There can be no assurance that the plans of our Group will
materialise in accordance with the expected time frame or that the objectives of our Group
will be accomplished at all. Our Directors intend to carry out the following implementation
plans:
1 From the Latest Practicable
Date to 31 December 2015
Purchase of materials and/or
equipment in relation to
expansion of existing sector
and to target and secure more
non-road infrastructure related
projects
Purchase materials for expansion of business in the
existing sector
Identify suppliers/operators who are able to supply
materials for the new product offerings we intend to
get into
Identify equipment that are of higher productivity
and capability for our existing sector
Identify equipment that are suited for targeting and
securing more non-road infrastructure related
projects
FUTURE PLANS AND USE OF PROCEEDS
– 145 –
Expansion via new companies
and/or acquisitions
Explore capital contributions or acquisition of
controlling stake in companies that may be in other
sectors of civil engineering, such as providing
services like lane marking or installation of precast
blocks
Expansion and enhancement of
work force to support our
business expansion in the
existing sector and to target
and secure more non-road
infrastructure related projects
New headcount of about 3 to 8 foreign workers
based at our plant, for fabrication of signage and
related works
Review the remuneration and benefits of key staff in
each department, critical to the execution of our
business strategies
Provide opportunities and subsidies for staff to
attend courses to learn new competencies and
upgrade their quality management skills
From 1 January 2016 to 30 June 2016
Purchase of materials and/or
equipment in relation to
expansion of existing sector
and to target and secure more
non-road infrastructure related
projects
Purchase materials for expansion of business in the
existing sectors
Identify suppliers/operators who are able to supply
materials for the new product offerings we intend to
get into
Place purchase orders with the selected suppliers
after we have secured projects in relation to our new
product offerings
Purchase equipment that are of higher productivity
and capability for our existing sector
Expansion via new companies
and/or acquisitions
Perform due diligence on potential targets and
internal evaluation and approval of our directors
Engage professional parties to conduct further due
diligence and provide advice
FUTURE PLANS AND USE OF PROCEEDS
– 146 –
Expansion and enhancement of
work force to support our
business expansion in the
existing sector and to target
and secure more non-road
infrastructure related projects
New headcount of about 3 to 5 staff that have
competencies in new skills, who are part of our
project and production teams
New headcount of about 5 to 10 foreign workers
based at our plant, for fabrication of signage and
related works
Provide opportunities and subsidies for staff to
attend courses to learn new competencies and
upgrade their quality management skills
Working capital and general
corporate use
Reserve working capital for business growth and
operation needs
From 1 July 2016 to 31 December 2016
Purchase of materials and/or
equipment in relation to
expansion of existing sector
and to target and secure more
non-road infrastructure related
projects
Purchase materials for expansion of business in the
existing sectors
Identify suppliers/operators who are able to supply
materials for the new product offerings we intend to
get into
Place purchase orders with the selected suppliers
after we have secured projects in relation to our new
product offerings
Identify equipment that are suited for targeting and
securing more non-road infrastructure related
projects
Purchase equipment that are of higher productivity
and capability for our existing sector
Expansion via new companies
and/or acquisitions
Perform due diligence on potential targets and
internal evaluation and approval of our directors
Engage professional parties to conduct further due
diligence and provide advice
Finalise potential target and complete due diligence
FUTURE PLANS AND USE OF PROCEEDS
– 147 –
Expansion and enhancement of
work force to support our
business expansion in the
existing sector and to target
and secure more non-road
infrastructure related projects
New headcount of about 4 to 6 staff that have
competencies in new skills, who are part of our
project and production teams
New headcount of about 8 to 15 foreign workers
based at our plant, for fabrication of signage and
related works
Provide opportunities and subsidies for staff to
attend courses to learn new competencies and
upgrade their quality management skills
Working capital and general
corporate use
Reserve working capital for business growth and
operation needs
From 1 January 2017 to 30 June 2017
Purchase of materials and/or
equipment in relation to
expansion of existing sector
and to target and secure more
non-road infrastructure related
projects
Purchase materials for expansion of business in the
existing sector
Place purchase orders with the selected suppliers
after we have secured projects in relation to our new
product offerings
Purchase equipment that are suited for targeting and
securing more non-road infrastructure related
projects
Expansion via new companies
and/or acquisitions
Finalise potential target and complete due diligence
Execute the merger and acquisition plan of potential
target in accordance with the requirements as
required under Chapter 19 of the GEM Listing Rules
Expansion and enhancement of
work force to support our
business expansion in the
existing sector and to target
and secure more non-road
infrastructure related projects
New headcount of about 5 to 8 staff that have
competencies in new skills, who are part of our
project and production teams
New headcount of about 5 to 8 foreign workers
based at our plant, for fabrication of signage and
related works
Provide opportunities and subsidies for staff to
attend courses to learn new competencies and
upgrade their quality management skills
FUTURE PLANS AND USE OF PROCEEDS
– 148 –
Working capital and general
corporate use
Reserve working capital for business growth and
operation needs
From 1 July 2017 to 31 December 2017
Purchase of materials and/or
equipment in relation to
expansion of existing sector
and to target and secure more
non-road infrastructure related
projects
Purchase materials for expansion of business in the
existing sector
Place purchase orders with the selected suppliers
after we have secured projects in relation to our new
product offerings
Purchase equipment that are suited for targeting and
securing more non-road infrastructure related
projects
Expansion via new companies
and/or acquisitions
Execute the merger and acquisition plan of potential
target in accordance with the requirements as
required under Chapter 19 of the GEM Listing Rules
Expansion and enhancement of
work force to support our
business expansion in the
existing sector and to target
and secure more non-road
infrastructure related projects
New headcount of about 2 to 3 staff that have
competencies in new skills, who are part of our
project and production teams
New headcount of about 4 to 6 foreign workers
based at our plant, for fabrication of signage and
related works
Provide opportunities and subsidies for staff to
attend courses to learn new competencies and
upgrade their quality management skills
Working capital and general
corporate use
Reserve working capital for business growth and
operation needs
Bases and key assumptions of the business plans
The business objectives and strategies set out by our Directors are based on the
following bases and assumptions:
— Our Group will have sufficient financial resources to meet the planned capital and
operating expenditure and business development requirements during the period
to which the business objectives relate;
— There will be no material change in existing laws and regulations, or other
government policies relating to our Group, or in the political, economic or market
conditions in which our Group operates;
FUTURE PLANS AND USE OF PROCEEDS
– 149 –
— There will be no change in the funding requirement for each of the
implementation plans described under the paragraph headed ‘‘Implementation
plan’’ in this section from the amount as estimated by our Directors;
— There will be no material changes in the bases or rates of taxation applicable to
the activities of our Group;
— There will be no disasters, natural, political, legal or otherwise, which would
materially disrupt the business or operations of our Group;
— Our Group will not be materially affected by the risk factors as set ou under the
section headed ‘‘Risk factors’’ in this prospectus;
— Our Group will be able to retain key staff in the management and the main
operational departments; and
— Our Group will be able to continue our operations in substantially the same
manner as our Group had been operated during the Track Record Period and our
Group will also be able to carry out our development plans without disruptions
adversely affecting our operations or business objectives in any way.
Reasons for the Placing and use of proceeds
The Placing of the Placing Shares will enhance the capital base of our Group and
provide us with additional working capital to implement the future plans set out in the
section headed ‘‘Business — Our objectives and business strategies’’ in this prospectus.
Use of proceeds
Our Directors intend to apply the net proceeds from the Placing to finance the business
expansion, capital expenditure and strengthen the capital base of our Group and improve
our overall financial position. Based on the Placing Price of HK$0.50 per Placing Share, the
net proceeds from the Placing of the Placing Shares, after deducting underwriting fees and
estimated expense in connection with the Placing, are estimated to be HK$23.4 million.
FUTURE PLANS AND USE OF PROCEEDS
– 150 –
From the
Latest
Practicable
Date to
31 December
2015
For the six
months
ending
30 June
2016
For the six
months ended
31 December
2016
For the six
months
ending
30 June
2017
For the six
months
ending
31 December
2017 Total
Approximate
percentage of
net proceeds
HK$
(in million)
HK$
(in million)
HK$
(in million)
HK$
(in million)
HK$
(in million)
HK$
(in million)
Purchase of materials and/or
equipment in relation to
expansion of existing
sector and to target and
secure more non-road
infrastructure related
projects 0.3 2.2 2.4 2.6 0.7 8.2 35%
Expansion via new companies
or acquisitions(1) — 1.9 1.7 2.9 1.7 8.2 35%
Expansion and enhancement
of work force to support
our business expansion in
the existing sector and
non-road infrastructure
related projects 0.2 1.3 1.2 1.4 0.6 4.7 20%
Working capital and other
general corporate
purposes — 0.7 0.8 0.5 0.3 2.3 10%
Total 0.5 6.1 6.1 7.4 3.3 23.4 100%
Note:
1. As at the Latest Practicable Date, we have not identified any targets.
To the extent that the net proceeds from the Placing are not immediately required for
the above purposes, it is the present intention of our Directors that such proceeds will be
placed on short-term interest bearing deposits with authorised financial institutions in
Singapore and/or Hong Kong.
We will bear the underwriting commissions, SFC transaction levy and Stock Exchange
trading fee payable by us in connection with the issue of the new Shares together with any
applicable fees relating to the Placing. The Selling Shareholder will be responsible for the
underwriting commissions attributable to the Sale Shares, together with Stock Exchange
trading fees, SFC transaction levy and any applicable fees in respect of the Sale Shares.
Based on the Placing Price, we estimate that the Selling Shareholder will receive net
proceeds of approximately HK$9.2 million, after deducting the underwriting commissions
and fees payable by the Selling Shareholder in respect of the Sale Shares. We will not receive
the net proceeds from the sale of the Sale Shares by the Selling Shareholder in the Placing.
FUTURE PLANS AND USE OF PROCEEDS
– 151 –
Our Board of Directors consists of two Executive Directors, and three Independent
Non-Executive Directors. The following table sets forth the information concerning our
Directors and senior management:
Name Age Address Position
Date of Joining/
Appointment
Roles and
Responsibilities
Relationship with
other Directors and
senior management
Executive Directors
Mr. Kelvin Tan
(陳添吉)
42 Block 232, Pasir
Ris Drive 4,
#13-510
Singapore
510232
Chairman and
Executive
Director
December 1997/
10 March 2015
Overall
management,
strategic
planning and
business
development
None
Mr. Peter Tan
(陳光輝)
47 35 Jalan Mariam
Singapore
509313
Chief executive
officer and
Executive
Director
December 1997/
10 March 2015
Lead operational
departments and
provide
guidance and
management
experience in
project
management
and contract
negotiation.
None
Independent Non-Executive Directors
Mr. Oh Eng Bin
(Hu Rongming)
(胡榮明)
41 11 Tanjong Rhu
Road
#09-04
Singapore
436896
Independent Non-
Executive
Director
23 June 2015 Responsible for
giving strategic
advice and
guidance on the
business and
operations of
our Group
None
Mr. Tan Kiang Hua
(陳建華)
54 1 Bukit Batok
Street 25,
#06-22,
Singapore
658882
Independent Non-
Executive
Director
23 June 2015 Responsible for
giving strategic
advice and
guidance on the
business and
operations of
our Group
None
Mdm. Kow Yuen-
Ting (Gao
Yunting)
(郜韵婷)
37 20 Clover Close
Singapore
579261
Independent Non-
Executive
Director
23 June 2015 Responsible for
giving strategic
advice and
guidance on the
business and
operations of
our Group
None
Senior management
Mr. Soh Chiau Kim
(蘇招金)
35 Apt Blk 766,
Woodlands
Circle, # 09-346,
Singapore
730766
General Manager July 2009/March
2013
Overall
management of
operations, with
a focus on
execution of
contracts.
None
DIRECTORS, SENIOR MANAGEMENT AND STAFF
– 152 –
DIRECTORS
Executive Directors
Mr. Kelvin Tan (陳添吉), age 42, co-founder of our Group, Executive Director and
Chairman of our Board. He was first appointed as our Director on 10 March 2015. Mr.
Kelvin Tan is also the director of Signmechanic Singapore, appointed 1 December 1997.
Mr. Kelvin Tan is responsible for our Group’s overall management, strategic planning and
business development. He has more than 15 years of experience in the signage industry.
Mr. Kelvin Tan started his career as a project team member in a company whose
principal business was in signage related works. Signmechanic Singapore was acquired by
Mr. Kelvin Tan and Mr. Peter Tan (who was an ex-colleague in that company) years after.
Since 1997, Mr. Kelvin Tan has been involved in Signmechanic Singapore, focusing on
the growth of the business. Mr. Kelvin Tan is involved in overall management, strategic
planning and business development, and maintains relationships with key customers in the
public infrastructure sector.
Mr. Kelvin Tan graduated with a diploma in electronic engineering from Ngee Ann
Polytechnic, Singapore in August 1992. Mr. Kelvin Tan does not have any current or past
directorships in any listed companies in the last three years.
Mr. Peter Tan (陳光輝), age 47, co-founder of our Group. Executive Director and chief
executive officer of our Group. He was first appointed as our Director on 10 March 2015.
Mr. Peter Tan is also the director of Signmechanic Singapore, appointed 1 December 1997.
Mr. Peter Tan is responsible for leading our Group’s operational departments and
providing guidance and management experience in project management and contract
negotiation. He has more than 15 years of experience in the signage industry.
Mr. Peter Tan started his career in the Singapore Air Force in 1987 as a technician. For
his next job, he worked as a project coordinator in the company (where Mr. Kelvin Tan was
also employed in) whose principal business was in signage related works. Signmechanic
Singapore was acquired by him and Mr. Kelvin Tan years after.
Since 1997, Mr. Peter Tan has been involved in Signmechanic Singapore, focusing on
the growth of the business. Mr. Peter Tan leads the operational departments and provides
guidance and management experience in project management and contract negotiation. He
also maintains relationships with customers in all non-public infrastructure contracts.
Mr. Peter Tan graduated with a diploma in mechanical engineering from Ngee Ann
Polytechnic, Singapore in August 1987. He also obtained a graduate diploma in sales and
marketing management from Temasek Polytechnic, Singapore in February 1993. Mr. Peter
Tan does not have any current or past directorships in any listed companies in the last three
years.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
– 153 –
Independent Non-Executive Directors
Mr. Oh Eng Bin (胡榮明), age 41, was appointed as our Independent Non-Executive
Director on 23 June 2015. He is currently the chairman of the nomination committee and a
member of the audit and remuneration committees. Mr. Oh is a partner in Rodyk &
Davidson LLP’s Corporate Practice Group and a partner in the firm’s China Practice and
Indonesia Practice. He has been in legal practice since 1999. Mr. Oh practises mainly in the
areas of corporate finance and mergers and acquisitions, with a focus on equity capital
markets transactions involving initial public offerings and reverse takeovers of Singapore
and foreign companies, as well as secondary capital market issues including secondary
listings, secondary post-listing fund raising and post-listing advisory and compliance. Mr.
Oh also advises on capital markets licensing and compliance, and on a wide range of general
corporate advisory work for both public listed and private companies including private
equity investments, joint ventures, corporate restructurings, debt restructuring and
franchising. Mr. Oh graduated with a Bachelor of Law degree (Honours) from the
National University of Singapore in June 1998 and is admitted to the Singapore Bar.
Mr. Oh is an independent non-executive director of SHS Holdings Limited and Weiye
Holding Limited, both companies are listed on the Mainboard of the Singapore Stock
Exchange. Save for the above, Mr. Oh does not have other current or past directorships in
any listed companies in the last three years.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
– 154 –
Mr. Tan Kiang Hua (陳建華), age 54, was appointed as our Independent Non-
Executive Director on 23 June 2015. He is currently the chairman of the remuneration
committee and a member of the audit and nomination committees. Mr. Tan graduated from
the National University of Singapore with a Bachelor of Business Administration degree in
June 1984. Mr. Tan has more than 25 years of experience in accounting, finance, investment
and business management. The following table summarises Mr. Tan’s professional
experience prior to joining our Group:
Company name
Principal business
activities of the
company Last position held Responsibilities Period of services
Holiday Inn Yangtze
Chongqing
Hotel Assistant controller Responsible for setting
up accounting
system and training
of staff
March 1988 to
June 1989
Holiday Inn Lido Beijing Hotel Assistant financial
controller
Responsible for
financial reporting,
credit control, cost
control and
cashiering
August 1989 to
March 1991
Beijing Lufthansa Center/
Kempinski Hotel
Hotel Chief financial
controller
Responsible for setting
up accounting
system, training of
staff and budgeting
April 1991 to
December 1992
Raffles International
Limited
Hotel management Development manager Responsible for
property investment
February 1993 to
December 1994
Shanghai Huanghe DHA
Pharmaceutical
Company Ltd
Pharmaceutical
manufacturing
General manager Responsible for
general
management, sales
and marketing and
financial control
January 1995 to
January 1997
Transpac Capital Pte Ltd Fund management Vice president Responsible for
portfolio investment
and management
February 1997 to
September 2003
Everbright Investment Pte
Ltd
Investment fund
management
Director Responsible for
portfolio investment
and management
October 2003 to
January 2004
Prime Capital Ltd Consultancy for
capital market fund
raising
Director Responsible for
business
development
February 2004 to
February 2007
Raintree Ventures Pte Ltd Fund management Investment director Responsible for
portfolio investment
and management
March 2007 to
April 2012
Niehands City Pte Ltd Property development Chief investment and
finance officer
Responsible for
financial
management, fund
raising and investor
relations
January 2014 till
Present
Note: Mr. Tan was not employed from May 2012 to December 2013.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Mr. Tan was a director of Wedo Virtual Tech Limited, a company incorporated in
Hong Kong, which was dissolved by means of striking off on 13 June 2014 pursuant to
section 291(6) of the Predecessor Companies Ordinance. Mr. Tan Kiang Hua confirmed
that the said company was inactive at the time of it being struck off and that as far as he is
aware, the dissolution of the said company has not resulted in any liability or obligation
being imposed against him.
Mdm. Kow Yuen-Ting (Gao Yunting) (郜韵婷), age 37, was appointed as our
Independent Non-Executive Director on 23 June 2015. She is currently the chairman of
the audit committee and a member of the nomination and remuneration committees. Mdm.
Kow graduated from the Nanyang Technological University of Singapore with a Bachelor
of Accountancy degree in July 2000. She is also a chartered accountant of Singapore. Mdm.
Kow has more than 10 years of experience in accounting and finance. The following table
summarises Mdm. Kow’s professional experience prior to joining our Group:
Company Name
Principal activities
of the company Last position held Responsibilities Period of services
Arthur Andersen
Associates (S) Pte Ltd
Audit, consultancy
and corporate
finance
Associate Financial analytical
review in restructuring
engagements and
statutory compliance
work in formal
insolvency agreements
August 2000 to
November 2001
Raffles International
Limited
Hotel management Assistant manager Coordination of annual
budget submission and
compilation of market
segment information
December 2001 to
November 2002
Accountant-General’s
Department (seconded
to the Ministry of
Foreign Affairs in
January 2003 as
Finance Officer)
Government Accountant Preparation of annual
budgets, periodic
forecast and financial
statements
November 2002 to
June 2005
JPMorgan Chase Bank,
N.A.
Finance Client service
manager
Client relationships in
treasury services
July 2005 to May
2007
Philip Morris Singapore
Pte Ltd
Tobacco Analyst Analysis of revenue,
budget and
management reporting
June 2007 to
August 2008
Polycom Asia Pacific Pte
Ltd.
Communications Asia pacific
controller
Preparation of budget and
management reports
for the Asia Pacific
region
November 2008 to
May 2011
KCT Consulting Pte. Ltd. Business and
management
consultancy
Finance and project
manager
Preparation of financial
statements and
handling of tax and
regulatory filings
January 2012 to
present
Mdm. Kow Yuen-Ting does not have any current or past directorships in any listed
companies in the last three years.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Each of our Directors (i) did not hold other positions in our Company or other
members of our Group as at the Latest Practicable Date; (ii) had no other relationship with
any Directors, senior management or substantial Shareholders of our Company as at the
Latest Practicable Date; and (iii) did not hold any other directorships in public listed
companies in the three years prior to the Latest Practicable Date. As at the Latest
Practicable Date, save as disclosed in the section headed ‘‘Substantial Shareholders’’ and the
section headed ‘‘Further information about our Directors and Substantial Shareholders’’ in
Appendix IV to this prospectus, each of our Directors did not have any interest in the
Shares within the meaning of Part XV of the SFO.
Save as disclosed in the prospectus, none of our Directors have any interests in any
business apart from business of our Group which competes or is likely to compete, either
directly or indirectly, with business of our Group. Please refer to Appendix IV to this
prospectus for further information about our Directors, including details of the interest of
our Directors in the Shares and underlying shares of our Company (within the meaning of
Part XV of the SFO) and particulars of their service contract and remuneration.
Save as disclosed herein, to the best of the knowledge, information and belief of our
Directors having made all reasonable enquiries, there was no other matter with respect to
the appointment of our Directors that needs to be brought to the attention of the
Shareholders and there was no information relating to our Directors and senior
management members that is required to be disclosed pursuant to Rule 17.50(2) of the
GEM Listing Rules as at the Latest Practicable Date.
Senior management
Mr. Soh Chiau Kim (蘇招金), age 35, was appointed as the general manager of our
Group on March 2013. He is responsible for overall management of operations, with a
focus on the execution of contracts. His roles include managing, executing and coordinating
the entire contracts, in particular larger value road infrastructure projects.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Mr. Soh obtained a bachelor’s degree (first class honours) in civil engineering from
Universiti Tecknologi Malaysia in July 2002. He has completed numerous courses from the
BCA Academy, as well as Awareness, Design and Implementation Training on OHSAS
18001 : 2007 and Construction Safety Course for Project Managers. The following table
summarises Mr. Soh’s professional experience prior to joining our Group:
Company name
Principal business
activities of the
company Last position held Responsibilities Period of services
Seri Jasmine Sdn. Bhd. Property development
and construction
Project engineer Tender and project
coordination
June 2002 to May 2003
Vital Landscape Sdn Bhd Property development Site engineer Project costing and
supervision
June 2003 to May 2006
MDD Properties Sdn Bhd Property development Site engineer Project costing,
contract negotiation
and supervision.
June 2006 to June 2009
Mr. Soh does not have any current or past directorships in any listed companies in the
last three years.
COMPANY SECRETARY
Mr. Li Chi Chung, aged 47, is our Company Secretary of our Group. He was appointed
on 15 June 2015. Mr. Li received a Bachelor of Laws degree from the University of Sheffield
in 1990. He is a practising solicitor and was admitted as a solicitor in Hong Kong in 1993.
Mr. Li’s directorships and other positions in other listed companies are as follows:
Company name
Principal business
activities of the company
(during the tenure) Position held Period of services
Quam Limited
(stock code: 00952)
Provision of financial services Independent non-
executive director
November 1999 to
September 2002
Century Ginwa Retail
Holdings Limited (stock
code: 00162)
Design, development,
manufacture and sale of a
wide range of wooden
furniture products
Independent non-
executive director
September 2000 to
November 2001
Eagle Nice (International)
Holdings Limited
(stock code: 02368)
Manufacturing and trading of
sportswear and garments
Independent non-
executive director
November 2002 to
February 2013
Winfull Group
Holdings Limited
(stock code: 00183)
Provision of property
brokerage services,
carrying out schemes for
property consolidation,
assembly and
redevelopment, property
trading and property
development in Hong Kong
Non-executive
director
March 2007 to
December 2011
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Company name
Principal business
activities of the company
(during the tenure) Position held Period of services
Anhui Tianda Oil Pipe
Company Ltd.
(stock code: 00839)
Manufacturing, sourcing and
distribution of specialised
seamless pipes
Independent non-
executive director
October 2007 to
February 2009
China Nonferrous Metals
Company Limited
(stock code: 08306)
Mining, processing and
trading of mineral
resources
Company secretary December 2007 to
June 2015
Cheung Wo International
Holdings Limited
(stock code: 00009)
Film distribution and
licensing, film processing,
advertising and
promotional services, and
property investment
Company secretary March 2008 to
March 2010
AVIC Joy Holdings
(HK) Limited
(stock code: 00260)
Operating compressed natural
gas, liquefied petroleum gas
and liquefied natural gas
refueling stations, manage
and operate LED energy
management contracts,
provide finance lease and
loan services & provide
land development services
in the PRC
Company secretary September 2009 to
June 2015
Infinity Chemical Holdings
Company Limited
(stock code: 00640)
Manufacturing and sales of
adhesives, primers,
hardeners and vulcanised
shoes adhesive related
products used by the
footwear manufacturers
Company secretary March 2011 to
December 2011
China City Infrastructure
Group Limited
(stock code: 02349)
Property development,
property investment, hotel
business and property
management in the PRC
Company secretary April 2011 to
June 2012
Evershine Group
Holdings Limited
(stock code: 08022)
Provision of travel agent
services, advertising and
marketing services, fashion
garment trading and mobile
application business
Company secretary July 2013 to
May 2015
Z-Obee Holdings Limited
(stock code: 00948)
Distribution and marketing of
mobile handset and mobile
handset components,
provision of design and
production solution
services for mobile handset,
assembly of mobile handset
and surface mounting
technology of printed
circuit board
Company secretary January 2014 to
April 2014
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Company name
Principal business
activities of the company
(during the tenure) Position held Period of services
China Zenith Chemical
Group Limited
(stock code: 00362)
Manufacturing and sales of
polyvinyl-chloride, vinyl
acetate, vitamin C, glucose
and starch, calcium
carbide; generation and
supply of heat and power
Company secretary May 2014 to
January 2015
PINE Technology Holdings
Ltd (stock code: 01079)
Manufacturing and sales of
high-quality computer
components and consumer
electronic products
Independent non-
executive director
June 2000 to present
China Financial International
Investments Limited
(stock code: 00721)
Investments in listed and
unlisted companies
Company secretary November 2004 to
present
Kenford Group
Holdings Limited
(stock code: 00464)
Designing, manufacturing
and sales of electrical
haircare products, electrical
healthcare products and
other small household
electrical appliances
Independent non-
executive director
March 2005 to
present
Kingbo Strike Limited
(stock code: 01421)
Provision of electrical
engineering services in
Singapore
Company secretary December 2013 to
present
Mr. Li does not act as an individual employee of the Company, but as an external
service provider in respect of the proposed appointment of Mr. Li as the company secretary
of the Company. Pursuant to Code F.1.1 of the Corporate Governance Code, an issuer can
engage an external service provider as its company secretary, provided that the issuer
should disclose the identity of a person with sufficient seniority at the issuer whom the
external provider can contact. In this respect, the Company has nominated Mr. Kelvin Tan
as its contact point for Mr. Li.
While the Company is well aware of the importance of the company secretary in
supporting the Board on governance matters, the Company, after having considered that
Mr. Li’s firm, Michael Li & Co., Solicitors has more than fifteen professional staff and one
qualified company secretary with professional qualifications, both the Company and Mr. Li
are of the view that there will be sufficient time, resources and supporting for fulfilment of
the company secretary requirements.
In view of Mr. Li’s experience in legal and company secretarial functions and with
stock exchange rules and regulations, our Directors believe that Mr. Li has the appropriate
legal and company secretarial expertise for the purposes of Rule 5.14 of the GEM Listing
Rules.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
Our Company will comply with the Corporate Governance Code in Appendix 15 to the
GEM Listing Rules.
Our Directors will review our corporate governance policies and compliance with the
Corporate Governance Code each financial year and comply with the ‘‘comply or explain’’
principle in our corporate governance report which will be included in our annual reports
upon the Listing.
BOARD COMMITTEES
AUDIT COMMITTEE
Our Group established an audit committee on 23 June 2015 with written terms of
reference in compliance with Rule 5.28 of the GEM Listing Rules and paragraph C.3 of the
Corporate Governance Code and Corporate Governance Report as set out in Appendix 15
of the GEM Listing Rules. The audit committee consists of three independent Non-
Executive Directors namely Mdm. Kow Yuen-Ting, Mr. Tan Kiang Hua and Mr. Oh Eng
Bin. Mdm. Kow Yuen-Ting, a Director with the appropriate professional qualifications,
serves as the chairman of the audit committee.
The primary duties of the audit committee are to assist the Board in providing an
independent view of the effectiveness of our Group’s financial reporting process, internal
control and risk management system, to oversee the audit process and to perform other
duties and responsibilities as assigned by the Board.
REMUNERATION COMMITTEE
Our Group established a remuneration committee on 23 June 2015 with written terms
of reference in compliance with paragraph B.1 of the Corporate Governance Code and
Corporate Governance Report as set out in Appendix 15 of the GEM Listing Rules. The
remuneration committee consists of three Independent Non-Executive Directors namely
Mr. Tan Kiang Hua, Mr. Oh Eng Bin and Mdm. Kow Yuen-Ting. Mr. Tan Kiang Hua
serves as the chairman of the remuneration committee.
The primary duties of the remuneration committee include (but without limitation): (i)
making recommendations to our Directors on the policy and structure for all remuneration
of Directors and senior management and on the establishment of a formal and transparent
procedure for developing policies on such remuneration; (ii) determining the terms of the
specific remuneration package of our Directors and senior management; and (iii) reviewing
and approving performance-based remuneration by reference to corporate goals and
objectives resolved by our Directors from time to time.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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NOMINATION COMMITTEE
Our Group also established a nomination committee on 23 June 2015 with written
terms of reference in compliance with paragraph A.5 of the Corporate Governance Code
and Corporate Governance Report as set out in Appendix 15 of the GEM Listing Rules.
The nomination committee consists of three Independent Non-Executive Directors namely
Mr. Oh Eng Bin, Mr. Tan Kiang Hua and Mdm. Kow Yuen-Ting. Mr. Oh Eng Bin serves as
the chairman of the nomination committee.
The primary function of the nomination committee is to make recommendations to the
Board to fill vacancies on the same.
COMPLIANCE ADVISER
In accordance with Rule 6A.19 of the GEM Listing Rules, our Company will appoint
Grand Vinco Capital Limited as its compliance adviser, who will have access to our
Company’s authorised representatives, Directors and other officers at all times:
(1) before the publication of any regulatory announcement, circular or financial
report;
(2) where a transaction, which might be a notifiable or connected transaction,
is contemplated including share issues and share repurchases;
(3) where our Company proposes to use the proceeds of the Placing in a manner
different from that detailed in this prospectus or where our Group’s business
activities, developments or results of operation deviate from any forecast,
estimate or other information in this prospectus; and
(4) where the Stock Exchange makes an inquiry regarding unusual movements in the
price or trading volume of the Shares.
The term of the appointment will commence on the Listing Date and end on the date
on which our Company complies with Rule 18.03 of the GEM Listing Rules in respect of its
financial results for the second full financial year commencing after the Listing Date and
such appointment may be subject to extension by mutual agreement.
STAFF
There were 66 full-time staff in our Group as at the Latest Practicable Date of which
approximately 30% were local employees and approximately 70% were foreign workers. All
our employees are based in Singapore.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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The following table sets forth the number of our staff in the respective functions of our
Group (including our Executive Directors) as at the Latest Practicable Date:
Number of
local
employees
Number of
foreign
workers
Total
number of
staff
Project department 3 5 8
Design 3 7 10
Administrative and finance 13 4 17
Production 1 30 31
Total 20 46 66
Our foreign workers are sourced and recruited through Independent Third Party
agencies. The supply of foreign workers in Singapore is subject to various regulations and
policies. Please see the section headed ‘‘Regulatory overview’’ in this prospectus for further
details.
As at the Latest Practicable Date, we have both foreign workers hired under both the
construction sector (for our workers engaged at work sites) and manufacturing sector (for
our workers engaged at plant). Their levy rates are of various tiers, based on MOM’s
definition of the proportion of foreign workers to the total workforce. The FWL for
workers for these two sectors, as at the Latest Practicable Date and the next two years as
announced in the Singapore Budget 2015 is as tabled below:
Sector Tier
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2012
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2013
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2014
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2015
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2016
Levy Rates
(S$) Higher
Skilled/Basic
skilled, with
effect from
1 July 2017
Construction Basic tier 280/400 300/450 300/550 300/550 300/650 300/700
MYE-waiver 550/650 600/750 700/950 600/950 600/950 600/950
Manufacturing Basic tier 230/330 250/350 250/370 250/370 250/370 Not available
Tier 2 330/430 350/450 350/470 350/470 350/470 Not available
Tier 3 500 550 550/650 550/650 550/650 Not available
The FWL had increased during the Track Record Period, as seen in above table but in
the Singapore Government’s budget released in 2015, the levy rates for manufacturing will
remain unchanged till 30 June 2017 while the levy rates for higher skilled workers will be
lowered or remained unchanged to incentivise the upgrading of workers and hiring of
skilled workers.
Our Group complies with strict immigration policies for our foreign workers. In view
of these stringent requirements, our Group faces a possible shortage of foreign workers. To
mitigate the increasing expenses incurred with employing foreign workers, our Group will
either hire skilled foreign workers (whose FWL are lower), or conduct regular in-house
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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training and provides external training for unskilled foreign workers. After sufficient
training, our Group would then apply to the BCA Academy to qualify them as skilled
foreign workers so as to benefit from the lower FWL. In our recruitment exercise, our
Group also makes it a point to hire more skilled foreign workers as they are normally more
productive and incur a lower FWL.
Out of the 66 staff, 2 have qualifications in engineering degree, 5 have qualifications in
non-engineering degree, 4 staff have engineering diplomas and 4 have non-engineering
diplomas. Our staff also attend safety courses.
The amount of expenditure incurred in relation to staff training for during the Track
Record Period as a percentage of our Group’s total revenue has been insignificant. We also
have no research and development. Training is provided to staff on an as-needed basis, and
all foreign workers undergo safety orientation courses.
Relationships with our employees
During the Track Record Period, we did not experience any significant problems with
employees or other labour related disturbances to our operations and we did not experience
any difficulties in the recruitment and retention of experienced staff. We believe we have a
good working relationship with our employees.
Compensation of Directors and senior management
During the two years ended 31 December 2014, the aggregate amount of compensation
paid (basic salary, performance-based compensation and retirement-based contribution) by
our Company to our five highest paid individuals were approximately S$0.5 million and
S$0.6 million, respectively.
Our Executive Directors are also employees of our Company and receive, in their
capacity as employees of our Company, compensation in the form of salaries and other
allowances and benefits in kind. Our Company reimburses our Directors for expenses which
are necessarily and reasonably incurred for providing services to our Company or executing
their functions in relation to the operations of our Company.
During the two years ended 31 December 2014, the aggregate amount of compensation
paid (basic salary, performance-based compensation and retirement-based contribution) by
our Company to our Directors were approximately S$345,000 and S$364,000, respectively.
Our Directors’ remuneration is determined with reference to salaries paid by
comparable companies, experience, responsibilities and performance of our Group.
Details of the terms of the service agreements are set out in the paragraph headed ‘‘C.
Further information about our Directors and Substantial Shareholders — (b) Particulars of
service agreements — Remuneration of the Directors’’ in Appendix IV to this prospectus.
During the Track Record Period, no remuneration was paid by our Group to, or
receivable by, our Directors or the five largest paid individuals as an inducement to join or
upon joining our Group. No compensation was paid by our Group to, or receivable by, our
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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Directors, past Directors or the five highest paid individuals for each of the Track Record
Period for the loss of any office in connection with the management of the affairs of any
subsidiary of our Group. The Directors estimate that under the current proposed
arrangement, the aggregate basic annual remuneration (excluding payment pursuant to
any discretionary benefits or bonus or other fringe benefits) payable by our Group to the
Directors will be approximately S$0.3 million for the year ending 31 December 2015.
None of our Directors waived any emoluments for any of the last two years. Save as
disclosed in this paragraph headed ‘‘Compensation of directors and senior management’’,
no other payments have been paid, or are payable, by our Company or any of our
subsidiaries to our Directors and the five highest paid individuals during the Track Record
Period.
Employees’ remuneration and benefits
Our employees are remunerated according to their job scope and responsibilities. Our
local employees are also entitled to discretionary bonus depending on their respective
performance. Our foreign workers are employed on one or two year contractual basis and
are remunerated according to their work skills. Our Group provides insurance coverage for
our foreign workers. Please refer to the section headed ‘‘Business — Insurance’’ in this
prospectus for further information.
RETIREMENT BENEFIT SCHEME
Our Group participates in the mandatory provident fund for our employees in
accordance with the Central Provident Fund (CPF) Act (which is in the context of the law
of Singapore). Our Group has paid the relevant contributions in accordance with the
aforesaid laws and regulations.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
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CONTROLLING SHAREHOLDERS
Immediately after completion of the Placing and the Capitalisation Issue, each of
Absolute Truth, Mr. Kelvin Tan and Mr. Peter Tan is entitled to exercise or control the
exercise of 30% or more of voting rights at general meetings of our Company. As such, each
of Absolute Truth, Mr. Kelvin Tan and Mr. Peter Tan is regarded as a Controlling
Shareholder.
Save as disclosed above, there is no other person who will, immediately following the
completion of the Placing and the Capitalisation Issue, be directly or indirectly interested in
30% or more of the Shares then in issue or have a direct or indirect equity interest in any
member of our Group representing 30% or more of the equity in such entity.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Having considered the following factors, we believe that our Group is capable of
carrying on our business independently of our Controlling Shareholders and their respective
associates (other than our Group) after the Listing.
(i) Management independence
As at the Latest Practicable Date, no Executive Director has overlapping roles or
responsibilities in any business other than our business nor has any business which
competes or is likely to compete, either directly or indirectly, with our business.
Each of our Directors is aware of his or her fiduciary duties as a director which
require, among other things, that he or she acts for the benefit and in the best interests
of our Company and does not allow any conflict between his or her duties as a Director
and his or her interest to exist. In the event that there is a potential conflict of interest
arising out of any transaction to be entered into between our Group and our Directors
or their respective associates, the interested Director(s) shall abstain from voting at the
relevant meeting of the Board in respect of such transaction and shall not be counted in
the quorum.
(ii) Operational independence
Our operations are independent of and not connected with any of our Controlling
Shareholders. Having considered that (i) we have established our own organisational
structure comprising individual departments, each with specific areas of
responsibilities including project department, design, administrative and finance, and
production; (ii) our Group has not shared our operational resources, such as
customers, marketing, sale and general administration resources with our
Controlling Shareholders and/or their associates; (iii) the Group has also established
a set of internal controls to facilitate the effective operation of its business; (iv) as at
the Latest Practicable Date, our Controlling Shareholders have no interest in any of
our customer, supplier or other business partners, our Directors consider that our
Group can operate independently from our Controlling Shareholders from the
RELATIONSHIP WITH CONTROLLING SHAREHOLDERSAND NON-COMPETITION UNDERTAKINGS
– 166 –
operational perspective; (v) as at the Latest Practicable Date, our Group had
independent access to suppliers or customers of our Group; and (vi) all of our
operating subsidiaries hold the licences necessary for the operation of our Group’s
business in their own names.
(iii) Administrative independence
Our Group has its own capabilities and personnel to perform all essential
administrative functions, including internal control and auditor monitor, financial and
accounting management, invoicing and billing, human resources and information
technology.
(iv) Financial independence
During the Track Record Period, Mr. Peter Tan and Mr. Kelvin Tan have jointly
and severally provided a personal guarantee to secure the repayment obligations under
credit facilities granted by DBS Bank Ltd (‘‘DBS’’) in Singapore to Signmechanic
Singapore. By a letter dated 17 March 2015 issued by DBS, DBS has released the said
personal guarantee.
During the Track Record Period, Mr. Peter Tan and Mr. Kelvin Tan have jointly
and severally provided a personal guarantee in respect of the repayment obligations of
Signmechanic Singapore under a loan agreement entered into between Signmechanic
Singapore and Ethoz Capital Limited. On or about 27 March 2015, Signmechanic
Singapore has repaid such loan in full. By a letter dated 6 April 2015 issued by Ethoz
Capital Limited, Ethoz Capital Limited has released the said personal guarantee.
As the above personal guarantees given by Mr. Peter Tan and Mr. Kelvin Tan
have been released as at the Latest Practicable Date, our Directors believe that we will
be financially independent from our Controlling Shareholders upon Listing.
RULE 11.04 OF THE GEM LISTING RULES
None of our Controlling Shareholders and our Directors has any interest in a business
apart from our Group’s business which competes or is likely to compete, directly or
indirectly, with our Group’s business, and would require disclosure pursuant to Rule 11.04
of the GEM Listing Rules.
DEED OF NON-COMPETITION
Our Controlling Shareholders have entered into the Deed of Non-competition in
favour of our Company (for ourselves and as trustee of our subsidiaries), pursuant to which
our Controlling Shareholders have jointly and severally, irrevocably and unconditionally
undertaken to and covenanted with our Company (for ourselves and for the benefit of our
subsidiaries) that during the continuation of the Deed of Non-competition it or he would
not, and would procure that its or his associates (other than any member of our Group)
would not, whether on its or his own account or in conjunction with or on behalf of any
RELATIONSHIP WITH CONTROLLING SHAREHOLDERSAND NON-COMPETITION UNDERTAKINGS
– 167 –
person, firm or company, whether directly or indirectly, carry on a business which is, or be
interested or involved or engaged in or acquire or hold any right or interest or otherwise
involved in (in each case whether as a shareholder, partner, principal, agent, director,
employee or otherwise and whether for profit, reward or otherwise) any business which
competes or is likely to compete directly or indirectly with the business currently and from
time to time engaged by our Group (including but not limited to the provision of the design,
fabrication, installation and maintenance of signage, in each case, to be more particularly
described or contemplated in this prospectus), in Singapore and any other country or
jurisdiction to which our Group provides such services and/or in which any member of our
Group carries on such business from time to time (the ‘‘Restricted Business’’). Such non-
competition undertaking does not apply to:
(i) any interests in the shares of any member of our Group; or
(ii) interests in the shares of a company other than our Company whose shares are
listed on a recognised stock exchange provided that:
(a) any Restricted Business conducted or engaged in by such company (and
assets relating thereto) accounts for less than 10% of that company’s
consolidated revenue or assets, as shown in that company’s latest audited
accounts; or
(b) the total number of the shares held by our Controlling Shareholders and/or
their respective associates in aggregate does not exceed 10% of the issued
shares of that class of the company in question and such Controlling
Shareholders and/or their respective associates are not entitled to appoint a
majority of the directors of that company and at any time there should exist
at least another shareholder of that company whose shareholdings in that
company should be more than the total number of shares held by our
Controlling Shareholders and their respective associates in aggregate; or
(c) our Controlling Shareholders and/or their respective associates do not have
the control over the board of such company.
The Deed of Non-competition shall take effect upon Listing and shall expire on the
earlier of:
(a) the day on which the Shares cease to be listed on GEM or other recognised stock
exchange; or
(b) the day on which our Controlling Shareholders and his/its associates, individually
or taken as a whole, cease to own, in aggregate, 30% or more of the then issued
share capital of our Company directly or indirectly or cease to be deemed as
Controlling Shareholders and do not have power to control the Board or there is
at least one other independent shareholder other than our Controlling
Shareholders and his/its associates holding more shares than our Controlling
Shareholders and his/its associates taken together.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERSAND NON-COMPETITION UNDERTAKINGS
– 168 –
Pursuant to the Deed of Non-competition, each of our Controlling Shareholders has
undertaken that if each of our Controlling Shareholders and/or any of his/its associates is
offered or becomes aware of any project or new business opportunity (‘‘New Business
Opportunity’’) that relates to the Restricted Business, whether directly or indirectly, he/it
shall (i) promptly within ten Business Days notify our Company in writing of such
opportunity and provide such information as is reasonably required by our Company in
order to enable our Company to come to an informed assessment of such New Business
Opportunity; and (ii) use his/its best endeavours to procure that such opportunity is offered
to our Company on terms no less favourable than the terms on which such New Business
Opportunity is offered to him/it and/or his/its associates.
All of our Directors (excluding those who is/are interested in the New Business
Opportunity and has/have conflict of interests with our Company) will review the New
Business Opportunity and decide whether to invest in the New Business Opportunity. If our
Group has not given written notice of its desire to invest in such New Business Opportunity
or has given written notice denying the New Business Opportunity within thirty (30)
Business Days (the ‘‘30-day Offering Period’’) of receipt of notice from our Controlling
Shareholders, our Controlling Shareholders and/or his/its associates shall be permitted to
invest in or participate in the New Business Opportunity on his/its own accord. With
respect to the 30-day Offering Period, our Directors consider that such period is adequate
for our Company to assess any New Business Opportunity. In the event that our Company
requires additional time to assess the new business opportunities, our Company may give a
written notice to our Controlling Shareholders during the 30-day Offering Period and our
Controlling Shareholders agree to extend the period to a maximum of 60 Business Days.
CORPORATE GOVERNANCE MEASURES
Our Company will adopt the following measures to manage the conflict of interests
arising from competing business and to safeguard the interests of our Shareholders:
— the Independent Non-Executive Directors will review, on an annual basis, the
compliance with the non-competition undertaking by our Controlling
Shareholders under the Deed of Non-competition;
— our Controlling Shareholders undertake to provide all information requested by
our Company which is necessary for the annual review by the Independent Non-
Executive Directors and the enforcement of the Deed of Non-competition;
— our Company will disclose decisions on matters reviewed by the Independent
Non-Executive Directors relating to compliance and enforcement of the Deed of
Non-competition in the annual report of our Company;
— our Controlling Shareholders will make confirmation on compliance with their
undertaking under the Deed of Non-competition in the annual report of our
Company; and
RELATIONSHIP WITH CONTROLLING SHAREHOLDERSAND NON-COMPETITION UNDERTAKINGS
– 169 –
— the Independent Non-Executive Directors may appoint independent financial
adviser and other professional advisers as they consider appropriate to advise
them on any matter relating to the Deed of Non-competition or connected
transaction(s) at the cost of our Company.
None of the members of our Group has experienced any dispute with its shareholders
or among its shareholders themselves and our Directors believe that each member of our
Group has maintained positive relationship with its shareholders. With the corporate
governance measures including the measures set out in this paragraph headed ‘‘Corporate
governance measures’’, our Directors believe that the interest of the Shareholders will be
protected.
RELATIONSHIP WITH CONTROLLING SHAREHOLDERSAND NON-COMPETITION UNDERTAKINGS
– 170 –
So far as our Directors are aware, immediately following completion of the Placing and
the Capitalisation Issue, the following persons were expected to have interest and/or short
positions in the Shares or underlying shares of our Company which would fall to be
disclosed to us pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or,
who is, directly or indirectly, interested in 10% or more of the nominal value of any class of
share capital carrying rights to vote in all circumstances at general meetings of our
Company or any other member of our Group:
Name of
interested party
Capacity/
Nature of interest
Total number
of Shares
Percentage of
interest in our
Company
Absolute Truth Beneficial owner 300,000,000
(Note)
75%
Mr. Kelvin Tan Interest of controlled corporation 300,000,000
(Note)
75%
Mr. Peter Tan Interest of controlled corporation 300,000,000
(Note)
75%
Note:
The entire issued share capital of Absolute Truth is beneficially owned as to 50% by Mr. Peter Tan and as
to 50% by Mr. Kelvin Tan. Under the SFO, each of Mr. Peter Tan and Mr. Kelvin Tan is deemed to be
interested in all the Shares held by Absolute Truth. Both Mr. Peter Tan and Mr. Kelvin Tan are the
Controlling Shareholders and Executive Directors.
Save as disclosed in this prospectus, we are not aware of any other person who will,
immediately following completion of the Placing and the Capitalisation Issue, have an
interest or short position in our Shares or underlying shares of our Company which would
fall to be disclosed to us pursuant to the provisions of Divisions 2 and 3 of Part XV of the
SFO, or, who is, directly or indirectly, interested in 10% or more of the nominal value of
any class of share capital carrying rights to vote in all circumstances at general meeting of
any of our subsidiaries. We are not aware of any arrangement which may at a subsequent
date result in a change of control of our Company.
SUBSTANTIAL SHAREHOLDERS
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SHARE CAPITAL
The authorised and issued share capital of our Company immediately following
completion of the Placing and the Capitalisation Issue will be as follows:
Authorised share capital: HK$
5,000,000,000 Shares 50,000,000
Issued and to be issued, fully paid or credited as fully paid:
1,000,000 Shares in issue as at the date of this
prospectus
10,000
319,000,000 Shares to be issued pursuant to the
Capitalisation Issue (including
20,000,000 Sale Shares)
3,190,000
80,000,000 New Shares to be issued pursuant to the
Placing
800,000
400,000,000 Shares 4,000,000
Assumptions
The above table assumes the Placing and the Capitalisation Issue become
unconditional and the issue of Shares pursuant thereto are made as described herein. It
takes no account of any Shares which may be allotted and issued or repurchased by our
Company under the general mandates for the allotment and issue or repurchase of Shares
granted to Directors as referred to below or otherwise.
Minimum public float
Pursuant to Rule 11.23(7) of the GEM Listing Rules, at the time of Listing and at all
times thereafter, our Company must maintain the ‘‘minimum prescribed percentage’’ of
25% of the total issued share capital of our Company in the hands of the public (as defined
in the GEM Listing Rules).
Ranking
The Placing Shares will rank equally with all Shares now in issue or to be allotted and
issued and will qualify for all dividends or other distributions declared, made or paid after
the date of this prospectus save for the entitlements under the Capitalisation Issue.
SHARE CAPITAL
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General mandate to issue Shares
Subject to the Placing becoming unconditional, our Directors have been granted a
general unconditional mandate to allot and issue and deal with the unissued Shares with an
aggregate nominal value of not more than:
(a) 20% of the aggregate nominal value of the share capital of our Company in issue
immediately following the completion of the Placing and the Capitalisation Issue;
and
(b) the aggregate nominal value of the share capital of our Company repurchased by
our Company (if any) pursuant to the general mandate to repurchase Shares as
described below.
Our Directors may, in addition to the Shares which they are authorised to issue under
the mandate, allot, issue and deal in the Shares pursuant to a rights issue, an issue of Shares
pursuant to the exercise of subscription rights attaching to any warrants of our Company,
scrip dividends or similar arrangements for the time being adopted.
For further details of this general mandate, please refer to the section headed ‘‘Further
information about our Company’’ in Appendix IV to this prospectus.
General mandate to repurchase Shares
Subject to the Placing becoming unconditional, our Directors have been granted a
general unconditional mandate to exercise all the powers of our Company to repurchase
Shares with a total nominal value of not more than 10% of the aggregate nominal value of
the share capital of our Company in issue immediately following the completion of the
Placing and the Capitalisation Issue.
This mandate only relates to repurchases made on the Stock Exchange, or on any other
stock exchange on which the Shares are listed (and which is recognised by the SFC and the
Stock Exchange for this purpose), and which are in accordance with all applicable laws and
the requirements of the GEM Listing Rules. A summary of the relevant GEM Listing Rules
is set out in the paragraph headed ‘‘Repurchase by our Company of our own securities’’ in
the section headed ‘‘Further information about our Company’’ in Appendix IV to this
prospectus.
The general mandate to issue and repurchase Shares will expire:
— at the conclusion of the next annual general meeting of our Company;
— at the expiration of the period within which the next annual general meeting of
our Company is required by any applicable law of the Cayman Islands or the
Articles to be held; or
— when varied, revoked or renewed by an ordinary resolution of the Shareholders in
general meeting,
SHARE CAPITAL
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whichever is the earliest.
For further details of this general mandate, please refer to the paragraphs headed
‘‘Written resolutions of the sole Shareholder passed on 23 June 2015’’ and ‘‘Repurchase by
our Company of our own securities’’ in the section headed ‘‘Further information about our
Company’’ in Appendix IV to this prospectus.
Circumstances under which general meeting and class meeting are required
As a matter of the Companies Law, an exempted company is not required by law to
hold any general meetings or class meetings. The holding of general meeting or class
meeting is prescribed for under the articles of association of a company. Accordingly, our
Company will hold general meetings as prescribed for under the Articles, a summary of
which is set out in ‘‘Summary of the constitution of our Company and the Cayman Islands
Company Law’’ set out in Appendix III to this prospectus.
SHARE CAPITAL
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You should read the following discussion and analysis of our results of operations and
financial condition in conjunction with our financial information as of and for the Track
Record Period, including the notes thereto, included in Appendix I to this prospectus. Our
financial information has been prepared in accordance with IFRSs. The following discussion
contains forward-looking statements concerning events that involve risks and uncertainties.
Our actual results may differ materially from those discussed in such forward-looking
statements as a result of various factors, including those set forth under ‘‘Risk Factors’’ and
elsewhere in this prospectus.
OVERVIEW
We have principally engaged in the design, fabrication, installation and maintenance of
signage and related products in both the public and private sectors in Singapore since 1997.
We are one of the established companies offering road signage in Singapore and have the
capability to offer our products across public and private sectors. Our revenue for the two
years ended 31 December 2014 was approximately S$7.8 million and S$11.9 million,
respectively, while our profit after tax for the same periods were approximately S$0.6
million and S$2.6 million, respectively. Our total comprehensive income for the same
periods were approximately S$0.6 million and S$2.5 million.
The business model is mostly the same for both public sector and private sector
projects. All our projects undergo the following stages (1) tendering, (2) project
implementation and (3) post-project review. However, there are some minor differences
in the above stages between public and private sector projects:
(a) During the tendering stage, the tender documents will typically include various
sections such as pricing, detailed scope of works, track record, certifications,
relevant corporate information and material specifications for public sector
projects whist the documents submitted during quotation are relatively less
complex private sector projects.
(b) Implementation stage
In the project implementation stage, some differences between public sector and
private sector projects are:
(i) Project team members involved in a public sector project may range from
eight to twelve members as compared to four to five members in a private
sector projects. Furthermore, public sector projects usually require
additional safety team members and workers;
(ii) Public sector projects typically involve a broader scope of value-adding
works such as installation of road safety products and lane marking. For
private sector projects, the scope is more limited to installation of signage;
FINANCIAL INFORMATION
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(iii) For public sector projects, there is usually a stricter and defined time frame
for public projects whist the installation schedules for private projects are
more flexible. For road signage projects, there will be certain closure times
during which the signage installation has to be completed;
(iv) For public sector projects in relation to road signage, more project
management is required as there are more work steps than private sector
projects, ranging from removal of existing signage, re-directing ongoing
traffic, managing of road closure hours, managing of subcontractors in
laying of roads and lane marking, managing of equipment that can be
deployed on the road site to installation of the road signage; and
(v) For public sector projects in relation to road signage, there are stricter
requirements set by the LTA of Singapore, both in terms of aesthetics and
technical requirements.
(c) Subsequent to the delivery and completion of the signage installation for road
signage public sector projects, there is typically a more detailed process for
customers to review that the signage installed is in accordance with specifications
due to stricter requirements set by the LTA. In certain instances, our project team
members will be on-site to work with them.
As such, there is higher barrier of entry into the public sector projects where reputable
track record and experienced management team take time to build. Given that we have been
in this industry for more than 15 years, we are in better position to get public sector projects
as compared to smaller companies in the market. Moreover, as explained above, there is
generally higher complexity, requirement for more resources, experience and project
management capability involved in public sector projects, therefore leading to a higher
margin for this sector.
BASIS OF PRESENTATION
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability under the Companies Law on 10 March 2015 and became the holding
company of Signmechanic Singapore pursuant to the Reorganisation completed on 23 June
2015. Details of which are set out in the section headed ‘‘History, Reorganisation and group
structure’’ in this prospectus.
The financial information of our Group has been prepared as if our Company had been
the holding company of Sino Promise and Signmechanic Singapore throughout the Track
Record Period.
FINANCIAL INFORMATION
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SIGNIFICANT FACTORS AFFECTING OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our Group’s financial condition and results of operations have been and will continue
to be affected by a number of factors, including those set out below:
Pipeline of public sector contracts
We provide signage and related products in Singapore, mainly in the public sector
during the Track Record Period. These contracts are mainly non-recurring, on a
transaction-by-transaction basis. The duration of our signage works typically align with
that of our customers, which can span from 1 month to 4 years. As our revenue is non-
recurring in nature, we have to continually secure new contracts of sufficient value.
Specifically, as our Group is established in signage works, we are highly dependent on the
pipeline of such contracts which in turn is dependent on the Singapore’s government
decision on its plans and budget for roads and public sector spending.
Timing of delivery of signage and related products
Our contracts relate to the supply and/or installation of signage and related products.
Our revenue is recognised based on the products sold, net of discounts and sales related
taxes. However, as our products are largely customised for a particular contract, our
delivery timing is dependent on the delivery schedule required by our customers, for
instance, when to install the signage for a specific stretch of road. Therefore, only when our
signage and related works are installed, our delivery of which accepted by our customer, we
can proceed with requests for payment. As such, the revenue that we recognise is dependent
not only on the number of contracts, its contract value, but also on our signage products
being delivered/installed. Such delivery can span from 1 month to 4 years, and the approved
payment from customer is dependent on the accepted delivery (installation) of our signage
products which can vary from month to month. For more information on the revenue
recognition, please see the Note 4 of the Accountants’ Report set out in Appendix I to this
prospectus.
Pricing of our projects
Our Group secures its contracts either through private invitation to quote or through
open tender. Our pricing is based on market rates and our internal cost plus pricing decided
based on various factors, including but not limited to, the competitive environment,
opportunity to optimise the use of workers, capacity and resources available and
requirements of the contract. For further details, please refer to section headed
‘‘Business-Pricing’’ in this prospectus. The gross profit margin that we can get from a
contract will vary in part, based on our pricing and each contract will result in a different
gross profit margin. Our gross profit margins for the two years ended 31 December 2014
amounted to approximately 36.7% and 46.8%, respectively.
FINANCIAL INFORMATION
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Staff cost
Staff cost contribute the third largest component of our cost of sales and also the
largest portion of our selling and administrative expenses during the Track Record Period.
Staff cost, as cost of sales, is factored into our pricing. On the other hand, staff cost as
administrative expenses, relate to overhead cost that is for salaries to employees, the
contribution to the CPF stipulated by regulations and also costs related to the employment
of foreign workers. The design, fabrication, installation and maintenance of signage and
related products are all dependent on labour and thus, it is a significant factor of our
financial performance.
Fluctuation in cost of sales
The main components of our cost of sales are purchases of materials from our
suppliers, staff costs, subcontracting costs and overheads. We purchase materials from our
suppliers, such as steel and aluminium products, micro prismatic reflective sheeting and
road safety products, which are in turn dependent on the prices of the underlying
commodities, such as aluminium, steel and plastics. We also engage subcontractors for part
of certain contracts secured by us, for instance, to provide certain services such as laying of
road markings, installation of precast blocks, bulky metal works or excavation works.
Please refer to the sections headed ‘‘Business — Suppliers’’ and ‘‘Business —
Subcontractors’’ for further details on our suppliers and subcontractors.
In our preparation of quotations, we will request for quotations from our suppliers and
subcontractors as well as an estimate of our own labour cost. However, the time period
from our quotation to our customers and to our purchase of materials, subcontracting
services and deployment of labour can range from approximately 1 month to 2 years. As
such, there is a possibility that the actual prices obtained from our suppliers and
subcontractors will be different from that anticipated when we quote our customers. We do
not enter into long-term contract with our suppliers nor subcontractors. The price that we
pay to our suppliers and subcontractors is fixed at the time of issue of purchase order to
them, and therefore, our exposure depends on the timing of the purchase order. The price of
materials and subcontracting service make up a significant component of our cost of sales,
and fluctuation in its prices will impact our financial performance. Our contracts with our
customers typically do not permit any adjustment for escalation in the price of supplies or
labour.
Our cost of sales mainly comprises (i) material costs (ii) subcontracting costs and (iii)
labour costs.
As part of our project management policy, we manage the risk of cost overruns via (i)
pricing based on market rates (reference can be made to the schedule of rates that are
published on the GeBIZ by the Singapore LTA) and our internal cost plus pricing (for
further details, please refer to section headed ‘‘Business-Pricing’’ in this prospectus) and (ii)
fixing our purchase price for longer-term contracts. For our cost plus pricing, we use the
latest available prices for material costs. We will also enquire with our potential suppliers
on the prices of their materials should we engage them to supply for the particular contract.
For subcontracting costs, we typically require our subcontractors to quote to us at
FINANCIAL INFORMATION
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approximately the same time we quote to our customers and therefore, there is certainty
with respective to subcontracting costs for contracts that we quote for. For staff costs, our
staff are not employed exclusively for the purposes of any single project. As the skills for the
installation of our signage products are similar across projects, our project team will
schedule our workers to work on a few projects to optimise our labour resource.
Another reason that we were able to manage these variable costs above mentioned
efficiently during the Track Record Period is because of our contracts and orders tenures
are short term in nature. The time period from our quotation to our customers and to our
purchase of materials, subcontracting services and deployment of labour can range from
approximately 1 month to 2 years. Of the contracts and orders that we have undertaken
during the Track Record Period, only 7 out of 1,041 and 10 out of 1,170 public sector
contracts and orders respectively were longer than one year from the time of our quotation
to our customers and to the time of completion placing our purchase orders to our
suppliers. In addition, all our private sector contracts and orders made during the Track
Record Period were of duration shorter than one year. As the contract durations are short
term in nature, we have been able to estimate our cost of sales accurately.
As such, we have no losses made on our contracts and orders during the Track Record
Period.
The following sensitivity analysis illustrates the impact of hypothetical fluctuations of
our cost of materials on our profit before tax during the Track Record Period. Fluctuations
in our cost of materials are assumed to be 1%, 3% and 5%, which is commensurate with
historical fluctuations in the prices of our major materials during the Track Record Period
as derived from the fluctuation of our cost of materials which accounted for approximately
49.9% and 53.6% of our cost of sales for the two years ended 31 December 2014.
Hypothetical fluctuations +/-1% +/-3% +/-5%
S$ S$ S$
(to nearest hundred)
Increase/decrease in costs of
material
Year ended 31 December 2013 +/-24,700 +/-74,100 +/-123,500
Year ended 31 December 2014 +/-33,800 +/-101,400 +/-169,000
Increase/decrease in profit before
taxation
Year ended 31 December 2013 -/+24,700 -/+74,100 -/+123,500
Year ended 31 December 2014 -/+33,800 -/+101,400 -/+169,000
For the two years ended 31 December 2014, our gross profit amounted to
approximately S$2.9 million and S$5.5 million respectively. For illustrative purpose, we
would have recorded a breakeven in our gross profit if the costs of our materials increased
by approximately 116.4% and 164.0%, respectively, from the corresponding period.
FINANCIAL INFORMATION
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Impact of listing expenses on the financial performance of our Group for the year ending 31
December 2015
During the Track Record Period, we had not incurred listing-related expenses in the
profit and loss account. The total estimated expenses in relation to the Listing are
approximately HK$17.4 million, of which approximately HK$16.6 million and HK$0.8
million is directly attributable to the issue of New Shares to be borne by our Group and
placing of Sales Shares to be borne by the Selling Shareholder, respectively. Out of the
estimated listing expenses of approximately HK$16.6 million to be borne by us,
approximately HK$12.1 million and HK$4.5 million are expected to be charged to the
profit or loss and reserve of our Group for the year ending 31 December 2015 respectively.
The recognition of the listing expenses is expected to materially affect our financial results for
the year ending 31 December 2015. The estimated listing-related expenses of our Group are
subject to adjustments based on the actual amount of expenses incurred/to be incurred by
our Company upon the completion of the Listing.
Changes in laws and regulations governing the construction industry in Singapore
Our business is governed by the relevant regulations and licensing from BCA and
MOM. Changes in laws and regulations governing our business may affect our profitability
and financial performance, such as the change in foreign worker levy rates will affect our
costs. A summary of the regulatory framework of our business in Singapore is set out in the
section headed ‘‘Regulatory overview’’ in this prospectus.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Revenue and costs recognition
Revenue is measured at the fair value of the consideration received or receivable, net of
discounts and sales related taxes. We recognise revenue when our customers approved our
products delivered and work done. This is applicable even for longer duration contracts as
revenue is recognised upon each separate delivery of our signage products (therefore several
billings of distinct products over the contract term). Costs are recognised as and when they
are incurred. Please refer to Note 4 of the Accountants’ Report set out in Appendix I to this
prospectus for details.
During the Track Record Period, the percentage of completion milestone revenue
recognition method is considered by the Directors to be inappropriate given the nature of
the Group’s business and the contracts generally entered into by the Group with the
relevant counter party. Although the contractual terms can span over for more than 1
financial year, these contracts are in substance bulk purchase orders of many different
product items to be delivered at different time over the contractual period. Under the terms
of the contracts, each of the delivery and installation of signage under the separate delivery
orders are separately accepted by customers and billings are made accordingly.
FINANCIAL INFORMATION
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Estimates of impairment for receivables
Impairment for receivables are estimated and made based on an evaluation of its
collectability. This involves judgement on its ultimate realisation, including the likelihood
of the debtor entering into bankruptcy or financial reorganisation and past collection
history.
For details of the significant accounting policies relating to our Group’s financial
information, please refer to Note 4 of the Accountants’ Report set out in Appendix I to this
prospectus.
RESULTS OF OPERATIONS
The following is a summary of the statements of comprehensive income of our Group
for each of two years ended 31 December 2014, respectively, derived from the Accountants’
Report set out in Appendix I to this prospectus.
For the financial year ended
31 December
2013
31 December
2014
S$ S$
Revenue 7,827,042 11,850,088
Cost of sales (4,952,092) (6,307,276)
Gross profit 2,874,950 5,542,812
Other income 71,198 208,193
Other gain and losses (263,571) (109,873)
Selling and administrative expenses (1,800,235) (2,638,320)
Other expense — (63,250)
Finance costs (66,923) (111,351)
Profit before tax 815,419 2,828,211
Income tax expense (203,938) (262,996)
Profit for the year 611,481 2,565,215
Total comprehensive income 633,684 2,543,012
FINANCIAL INFORMATION
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PRINCIPAL COMPONENTS OF STATEMENTS OF COMPREHENSIVE INCOME
The following table sets forth the revenue of our Group for each of the two financial
years ended 31 December 2014, respectively:
For the financial year ended
31 December
2013
31 December
2014
S$’000 S$’000
Revenue
Public sector 5,220 9,562
Private sector 2,607 2,288
Total 7,827 11,850
Revenue
Our revenue comprised of revenue from the sales of signage and related products in
both the public and private sectors in Singapore, which amounted to approximately S$7.8
million and S$11.9 million for the two years ended 31 December 2014, respectively. Public
sector includes road signage, education institutions, public housing flats/compounds,
defence compound, airport and national parks, amongst others. Private sector includes
signage and related products for commercial buildings, industrial buildings, private
residential buildings, hospital and fast food chains.
Cost of sales
Cost of sales comprised costs incurred for the sales of our signage and related products
and amounted to approximately S$5.0 million and S$6.3 million for the two years ended 31
December 2014 respectively. Our cost of sales is cost directly associated with the sales of our
signage and related products. The table below sets forth a breakdown of our cost of sales by
nature and percentage contribution to total costs for the periods indicated.
For the financial year ended
31 December 2013 31 December 2014
S$
Approximate
% to
cost of sales S$
Approximate
% to
cost of sales
Materials 2,470,557 49.9 3,378,744 53.6
Staff costs 652,451 13.2 705,454 11.2
Subcontracting costs 1,447,075 29.2 1,712,285 27.1
Overheads 382,009 7.7 510,793 8.1
Total 4,952,092 100.0 6,307,276 100.0
FINANCIAL INFORMATION
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A further breakdown of material costs is indicated in the table below:
For the financial year ended For the financial year ended
31 December 2013 31 December 2014
S$
Approximate
% S$
Approximate
%
Metal products 575,030 23.3 1,129,402 33.4
Sheeting products 702,464 28.4 832,716 24.6
Safety products 120,820 4.9 164,860 4.9
Consumables 637,910 25.8 644,212 19.1
Others 434,333 17.6 607,554 18.1
Total 2,470,557 100.0 3,378,744 100.0
Our composition of cost of sales remained fairly constant during the Track Record
Period except that in the year ended 31 December 2014, there was an increase of metal
product purchases. This increase was attributed to new contracts where more metal
products were required for parts such as railings.
Materials include our purchases of steel and aluminium products, micro prismatic
reflective sheeting and road safety products which are used in our supply and installation of
signage and related products. Subcontracting costs are paid to our subcontractors for
services in relation to the laying of road markings, installation of precast blocks, bulky
metal works or excavation works. Staff costs relate to costs for our staff who work directly
on-site such as project engineer, supervisors and foreign workers. Overheads relate to
depreciation, utilities and other miscellaneous expenses incurred directly with the sales of
our products.
Gross profit
Our gross profit was approximately S$2.9 million and S$5.5 million for the two years
ended 31 December 2014 respectively. The gross profits and gross profit margins fluctuated
due to higher turnover, with higher selling price and labour optimisation possible in certain
contracts.
Other income
Our other income comprised mainly government grants, rental income in respect of
subleasing of workshop premise and bank interest income. Government grants relate
mainly to cash bonus from the government under the ‘Productivity and Innovation Credit
Scheme’ which serves to encourage corporate productivity and innovation. Such
government grants vary from year to year, depending on government policy and whether
our business in the particular year is able to make use of such available grants. They are
therefore non-recurring in nature. Rental income in respect of subleasing of workshop
premise is expected to recur as we have agreements for the subleases up to January and
February 2017. To the extent we would not require the spare space for our own use, we will
FINANCIAL INFORMATION
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continue the subletting arrangements. Other income amounted to approximately S$71,198
and S$208,193 for the two years ended 31 December 2014 respectively. Other income
amounted to approximately 0.9% and 1.8% of our total turnover for two years ended 31
December 2014, respectively.
The table below sets forth a breakdown of our other income for the periods indicated.
For the financial year ended
31 December
2013
31 December
2014
S$ S$
Bank interest income 22 496
Government grants 56,903 78,629
Rental income in respect of subleasing of workshop
premise — 113,508
Others 14,273 15,560
Total 71,198 208,193
Other gain and losses
Our other gain and losses comprised mainly impairment loss on a freehold property,
allowance on doubtful debts, write-off of property, plant and equipment, loss on disposal of
property, plant and equipment and fair value gain on available-for-sale investments. The
freehold property related to our previous premise, which we entered into an agreement for
its sale in August 2013 and the disposal was completed in October 2014. We conducted our
business on this premise, which was located at 2B Mandai Estate #01-01 Singapore 729929.
This premise was acquired in 2010 for a value of approximately S$4.65 million and revalued
to S$9.0 million on 18 August 2011. We disposed this premise with a carrying value of S$9.1
million in October 2014 for a net value of approximately S$8.8 million. The premise was
about 1,582 square metres. For available-for-sale investments, it was not our principal
business and we do not intend to continue with such investment activity in the future.
Allowance for doubtful debts related to trade receivables which we considered to be
impaired based on the low likelihood of collectibility. Other gain and losses amounted to
losses of S$263,571 and S$109,873 for the two years ended 31 December 2014 respectively.
Other gain and losses amounted to approximately 3.4% and 0.9% of our total revenue for
two years ended 31 December 2014, respectively.
FINANCIAL INFORMATION
– 184 –
The table below sets forth a breakdown of our other gain and losses for the periods
indicated.
For the financial year ended
31 December
2013
31 December
2014
S$ S$
Impairment loss on a freehold property (upon
reclassified as held for sale) (263,571) —
Allowance on doubtful debts — (106,398)
Write-down of property, plant and equipment — (7,848)
Loss on disposal of property, plant and equipment — (5,021)
Fair value gain on available-for-sale investments — 9,394
Total (263,571) (109,873)
Selling and administrative expenses
The following table sets forth a breakdown of our selling and administrative expenses
for the periods indicated:
For the financial year ended
31 December
2013
31 December
2014
S$’ S$’
Staff costs 1,392,644 1,736,986
Rental expenses 12,520 45,224
Depreciation 103,735 76,721
Upkeep of vehicles and machinery 177,015 140,819
Professional fees 12,900 314,829
Others 101,421 323,741
Total 1,800,235 2,638,320
Selling and administrative expenses comprised mainly staff costs, rental expenses,
depreciation, upkeep of vehicles and machinery and professional fees. Others mainly
include telecommunication, utilities, transportation expenses and other miscellaneous
expenses. Selling and administrative expenses amounted to approximately S$1.8 million and
S$2.6 million for the two years ended 31 December 2014 respectively.
Staff costs related to directors’ remuneration, staff salaries, CPF contributions, staff
incentives and other welfare expenses. Our staff costs amounted to approximately S$1.4
million and S$1.7 million for the two years ended 31 December 2014 respectively.
FINANCIAL INFORMATION
– 185 –
Rental expenses related mainly to rental of our current office premise which amounted
to S$12,520 and S$45,224 for the two years ended 31 December 2014 respectively.
Depreciation related to depreciation of our fixed assets, mainly office equipment and
machinery, motor vehicles, computers and renovation which amounted to approximately
S$0.1 million and S$0.1 million for the two years ended 31 December 2014 respectively.
Upkeep of vehicles and machinery referred to maintenance and servicing fees, which
amounted to approximately S$0.2 million and S$0.1 million for the two years ended 31
December 2014 respectively. Professional fees related to audit fee, secretarial and legal fees
of approximately S$13,000 and S$0.3 million.
Others included telecommunication, utilities, transportation expenses and other
miscellaneous expenses. Other expenses amounted to approximately S$0.1 million and
S$0.3 million for the two years ended 31 December 2014 respectively. Selling and
administrative expenses amounted to approximately 23.0% and 22.3% of our total revenue
for two years ended 31 December 2014, respectively.
Other expenses
Other expense of S$63,250 for the year ended 31 December 2014 related to expenses
directly attributable in respect of workshop premises.
Finance costs
Finance costs comprised mainly interest expense on bank borrowings and finance
lease, amounted to S$66,923 and S$111,351 for the two years ended 31 December 2014
respectively. These related to interests on property loan, finance leases and trade financing.
Taxation
Since our operation is based in Singapore, our Group is liable to pay corporate income
tax in accordance with the tax regulations of Singapore. Income tax expenses of our Group
amounted to approximately S$203,938 and S$262,996 for the two years ended 31 December
2014 respectively.
The statutory corporate tax rate in Singapore was 17.0% throughout the Track Record
Period, while our corresponding effective tax rate were approximately 25.0% and 9.3% for
the two years ended 31 December 2014, respectively. Our effective tax rate was lower than
the statutory tax rate for the year ended 31 December 2014 due to the tax incentives relating
to the Productivity and Innovation Credit Scheme where we had additional tax deductions.
Our effective tax rate was higher than the statutory tax rate for the year ended 31 December
2013 due to non-deductible loss on disposal of freehold property. Our Directors have
confirmed that all relevant taxes had been paid when due. Please see Note 10 of the
Accountants’ Report found in Appendix I to this prospectus for further details.
FINANCIAL INFORMATION
– 186 –
PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS
Financial year ended 31 December 2014 compared to financial year ended 31 December 2013
Revenue
Our revenue increased by approximately S$4.0 million or 51.4%, from approximately
S$7.8 million for the year ended 31 December 2013 to approximately S$11.9 million for the
year ended 31 December 2014. This was principally due to the fulfillment of several higher
value contracts of signage and related products in the year ended 31 December 2014,
aggregating to approximately S$4.0 million. These higher value contracts of the
abovementioned contracts mainly related to:
(i) five contracts which aggregated to approximately S$1.4 million for which we
provided new and replacement of directional and traffic signs over a two-year
period;
(ii) two contracts which aggregated to approximately S$2.0 million for which we
provided directional and traffic signs, and gantry signs on expressway; and
(iii) one contract which aggregated to approximately S$1.0 million for which we
provided travel time display boards.
We deliver our products to both the public and private sectors in Singapore. The
following table sets forth the number of contracts with corresponding revenue recognised in
both the public and private sectors during the Track Record Period.
Year end 31 December 2013 Year end 31 December 2014
Number of
contracts
and orders
Revenue
recognised
Number of
contracts
and orders
Revenue
recognised
S$’000 S$’000
Public sector 1,041 5,220 66.7% 1,170 9,562 80.7%
Private sector 1,170 2,607 33.3% 1,108 2,288 19.3%
Total 2,211 7,827 100.0% 2,278 11,850 100.0%
Approximately 66.7% and 80.7% of our revenue were generated from the public sector
for the two years ended 31 December 2014 respectively. Of this revenue, approximately
S$4,149,000 and S$8,927,000 were generated from LTA-related projects for the two years
ended 31 December 2014 respectively. This represented approximately 79.5% and 93.4% of
our revenue generated from the public sector, and approximately 53.0% and 75.3% of our
total revenue for the two years ended 31 December 2014 respectively. Our Group is
therefore reliant on new public sector projects that involved additions or modifications to
road infrastructure that require the approval of LTA, and government spending in this
sector.
FINANCIAL INFORMATION
– 187 –
As seen in the above table, the proportion of revenue derived from the public sector
increased in the year ended 31 December 2014 due mainly to obtaining more new contracts
which were all road signage and related works. The public sector contracts that we obtained
in the year ended 31 December 2014 were also of higher value as we secured higher value
contracts in the year. Our revenue generated from the private sector remained relatively
stable during the Track Record Period.
Cost of Sales
In line with the increase in our revenue, our cost of sales increased by approximately
S$1.4 million or 27.4%, from approximately S$5.0 million for the year ended 31 December
2013 to approximately S$6.3 million for the year ended 31 December 2014. The increase in
cost of sales, however, was less than proportional to the increase in revenue. The reasons
were due to:
(a) the increase in our material costs by approximately S$0.9 million or 36.8%, from
approximately S$2.5 million for the year ended 31 December 2013 to
approximately S$3.4 million for the year ended 31 December 2014. The increase
in material costs was less than proportional to the approximately 51.4% increase
in turnover due to less increase in material costs (which remained fairly constant)
than the relatively high increase in selling price;
(b) the increase in our subcontracting costs by approximately S$0.3 million or 18.3%,
from approximately S$1.4 million for the year ended 31 December 2013 to
approximately S$1.7 million for the year ended 31 December 2014. The increase in
subcontracting costs was less than proportional to the approximately 51.4%
increase in turnover due to less increase in subcontracting costs (which remained
fairly constant) than the relatively high increase in selling price; and
(c) the increase in our staff costs by approximately S$0.1 million or 8.1%, from
approximately S$0.6 million for the year ended 31 December 2013 to
approximately S$0.7 million for the year ended 31 December 2014. The less
than proportional increase in staff costs was due to (i) improved utilisation of
labour as our staff and workers were able to take on more responsibilities and
work load for the year ended 31 December 2014, (ii) closer proximity for the
contracts that we took on in the year ended 31 December 2014, therefore reducing
time spent on traveling from one location to another for our signage installation
and (iii) relocation of our office and operations in the first half of 2014 such that
our operations was now closer to the central area in Singapore thus reducing time
to travel to both our suppliers and the worksite for installation (as the case may
be).
Gross profit and gross profit margin
Our gross profit increased by approximately S$2.7 million or 92.8%, from
approximately S$2.9 million for the year ended 31 December 2013 to approximately
S$5.5 million for the year ended 31 December 2014. Our gross profit margin increased from
approximately 36.7% to 46.8% during such period.
FINANCIAL INFORMATION
– 188 –
Our increase in gross profit and gross profit margin was attributed to increase in
revenue, lower than proportional increase in cost of sales, and higher selling price in certain
contracts. Of these, our gross margin was improved also mainly due to:
(i) five contracts which aggregated to approximately S$1.4 million had a higher unit
selling price as the nature of these contracts were that our signage products were
to be installed at various areas over a two year period (as and when new signs are
required or needed to be replaced) as opposed to contracts where our works were
specific to a certain area;
(ii) two contracts which aggregated to approximately S$2.0 million had either a
higher unit selling price for gantry signs or required a relatively short delivery
time; and
(iii) one contract which aggregated to approximately S$1.0 million, the supply and
installation of travel time display boards was a new revenue source for our Group
for which labour utilisation was optimised as our staff costs did not increase
materially despite taking on this contract.
During the Track Record Period, we recorded gross profits and gross profit margins as
below for public and private sector projects.
Year ended 31 December 2013 Year ended 31 December 2014
Revenue
recognised Gross profit
Gross profit
margin
Revenue
recognised Gross profit
Gross profit
margin
S$’000 S$’000
Approximate
% S$’000 S$’000
Approximate
%
Public sector 5,220 1,953 37.4 9,562 4,595 48.1
Private sector 2,607 921 35.3 2,288 948 41.4
7,827 2,875 36.7 11,850 5,543 46.8
The increase in gross profits was mainly due to the increase in gross profits contributed
by the public sector projects, whose gross profit margin increased from approximately
37.4% for the year ended 31 December 2013 to approximately 48.1% for the year ended 31
December 2014 due to the higher selling prices and more optimal labour utilisation.
With regard to gross profit for our contracts, we have a budgeted margin set for each
of our projects starting from the bidding stage of our project management. We would
estimate the latest available prices for material costs, labour costs and subcontracting costs.
Material and subcontracting costs are actual costs provided by our suppliers and
subcontractors. We then incorporate a fixed margin on top of such costs during
quotation. In general, we set a gross profit margin of 45% for public sector projects and
40% for private sector projects during the Track Record Period.
FINANCIAL INFORMATION
– 189 –
Subsequent to the completion of our contracts, we review our performance in terms of
meeting our customers’ requirements, timeliness, scheduling and reliability of signage
works, subcontractors’ performance as well as our budgeted margin in order to improve our
services to customers in the future.
Other income
Other income amounted to S$71,198 and S$208,193 for the two years ended 31
December 2014 respectively. The increase was mainly due to the increase in government
grants and rental income for our premise which we sub-let in the year ended 31 December
2014. Government grants amounted to S$56,903 and S$78,629 for the two years ended 31
December 2014 respectively. Of which, S$51,814 (comprising S$15,000 of cash bonus and
S$36,814 of cash payout for the year ended 31 December 2013) and S$57,716 (comprising
nil cash bonus and S$57,716 of cash payout for the year ended 31 December 2014) for the
two years ended 31 December 2014 respectively related to cash bonus and cash payout
under the ‘‘Productivity and Innovation Credit Scheme’’, an initiative of the Singapore
Government to encourage corporate productivity and innovation.
Other gain and losses
Other gain and losses amounted to approximately S$263,571 and S$109,873 for the two
years ended 31 December 2014 respectively. The decrease was mainly due to an impairment
loss on freehold property which was our previous premise recognised only in the year ended
31 December 2013. In the year ended 31 December 2014, the loss was mainly relating to the
allowance of doubtful debts.
Selling and administrative expenses
Selling and administrative expenses increased by approximately S$0.8 million or
46.6%, from approximately S$1.8 million for the year ended 31 December 2013 to
approximately S$2.6 million for the year ended 31 December 2014. The increase was
primarily due to (i) increase in staff costs of approximately S$0.3 million mainly due to
increase in number of staff, incentives paid to staff and staff welfare expenses, (ii) increase
in professional fees of approximately S$0.3 million mainly due to appointment of auditors,
legal fee for disposal of property, and administrative supporting services, and (iii) increase
in other expenses of approximately S$0.2 million due to expansion of business.
Net profit before tax and net profit before tax margin
Our net profit before tax increased by approximately S$2.0 million or 246.8%, from
approximately S$0.8 million for the year ended 31 December 2013 to approximately S$2.8
million for the year ended 31 December 2014. This was mainly attributable to the increase
in gross profit by approximately S$2.7 million as discussed above. Our net profit before tax
margin increased from approximately 10.4% for the year ended 31 December 2013 to
approximately 23.9% for the year ended 31 December 2014, due to the increase of
approximately 246.8% in net profit before tax, increase in gross profit margin from
approximately 36.7% to 46.8% during such period.
FINANCIAL INFORMATION
– 190 –
During the Track Record Period, we recorded net profit before tax and net profit
before tax margins as below for public and private sector projects.
Year ended 31 December 2013 Year ended 31 December 2014
Revenue
recognised
Net Profit
before tax
Net profit
before tax
margin
Revenue
recognised
Net Profit
before tax
Net profit
before tax
margin
S$’000 S$’000
Approximate
% S$’000 S$’000
Approximate
%
Public sector 5,220 580 11.1 9,562 2,405 25.1
Private sector 2,607 235 9.0 2,288 423 18.5
7,827 815 10.4 11,850 2,828 23.9
The increase in net profit before tax was mainly due to the increase in net profits
contributed by the public sector projects, whose net profit margin increased from
approximately 11.1% for the year ended 31 December 2013 to approximately 25.1% for
the year ended 31 December 2014. This was due to the the increase in gross profit in the
public sector projects by approximately S$2.6 million and increase in gross profit margin in
the public sector projects from approximately 37.4% to 48.1% during such period.
Income tax
Income tax increased by S$59,058 or 29.0%, from S$203,938 for the year ended 31
December 2013 to S$262,996 for the year ended 31 December 2014. Our effective tax rate
was approximately 25.0% for the year ended 31 December 2013 and approximately 9.3%
for the year ended 31 December 2014. Our effective tax rate was lower than the statutory
tax rate for the year ended 31 December 2014 due to tax incentives relating to the
Productivity and Innovation Credit Scheme where we had additional tax deductions. Our
effective tax rate was higher than the statutory tax rate for the year ended 31 December
2013 due to deductible loss on disposal of freehold property.
Profit for the year
Our profit for the year increased by approximately S$2.0 million or 319.5%, from
approximately S$0.6 million for the year ended 31 December 2013 to approximately S$2.6
million for the year ended 31 December 2014. This was mainly attributable to the increase
in gross profit by approximately S$2.7 million as discussed above.
Net profit margin
Our net profit margin increased from approximately 7.8% for the year ended 31
December 2013 to approximately 21.6% for the year ended 31 December 2014, due to the
increase of approximately 319.5% in net profit after tax for the year, increase in gross profit
margin from approximately 36.7% to 46.8% during such period.
FINANCIAL INFORMATION
– 191 –
LIQUIDITY AND CAPITAL RESOURCES
Our business operation depends on the sufficiency of working capital and effective cost
management, in particular competitive prices from our suppliers and management of our
foreign workforce. Our source of funds for our operations mainly comes from our internal
generated funds. Our primary uses of cash are for payment to suppliers, subcontractors and
working capital needs. Upon the Listing, our source of funds will be a combination of
internal generated funds and net proceeds from the Placing. The following table is a
condensed summary of our statements of cash flows for the periods indicated:
For the financial year ended
31 December
2013
31 December
2014
S$ S$
Net cash flows generated from operating activities 1,204,954 3,745,761
Net cash flows (used in)/from investing activities (160,923) 7,811,103
Net cash flows from/(used in) financing activities 64,845 (9,287,944)
Net increase in cash and cash equivalents 1,108,876 2,268,920
Cash and cash equivalents at the beginning of the
year 1,709,695 2,818,571
Cash and cash equivalents at the end of the year 2,818,571 5,087,491
Operating activities
Net cash generated from operating activities primarily consisted of profit before tax
adjusted for non-cash items, such as depreciation, allowance on doubtful debts, impairment
loss on freehold property upon reclassified as held for sale, fair value gain on available-for-
sale investments, finance costs, interest income and loss on disposal and write-off of the
plant and equipment. We derive our cash inflow from operations principally from our
revenue. Our cash outflow used in operations is principally for payment to suppliers,
subcontractors and working capital needs.
For the year ended 31 December 2014, our net cash generated from operating activities
was approximately S$3.7 million. The net cash from operating activities was mainly
attributable to our profit before tax of approximately S$2.8 million, which was negatively
adjusted primarily for (i) interest income of S$496 and (ii) fair value gain on available-for-
sale investments of S$9,394, offset by a positive adjustment of (iii) S$235,367 from
depreciation of mainly motor vehicles, office equipment and machinery and computers, (iv)
S$106,398 from allowance on doubtful debts, (v) S$111,351 of finance costs and (vi)
S$12,869 loss on disposal and write-off of plant and equipment. These adjustments were
non-cash items, and adjusted as they did not impact the cashflow of our Group.
The difference of approximately S$0.5 million between the operating cash flows before
movements in working capital and net cash flow generated from operating activities was
mainly attributable to the combined effect of (i) increase in inventories of S$278,005, (ii)
increase of trade and other receivables of S$11,355, (iii) increase in amount due from related
FINANCIAL INFORMATION
– 192 –
party of S$20,459, (iv) decrease in trade payables of S$492,203, (v) income tax paid of
S$9,488, offset by (vi) increase in other payables and accruals of approximately S$1.1
million and (vii) increase in amount due to related parties of S$139,028.
For the year ended 31 December 2013, our net cash generated from operating activities
was approximately S$1.2 million. The net cash from operating activities was mainly
attributable to our profit before tax of approximately S$0.8 million, which was negatively
adjusted primarily for (i) interest income of S$22, offset by a positive adjustment of (ii)
S$263,571 from impairment loss on freehold property upon reclassified as held for sale, (iii)
S$250,347 of depreciation expenses for mainly motor vehicles, office equipment and
machinery and computers and (iv) S$66,923 of finance costs. These adjustments were non-
cash items, and adjusted as they did not impact the cashflow of our Group.
The difference of approximately S$0.2 million between the operating cash flows before
movements in working capital and net cash flow generated from operating activities was
mainly attributable to the combined effect of (i) increase in inventories of S$254,362, (ii)
increase in trade and other receivables of approximately S$1.0 million, (iii) increase in
amount due from related party of S$3,087, (iv) income tax paid of S$130,879 offset by (v)
increase in trade payables of S$780,875, (vi) increase in other payables and accruals of
S$315,679 and (vii) increase in amount due to related parties of S$142,409.
Investing activities
We derive our cash inflow from investing activities primarily from proceeds from
disposal of asset classified as held for sale and available-for-sale investments and our cash
outflow used in investing activities is primarily for the purchase of plant and equipment and
placement of pledged deposits.
For the year ended 31 December 2014, our net cash generated from investing activities
was approximately S$7.8 million, due to (i) disposal of asset classified as held for sale,
which was our previous premise for approximately S$8.6 million, (ii) disposal of available-
for-sale investments of approximately S$0.3 million and offset by, (iii) purchase of plant
and equipment which was mainly for motor vehicles, computers, office equipment and
machinery (cutting plotter, engraver and forklift) for approximately S$0.5 million and (iv)
placement of pledged bank deposits of approximately S$0.5 million.
For the year ended 31 December 2013, our net cash used in investing activities was
approximately S$0.2 million, mainly due to (i) purchase of plant and equipment which was
for motor vehicles and office equipment and machinery (computer controlled cutting
machinery) for approximately S$0.2 million, (ii) placement of pledged bank deposit of
$54,501 and offset (iii) by deposit received on disposal of asset classified as held for sale of
S$90,000.
Financing activities
Our cash outflows used in financing activities is primarily for repayment of bank loan,
obligations under finance leases and bills payables, repayment to directors, payment of
interest obligations and payment of dividends.
FINANCIAL INFORMATION
– 193 –
For the year ended 31 December 2014, our net cash used in financing activities was
approximately S$9.3 million, mainly due to the repayment of bank loan, obligations under
finance leases, bills payables and interest obligations of approximately S$4.0 million,
payment of dividends of approximately S$5.4 million and repayment to directors of
approximately S$0.8 million. The cash from financing activities came from increase in bills
payables of approximately S$0.9 million.
For the year ended 31 December 2013, our net cash generated from financing activities
was S$64,845, mainly due to (i) increase in bills payables of approximately S$0.5 million
and offset by (ii) the repayment of interest-bearing obligations (bank loan, bills payables
and obligations under finance leases and interest obligations) of approximately S$0.4
million and (iii) payment of dividends of S$0.1 million.
INDEBTEDNESS
We have total present value of minimum lease payments in relation to finance lease,
which are secured by the relevant leased assets and unguaranteed of approximately
S$285,000, of which current portion of approximately S$106,000 and non-current portion
of approximately S$179,000 and finance bills payable, which are secured by fixed deposits
of our Group and unguaranteed of approximately S$526,000 as at 30 April 2015. The
following table summarises the details of our banking and other facilities as at 30 April
2015 :
Facilities Type
Committed/
Restricted
Principal
amount
Interest
rates Security
Amount outstanding
and utilised as at
30 April 2015
Amount
unutilised as at
30 April 2015
S$ % Current Non-Current
Uncommitted facilities —
trade
No 750,000 5.75% Charge on fixed
deposit
525,753 — 224,247
Uncommitted facilities —
letter of guarantee
No 150,000 n/a Charge on fixed
deposit
61,903 52,875 35,222
Uncommitted facilities —
extra long term letter of
guarantee
No 57,000 n/a Charge on fixed
deposit
— 52,875 4,125
587,656 105,750 263,594
FINANCIAL INFORMATION
– 194 –
Contractual commitments
As at 31 December 2013, 31 December 2014 and as at the Latest Practicable Date, our
Group had obligations under finance lease commitments, repayable as follows:
As at
31 December
2013
31 December
2014
Latest
Practicable
Date
S$ S$ S$
Within a year 76,019 91,825 103,501
After one year but within five years 135,605 155,170 166,157
211,624 246,995 269,658
The above finance leases were for certain motor vehicles. These obligations are secured
by a charge over leased assets of carrying amounts of approximately S$0.3 million in each of
the years ended 31 December 2014 and approximately S$0.3 million as at the Latest
Practicable Date.
As at 31 December 2013, 31 December 2014 and as at the Latest Practicable Date, our
Group had obligations under operating lease commitments were payable as follows:
As at
31 December
2013
31 December
2014
Latest
Practicable
Date
S$ S$ S$
Within a year — 406,560 359,520
After one year but within five years — 392,000 224,000
— 798,560 583,520
The above operating lease commitments were in relation to Singapore office and
workshop premises and worker dormitory. The lease for our premises was headed in section
‘‘Business — Property interest’’ to this prospectus. These leases have no renewal option and
no contingent rental provision. As at the Latest Practicable Date, we only have the
abovementioned operating lease commitments.
Contingent liabilities
As at 30 April 2015, being the latest practicable date for the preparation of the
indebtedness statement in this prospectus, we had provided guarantees in respect of
performance bonds in favor of our customers with utilised amount of approximately S$0.2
million.
FINANCIAL INFORMATION
– 195 –
Our Directors confirm that, taking into consideration our internal resources available
to us as at 30 April 2015, we have sufficient working capital for our requirements as at 30
April 2015, including funds necessary to meet our contractual obligations, maintain our
operations and complete to fulfil our existing contracts as at 30 April 2015. Our Directors
are not aware of any other factors that would have a material impact on our Group’s
liquidity as at 30 April 2015, including those that may materially and adversely affect our
future cash requirements associated with trends known to our Group. As at 30 April 2015,
our Directors are not aware of any change in the applicable legal and regulatory
requirements that would have a material adverse impact on our Group’s liquidity.
Save as disclosed above, our Group had no material contingent liabilities and was not
involved in any material legal proceedings. Our Directors are not aware of any pending or
potential material legal proceedings involving our Group. If our Group is involved in such
material legal proceedings, our Group will record contingency loss when, based on
information then available, it is likely that a loss will incur and the amount of loss can be
reasonable estimated.
During the Track Record Period, Mr. Kelvin Tan and Mr. Peter Tan have jointly and
severally provided personal guarantees in favour of DBS Bank Ltd in Singapore and Ethoz
Capital Ltd for maximum guarantee amount of approximately S$5.9 million respectively.
Apart from the above, we do not have other material outstanding mortgages, charges,
debentures or other loan capital (issued or agreed to be issued), bank overdrafts, loans,
liabilities under acceptance or other similar indebtedness, hire purchase and finance lease
commitments or any guarantees or other material contingent liabilities outstanding as at 30
April 2015. Our Directors confirmed that there has not been any material change in our
indebtedness since 30 April 2015. Our Directors confirmed that we have not raised material
external debt financing and unlikely to do so in the near future.
Our Directors confirmed that we had not experienced difficulties in repayment and
breached major covenant of our bank loans during the Track Record Period.
CAPITAL EXPENDITURES
During the Track Record Period, our Group’s capital expenditures have principally
consisted of expenditures on computer, motor vehicles, office equipment and machinery
and renovation. We incurred cashflows on capital expenditures for purchase of property,
plant and equipment in the amounts of approximately S$0.2 million and S$0.5 million for
the two years ended 31 December 2014, respectively. We incurred capital expenditure for
purchase of motor vehicles, computers and machinery of approximately S$0.1 million for
the four months ended 30 April 2015.
FINANCIAL INFORMATION
– 196 –
ASSETS AND LIABILITIES
The table below sets out selected information for our assets and liabilities as at 31
December 2013 and 31 December 2014, and as at 30 April 2015 :
As at31 December
2013
31 December
2014
30 April
2015(Unaudited)
NON-CURRENT ASSETSProperty, plant and equipment 296,099 679,373 721,033Available-for-sale investments 269,505 20 20Deferred tax assets 12,996 — —
578,600 679,393 721,053
CURRENT ASSETSInventories 337,656 615,661 507,683Trade and other receivables 2,359,598 2,441,845 4,164,367Amount due from a related party 24,401 44,860 —Amount due from a director — 7,006 599Pledged bank deposits 79,564 586,564 956,999Bank balances and cash 2,818,571 5,087,491 4,035,997
5,619,790 8,783,427 9,665,645
Asset classified as held for sale 8,848,283 — —
14,468,073 8,783,427 9,665,645
CURRENT LIABILITIESTrade payables 1,181,859 689,656 964,471Bills payables 529,880 909,841 525,753Other payables and accruals 757,435 1,803,726 1,732,939Amounts due to related parties 209,165 348,193 —Term loan — — —Amounts due to directors 822,582 1,999 1,999Obligations under finance leases 76,019 91,825 105,572Income tax payable 208,031 448,543 178,135
3,784,971 4,293,783 3,508,869
Liability directly associated withasset classified as held for sale 3,283,657 — —
7,068,628 4,293,783 3,508,869
NET CURRENT ASSETS 7,399,445 4,489,644 6,156,776
NON-CURRENT LIABILITYObligations under finance leases 135,605 155,170 179,470
NET ASSETS 7,842,440 5,013,867 6,698,359
FINANCIAL INFORMATION
– 197 –
We recorded net current assets of approximately S$7.4 million and S$4.5 million as at
31 December 2013 and 2014, respectively. Net current assets decreased by approximately
S$2.9 million or approximately 39.3% primarily due to (i) net assets directly associated with
asset classified as held for sale of approximately S$5.6 million associated with the property
disposed in October 2014, (ii) the increase in other payables and accruals of approximately
S$1.0 million and (iii) the increase in income tax payable of approximately S$0.2 million.
The above decrease in net current assets was partially offset by (i) increase in bank
balances and cash of approximately S$2.3 million, (ii) increase in pledged bank deposits of
approximately S$0.5 million, (iii) increase in inventories of approximately S$0.3 million and
(iii) decrease in amounts due to directors of approximately S$0.8 million.
Based on the unaudited management accounts of our Group as at 30 April 2015, the
net current assets increased to approximately S$6.2 million. The increase as compared with
31 December 2014 was mainly due to (i) increase in trade and other receivables of
approximately S$1.7 million, (ii) increase in pledged bank deposits of approximately S$0.4
million, (iii) decrease in bills payables of approximately S$0.4 million, offset by (iv)
decrease in bank balances and cash of approximately S$1.1 million, and (v) increase in trade
payables of approximately S$0.3 million. The increase in trade and other receivables, trade
payables and increase in pledged bank deposits were in line with the revenue generated for
the four months ended 30 April 2015. The decrease in bills payables was mainly due to
decrease in principal amount for the trade facility.
CERTAIN BALANCE SHEET ITEMS
Our inventories as at 31 December 2013 and 31 December 2014 were approximately
S$0.3 million and S$0.6 million respectively, of which a breakdown is set out below:
As at
31 December
2013
31 December
2014
S$ S$
Materials 60,516 120,456
Work-in-progress 277,140 421,935
Finished goods — 73,270
Total 337,656 615,661
Materials refer to our purchases of steel and aluminium products and road safety
products. The increase of approximately S$60,000 of materials was due to purchases closer
to the year end of 31 December 2014, in line with the increased in revenue. Work-in-
progress related to a contract with a customer for which our signage and related products
were delivered to the site but pending for installation and acceptance by the customer. The
increase of approximately S$0.1 million in work-in-progress was due to higher value of
works under the abovementioned customer. Finished goods related to our signage products
that were fabricated and ready for installation at site as at year end.
FINANCIAL INFORMATION
– 198 –
Our Group makes allowance for inventories based on assessments of the net realisable
values of existing inventories. Allowances are applied to inventories where events or
changes in circumstances indicate that the net realisable value of certain items is lower than
the cost of those items. The identification of obsolete inventories requires the use of
estimation of the net realisable value of items of inventory and estimates on the conditions
and usefulness of items of inventories. Where the estimated net realisable value is lower
than the cost of the inventory items, an impairment may arise. Our Directors are of the view
that our Group’s provisioning policies for inventories are adequate.
Based on the above, the Sole Sponsor is of the view that there is no reasonable doubt as
to the opinion of our Directors on the sufficiency of our Group’s provisioning policies for
inventories.
Our inventory turnover days for the Track Record Period was approximately 9 days
and 21 days respectively. The increase in the inventory turnover days was due to an order
for steel products in the later part of the year ended 31 December 2014.
The relatively lower consumption of existing inventory as at 31 December 2014 was
due to (i) less business activity in general during these two months due to more public
holidays such as the new year and lunar new year and (ii) composition of the materials
(inventory) which comprised of a bulk purchase of steel products of approximately
S$69,000 expected to be consumed over the next 18 months. Up to 30 April 2015,
approximately 48% of our inventory as at 31 December 2014 had been consumed.
Trade and other receivables
Our trade and other receivables as at 31 December 2013 and 2014 were approximately
S$2.4 million and S$2.4 million respectively, of which a breakdown is set out below:
At 31 December
2013 2014
S$ S$
Trade receivables 1,300,761 1,620,142
Less: allowance for doubtful debts (23,210) (129,608)
1,277,551 1,490,534
Unbilled receivables 603,696 136,335
Retention receivables 213,102 241,017
Purchase advances paid to suppliers 174,873 143,536
Receivable from disposal of freehold property — 200,000
Rental and other deposits 37,540 147,840
Other receivables and prepayments 52,836 82,583
2,359,598 2,441,845
FINANCIAL INFORMATION
– 199 –
Trade receivables increased from approximately S$1.3 million as at 31 December 2013
to approximately S$1.6 million as at 31 December 2014, which was in line with our revenue
trend during the Track Record Period and partly due to improvement in accounts receivable
turnover days from 62 to 51 days. Trade receivables are non-interest bearing and due within
30 to 60 days from the date of invoice.
The aging analysis of trade receivables net of allowance for doubtful debts presented
based on invoice date is as follows:
At 31 December
2013 2014
S$ S$
1–30 days 790,139 607,134
31–60 days 201,864 238,622
61–90 days 148,665 57,261
91–180 days 63,921 306,283
181–365 days 72,962 266,187
Over 365 days — 15,047
1,277,551 1,490,534
Based on the above table, there was approximately S$0.6 million of trade receivables
that were past 60 days as at 31 December 2014. Despite our credit terms typically being 30
to 60 days, such overdues were mainly due to (i) our billings not coinciding with our
customers’ processing dates for payments for instance, if payment is to be made by the 30th
of a calendar month to be within the credit terms but customers process the payments on a
monthly fixed date after the 30th, for instance on the 10th of each month, there will be an
additional time of 10 days, and (ii) customers requesting for a delay in payment as they have
yet to be paid by the end customers and we extend their credit period after considering their
payment history and financial situations in order to establish a long relationship with them.
FINANCIAL INFORMATION
– 200 –
The aging analysis of trade receivables (net of allowance for doubtful debts), based on
the due date that are past due but not impaired is as follows:
As at
31 December
2013
31 December
2014
S$ S$
Overdue:
31 to 60 days 201,864 238,622
61 to 90 days 148,665 57,261
91 to 180 days 63,921 312,283
181 to 365 days 72,962 266,187
Over 365 days — 9,047
Total 487,412 883,400
As at 31 December 2013 and 2014, approximately S$0.5 million and S$0.9 million,
representing approximately 37.5% and 54.5% of our trade receivables, respectively, were
past due but not impaired. The increase in proportion of overdue trade receivables was due
to certain contracts where the payment was made after our main contractors received the
approved delivery of the works from their customers.
The movement in the allowance on doubtful debts for trade receivables is as follows:
As at
31 December
2013
31 December
2014
S$ S$
At beginning of the year 23,210 23,210
Allowance on doubtful debts recognised in profit or
loss — 106,398
At end of the year 23,210 129,608
As at 31 December 2013 and 2014, S$23,210 and S$129,608, representing
approximately 1.8% and 8.0% of our trade receivables, respectively, were provided as
doubtful debts. These were due to the customers who faced financial difficulties or entered
into liquidation. Apart from the above, our Directors are of the view that no further
provision is necessary in respect of the overdue balances that were not impaired as there has
not been a significant change in credit quality of our customers and these balances are
considered fully recoverable. Approximately 81.7% of our net trade receivables balance as
at 31 December 2014 had been subsequently settled up to the Latest Practicable Date.
FINANCIAL INFORMATION
– 201 –
Our Group assessed indicators of impairment for trade receivables at the end of each
reporting period. Trade receivables would be impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition, the
estimated future cash flows have been affected. Objective evidence of impairment for a
portfolio of receivables would include our Group’s past experience of collecting payments,
an increase in the number of delayed payments in the portfolio past the average credit
period, observable changes in national or local economic conditions that correlate with
default on receivables.
In assessing whether adequate allowance for doubtful debts had been provided for at
the end of each reporting period, our Directors assessed the creditworthiness of individual
debtors and the likelihood in collection of outstanding trade receivables by reference to past
payment history and financial viability of the relevant counterparty and subsequent
settlement amounts. Impairment was provided for those delayed payments in the portfolio
past the average credit period which was in financial difficulties or when it became probable
that the relevant debts were unlikely to be settled when other apparent impairment
indicators arose. After individual assessment, trade receivables would be assessed for
impairment on collective basis according to our Group’s past experience of collecting
payments.
Further, the credit period granted by our Group to our customers is based on our
assessment of our targeted customers’ performance, creditworthiness and history of
business cooperation with such customers. Our Group has good debt settlement track
records based on historical information. For those trade receivables that are past due as at
the Latest Practicable Date, our Group has regularly made contacts with those customers
and there are no indications that they will not settle the outstanding amounts in full or
outside the credit period granted by our Group to such customers. Our Directors are of the
view that our Group’s provisioning policies for trade receivables are adequate.
Based on the above, the Sole Sponsor is of the view that there is no reasonable doubt as
to the opinion of our Directors on the sufficiency of our Group’s provisioning policies for
trade receivables.
For the two years ended 31 December 2014, the trade receivable turnover days were 62
days and 51 days respectively. The shorter trade receivable turnover days for the year ended
31 December 2014 was primarily due to the faster settlement for a certain new contract for
the year ended 31 December 2014.
Unbilled receivables related to contracts where revenue had been recognised but not
yet billed as at 31 December 2014. Typically these situations arose when goods had been
delivered and accepted by the customers as at the year-end but invoicing was not yet made.
Unbilled receivables decreased from approximately S$0.6 million as at 31 December 2013 to
approximately S$0.1 million as at 31 December 2014, which was due to the completed works
for contracts where the billing schedules were not reached in the year ended 31 December
2013 but in 2014 billing schedule. Unbilled receivables are non-interest bearing.
FINANCIAL INFORMATION
– 202 –
Our contracts typically provide for a retention sum of 10% with each payment, up to a
maximum of 5% of the contract value. Half of the retention sum shall be released upon
practical completion, and the balance amount shall be released upon the expiration of the
defect liability period. Despite the increase in number of contracts, the balance of our
retention receivables remained stable at approximately S$0.2 million as the increase in new
contracts in the year ended 31 December 2014 did not require retention monies.
Other than those debtors provided with impairment allowance, none of our other
customer has defaulted in their payment obligations during the Track Record Period and
the retention receivables were settled in accordance with the terms of the respective
contracts.
Purchase advances paid to suppliers remained relatively constant as at 31 December
2013 and 2014. Purchase advances related to monies paid for the micro prismatic reflective
sheeting for sheeting products whose ownership had not yet passed to us. Receivable from
disposal of freehold property related to the balance from the proceeds from the disposal of
our previous premise. The Executive Directors have provided an undertaking to indemnify
the Company for any loss from non-settlement of this amount.
Rental and other deposits increased from approximately S$38,000 as at 31 December
2013 to approximately S$148,000, mainly due to deposit paid for our new office rental.
Trade payables
Trade payables as at 31 December 2013 and 2014 were approximately S$1.2 million
and S$0.7 million respectively, of which a breakdown is set out below:
As at
31 December
2013
31 December
2014
S$ S$
Trade payables 1,181,859 689,656
Trade payables decreased from approximately S$1.2 million as at 31 December 2013 to
approximately S$0.7 million as at 31 December 2014. Despite an increase in revenue during
the Track Record Period, our trade payables decreased due to the improvement of our trade
payables turnover from 130 to 74 days, a result of increased trade financing taken in the
year ended 31 December 2014. Our trade payables comprised primarily of amounts payable
to our subcontractors and suppliers. The credit period granted by our subcontractors or
suppliers is normally 30 to 60 days after issuance of invoice. Approximately 88.3% of our
trade payables balance as at 31 December 2014 had been subsequently settled as at the
Latest Practicable Date.
FINANCIAL INFORMATION
– 203 –
Bills Payables
At 31 December
2013 2014
S$ S$
Bills payables 529,880 909,841
Bills payables related to facilities granted by the banks, secured by pledged bank
deposits. Bills payables amounted to approximately S$0.5 million and S$0.9 million as at 31
December 2013 and 2014 respectively. Bills payables increased due to additional purchases
close to the year ended 31 December 2014 with a corresponding increase in facility granted
by the banks.
Other payables and accruals
Other payables and accruals as at 31 December 2013 and 2014 were approximately
S$0.8 million and S$1.8 million respectively, of which a breakdown is set out below:
At 31 December
2013 2014
S$ S$
Advance billings to customers 539,677 589,458
Retention payable to suppliers 4,380 33,370
Goods and services tax payable 16,374 751,710
Accrued operating expenses 66,999 356,396
Deposit received in respect of disposal of freehold
property 90,000 —
Accrued staff bonus/commission 21,577 38,899
Payable for acquisition of plant and equipment — 25,064
Other payables 18,428 8,829
757,435 1,803,726
Other payables and accruals increased from approximately S$0.8 million as at 31
December 2013 to approximately S$1.8 million as at 31 December 2014. The increase was
mainly due to (i) increase in accrued operating expenses of approximately S$0.3 million,
mainly relating to accrual of professional fees, (ii) increase in goods and service tax payable
of approximately S$0.7 million, mainly relating to the disposal of freehold property, (iii)
increase in payable for mainly computers purchased (iv) increase in retention payable to
suppliers of approximately S$29,000 and partly offset by (v) decrease in deposit received of
S$90,000 for the disposal of freehold property only as at 31 December 2013.
FINANCIAL INFORMATION
– 204 –
Asset classified as held for sale and liability directly associated with asset held for sale
The asset classified as held for sale and liability directly associated with it related to the
previous premise which an agreement to sell was entered into in August 2013 and completed
in October 2014. The liability referred to the property loan for the premise. As the disposal
was completed in October 2014, the asset classified as held for sale of approximately S$8.8
million and liability directly associated with it of approximately S$3.3 million was only
reflected as at 31 December 2013.
KEY FINANCIAL RATIOS
As at
31 December
2013
31 December
2014
times times
Current ratio (1) 1.5 2.0
Gearing ratio (2) 0.51 0.23
For the financial year ended
31 December
2013
31 December
2014
% %
Return on total assets (3) 9.9 27.1
Return on equity (4) 7.8 51.2
For the financial year ended
31 December
2013
31 December
2014
Days Days
Trade receivable turnover (5) 62 51
Trade payable turnover (6) 130 74
Inventory turnover (7) 9 21
Analysis regarding our average trade receivable turnover, average trade payable
turnover and average inventory turnover can be found in the section headed ‘‘Financial
Information — Certain Balance Sheet Items’’ in this prospectus.
FINANCIAL INFORMATION
– 205 –
Notes:
(1) Current ratio is calculated by dividing current assets by current liabilities as at the respective year
end, excluding asset classified as held for sale and liability directly associated with asset held for
sale.
(2) Gearing ratio is calculated by dividing total borrowings (namely, bills payables, obligations under
finance leases and liability directly associated with asset held for sale) by total equity as at the
respective year end.
(3) Return on total assets is calculated by dividing profit for the year by the total assets (excluding asset
classified as held for sale) as at the respective year end.
(4) Return on equity is calculated by dividing profit for the year by the total equity as at the respective
year end.
(5) Trade receivable turnover is calculated by dividing the ending trade receivables balance and amount
from a related party balance by the revenue for the financial year and multiply by 365 days.
(6) Trade payable turnover is calculated by dividing the ending trade payables and amounts due to
related parties balance, by the total purchases of materials and subcontracting costs, for the
financial year and multiply by 365 days.
(7) Inventory turnover is calculated based on the ending material and finished goods balance divided by
cost of materials, multiplied by 365 days respectively.
Current ratio
Our Group’s current ratio increased from 1.5 as at 31 December 2013 to 2.0 as at 31
December 2014. The increase in the current ratio was due to the increase in cash and bank
balances as a result of profit from operation.
Gearing ratio
Our Group’s gearing ratio decreased from 0.51 to 0.23 from the year ended 31
December 2013 to 31 December 2014. The decrease in the gearing ratio was due to the
disposal of the asset held for sale which referred to the freehold property disposed in
October 2014. As such, the liability (property loan) associated with this property of
approximately S$3.3 million was only reflected as at 31 December 2013, before the disposal
of the property in October 2014.
Return on total assets
Our return on total assets increased from approximately 9.9% for the year ended 31
December 2013 to approximately 27.1% for the year ended 31 December 2014, which was
mainly due to our substantial increase in profit for the year by approximately 319.5%,
being more than our increase in total assets for the year ended 31 December 2014.
FINANCIAL INFORMATION
– 206 –
Return on equity
Our return on equity increased from approximately 7.8% for the year ended 31
December 2013 to approximately 51.2% for the year ended 31 December 2014, which was
mainly due to the increase in profit for the year by approximately 319.5% from
approximately S$0.6 million as at 31 December 2013 to approximately S$2.6 million as at
31 December 2014. That was mainly because of the significant increase in turnover from
approximately S$7.8 million as at 31 December 2013 to approximately S$11.9 million as at
31 December 2014, representing an increase of approximately 51.4% which resulted in
significant increase in profit for the year.
WORKING CAPITAL
Our Directors are of the opinion that, taking into consideration the internal resources
and credit facilities presently available to our Group, and the estimated net proceeds of the
Placing, our Group has sufficient working capital for our present requirements, that is, for
at least the next 12 months commencing from the date of this prospectus.
RELATED PARTY TRANSACTIONS
The table below sets out the amounts from/to related parties and amounts due from/to
directors as at the financial years ended 31 December 2013 and 2014 :
As at
31 December 31 December
2013 2014
S$ S$
Amount due from a related party 24,401 44,860
Amount due from a director — 7,006
Amounts due to related parties 209,165 348,193
Amounts due to directors 822,582 1,999
Amounts due from/to related parties were trade in nature, unsecured, interest-free and
repayable within 30 days credit period. Details of which are set out in Note 25 and Note 32
of the Accountants’ Report in Appendix I to this prospectus.
Amount due from a director of Signmechanic Singapore represented advance to Mr.
Kelvin Tan as at 31 December 2013 and 2014 and the amount was unsecured, non-interest
bearing and repayable on demand. The amounts due to directors of Signmechanic
Singapore represented advances from Mr. Peter Tan, Mr. Kelvin Tan, Ms. Khoo Ai Lin and
Ms. Ong Siew Mui as at 31 December 2013 and 2014 and the amounts were unsecured, non-
interest bearing and repayable on demand. The Directors confirmed that the balances of the
amounts due from/to them have been fully settled prior to Listing. Details of which are set
out in the Accountants’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
– 207 –
With respect to the related party transactions set forth in Note 32 of the Accountants’
Report in Appendix I to this prospectus, our Directors confirm that these transactions were
conducted on normal commercial terms and/or that such terms were no less favourable to
our Group than terms available to Independent Third Parties and were fair and reasonable
and in the interest of our Shareholders as a whole.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma adjusted net tangible assets of our Group prepared
in accordance with paragraph 31 of Chapter 7 of the GEM Listing Rules is for illustrative
purposes only, and is set out below to illustrate the effect of the Placing on the audited net
tangible assets of our Group as of 31 December 2014 as if the Placing had been completed
on 31 December 2014.
This unaudited pro forma adjusted net tangible assets has been prepared for
illustrative purposes only and because of its hypothetical nature, it may not give a true
picture of the net tangible assets of our Group as at 31 December 2014 or at any future
dates following the Placing. The unaudited pro forma adjusted net tangible assets does not
form part of the Accountants’ Report.
Audited net
tangible
assets as at
31 December
2014
Estimated
net proceeds
from the
Placing
Unaudited
pro forma
adjusted net
tangible
assets of the
Group
Unaudited
pro forma
adjusted net
tangible
assets per
Share
S$ S$ S$
(Note 1) (Note 2) (Note 3) (Note 5)
Based on a Placing Price of
HK$0.50 per Placing
Share
5,013,867 4,106,675 9,120,542 2.28
(Singapore
cents) or
12.99
(Hong
Kong cents)
Notes:
(1) The amount audited net tangible assets of the Group as at 31 December 2014 is derived from thefinancial information set forth in the Accountants’ Report set out in Appendix I to this prospectus,which is based on the audited net tangible assets of our Group of approximately S$5.0 million.
(2) The estimated net proceeds from the Placing are based on the indicative Placing Price of HK$0.50per Placing Share after deduction of the estimated underwriting fees and other related expensespayable by our Company. The estimated net proceeds are converted into S$ at the rate of S$1 =HK$5.6963.
FINANCIAL INFORMATION
– 208 –
(3) The unaudited pro forma adjusted net tangible assets per Placing Share is calculated based on400,000,000 Shares in issue immediately following the completion of the Placing and theCapitalisation. It does not take into account any shares which may be allotted and issued orrepurchased by the Company pursuant to the general mandates for the allotment and issue orrepurchase of shares referred to in Appendix IV to this prospectus or otherwise.
(4) No adjustment has been made to the unaudited pro forma net tangible assets to reflect any tradingresults or other transactions of our Group entered into subsequent to 31 December 2014.
(5) The unaudited pro forma net tangible assets per share is arrived at after the adjustments referred toin the preceding paragraphs and on the basis that 400,000,000 Shares were in issue immediatelyfollowing the completion of the Placing.
DISTRIBUTABLE RESERVES
The aggregate amount of the distributable reserves as at 31 December 2013 and 31
December 2014 of Signmechanic Singapore were approximately S$7.3 million and S$4.5
million respectively.
DIVIDEND POLICY
For each of the two years ended 31 December 2014, Signmechanic Singapore declared
dividends of S$0.1 million and approximately S$5.4 million, respectively, out of the
distributable profit and all these dividends had been paid as at the Latest Practicable Date.
Dividends declared and paid in the past should not be regarded as an indication of the
dividend policy to be adopted by our Company following Listing.
After completion of the Placing, our Shareholders will be entitled to receive dividends
only when declared by our Board. The payment and the amount of any dividends will be at
the discretion of our Directors and will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual restrictions (if
any) and other factors which our Directors deem relevant. We do not have any
predetermined dividend payout ratio.
Cash dividends on our shares, if any, will be paid in Hong Kong dollars. Other
distributions, if any, will be paid to our shareholders by any means which our Directors
deem legal, fair and practicable. Investors should note that historical dividend distributions
are not indicative of our future dividend distribution policy.
FINANCIAL RISK MANAGEMENT AND FAIR VALUE
Credit risk management
Our Group’s maximum exposure to credit risk in the event of the counterparties’
failure to perform their obligations at 31 December 2013 and 31 December 2014 in relation
to each class of recognised financial assets is the carrying amount of those assets as stated in
the statement of financial position. Our Group’s credit risk is primarily attributable to our
trade receivables and cash and cash equivalents. In order to minimise the credit risk, our
Group have established policies and systems for the monitoring and control of credit risk.
Please refer to Note 30 of the Accountants’ Report in Appendix I to this prospectus for
further details.
FINANCIAL INFORMATION
– 209 –
Liquidity risk management
Our Group’s exposure to liquidity risk arises in the general funding of our Group’s
operations, in particular, that the duration of our contracts span from 1 month to 4 years
and during which the amount of progress claim vary from month to month depending on
the provision of signage and related products for the month. Our supply and installation
schedule is as directed by our customer, in accordance with the main contractor’s schedule.
Please refer to section headed ‘‘Risk Factors’’ in this prospectus. As such, we actively
manage our customers’ credit limits, aging, repayment of retention monies and monitor our
operating cash flows to ensure adequate working capital funds and repayment schedule is
met.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors have confirmed that, as at the Latest Practicable Date, there are no
circumstances which, would have given rise to a disclosure requirement under Rules 17.15
to 17.21 of the GEM Listing Rules.
LATEST DEVELOPMENT SUBSEQUENT TO THE TRACK RECORD PERIOD AND
NO MATERIAL ADVERSE CHANGE
We have continued to focus on strengthening our market position for our signage and
related products in the public sector in Singapore. The following is a summary of our
selected unaudited financial information for the four months ended 30 April 2015 which
was prepared on the same basis as our audited financial information in Appendix I to this
prospectus. As far as we are aware, our industry remained relatively stable after the Track
Record Period. There was no material adverse change in the general economic and market
conditions in the country or the signage industry in which we operate that had affected or
would affect our business operations or financial condition materially and adversely.
Based on our unaudited financial information for the four months ended 30 April
2015, our revenue increased by approximately 12.4%, as compared to that for the four
months ended 30 April 2014. The increase was primarily due to new contracts whose
revenue was recognised in the four months ended 30 April 2015. From 1 January 2015 up to
the Latest Practicable Date, we did not experience any significant drop in revenue or
increase in cost of sales or other costs (apart from listing expenses incurred) as there were
no significant changes to the general business model of our Group and economic
environment.
Our Directors confirm that, up to the date of this prospectus, there has been no
material adverse change in our financial or trading position or prospects since 1 January
2015 and there is no event since 1 January 2015 which would materially affect the
information shown in our financial statements included in the Accountants’ Report set
forth in Appendix I to this prospectus, in each case except as otherwise disclosed herein.
FINANCIAL INFORMATION
– 210 –
JOINT LEAD MANAGERS
Grand Vinco Capital Limited
Sinomax Securities Limited
UNDERWRITERS
Grand Vinco Capital Limited
Sinomax Securities Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
The Underwriting Agreement
Pursuant to the Underwriting Agreement, our Company and the Selling Shareholder
are offering the Placing Shares for subscription and purchase by way of placing to selected
professional, institutional or other investors in Hong Kong at the Placing Price subject to
the terms and conditions in the Underwriting Agreement and this prospectus.
Subject to, among other conditions, the Stock Exchange granting the listing of, and
permission to deal in, our Shares in issue and to be issued as mentioned in this prospectus
(including any Shares which may fall to be allotted and issued pursuant to the
Capitalisation Issue) and to certain other conditions set out in the Underwriting
Agreement being fulfilled or waived on or before the dates and times specified in the
Underwriting Agreement, the Underwriters have severally agreed to subscribe for or
purchase or procure subscribers or purchasers for their respective applicable proportions of
the Placing Shares on the terms and conditions of the Underwriting Agreement and this
prospectus.
Grounds for termination
Vinco Capital (for itself and on behalf of the Underwriters) shall have the absolute
right to terminate the underwriting arrangements with immediate effect pursuant to the
Underwriting Agreement by notice in writing given to our Company (for ourselves and on
behalf of the Selling Shareholder) at any time prior to 8 : 00 a.m. (Hong Kong time) on the
Listing Date (the ‘‘Termination Time’’), if any of the following events shall occur prior to
the Termination Time:
(a) there develops, occurs, exists or comes into force:
(i) any change or development involving a prospective change or development
in, or any event or series of events resulting or likely to result in or
representing any prospective change or development in, local, national,
regional or international financial, political, military, industrial, legal,
economic, currency market, credit, fiscal or regulatory or market matters
or conditions (including, without limitation, conditions in stock and bond
markets, money and foreign exchange markets, credit markets, and inter-
bank markets, a change in the system under which the value of the Hong
UNDERWRITING
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Kong currency is linked to that of the currency of the United States or a
devaluation of the Renminbi against any foreign currencies) in or affecting
Hong Kong, the Cayman Islands, Singapore, the British Virgin Islands, or
any other jurisdiction relevant to any member of our Group (each a
‘‘Relevant Jurisdiction’’); or
(ii) any new law or regulation or any change or development involving a
prospective change in any existing law or regulation, or any change or
development involving a prospective change in the interpretation or
application thereof by any court or other competent authority in or
affecting any Relevant Jurisdiction; or
(iii) any event or series of events in the nature of force majeure (including,
without limitation, acts of government, labour disputes, strikes, lock-outs,
fire, explosion, flooding, earthquake, civil commotion, riots, public disorder,
declaration of a national or international emergency, acts of war, riot, public
disorder, acts of terrorism (whether or not responsibility has been claimed),
acts of God, epidemic, pandemic, outbreak of disease (including without
limitation Severe Acute Respiratory Syndromes (SARS), H5N1, H1N1,
H7N9)), economic sanctions, in or affecting any of the Relevant
Jurisdictions; or
(iv) any local, national, regional or international outbreak or escalation of
hostilities (whether or not war is or has been declared) or other state of
emergency or calamity or crisis in or affecting any of the Relevant
Jurisdictions; or
(v) (A) any moratorium, suspension, restriction or limitation on trading in
securities generally on the Stock Exchange, the New York Stock Exchange,
the NASDAQ Global Market or the London Stock Exchange; or (B) a
general moratorium on commercial banking activities in any of the Relevant
Jurisdictions declared by the relevant authorities, or a disruption in
commercial banking activities or foreign exchange trading or securities
settlement or clearance services procedures or matters in or affecting any of
the Relevant Jurisdictions; or
(vi) any change or development or event involving a prospective change in
taxation or exchange controls (or the implementation of any exchange
control), currency exchange rates or foreign investment regulations in any of
the Relevant Jurisdictions; or
(vii) any imposition of economic sanction or withdrawal of trading privileges, in
whatever form, directly or indirectly, by, or for, any of the Relevant
Jurisdictions; or
(viii) any adverse change or development or event or a prospective adverse change
or development or event in our Group’s assets, liabilities, profit, losses,
performance, condition, business, financial, earnings, trading position,
UNDERWRITING
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prospects, properties, results of operations, general affairs, shareholders’
equity, management, position or condition, financial or otherwise, whether
or not arising in the ordinary course of business, as determined by Vinco
Capital in its sole and absolute discretion; or
(ix) the commencement by any judicial, regulatory, governmental or political
body or organisation of any action, claim or proceedings against any
Director or an announcement by any judicial, regulatory, governmental or
political body or organisation that it intends to take any such action; or
(x) a Director being charged with an indictable offence or prohibited by
operation of law or otherwise disqualified from taking part in the
management of a company; or
(xi) the chairman or chief executive officer of our Company vacating his office in
circumstances where the operations of our Group may be adversely affected,
save and except for health reasons; or
(xii) save as disclosed in this prospectus, a contravention by any member of our
Group of the GEM Listing Rules or any applicable laws or regulations in the
Cayman Islands, Hong Kong, Singapore and the British Virgin Islands; or
(xiii) an order or petition is presented for the winding up or liquidation of our
Company or any of our subsidiaries, or our Company or any of our
subsidiaries make any composition or arrangement with its creditors or enter
into a scheme of arrangement or any resolution is passed for the winding-up
of our Company or any of our subsidiaries or a provisional liquidator,
receiver or manager is appointed over all or part of the assets or undertaking
of our Company or any of our subsidiaries or anything analogous thereto
occurs in respect of our Company or any of our subsidiaries; or
(xiv) a valid demand by any creditor for repayment or payment of any of our
Company’s indebtednesses or those of any of our subsidiaries or in respect of
which our Company or any of our subsidiaries is liable prior to its stated
maturity; or
(xv) any loss or damage sustained by our Company or any of our subsidiaries as a
result of a breach of its respective obligations or non-compliance with the
applicable laws and regulations (howsoever caused and whether or not the
subject of any insurance or claim against any person); or
(xvi) any litigation or claim of material importance being threatened or instigated
against our Company or any of our subsidiaries or any of the Directors; or
(xvii) a prohibition on our Company for whatever reason from allotting the Placing
Shares pursuant to the terms of the Placing; or
UNDERWRITING
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(xviii) non-compliance by our Group or our Directors or the Selling Shareholder of
this prospectus (of any other documents used in connection with the
contemplated Placing of the Placing Shares) or any aspect of the Placing with
the GEM Listing Rules or any other applicable law or regulation; or
(xix)other than with the approval of the Sole Sponsor (such approval shall not be
unreasonably withheld or delayed), the issue or requirement to issue by our
Company of any supplement or amendment to this prospectus (or to any
other documents used in connection with the contemplated Placing of our
Shares) pursuant to the Companies (Winding Up and Miscellaneous
Provision) Ordinance (Cap 32) or the GEM Listing Rules; or
(xx) any event which give rise or would give rise to liability on the part of our
Company pursuant to the indemnity provisions in the Underwriting
Agreement; or
(xxi) any change or prospective change in, or a materialisation of, any of the risks
set out in the section headed ‘‘Risk Factors’’ in this Prospectus, and which,
individually or in the aggregate, in the sole opinion of the Sole Sponsor and
the Joint Lead Managers (for themselves and on behalf of the Underwriters),
(A) has or may have or will have or is likely to have a materially adverse
effect, whether directly or indirectly, on the assets, liabilities, business,
general affairs, management, shareholders’ equity, profits, losses, trading
position or other condition or prospects of our Company or our subsidiaries
as a whole; or (B) has or may have or will have or is likely to have a material
adverse effect on the success or the level of indication of interest in the
Placing; or (C) makes, may make or will or is likely to make it impracticable
or inadvisable or in expedient for any part of the Underwriting Agreement or
the Placing to proceed or to be performed or implemented as envisaged or to
market the Placing; or (D) makes or may make or will or is likely to make it
inadvisable or inexpedient to proceed with the Placing or the delivery of the
Placing Shares on the terms and in the manner contemplated by this
prospectus; or
(xxii) a prohibition on the Selling Shareholder for whatever reason from selling the
Sale Shares pursuant to the Placing; or
(b) there has come to the notice of the Sole Sponsor and/or the Joint Lead Managers
or any of the Underwriters after the date of the Underwriting Agreement:
(i) that any statement contained in this prospectus and other Placing Documents
(as defined in the Underwriting Agreement), the formal notice or any
announcements in the agreed form issued or used by or on behalf of our
Company in connection with the Placing (including any supplement or
amendment thereto) was, when it was issued, or has or may become untrue or
incorrect or misleading in a material respect, or any expression of opinion,
UNDERWRITING
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intention or expectation contained therein is not fair and honest and based
on reasonable assumptions with reference to the facts and circumstances then
subsisting, when taken as a whole; or
(ii) that any matter has arisen or has been discovered which, had it arisen or been
discovered immediately before the date of this prospectus which would or
might constitute a material omission from this prospectus and/or in any
notices or announcements issued or used by or on behalf of our Company in
connection with the Placing (including any supplement or amendment
thereto); or
(iii) that any of the warranties given by our Company or the covenantors or the
Underwriting Agreement is (or would when repeated be) untrue, inaccurate
or misleading or having been breached; or
(iv) that any matter, event, act or omission which gives or is likely to give rise to
any liability of a material nature of our Company or the Covenantors out of
or in connection with any breach, inaccuracy and/or incorrectness of the
warranties as set out in the Underwriting Agreement and/or pursuant to the
indemnities given by our Company, the covenantors or any of them under the
Underwriting Agreement; or
(v) that any breach of any of the obligations or undertakings of any party to the
Underwriting Agreement to be material in the context of the Placing (other
than the Sole Sponsor, the Joint Lead Managers or the Underwriters); or
(vi) that our Company withdraws this prospectus; or
(vii) that approval by the Listing Division of the listing of, and permission to deal
in, our Shares to be issued under the Placing is refused or not granted, other
than subject to customary conditions, on or before the date of approval of
the listing, or if granted, the approval is subsequently withdrawn, qualified
(other than by customary conditions) or withheld; or
(viii) that any of the experts described under the paragraph headed ‘‘Other
Information — Qualifications of experts and Consents of experts’’ in
Appendix IV to this prospectus has withdrawn its respective consent to the
issue of this prospectus with the inclusion of its reports, letters, summaries of
valuations and/or opinions (as the case may be) and references to its name
included in the form and context in which it respectively appears.
Undertakings
Under Rule 13.16A(1) of the GEM Listing Rules, no further Shares or securities
convertible into our equity securities (whether or not a class already listed) may be issued by
our Company or form the subject of any agreement to such an issue within six months from
UNDERWRITING
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the Listing Date (whether or not such issue of Shares or our securities will be completed
within six months from the Listing Date), except in the circumstances prescribed by Rule
13.16A(1) of the GEM Listing Rules.
We have undertaken to the Sole Sponsor, the Joint Lead Managers, the Joint
Bookrunners, and the Underwriters under the Underwriting Agreement that, and our
Controlling Shareholders have undertaken to the Sole Sponsor, the Joint Lead Managers,
the Joint Bookrunners and the Underwriters to procure, that except pursuant to the
Placing, (1) our Company will not without the prior written consent of the Joint Lead
Managers (for themselves and on behalf of the Underwriters) (such consent not to be
unreasonably withheld or delayed) and unless in compliance with the GEM Listing Rules
(including but not limited to Rule 17.29 of the GEM Listing Rules), at any time after the
date of the Underwriting Agreement up to and including the date falling six months after
the Listing Date (the ‘‘First Six-month Period’’), (i) offer, accept subscription for, pledge,
charge, allot, issue, sell, lend, mortgage, assign, contract to allot, issue or sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant or agree to
grant any option, right or warrant to purchase or subscribe for, make any short sale, lend or
otherwise transfer or dispose of, either directly or indirectly, conditionally or
unconditionally, or repurchase, any of our share capital, debt capital or other securities
of our Company or any interest therein or any voting right or any other right attaching
thereto (including, but not limited to, any securities convertible into or exercisable or
exchangeable for, or that represent the right to receive any such share capital or securities
or any interest therein) save as pursuant to the repurchase mandate granted by our
Shareholders to our Directors as described in Appendix IV to this prospectus, or (ii) enter
into any swap or other arrangement that transfers to or in favour of any third party other
than any member of our Group, in whole or in part, any of the economic consequences of
ownership of such share capital or securities or interest therein or any voting right or any
other right attaching thereto, or (iii) enter into any transaction with the same economic
effect as any transaction described in (i) and (ii) above, or (iv) agree or contract to, or
publicly announce any intention to enter into, any foregoing transaction described in (i), (ii)
and (iii); whether any of the foregoing transactions described in (i), (ii) and (iii) is to be
settled by delivery of Shares or such other securities, in cash or otherwise; and (2) in the
event of an issue or disposal of any Shares or any interest therein or any voting right or any
other right attaching thereto during the six-month period immediately following the First
Six-month Period (the ‘‘Second Six-month Period’’), we will take all reasonable steps to
ensure that such issue or disposal will not create a disorderly or false market in the
securities of our Company.
Under Rule 13.16A(1) of the GEM Listing Rules, each of our Controlling
Shareholders, namely Mr. Kelvin Tan, Mr. Peter Tan and Absolute Truth, has
undertaken to the Stock Exchange that except pursuant to the Placing that they shall
not, and shall procure that the relevant registered holder(s) shall not (i) at any time during
the period commencing on the date by reference to which disclosure of the shareholding of
our Controlling Shareholders is made in this prospectus and ending on the date which is six
months from the Listing Date, dispose of, nor enter into any agreement to dispose of or
otherwise create any options, rights, interest or encumbrances in respect of, any of our
securities in respect of which it is shown by this prospectus to be the beneficial owners; and
UNDERWRITING
– 216 –
(ii) at any time during the period of six months commencing on the date on which the period
referred to in paragraph (i) above expires, dispose of, nor enter into any agreement to
dispose of or otherwise create any options, rights, interests or encumbrances in respect of,
any of our securities referred to in paragraph (i) above if, immediately following such
disposal or upon the exercise or enforcement of such options, rights, interests or
encumbrances, they would then cease to be our Company’s controlling shareholders (as
defined under the GEM Listing Rules).
Note of Rule 13.16A(1) of the GEM Listing Rules provides that our Controlling
Shareholders are free to purchase additional securities and dispose of securities thus
purchased in the period commencing on the date by reference to which disclosure of the
shareholding of the Controlling Shareholders is made in this prospectus and ending on the
date which is 1 year from the Listing Date, subject to compliance with the requirements of
Rule 11.23 of the GEM Listing Rules to maintain an open market in the securities and a
sufficient public float.
Under Rule 13.19 of the GEM Listing Rules, our Controlling Shareholders have also
undertaken to the Stock Exchange, our Company, the Sole Sponsor and the Joint Lead
Managers (for themselves and on behalf of the Underwriters) that (i) in the event that our
Controlling Shareholders or any of their close associates pledges or charges any direct or
indirect interest in the relevant Shares in favour of an authorised institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)), as security for a bona
fide commercial loan or pursuant to any right or waiver grated by the Stock Exchange
pursuant to Rule 13.18(4) of the GEM Listing Rules, at any time during the period
commencing on the date of this prospectus and ending on the date which is six months from
the Listing Date, he/it must inform our Company immediately thereafter, disclosing the
details specified in Rules 17.43(1) to (4) of the GEM Listing Rules; and (ii) having pledged
or charged any interest in Shares under (i) above, he/she must inform our Company
immediately in the event that he/she becomes aware that the pledgee or chargee has
disposed of or intended to dispose of such interest and of the number of Shares affected.
Total commission, fee and expenses
In connection with the Placing, the Underwriters will receive an underwriting
commission of 3.0% of the aggregate Placing Price of all Placing Shares according to the
arrangement of the Underwriting Agreement, out of which they will pay any sub-
underwriting commissions and praecipium.
In connection with the Listing and the Placing, the total expenses, including the listing
fees, the underwriting commission, the brokerage, the SFC transaction levy, the Stock
Exchange trading fee, legal and other professional fees, printing and other expenses, to be
borne by our Company and the Selling Shareholder, at the Placing Price of HK$0.50, are
estimated to be approximately HK$16.6 million and approximately HK$0.8 million
respectively.
UNDERWRITING
– 217 –
Underwriters’ interest in our Company
Save as provided for under the Underwriting Agreement and disclosed otherwise in
this prospectus, none of the Sole Sponsor, the Joint Lead Managers and the Underwriters
or any of its directors, employees or associates has any shareholding interests in any
member of our Group nor has any right or option to subscribe for or nominate persons to
subscribe for any Shares.
SOLE SPONSOR’S INTEREST AND INDEPENDENCE
Save as disclosed in this prospectus, and for advisory and documentation fee paid and
to be paid to Grand Vinco Capital Limited as the Sole Sponsor in connection with the
Listing and as our compliance adviser with effect from the Listing Date, Vinco Capital nor
any of its close associates has or may, as a result of the Listing and the Placing, have any
interest in any class of securities of our Company or any other members of our Group
(including options or rights to subscribe for such securities).
No director or employee of Vinco Capital who is involved in providing advice to our
Company has or, as a result of the Listing and/or the Placing, may have any interest in any
class of securities of our Company or any other members of our Group (including options
or rights to subscribe for such securities). No director or employee of Vinco Capital has any
directorship in our Company or any other members of our Group.
The Sole Sponsor satisfies the independence criteria applicable to sponsors as set forth
in Rule 6A.07 of the GEM Listing Rules.
UNDERWRITING
– 218 –
CONDITIONS OF THE PLACING
The Placing will be conditional upon, among others:
(i) the Stock Exchange granting the listing of, and permission to deal in, the Shares in
issue and the Shares to be issued as mentioned in this prospectus on GEM;
(ii) the obligations of the Underwriters under the Underwriting Agreement becoming
unconditional (including the waiver of any condition(s) by the Sole Sponsor and/
or Vinco Capital (for itself and on behalf of the Underwriters)) and the
Underwriting Agreement not being terminated in accordance with the terms of
that agreement or otherwise.
The consummation of the Placing is conditional upon, among other things, the Placing
becoming unconditional and not having been terminated in accordance with its terms.
If such conditions have not been fulfilled or waived by the Sole Sponsor and/or Vinco
Capital (where appropriate) (for itself and on behalf of the Underwriters) prior to the times
and dates specified, the Placing will lapse and the Stock Exchange will be notified
immediately. Notice of the lapse of the Placing will be published by our Company on the
website of the Stock Exchange at www.hkexnews.hk and our Company’s website at
www.kpmholding.com on the next Business Day following such lapse.
THE PLACING
100,000,000 Placing Shares (comprising 80,000,000 New Shares and 20,000,000 Sale
Shares) are being offered pursuant to the Placing, representing in aggregate 25% of the
enlarged issued share capital of our Company immediately after the Capitalisation Issue
and completion of the Placing.
The Placing is fully underwritten by the Underwriters (subject to the terms and
conditions of the Underwriting Agreement. Pursuant to the Placing, it is expected that the
Underwriters, on behalf of our Company and the Selling Shareholder, will conditionally
place 100,000,000 Placing Shares at the Placing Price to selected individual, professional
and institutional investors in Hong Kong.
BASIS OF ALLOCATION
Allocation of the Placing Shares to selected individual, professional and institutional
investors will be based on a number of factors, including the level and timing of demand
and whether or not it is expected that the relevant investors are likely to purchase further
Shares or hold or sell their Shares after the Listing. Such allocation is intended to result in a
distribution of the Placing Shares which would lead to the establishment of a solid
professional and institutional shareholder base to the benefit of our Company and the
Shareholders as a whole. In particular, the Placing Shares will be allocated pursuant to Rule
11.23(8) of the GEM Listing Rules, that not more than 50% of the Shares in public hands at
the time of Listing will be owned by the three largest public Shareholders. There will not be
any preferential treatment in the allocation of the Placing Shares to any persons.
STRUCTURE AND CONDITIONS OF THE PLACING
– 219 –
No allocations will be permitted to nominee companies unless the name of the ultimate
beneficiary is disclosed, without the prior written consent of the Stock Exchange. Details of
the Placing will be announced in accordance with Rules 10.12(4), 16.08 and 16.16 of the
GEM Listing Rules.
PLACING PRICE
The Placing Price is HK$0.50 per Placing Share. Subscribers or purchasers, when
subscribing for or purchasing the Placing Shares, shall pay the Placing Price plus 1%
brokerage, 0.005% Stock Exchange trading fee and 0.0027% SFC transaction levy,
representing a total of HK$2,525.20 for every board lot of 5,000 Shares.
The net proceeds from the Placing of New Shares based on the Placing Price of
HK$0.50 per Share are estimated to be approximately HK$23.4 million, after deduction of
the underwriting commission and other expenses relating to the Placing and the Listing
payable by our Company.
The level of indications of interests in the Placing and the basis of allocations of the
Placing Shares will be announced on the Stock Exchange’s website at www.hkexnews.hk
and our Company’s website at www.kpmholding.com on or before Thursday, 9 July 2015.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Application has been made to the Stock Exchange for listing of and permission to deal
in the Shares in issue and to be issued as mentioned in this prospectus. Subject to the
granting of the listing of, and permission to deal in, the Shares in issue and to be issued as
mentioned in this prospectus on GEM and the compliance with the stock admission
requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for
deposit, clearance and settlement in CCASS with effect from the Listing Date, or any other
date as determined by HKSCC. Settlement of transactions between participants of the
Stock Exchange is required to take place in CCASS on the second Business Day after any
trading day. Investors should seek the advice of their stockbroker or other professional
adviser for details of those settlement arrangements as such arrangements will affect their
rights and interests. All activities under CCASS are subject to the General Rules of CCASS
and CCASS Operational Procedures in effect from time to time.
All necessary arrangements have been made for the Shares to be admitted into CCASS.
DEALINGS AND SETTLEMENT
Dealings in the Shares on GEM are expected to commence at 9 : 00 a.m. on Friday, 10
July 2015. Shares will be traded in board lots of 5,000 Shares each and are freely
transferable. The stock code for the Shares is 8027.
STRUCTURE AND CONDITIONS OF THE PLACING
– 220 –
The following is a text of a report, prepared for the purpose of incorporation in this
prospectus, received from the independent reporting accountants, Deloitte Touche Tohmatsu,
Certified Public Accountants, Hong Kong.
30 June 2015
The Directors
KPM Holding Limited
Grand Vinco Capital Limited
Dear Sirs,
We set out below our report on the financial information relating to KPM Holding
Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the
‘‘Group’’) for each of the two years ended 31 December 2014 (the ‘‘Track Record Period’’),
for inclusion in the prospectus of the Company dated 30 June 2015 in connection with the
initial listing of the shares of the Company on the Growth Enterprise Market of The Stock
Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) (the ‘‘Prospectus’’).
The Company was incorporated and registered as an exempted company in the
Cayman Islands with limited liability on 10 March 2015, with headquarter located in
Singapore. The Company is an investment holding company. The principal activities of its
operating subsidiary are engaged in design, fabrication, installation and maintenance of
signage products. Pursuant to a group reorganisation, as more fully explained in the section
headed ‘‘History, Reorganisation and Group structure — Reorganisation’’ in the Prospectus
(the ‘‘Group Reorganisation’’), the Company became the holding company of the entities
comprising the Group on 23 June 2015.
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –
As at 31 December 2013 and 2014 and the date of this report, the Group has equity
interests in the following subsidiaries:
Name of subsidiaries
Place of
incorporation Legal form
Date of
incorporation
Issued and
fully paid
share capital
Equity interest
attributable to the Company Principal activities
31 December Date of
the report2013 2014
Direct
Sino Promise Investments
Limited (‘‘Sino Promise’’)
British Virgin
Islands
(‘‘BVI’’)
Limited liability
company
12 January
2015
US$1 N/A N/A 100% Investment holding
Indirect
Signmechanic Pte. Ltd.
(‘‘Signmechanic Singapore’’)
Singapore Limited liability
company
2 September
1997
S$500,000 100% 100% 100% Engaged in the design,
fabrication, installation
and maintenance of
signage products
All entities now comprising the Group adopted 31 December as their financial year end
date.
The statutory financial statements of Signmechanic Singapore for the years ended 31
December 2013 and 2014 were prepared in accordance with the Singapore Financial
Reporting Standards (‘‘SFRSs’’) issued by Accounting Standards Council in Singapore and
were audited by BSPL PAC and Deloitte & Touche LLP Singapore, respectively.
No audited financial statements have been prepared for the Company and Sino
Promise since their respective dates of incorporation as they were incorporated in the
jurisdictions where there are no statutory audit requirements.
For the purpose of this report, the directors of Signmechanic Singapore have prepared
the financial statements of Signmechanic Singapore for the Track Record Period in
accordance with International Financial Reporting Standards (‘‘IFRSs’’) (the ‘‘Underlying
Financial Statements’’). We have undertaken an independent audit on the Underlying
Financial Statements in accordance with the Hong Kong Standards of Auditing issued by
the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’) and have
examined the Underlying Financial Statements in accordance with Auditing Guideline
3.340 ‘‘Prospectuses and the Reporting Accountant’’ as recommended by the HKICPA.
The financial information for the Track Record Period (‘‘Financial Information’’) set
out in this report has been prepared from the Underlying Financial Statements on the basis
of presentation set out in note 2 to Section A below. No adjustments are considered
necessary to the Underlying Financial Statement in the preparation of this report for
inclusion in the Prospectus.
The Underlying Financial Statements are the responsibility of the directors of
Signmechanic Singapore who approved their issue. The directors of the Company are
responsible for the contents of the Prospectus in which this report is included. It is our
responsibility to compile the Financial Information set out in this report from the
Underlying Financial Statements, to form an independent opinion on the Financial
Information and to report our opinion to you.
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –
In our opinion, on the basis of presentation set out in note 2 to Section A below, the
Financial Information gives, for the purpose of this report, a true and fair view of the state
of affairs of the Group as at 31 December 2013 and 2014 and the results and cash flows of
the Group for the Track Record Period.
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –
A. FINANCIAL INFORMATION
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Year ended 31 December
NOTES 2013 2014
S$ S$
Revenue 6 7,827,042 11,850,088
Cost of sales (4,952,092) (6,307,276)
Gross profit 2,874,950 5,542,812
Other income 7 71,198 208,193
Other gains and losses 8 (263,571) (109,873)
Selling and administrative expenses (1,800,235) (2,638,320)
Other expense — (63,250)
Finance costs 9 (66,923) (111,351)
Profit before tax 815,419 2,828,211
Income tax expense 10 (203,938) (262,996)
Profit for the year 11 611,481 2,565,215
Other comprehensive income (expense)
Items that may be reclassified subsequently to profit
or loss:
Available-for-sale investments
Fair value gain (loss) on available-for-sale
investments 22,203 (12,809)
Reclassification of cumulative gains from
investment valuation reserve to profit or
loss upon disposal of available-for-sale
investments — (9,394)
Other comprehensive income (expense) for the
year 22,203 (22,203)
Total comprehensive income for the year 633,684 2,543,012
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –
STATEMENTS OF FINANCIAL POSITION
At 31 December
NOTES 2013 2014
S$ S$
NON-CURRENT ASSETS
Property, plant and equipment 16 296,099 679,373
Available-for-sale investments 17 269,505 20
Deferred tax assets 27 12,996 —
578,600 679,393
CURRENT ASSETS
Inventories 18 337,656 615,661
Trade and other receivables 19 2,359,598 2,441,845
Amount due from a related party 25 24,401 44,860
Amount due from a director 26 — 7,006
Pledged bank deposits 20 79,564 586,564
Bank balances and cash 20 2,818,571 5,087,491
5,619,790 8,783,427
Asset classified as held for sale 21 8,848,283 —
14,468,073 8,783,427
CURRENT LIABILITIES
Trade payables 22 1,181,859 689,656
Bills payables 22 529,880 909,841
Other payables and accruals 23 757,435 1,803,726
Amounts due to related parties 25 209,165 348,193
Amounts due to directors 26 822,582 1,999
Obligations under finance leases 24 76,019 91,825
Income tax payable 208,031 448,543
3,784,971 4,293,783
Liability directly associated with asset classified as
held for sale 21 3,283,657 —
7,068,628 4,293,783
NET CURRENT ASSETS 7,399,445 4,489,644
TOTAL ASSETS LESS CURRENT
LIABILITIES 7,978,045 5,169,037
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –
At 31 December
NOTES 2013 2014
S$ S$
NON-CURRENT LIABILITY
Obligations under finance leases 24 135,605 155,170
NET ASSETS 7,842,440 5,013,867
CAPITAL AND RESERVES
Share capital 28 500,000 500,000
Reserves 7,342,440 4,513,867
TOTAL EQUITY 7,842,440 5,013,867
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –
STATEMENTS OF CHANGES IN EQUITY
Share
capital
Investment
valuation
reserve
Accumulated
profits Total
S$ S$ S$ S$
At 1 January 2013 500,000 — 6,808,756 7,308,756
Profit for the year — — 611,481 611,481
Fair value gain on available-
for-sale investments — 22,203 — 22,203
Total comprehensive income
for the year — 22,203 611,481 633,684
Dividend declared (Note 13) — — (100,000) (100,000)
At 31 December 2013 500,000 22,203 7,320,237 7,842,440
Profit for the year — — 2,565,215 2,565,215
Fair value loss on available-
for-sale investments — (12,809) — (12,809)
Reclassification of cumulative
gains from investment
valuation reserve to profit or
loss upon disposal of
available-for-sale
investments — (9,394) — (9,394)
Total comprehensive (expense)
income for the year — (22,203) 2,565,215 2,543,012
Dividend declared (Note 13) — — (5,371,585) (5,371,585)
At 31 December 2014 500,000 — 4,513,867 5,013,867
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –
STATEMENTS OF CASH FLOWS
Years ended 31 December
2013 2014
S$ S$
OPERATING ACTIVITIES
Profit before tax 815,419 2,828,211
Adjustments for:
Bank interest income (22) (496)
Depreciation of property, plant and equipment 250,347 235,367
Finance costs 66,923 111,351
Fair value gain on available-for-sale investments — (9,394)
Allowance on doubtful debts — 106,398
Impairment loss on a freehold property upon reclassified as
held for sale 263,571 —
Loss on disposal of property, plant and equipment — 5,021
Write-off of property, plant and equipment — 7,848
Operating cash flows before movements in working capital 1,396,238 3,284,306
Increase in inventories (254,362) (278,005)
(Increase) decrease in trade and other receivables (1,041,919) 11,355
Increase in amount due from a related party (3,087) (20,459)
Increase (decrease) in trade payables 780,875 (492,203)
Increase in other payables and accrual 315,679 1,111,227
Increase in amounts due to related parties 142,409 139,028
Cash generated from operations 1,335,833 3,755,249
Corporate income taxes paid (130,879) (9,488)
NET CASH FROM OPERATING ACTIVITIES 1,204,954 3,745,761
INVESTING ACTIVITIES
Advance to a director — (7,006)
Placement of pledged bank deposits (54,501) (507,000)
Proceeds from disposal of available-for-sale investments — 256,676
Purchase of property, plant and equipment (196,444) (490,346)
Proceeds from disposal of asset classified as held for sale — 8,558,283
Deposit received on disposal of asset classified as held for sale 90,000 —
Interest received 22 496
NET CASH (USED IN) FROM INVESTING ACTIVITIES (160,923) 7,811,103
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –
Years ended 31 December
2013 2014
S$ S$
FINANCING ACTIVITIES
Advance from directors 37,509 —
Repayment to directors (6,108) (820,583)
Raised in bills payables 529,880 909,841
Repayment of bills payables (50,998) (529,880)
Obligations under finance leases interest paid (11,549) (23,666)
Repayment of bank loan (192,854) (3,283,657)
Bank loan interest paid (46,983) (48,127)
Repayment of obligations under finance leases (85,661) (80,729)
Trade finance interest paid (8,391) (39,558)
Dividend paid (100,000) (5,371,585)
NET CASH FROM (USED IN) FINANCING ACTIVITIES 64,845 (9,287,944)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,108,876 2,268,920
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 1,709,695 2,818,571
CASH AND CASH EQUIVALENTS AT END OF YEAR,
represented by bank balances and cash 2,818,571 5,087,491
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –
NOTES TO THE FINANCIAL INFORMATION
1. GENERAL
The Company was incorporated and registered as an exempted company in the Cayman Islands with
limited liability on 10 March 2015 and its registered office is Clifton House, 75 Fort Street, P.O. Box 1350,
Grand Cayman KY1-1108, Cayman Islands. The principal place of business is at 424 Tagore Industrial Avenue,
Sindo Industrial Estate, Singapore 787807.
The Company is an investment holding company and the principal activities of its operating subsidiary are
engaged in the design, fabrication, installation and maintenance of signage products.
The Financial Information is presented in Singapore Dollar (‘‘S$’’), which is also the functional currency
of the Company.
2. GROUP REORGANISATION AND BASIS OF PRESENTATION OF FINANCIAL INFORMATION
Prior to the commencement of the Group Reorganisation in 2015, throughout the Track Record Period,
Signmechanic Singapore is under control of two independent individuals, Mr. Tan Thiam Kiat and Mr. Tan
Kwang Hwee (together referred to as the ‘‘Controlling Shareholders’’). Mr. Tan Thiam Kiat and Mr. Tan Kwang
Hwee held 50% respectively of the issued share capital of Signmechanic Singapore immediately prior to the
implementation of the Group Reorganisation.
On 23 March 2015, Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee have executed an acting in concert
confirmatory deed in respect of Signmechanic Singapore whereby they confirmed the existence of their acting in
concert arrangements during the Track Record Period and for so long as they remain interests in Signmechanic
Singapore to collectively control over Signmechanic Singapore. The Group Reorganisation comprised of the
following steps:
. On 12 January 2015, Sino Promise was incorporated in the BVI. The authorised share capital of Sino
Promise was US$50,000 divided into 50,000 shares of US$1.00 each and its issued and paid-up share
capital was US$1, which has been allotted and issued to the Company on 10 March 2015.
. On 10 March 2015, the Company was incorporated in the Cayman Islands under the Companies
Law, with an authorised share capital of HK$380,000 divided into 38,000,000 shares of HK$0.01
each.
. On 23 June 2015, the Controlling Shareholders transferred the entire issued share capital of
Signmechanic Singapore to Sino Promise in the consideration of HK$38,106,550, which was
satisfied by (i) the Company allotting and issuing 999,999 new shares of the Company to the
Controlling Shareholders, credited as fully paid and (ii) the crediting of the one nil-paid share of the
Company, which was registered in the name of Absolute Truth Investments Limited (a company
controlled by the Controlling Shareholders), as fully paid. The total issued shares of the Company
has been increased to 1,000,000 shares since then. The Company had nominated Sino Promise to
hold the entire issued share capital of Signmechanic Singapore. The Controlling Shareholders had
nominated Absolute Truth Investments Limited to hold the 999,999 new shares of the Company. In
consideration of the Company nominating Sino Promise to hold the entire issued share capital of
Signmechanic Singapore, on 23 June 2015, Sino Promise allotted and issued 9 new shares to the
Company, credited as fully paid.
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –
Since the Controlling Shareholders’ interest in Signmechanic Singapore is the same before and after the
above transactions, the Group, comprising the Company, Sino Promise and Signmechanic Singapore, resulting
from the group reorganisation is regarded as a continuing entity. The Financial Information of the Group has
been prepared as if the Company had been the holding company of Sino Promise and Signmechanic Singapore
throughout the Track Record Period. As the Company and Sino Promise are incorporated subsequent to the
Track Record Period, the Financial Information was prepared based on the financial statements of
Signmechanic Singapore for the Track Record Period.
3. APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
For the purpose of preparing and presenting the Financial Information for the Track Record Period, the
Group has consistently adopted IFRSs, International Accounting Standards (‘‘IASs’’), amendments and
interpretations which are mandatorily effective for the Group’s accounting period beginning on 1 January 2014
throughout the Track Record Period.
At the date of this report, the following new and revised IFRSs have been issued but are not yet
effective. The Group has not early applied these standards and amendments.
IFRS 9 Financial Instruments1
IFRS 14 Regulatory Deferral Accounts2
IFRS 15 Revenue from Contracts with Customers3
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations5
Amendments to IAS 1 Disclosure Initiative5
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and
Amortisation5
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions4
Amendments to IFRSs Annual Improvements to IFRSs 2010–2012 Cycle6
Amendments to IFRSs Annual Improvements to IFRSs 2011–2013 Cycle4
Amendments to IFRSs Annual Improvements to IFRSs 2012–2014 Cycle5
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants5
Amendments to IAS 27 Equity Method in Separate Financial Statements5
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture5
Amendments to IFRS 10,
IFRS 12 and IAS 28
Investment Entities: Applying the Consolidation Exception5
1 Effective for annual periods beginning on or after 1 January 20182 Effective for first annual IFRS financial statements beginning on or after 1 January 20163 Effective for annual periods beginning on or after 1 January 20174 Effective for annual periods beginning on or after 1 July 20145 Effective for annual periods beginning on or after 1 January 20166 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions
IFRS 9 Financial Instruments
IFRS 9 issued in 2009 introduces new requirements for the classification and measurement of
financial assets. IFRS 9 was subsequently amended in 2010 to include the requirements for the
classification and measurement of financial liabilities and for derecognition, and further amended in 2013
to include the new requirements for hedge accounting. Another revised version of IFRS 9 was issued in
2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the
classification and measurement by introducing a ’fair value through other comprehensive income’
(FVTOCI) measurement category.
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –
Key requirements of IFRS 9 are described below:
. All recognised financial assets that are within the scope of IAS 39 Financial Instruments:
Recognition and Measurement are subsequently measured at amortised cost or fair value.
Specifically, debt investments that are held within a business model whose objective is to
collect the contractual cash flows, and that have contractual cash flows that are solely
payments of principal and interest on the principal outstanding are generally measured at
amortised cost at the end of subsequent accounting periods. Debt instruments that are held
within a business model whose objective is achieved both by collecting contractual cash flows
and selling financial assets, and that have contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding, are measured at FVTOCI. All other debt investments and equity
investments are measured at their fair value at the end of subsequent accounting periods. In
addition, under IFRS 9, entities may make an irrevocable election to present subsequent
changes in the fair value of an equity investment (that is not held for trading) in other
comprehensive income, with only dividend income generally recognised in profit or loss.
. With regard to the measurement of financial liabilities designated as at fair value through
profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the effects of changes in the liability’s credit
risk in other comprehensive income would create or enlarge an accounting mismatch in profit
or loss. Changes in fair value of financial liabilities attributable to changes in the financial
liabilities’ credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the
entire amount of the change in the fair value of the financial liability designated as fair value
through profit or loss was presented in profit or loss.
. In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss
model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss
model requires an entity to account for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition. In
other words, it is no longer necessary for a credit event to have occurred before credit losses
are recognised.
. The new general hedge accounting requirements retain the three types of hedge accounting.
However, greater flexibility has been introduced to the types of transactions eligible for hedge
accounting, specifically broadening the types of instruments that qualify for hedging
instruments and the types of risk components of non-financial items that are eligible for
hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the
principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also
no longer required. Enhanced disclosure requirements about an entity’s risk management
activities have also been introduced.
The management of the Group considers that the adoption of IFRS 9 in the future may have an
impact on the amounts reported in respect of the Group’s financial assets and financial liabilities.
However, it is not practicable to provide a reasonable estimate of the financial effect on the Group’s
financial information until a detailed review has been completed.
IFRS 15 Revenue from Contracts with Customers
In 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue
recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related
Interpretations when it becomes effective.
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-
step approach to revenue recognition:
. Step 1 : Identify the contract(s) with a customer
. Step 2 : Identify the performance obligations in the contract
. Step 3 : Determine the transaction price
. Step 4 : Allocate the transaction price to the performance obligations in the contract
. Step 5 : Recognise revenue when (or as) the entity satisfies a performance obligation
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e.
when ’control’ of the goods or services underlying the particular performance obligation is transferred to
the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios.
Furthermore, extensive disclosures are required by IFRS 15.
The management of the Group has yet to perform a detailed review on the potential impacts of
IFRS 15. Hence, it is not practicable to provide a reasonable estimate of the financial effect and the
relevant disclosures at this juncture.
Except as described above, the management of the Group considers that the application of the other
new and revised standards is unlikely to have a material impact on its financial position and performance
as well as disclosure.
4. SIGNIFICANT ACCOUNTING POLICIES
The Financial Information has been prepared on the historical cost basis, except for certain financial
instruments that are measured at fair values, and in accordance with the following accounting policies which
conform to IFRSs. In addition, the Financial Information includes applicable disclosures required by the Rules
Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange.
In addition, the Financial Information includes applicable disclosures required by the Hong Kong
Companies Ordinance which for the Track Record Period continue to be those of the predecessor Companies
Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong
Companies Ordinance (Cap. 622), ‘‘Accounts and Audit’’, which are set out in sections 76 to 87 of Schedule 11 to
that ordinance.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,
the Group takes into account the characteristics of the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the Financial Information is determined on such a basis, except
leasing transactions that are within the scope of IAS 17 Leases and measurements that have some similarities to
fair value but are not fair value, such as net realisable value in IAS 2 Inventories or value in use in IAS 36
Impairment of assets.
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which are described as follows:
. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Merger accounting for business combination involving entities under common control
The Financial Information incorporate the financial statements items of the combining entities or
businesses in which the common control combination occurs as if they had been combined from the date
when the combining entities or businesses first came under the control of the controlling party.
The net assets of the combining entities or businesses are consolidated using the existing book values
from the controlling party’s perspective. No amount is recognised in respect of goodwill or excess of
acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities
over cost at the time of common control combination, to the extent of the continuation of the controlling
party’s interest.
The statement of profit or loss and other comprehensive income includes the results of each of the
combining entities or businesses, as appropriate, from the earliest date presented or since the date when
the combining entities or businesses first came under the common control, where this is a shorter period,
regardless of the date of the common control combination.
Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as
met only when the asset is available for immediate sale in its present condition subject only to terms that
are usual and customary for sales of such asset and its sale is highly probable. Management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Non-current assets classified as held for sale are measured at the lower of their previous carrying
amount and fair value less costs of disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for goods sold and
services provided in the normal course of business, net of discounts and sales related taxes.
Revenue from the sales of goods including signage, bollard, variable-message signs and aluminum
railings is recognised when goods are delivered to and accepted by the customers.
Service income is recognised when services are provided.
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –
Interest income is recognised when it is probable that the economic benefits will flow to the Group
and the amount of income can be measured reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts the estimated future cash receipts through the expected life of the financial asset to that
asset’s net carrying amount on initial recognition.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the
term of the relevant lease.
The Group as lessee
Assets held under finance leases are recognised as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding
liability to the lessor is included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligations so
as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are
recognised immediately in profit or loss.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Foreign currencies
In preparing the financial information of the Group, transactions in currencies other than the
functional currency of the Group (foreign currencies) are recorded in the respective functional currency
(i.e. the currency of the primary economic environment in which the Group operates) at the rates of
exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange
differences on monetary items are recognised in profit or loss in the period in which they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will
comply with the conditions attaching to them and that the grants will be received.
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –
Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are intended to compensate.
Retirement benefit costs
Payments made to Central Provident Fund (‘‘CPF’’) in Singapore which is a defined contribution
retirement plan are recognised as an expense when employees have rendered service entitling them to the
contributions.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ’profit
before tax’ as reported in the statement of profit or loss and other 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 never taxable or deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of each reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the Financial Information and the corresponding tax base used in the computation of taxable
profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax
assets are recognised for all deductible temporary difference to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in a business consolidation) of assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow
all or part of the assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of each reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of each reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Current and deferred tax is recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or directly in equity respectively.
Property, plant and equipment
Property, plant and equipment, including freehold property held for use in production or supply of
goods or services or for administrative purposes are stated in the statements of financial position at cost
less subsequent accumulated depreciation and accumulated impairment losses, if any.
Other than freehold property, depreciation is recognised so as to write off the cost of items of
property, plant and equipment less their residual values over their estimated useful lives, using the
straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at
the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective
basis.
APPENDIX I ACCOUNTANTS’ REPORT
– I-16 –
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end
of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Impairment of tangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets
with finite useful lives 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. When 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. Where a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised in profit or loss immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are
determined on a first-in, first-out method. Net realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs necessary to make the sale.
Financial instruments
Financial assets and financial liabilities are recognised in the statements of financial position when a
group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to
or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a
trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or convention in the marketplace.
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –
Financial assets
The Group’s financial assets are classified as loans and receivables and available-for-sale (‘‘AFS’’)
financial assets. The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial debt
instrument and of allocating interest income over the Track Record Period. The effective interest rate is
the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received
that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the finance assets, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
Interest income is recognised on an effective interest basis for debt instruments.
AFS financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not
classified as (a) loans and receivables; (b) held-to-maturity investments; or (c) financial assets at FVTPL.
Equity securities held by the Group that are classified as AFS financial assets and are traded in an
active market are measured at fair value at the end of each reporting period. Other changes in the carrying
amount of AFS financial assets are recognised in other comprehensive income and accumulated under the
heading of ‘‘investment revaluation reserve’’. When the investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is
reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets
below).
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to
receive the dividends is established.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including
trade and other receivables, amounts due from a related party and a director, pledged bank deposits and
bank balances and cash) are carried at amortised cost using effective interest method, less any identified
impairment losses (see accounting policy on impairment of financial assets below).
Interest income is recognised by applying the effective interest rate, except for short-term receivables
where the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired where there is objective evidence that, as a result of one or
more events that occurred after the initial recognition of the financial asset, the estimated future cash
flows of the financial assets have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below
its cost is considered to be objective evidence of impairment.
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –
For loans and receivables, objective evidence of impairment could include:
. significant financial difficulty of the issuer or counterparty;
. breach of contract, such as a default or delinquency in interest or principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade 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,
observable changes in national or local economic conditions that correlate with default on receivables.
When an AFS financial asset is considered to be impaired, cumulative losses previously recognised
in other comprehensive income are reclassified to profit or loss in the period.
For financial assets carried at amortised cost, the amount of impairment loss recognised is the
difference between the asset’s carrying amount and the present value of the estimated future cash flows
discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use of an
allowance account. Changes in the carrying amount of the allowance account are recognised in profit or
loss. When a trade receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited to profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of
impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment loss was recognised, the previously recognised impairment loss is reversed through profit or
loss to the extent that the carrying amount of the 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 AFS equity investments, impairment losses previously recognised in profit or loss are
not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is
recognised in other comprehensive income and accumulated under the heading of ‘‘investment revaluation
reserve’’.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.
Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. Equity instrument issued by the Company is recognised at the proceeds
received, net of direct issue costs.
Financial liabilities
Financial liabilities including trade and bills payables, other payables, amounts due to related
parties and directors and property loan are subsequently measured at amortised cost, using the effective
interest method.
APPENDIX I ACCOUNTANTS’ REPORT
– I-19 –
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the Track Record Period. The effective interest rate is the rate that
exactly discounts estimated future cash payments (including all fees and points paid or received that form
an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
Interest expense is recognised on an effective interest basis.
Derecognition
The Group derecognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity.
On derecognition of a financial asset, the difference between the asset’s carrying amount and the
sum of the consideration received and receivable and the cumulative gain or loss that had been recognised
in other comprehensive income and accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or expire. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in profit or loss.
5. KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of each reporting period, that has a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year from the end of each reporting
period.
Useful lives and impairment assessment of property, plant and equipment
Property, plant and equipment (other than freehold property) are stated at cost less accumulated
depreciation and accumulated impairment loss in the statement of financial position. The estimation of
their useful lives is the key element for the annual depreciation expense. Property, plant and equipment are
evaluated for any possible impairment on a specific asset basis or group of similar assets basis, as
applicable. This process requires the management’s estimate of future cash flows generated by each asset
or group of assets. For any instance where this evaluation process indicates impairment, the appropriate
asset’s carrying value would be written down to the recoverable amount and the impairment loss
recognised would be charged to profit or loss. As at 31 December 2013 and 2014, the carrying amount of
property, plant and equipment amounted to S$296,099 and S$679,373, respectively. The details of
impairment on property, plant and equipment were set out in Note 21.
Estimated impairment of trade receivables
When there is objective evidence of impairment loss, the Group takes into consideration the
estimation of future cash flows. The amount of the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e.
the effective interest rate computed at initial recognition). When the actual future cash flows are less than
expected, a material impairment loss may arise. As at 31 December 2013 and 2014, the carrying amount of
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –
trade receivables of the Group amounted to S$1,277,551 and S$1,490,534, respectively, net of impairment
loss recognised of S$23,210 and S$129,608 respectively. The details of allowance provided for on doubtful
debts were set out in Note 19.
Estimated allowance for write-down of inventories to net realisable value
The Group makes allowance for inventories based on assessments of the net realisable values of
existing inventories. Allowances are applied to inventories where events or changes in circumstances
indicate that the net realisable value of certain items is lower than the cost of those items. The
identification of obsolete inventories requires the use of estimation of the net realisable value of items of
inventory and estimates on the conditions and usefulness of items of inventories. Where the estimated net
realisable value is lower than the cost of the inventory items, an impairment may arise. As at 31 December
2013 and 2014, the carrying amount of inventories amounted to S$337,656 and S$615,661, respectively.
6. REVENUE AND SEGMENT INFORMATION
The Group operates in a single segment which mainly including sale of signage, bollard, variable-message
signs and aluminium railing to customers located in Singapore.
Information is reported to the Controlling Shareholders, being the chief operating decision maker
(‘‘CODM’’) of the Group, for the purposes of resource allocation and performance assessment. The accounting
policies are the same as Group’s accounting policies described in Note 4. The CODM reviews revenue by nature
of contracts, i.e. ‘‘Public’’ and ‘‘Private’’ and profit for the year as a whole. No analysis of the Group’s assets and
liabilities is regularly provided to the CODM for review. Accordingly, only entity-wide disclosures on products,
major customers and geographical information are presented in accordance with IFRS 8 Operating Segments.
An analysis of the Group’s revenue for the Track Record Period provided to the CODM for resource
allocation and performance assessment is as follows:
2013 2014
S$ S$
Public 5,220,488 9,561,824
Private 2,606,554 2,288,264
7,827,042 11,850,088
Entity-wide disclosures
Major products
Revenue during the Track Record Period represents sale of signage, bollard, variable-message signs
and alluminum railing in Singapore.
No information in respect of revenues from external customers for each product and service was
presented, as the necessary information is not available and the cost to develop it would be excessive in the
opinion of the management of the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-21 –
Major customers
During the Track Record Period, the revenue from customers individually contributed over 10% of
total revenue of the Group are as follows:
Year ended 31 December
2013 2014
S$ S$
Customer A —Note 1,431,554
Customer B —Note 1,347,011
Note The corresponding revenue did not contribute over 10% of the total revenue of the Group.
None of the customers individually contributed over 10% of total revenue of the Group for
the year ended 31 December 2013.
Geographical information
The Group principally operates in Singapore, also the place of domicile. All revenue and non-
current assets of the Group are generated from external customers and located in Singapore by location of
customers and non-current assets, respectively.
7. OTHER INCOME
Year ended 31 December
2013 2014
S$ S$
Bank interest income 22 496
Government grants (Note) 56,903 78,629
Rental income under operating lease in respect of subleasing of
workshop premises — 113,508
Others 14,273 15,560
71,198 208,193
Note: Included in the amount is S$51,814 and S$57,716 cash bonus and cash payout under the
‘‘Productivity and Innovation Credit Scheme’’ (‘‘PIC Scheme’’) for the years ended 31 December
2013 and 2014, respectively. The PIC Scheme cash bonus gives businesses a dollar-for-dollar
matching cash bonus for qualifying expenditure incurred during the Year of Assessment 2013 to
2015 subject to an overall cap of S$15,000 for all 3 years of assessment combined. On the other
hand, the PIC Scheme cash payout allows businesses to convert up to S$100,000 of their total
qualifying expenditure incurred from Year of Assessment 2013 to 2018 for each year of assessment
in all 6 qualifying activities into a non-taxable cash receipt, at maximum amount of S$60,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-22 –
8. OTHER GAINS AND LOSSES
Year ended 31 December
2013 2014
S$ S$
Impairment loss on a freehold property upon reclassified as held for
sale (Note 21) (263,571) —
Allowance on doubtful debts (Note 19) — (106,398)
Write-off of property, plant and equipment — (7,848)
Loss on disposal of property, plant and equipment — (5,021)
Fair value gain on available-for-sale investments — 9,394
(263,571) (109,873)
9. FINANCE COSTS
Year ended 31 December
2013 2014
S$ S$
Interests on borrowings wholly repayable within five years:
— Bank loan 46,983 48,127
— Obligations under finance leases 11,549 23,666
— Trade financing 8,391 39,558
66,923 111,351
10. INCOME TAX EXPENSE
Year ended 31 December
2013 2014
S$ S$
Current tax
— Singapore Corporate Income Tax (‘‘CIT’’) 203,938 250,000
Deferred tax (Note 27) — 12,996
203,938 262,996
Singapore CIT is calculated at 17% of the estimated assessable profit eligible for CIT rebate of 30%,
capped at S$30,000 for Year of Assessment 2013 to 2015. Singapore incorporated companies can also enjoy 75%
tax exemption on the first S$10,000 of normal chargeable income and a further 50% tax exemption on the next
S$290,000 of normal chargeable income.
APPENDIX I ACCOUNTANTS’ REPORT
– I-23 –
The income tax expense for the year can be reconciled to the profit before tax per the statement of profit
or loss and other comprehensive income as follows:
Year ended 31 December
2013 2014
S$ S$
Profit before tax 815,419 2,828,211
Tax at Singapore CIT of 17% 138,621 480,796
Tax effect of expenses not deductible for tax purpose 61,084 15,282
Tax effect of income under tax exemption and rebate (55,925) (55,925)
Tax effect of enhanced allowance (Note) — (179,664)
Others 60,158 2,507
Income tax expense for the year 203,938 262,996
Note: Being additional 300% tax deductions/allowances for qualified capital expenditures and operating
expenses under the PIC scheme in Singapore for the Year of Assessment 2014.
11. PROFIT FOR THE YEAR
Year ended 31 December
2013 2014
S$ S$
Profit for the year has been arrived at after charging:–
Auditor’s remuneration 5,400 70,000
Depreciation of property, plant and equipment 250,347 235,367
Cost of inventories recognised as expenses 3,917,632 5,091,029
Directors’ and chief executive’s remuneration (Note 12) 263,920 287,157
Other staff costs
— salaries and other staff costs 1,640,079 1,811,670
— contributions to CPF 104,745 140,177
Total staff costs 2,008,744 2,239,004
Minimum lease payment under operating lease in respect staff
dormitory, office and working premises — 267,680
Direct attributable expenses in respect of subleasing workshop
premises recognised in other expense — 63,250
APPENDIX I ACCOUNTANTS’ REPORT
– I-24 –
12. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS
The following table sets forth certain information in respect of the directors of Signmechanic Singapore,
who will be appointed as directors of the Company, during the Track Record Period:
Name Position
Date of joining
Signmechanic
Singapore and
appointment as
director
Date of
resignation
Mr. Tan Thiam Kiat, Kelvin
(Mr. Kelvin Tan)
Chairman and Executive
director
1 December 1997 N/A
Mr. Tan Kwang Hwee, Peter
(Mr. Peter Tan)
Executive director and
Chief Executive Officer
1 December 1997 N/A
During the Track Record Period, the emoluments paid or payable to each of the directors and the chief
executive (Mr. Kelvin Tan) of Signmechanic Singapore were as follows:
For the year ended 31 December 2013
Mr. Kelvin
Tan Mr. Peter Tan Total
S$ S$ S$
Fee — — —
Salaries and other benefits 103,200 103,200 206,400
Bonus* 16,600 16,600 33,200
Contributions to CPF 12,160 12,160 24,320
131,960 131,960 263,920
For the year ended 31 December 2014
Mr. Kelvin
Tan Mr. Peter Tan Total
S$ S$ S$
Fee — — —
Salaries and other benefits 120,757 127,200 247,957
Bonus* 10,000 10,000 20,000
Contributions to CPF 9,600 9,600 19,200
140,357 146,800 287,157
* The discretionary bonus is determined having regard to the performance and market trend by the
management of the Group.
Neither the chief executive nor any of the directors of Signmechanic Singapore waived any emoluments
during the Track Record Period.
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –
Employees’ emoluments
Of the five individuals with the highest emoluments in the Group, 2 and 2 were directors of
Signmechanic Singapore during the years ended 31 December 2013 and 2014 whose emoluments are
included in the disclosures above. The emoluments of the remaining 3 and 3 individuals were as follows:
Year ended 31 December
2013 2014
S$ S$
Salaries and other staff costs 167,388 224,982
Bonus* — 22,850
Contributions to CPF 24,107 20,630
191,495 268,462
* The discretionary bonus is determined having regard to the performance and market trend by the
management of the Group.
Their emoluments were within the following band:
Year ended 31 December
2013 2014
No. of
employees
No. of
employees
Nil to HK$1,000,000 3 3
During the Track Record Period, no emoluments were paid by the Group to any of the directors of
Signmechanic Singapore or the five highest paid individual of the Group as an inducement to join or upon
joining the Group or as compensation for loss of office.
13. DIVIDENDS
During the year ended 31 December 2013, Signmechanic Singapore had declared and paid a dividend of
S$100,000 to its then shareholders.
During the year ended 31 December 2014, Signmechanic Singapore had declared and paid dividend to its
then shareholders in total of S$5,371,585 to its shareholders on 8 November 2014 and 10 November 2014
respectively.
The rate of dividend and the number of shares ranking for dividend are not presented as such information
is not meaningful having regard to the purpose of this report.
14. EARNINGS PER SHARE
No earnings per share information is presented, as its inclusion, for the purpose of this report, is not
considered meaningful.
15. RETIREMENT BENEFITS CONTRIBUTION
The Group’s employees employed in Singapore are required to join the CPF. The Group’s contributions
to the CPF Scheme are made in accordance with 16% of monthly salary with the cap of S$30,000 per annum as
prescribed by the Central Provident Fund Ordinance of Singapore.
APPENDIX I ACCOUNTANTS’ REPORT
– I-26 –
The total cost charged to profit or loss of S$129,065 and S$159,377 for the years ended 31 December 2013
and 2014 respectively, represents contributions paid to the retirement benefits scheme by the Group.
As at 31 December 2013 and 2014, contributions of S$36,431 and S$24,401, respectively, were due in
respective years had not been paid to the plans. The amounts were paid subsequent to the end of the respective
year.
16. PROPERTY, PLANT AND EQUIPMENT
Freehold
Property Computers
Furniture
and fittings
Air
conditioners
Office
equipment
and
machinery Renovation
Motor
vehicles Total
S$ S$ S$ S$ S$ S$ S$ S$
COST
At 1 January 2013 9,000,000 59,414 4,467 4,160 353,439 102,938 588,592 10,113,010
Additions 111,854 4,190 — 3,600 36,800 — 90,000 246,444
Reclassified as held for sale (9,111,854) — — — — — — (9,111,854)
At 31 December 2013 — 63,604 4,467 7,760 390,239 102,938 678,592 1,247,600
Additions — 102,194 2,372 — 211,243 82,507 267,892 666,208
Eliminated on write-off/
disposals — (36,995) (4,467) (7,760) (290,223) (102,938) (80,600) (522,983)
At 31 December 2014 — 128,803 2,372 — 311,259 82,507 865,884 1,390,825
DEPRECIATION AND
IMPAIRMENT
At 1 January 2013 — (46,639) (2,767) (1,374) (312,080) (35,277) (303,017) (701,154)
Impairment loss recognised
in profit or loss
(Note 21) (263,571) — — — — — — (263,571)
Eliminated on
reclassification as held
for sale 263,571 — — — — — — 263,571
Provided for the year — (13,128) (1,700) (6,386) (46,054) (67,661) (115,418) (250,347)
At 31 December 2013 — (59,767) (4,467) (7,760) (358,134) (102,938) (418,435) (951,501)
Provided for the year — (28,644) (474) — (42,791) (16,501) (146,957) (235,367)
Eliminated on write-off/
disposals — 36,994 4,467 7,760 282,378 102,938 40,879 475,416
At 31 December 2014 — (51,417) (474) — (118,547) (16,501) (524,513) (711,452)
CARRYING AMOUNTS
At 31 December 2013 — 3,837 — — 32,105 — 260,157 296,099
At 31 December 2014 — 77,386 1,898 — 192,712 66,006 341,371 679,373
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –
Freehold property comprising a building (fully depreciated prior to the Track Record Period) and land
that has an unlimited useful life and therefore is not depreciated and the carrying amount of freehold property is
measured at cost which are situated on freehold land in Singapore. The above items of property, plant and
equipment are depreciated on a straight-line basis over the following estimated useful lives:
Computers 3 years
Furniture and fittings 5 years
Air conditioners 5 years
Office equipment & machinery 5 years
Renovation 5 years
Motor vehicles 5 years
In August 2013, following the binding agreement with a third party for disposal of the freehold property
by the Group, the management of the Group reassessed the remaining useful life of existing non-movable
facilities including air furniture and fittings, air conditioners and renovation, taking into account the expected
completion date of hand-over the freehold property to the buyer. Since the remaining useful life of those
facilities was expected to be shorter than originally estimated, useful life has been revised to the end of 2013.
This change in useful life has increased the depreciation charge for the year ended 31 December 2013 by
S$89,147.
During the years ended 31 December 2013 and 2014, included in the additions of motor vehicles
amounting to S$50,000 and S$116,100 (net of trade-in price of disposed motor vehicles amounting to nil and
S$34,698), respectively, which were acquired under hire purchase arrangements. These constituted as non-cash
transactions during the years.
17. AVAILABLE-FOR-SALE INVESTMENTS
At 31 December
2013 2014
S$ S$
Listed equity securities in Singapore, at fair value 269,505 20
At 31 December 2013, the balance represented investments in two listed equity securities in Singapore and
measured at fair value by reference to quoted prices as at year end. During the year ended 31 December 2014,
One investment was disposed of, resulting in S$9,394 fair value gain (Note 8) recognised in profit or loss for the
year.
18. INVENTORIES
At 31 December
2013 2014
S$ S$
Raw material 60,516 120,456
Work-in-progress 277,140 421,935
Finished goods — 73,270
337,656 615,661
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –
19. TRADE AND OTHER RECEIVABLES
At 31 December
2013 2014
S$ S$
Trade receivables 1,300,761 1,620,142
Less: allowance for doubtful debts (23,210) (129,608)
1,277,551 1,490,534
Unbilled receivables 603,696 136,335
Retention receivables 213,102 241,017
Purchase advances paid to suppliers 174,873 143,536
Receivables from disposals of freehold property (note) — 200,000
Rental and other deposits 37,540 147,840
Other receivables and prepayments 52,836 82,583
2,359,598 2,441,845
Note: The amount of $200,000 is withheld by a lawyer as the stakeholder is pending the finalisation of
transfer of a part of related common property from the Management Corporation Strata Title to
increase in the gross floor area of the disposed property. The directors are of the view that the
process is administrative and is confident that the finalisation will be done in due course. In
addition, the Controlling Shareholders have provided an undertaking to indemnify the Group for
any loss arising from non-settlement of this amount.
For majority of customers, invoices are issued upon transferred risks and rewards of the products or upon
completion of rendering services. For one particular customer, invoices would be raised in according to the
schedule set out in the sales contracts (i.e. recognised as advanced billing as disclosed in Note 23) while the
revenue will be recognised until goods are delivered and accepted by the counterparties.
Trade receivables are generally granted a credit period of 30 to 60 days from the invoice date for trade
receivables to all customers. The following is an aging analysis of trade receivables net of allowance for doubtful
debts presented based on invoice date at the end of the reporting period, which approximated the respective
revenue recognition dates:
At 31 December
2013 2014
S$ S$
1–30 days 790,139 607,134
31–60 days 201,864 238,622
61–90 days 148,665 57,261
91–180 days 63,921 306,283
181–365 days 72,962 266,187
Over 365 days — 15,047
1,277,551 1,490,534
Before granting credit to new customers, the Group reviews the customers’ profile and available financial
information to assess the potential customer’s credit quality and defines credit limits for each customer.
APPENDIX I ACCOUNTANTS’ REPORT
– I-29 –
The Group assesses at each of the reporting period end whether there is objective evidences that trade and
other receivables are impaired. At each of reporting period end, unbilled receivables, all aged within 30 days
from the date of revenue recognition, related to invoices issued after the financial year ended for the products
delivered prior to each of year end. Retention receivables are retention monies held by customers which will be
refunded upon expiry of defect liability period, generally of 1 year, in accordance with sales contracts.
The following is an aging analysis of trade receivables (net of allowance for doubtful debts) which are past
due but not impaired based on the due date:
At 31 December
2013 2014
S$ S$
Overdue:
31–60 days 201,864 238,622
61–90 days 148,665 57,261
91–180 days 63,921 312,283
181 days to 365 days 72,962 266,187
Over 365 days — 9,047
487,412 883,400
The Group has provided allowance for individual receivables that were considered to be impaired
based on management assessment performed at each reporting period end and write off individual debtors
with long overdue amounts which management assessed are unlikely to be recovered. Based on past
experience, management believes that no impairment allowance is necessary in respect of remaining
balances as there has not been a significant change in credit quality and the remaining balances are still
considered fully recoverable. The balances of trade receivables that are neither past due nor impaired have
good credit quality as assessed by the Group according to repayment history of respective customer. The
Group does not hold any collateral over these balances.
Movement in the allowance on doubtful debts for trade receivables
At 31 December
2013 2014
S$ S$
At beginning of the year 23,210 23,210
Allowance on doubtful debts recognised in profit or loss (Note) — 106,398
At end of the year 23,210 129,608
Note: An allowance for impairment is established when there is objective evidence that the Group will
not be able to collect all outstanding debts according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments are considered indicators that the
receivable is impaired. The amount of the allowance is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. As at 31 December 2013 and 2014, allowance of S$23,210 and S$129,608, respectively
was provided for on debts which the counterparts were facing financial difficulties or entering into
liquidation process.
APPENDIX I ACCOUNTANTS’ REPORT
– I-30 –
20. PLEDGED BANK DEPOSITS AND BANK BALANCES AND CASH
As at 31 December 2013 and 2014, included in pledged bank deposits are S$79,564 and S$79,564,
respectively representing balances held in trust for the Group by Controlling Shareholders. Pledged bank
deposits have been pledged as a security for bankers guarantee issued in relation to contracts awarded to the
Group and bills payables facilities (Note 22). Pledged bank deposits carry prevailing market interest rate at
0.05% and 0.25% per annum as at 31 December 2013 and 2014, respectively.
Bank balances carry interest at prevailing market interest rates at 0.05% and 0.25% per annum as at 31
December 2013 and 2014, respectively.
21. ASSET CLASSIFIED AS HELD FOR SALE AND LIABILITY DIRECTLY ASSOCIATED WITH
ASSET HELD FOR SALE
The major classes of assets and liabilities classified as held for sale are as follows:
31 December
2013
S$
Asset classified as held for sale:
Property, plant and equipment 8,848,283
Liability classified as held for sale:
Property loan 3,283,657
In August 2013, the Group entered into a binding agreement with an independent third party to sell the
freehold property for S$9,000,000 and received a deposit of S$90,000. Accordingly, the freehold property and
related property loan which were expected to be sold or settled within twelve months were classified as held for
sale and were presented separately in the statement of financial position. Based on the transaction price and the
expected cost to sell amounting to S$151,717, including legal fee for completion of the transaction, the freehold
property which was previously included in the property, plant and equipment (Note 16) was written down from
the carrying amount to level 2 fair value less cost to sell.
As at 31 December 2013, the property loan is subject to floating interest rate of 3.65% per annum below
enterprise financing rate and secured by a first legal mortgage over the freehold property with original maturity
expires in 2037 and jointly and severally guaranteed by the Controlling Shareholders. The property loan was
denominated in S$ and was fully settled upon the completion of disposal of the freeland property in October
2014.
The guarantees provided by the Controlling Shareholders were released in October 2014.
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –
The table below summarises the repayment of property loan based on the agreed scheduled repayments set
out in the loan agreement:
At
31 December
2013
S$
Carrying amount repayable
— within one year 180,852
— more than one year but not more than two years 180,852
— more than two years but not more than five years 542,556
— more than five years 2,379,397
3,283,657
22. TRADE PAYABLES/BILLS PAYABLES
At 31 December
2013 2014
S$ S$
Trade payables 1,181,859 689,656
Bills payables 529,880 909,841
The following is an aging analysis of trade payables presented based on the purchase recognition date,
that is, goods receipt date, at the end of each reporting period:
At 31 December
2013 2014
S$ S$
0–30 days 570,153 148,912
31–90 days 554,049 260,016
Over 90 days 57,657 280,728
1,181,859 689,656
The credit period on trade payable is normally between 30 to 60 days from the purchase recognition date
for the Track Record Period.
As at 31 December 2013 and 2014, all bills payables of the Group are aged within 120 days and the bills
payables are drawn down under the terms of the banking facilities granted by the banks to the Group. Bills
payables carried interest at prime rate plus margin per annum, i.e. 5.75% per annum as at 31 December 2013
and 2014, and are secured by pledged bank deposits as disclosed in Note 20.
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –
23. OTHER PAYABLES AND ACCRUALS
At 31 December
2013 2014
S$ S$
Advance billings to customers 539,677 589,458
Retention payable to suppliers 4,380 33,370
Goods and services tax payable 16,374 751,710
Accrued operating expenses 66,999 356,396
Deposit received in respect of disposal of freehold property (Note 21) 90,000 —
Accrued staff bonus/commission 21,577 38,899
Payable for acquisition of property, plant and equipment — 25,064
Other payables 18,428 8,829
757,435 1,803,726
24. OBLIGATIONS UNDER FINANCE LEASES
The Group entered into lease arrangements with independent third parties in relation to certain motor
vehicles during the Track Record Period. The Group considered that these lease arrangements are finance lease
as substantially all the risks and rewards incidental to ownership of these motor vehicles retained with the
Group. The lease terms ranged from 2–7 years. Interest rates of underlying all obligations under finance leases
at the date of inception is 3.8% to 10.8% and 3.8% to 7.1% per annum as at 31 December 2013 and 2014,
respectively.
Minimum lease payments
Present value of minimum lease
payments
As at 31 December As at 31 December
2013 2014 2013 2014
S$ S$ S$ S$
Amounts payable under
finance leases:
Within one year 87,848 101,901 76,019 91,825
In more than one year but not
more than two years 77,376 68,280 65,221 62,038
In more than two years but not
more than five years 84,858 97,601 70,384 93,132
250,082 267,782 211,624 246,995
Less: future finance charges (38,458) (20,787) — —
Present value of lease obligations 211,624 246,995
Less: Amount due for
settlement within 12 months
(shown under current liabilities) (76,019) (91,825)
Amount due for settlement
after 12 months 135,605 155,170
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –
As at 31 December 2013 and 2014, the balance of obligations under finance leases are secured by the
lessor’s charge over the leased assets of carrying amounts of S$260,157 and S$270,337, respectively and
denominated in S$.
25. AMOUNTS DUE FROM (TO) RELATED PARTIES
The amounts due from (to) related parties (details of relationship with the Group are set out in Note 32) as
at 31 December 2013 and 2014 are trade in nature, unsecured, non-interest bearing and repayable within 30 days
credit period.
31–90 days
91–180
days
180 days
to 365 days
Over
365 days Total
S$ S$ S$ S$ S$
Amount due from a related party:
At 31 December 2013
C.K. Toh Construction Pte. Ltd.
(‘‘C.K. Toh Construction’’) — 2,926 21,475 — 24,401
At 31 December 2014
C.K. Toh Construction 7,716 631 12,112 24,401 44,860
1–30 days 31–90 days
91–180
days Total
S$ S$ S$ S$
Amounts due to related parties:
At 31 December 2013
C.K. Toh Construction (46,880) (78,126) (63,934) (188,940)
Signmechanic Sdn Bhd — — (11,611) (11,611)
T3 Holdings Pte. Ltd. (‘‘T3 Holdings’’) (8,614) — — (8,614)
(55,494) (78,126) (75,545) (209,165)
At 31 December 2014
C.K. Toh Construction (9,823) (25,681) (304,417) (339,921)
Signmechanic Sdn Bhd — — (6,811) (6,811)
T3 Holdings — (1,461) — (1,461)
(9,823) (27,142) (311,228) (348,193)
26. AMOUNTS DUE FROM (TO) DIRECTORS
The amount due from a director of Signmechanic Singapore represented advance to Mr. Tan Thiam Kiat
as at 31 December 2014 and the amount is unsecured, non-interest bearing and repayable on demand. The
maximum balance outstanding in respect of amount due from a director during 2014 is S$7,006.
The amounts due to directors of Signmechanic Singapore represented advances from Mr. Tan Kwang
Hwee, Mr. Tan Thiam Kiat, Ms. Khoo Ai Lin and Ms. Ong Siew Mui as at 31 December 2013 and 2014 and the
amounts are unsecured, non-interest bearing and repayable on demand.
The amounts due from (to) directors have been settled in May 2015.
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –
27. DEFERRED TAX ASSETS
The following are the major deferred tax assets recognised and movements thereon during the Track
Record Period:
Accelerated
Depreciation
S$
At 1 January 2013 and 31 December 2013 12,996
Charged to profit or loss (12,996)
At 31 December 2014 —
28. SHARE CAPITAL
The share capital as at 1 January 2013, 31 December 2013 and 2014 represented the share capital of
Signmechanic Singapore.
Number of
shares Share capital
S$
Ordinary shares 500,000 500,000
Issued and fully paid:
At 1 January 2013, 31 December 2013 and 31 December 2014 500,000 500,000
The Company and Sino Promise were incorporated subsequent to the Track Record Period and hence no
share capital for these companies was presented as at 31 December 2013 and 2014.
29. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that it will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s
overall strategy remains unchanged throughout the Track Record Period.
The capital structure of the Group consists of debt, which includes property loan, obligations under
finance leases and amounts due to directors, as disclosed in Notes 21, 24 and 26, respectively, net of bank
balances and cash and equity attributable to owners of the Group, comprising share capital and reserves.
The management of the Group reviews the capital structure from time to time. As a part of this review, the
management considers the cost of capital and the risks associated with each class of capital. Based on
recommendations of the management, the Group will balance its overall capital structure through the payment
of dividends, the issue of new shares and new debts.
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –
30. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
At 31 December
2013 2014
S$ S$
Financial assets
Loans and receivables (including cash and cash equivalents) 5,092,978 7,987,283
Available-for-sale investments 269,505 20
5,362,483 7,987,303
Financial liabilities
Amortised cost 2,854,870 2,412,247
b. Financial risk management objectives and policies
The major financial instruments include trade and other receivables, amounts due from a related
party and a director, pledged bank deposits, bank balances and cash, trade and bills payables, other
payables, obligations under finance leases and amounts due to related parties and directors. Details of the
financial instruments are disclosed in the respective notes. The risks associated with these financial
instruments include market risks (interest rate risk and other price risk), liquidity risk and credit risk. The
policies on how to mitigate these risks are set out below. The management manages and monitors these
exposures to ensure appropriate measures are implemented on a timely and effective manner.
Market risks
(i) Interest rate risk
The Group is exposed to cash flow interest rate risk in relation to bills payables, pledged bank
deposits and bank balances. The cash flow interest rate risk is mainly concentrated on fluctuations
associated with bills payables with floating rate which represent prime rate plus margin per annum
and variable rate pledged bank deposits and bank balances.
The Group currently does not have an interest rate hedging policy. However, the management
monitors interest rate risk exposure and will consider interest rate hedging should the need arise.
No sensitivity analysis of pledged bank deposits, bank balances and bills payables is presented
as a reasonably possible change in interest rate would not have significant impact on profit or loss of
the Group.
Obligations under finance leases issued at fixed rates expose the Group to fair value interest-
rate risk. During the Track Record Period, the Group did not hedge its fair value interest rate risk.
(ii) Other price risk
The Group is exposed to equity price risk through its available-for-sale investments in relation
to listed equity securities in Singapore.
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –
Sensitivity analysis
The sensitivity analyses have been determined based on the exposure to equity price risks at
the end of reporting period. If the prices of the respective equity instruments had been 5% higher/
lower, the investment valuation reserve would increase/decrease by S$13,475 for the Group as a
result of the changes in fair value of available-for-sale investments.
No sensitivity analysis is presented for the available-for-sale investments for the year ended 31
December 2014 as significant amount of available-for-sale investments have been disposed of during
the year ended 31 December 2014.
Liquidity risk
In the management of the liquidity risk, the management of the Group monitors and
maintains a level of bank balances and cash deemed adequate by the management to finance the
Group’s operations and mitigate the effects of fluctuations in cash flows.
The following tables detail the Group’s remaining contractual maturities for its financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be required to pay. The tables include
both interest and principal cash flows.
Effective
interest rate
On demand
or within
3 months 3–6 months 6–12 months 1–5 years
Total
undiscounted
cash flows
Carrying
amount
S$ S$ S$ S$ S$ S$
At 31 December 2013
Non-interest bearing instruments
Trade and other payables 1,293,243 — — — 1,293,243 1,293,243
Amounts due to related parties 209,165 — — — 209,165 209,165
Amounts due to directors 822,582 — — — 822,582 822,582
Interest bearing instruments
Bills payables 5.75% 569,402 — — — 569,402 529,880
Obligations under finance leases 3.8–7.14% 21,962 21,962 43,924 162,234 250,082 211,624
2,916,354 21,962 43,924 162,234 3,144,474 3,066,494
At 31 December 2014
Non-interest bearing instruments
Trade and other payables 1,152,214 — — — 1,152,214 1,152,214
Amounts due to related parties 348,193 — — — 348,193 348,193
Amounts due to directors 1,999 — — — 1,999 1,999
Interest bearing instruments
Bills payables 5.75% 943,246 — — — 943,246 909,841
Obligations under finance leases 3.8–10.8% 25,475 25,475 50,951 165,881 267,782 246,995
2,471,127 25,475 50,951 165,881 2,713,434 2,659,242
Credit risk
The Group’s concentration of credit risk by geographical locations is mainly in Singapore,
which accounted for 100% of the total financial assets as at 31 December 2013 and 2014.
In order to minimise the credit risk on trade and other receivables, amount due from a related
party and amount due from a director, the management of the Group has delegated a team
responsible for monitoring procedures to ensure that follow-up action is taken to recover overdue
debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –
end of each reporting period to ensure that adequate impairment losses are made for irrecoverable
amounts. In this regard, the management of the Group considers that the Group’s credit risk is
significantly reduced.
Approximately 38% and 40% of total trade receivables outstanding at 31 December 2013 and
2014 were due from top 5 customers which exposed the Group to concentration of credit risk.
Other than concentration of credit risk on bank deposits and balances placed in 5 banks in
which the counterparties are financially sound and on trade receivables from top 5 customers, the
Group has no other significant concentration of credit risk on other receivables, with exposure
spread over a number of counterparties.
At the end of each reporting period, the Group’s maximum exposure to credit risk which will
cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is
arising from the carrying amount of the respective recognised financial assets as stated in the
statement of financial position.
c. Fair value measurements of financial instruments
Fair value of the Group’s financial assets that are measured at fair value on recurring basis
Certain of the Group’s financial assets are measured at fair value at the end of each reporting
period. The following table gives information about how the fair values of these financial assets are
determined (in particular, the valuation technique and inputs used), as well as the level of the fair
value hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the
degree to which the inputs to the fair value measurements is observable.
Financial assets
Fair value as at Fair value
hierarchy
Valuation
technique and key
inputs31 December 2013 31 December 2014
Available-for-sale investments Listed equity
securities in
Singapore:
S$269,505
Listed equity
securities in
Singapore:
S$20
Level 1 Quoted bid prices
in an active
market
There is no transfer between the different levels of the fair value hierarchy during the Track
Record Period.
Fair value of the Group’s financial assets and financial liabilities that are not measured at fair value on
recurring basis
The fair value of other financial assets and financial liabilities is determined in accordance
with generally accepted pricing model based on discounted cash flow analysis.
The management of the Group considers that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the Financial Information approximate to their fair
values.
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –
31. OPERATING LEASES COMMITMENTS
As lessee
At the end of each of the reporting period, the Group had commitment for future minimum lease
payments under non-cancellable operating leases which fall due as follows:
At 31 December
2013 2014
S$ S$
Within one year — 406,560
In the second to fifth year inclusive — 392,000
— 798,560
Operating lease payment represented rentals payable by the Group for staff dormitory, office and
workshop premises. Leases are negotiated for terms of 1 to 3 years with fixed rental and no renewal option
or contingent rent provision.
As lessor
At the end of the reporting period, part of the workshop premises of the Group is subleased out for
rental income under non-cancellable operating lease which fall due as follows:
At 31 December
2013 2014
S$ S$
Within one year — 60,000
In the second to fifth year inclusive — 71,667
— 131,667
Lease is negotiated for a term of 3 years with fixed rental and no contingent rent provision.
32. RELATED PARTY DISCLOSURES
Apart from details disclosed elsewhere in the Financial Information, the Group has entered into the
following significant transactions with its related parties during the Track Record Period:
Name of related parties Nature of transactions Years ended 31 December
2013 2014
S$ S$
C.K. Toh Construction Sub-contracting of installation
work and supply of labour from
related party
182,295 177,012
Sales to related parties 41,955 19,120
T3 Holdings Rental expense of crane from
related party
108,984 31,348
Signmechanic Sdn Bhd Purchases of signages and sub-
contracting of installation work
from related party
74,130 70,039
Fusion Displays Purchase of machineries — 39,600
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –
The Controlling Shareholders have equity interests in these related parties with significant influence over
them.
In addition, Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee had jointly and severally provided a personal
guarantee in favour of Ethoz Capital Ltd (‘‘Ethoz Capital’’) to secure the obligations and liabilities of
Signmechanic Singapore under a loan agreement entered into between Signmenchanic Singapore as the
borrower and Ethoz Capital as the lender dated 31 October 2014 in relation to a loan facility of S$1,000,000
granted by Ethoz Capital to Signmechanic Singapore.
The loan had not been utilised as at 31 December 2014 and it was utilised subsequent to 2014 and fully
repaid in March 2015 and Ethoz Capital has released the guarantee from Mr. Tan Thiam Kiat and Mr. Tan
Kwang Hwee.
At the end of the respective reporting period, the Group has the following balances with related parties:
At 31 December
2013 2014
S$ S$
Amount due from a related party
— C.K. Toh Construction 24,401 44,860
Amounts due to related parties
— C.K. Toh Construction 188,940 339,921
— Signmechanic Sdn Bhd 11,611 6,811
— T3 Holdings 8,614 1,461
209,165 348,193
Compensation of key management personnel
The remuneration of directors of Signmechanic Singapore, which represent key management of the
Group during the Track Record Period was as follows:
Years ended 31 December
2013 2014
S$ S$
Short-term benefits 309,600 334,007
Post-employment benefits 35,520 29,720
345,120 363,727
The remuneration of directors of Signmechanic Singapore and key executives is determined by
having regard to the performance of individuals of the Group and market trends.
Guaranteed from Controlling Shareholders
Apart from disclosure elsewhere in these financial statements, the Controlling Shareholders jointly
and severally provided a personal guarantee in respect of a loan facility of S$1,000,000 in favor to the
Group in October 2014. The loan has not been drawn down as at 31 December 2014.
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –
33. CONTINGENT LIABILITIES
As at 31 December 2013 and 2014, the Group has following contingent liabilities:
At 31 December
2013 2014
S$ S$
Guarantee provided in respect of performance bonds in favor
of customers 204,411 193,528
B. DIRECTORS’ REMUNERATION
Under the arrangements presently in force, the aggregate remuneration payable to the
directors for the year ending 31 December 2015, excluding discretionary bonus, is estimated
to be approximately S$0.3 million.
Save as disclosed herein, no remuneration has been paid or is payable to the directors
of the Group during the Track Record Period.
C. SUBSEQUENT EVENTS
The following events and transactions took place subsequent to 31 December 2014 :
. In January 2015, the Group has drawn a 4-year term loan of S$1,000,000, which
carries a fixed interest rate of 4% per annum and is repayable over 48 monthly
instalments. The term loan is unsecured, guaranteed jointly and severally by the
Controlling Shareholders. The loan was fully repaid on 27 March 2015 and the
guarantee from the Controlling Shareholders was released as well.
. On 7 April 2015, an addition 750,000 shares in Signmechanic Singapore were
allotted an issued to each of Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee and
the shares were issued at a cash consideration of S$750,000 each.
. On 23 June 2015, shareholders’ resolutions of the Company were passed to
approve the increase of the Company’s authorised share capital of the Company
from HK$380,000 divided into 38,000,000 shares of HK$0.01 each to
HK$50,000,000 divided into 5,000,000,000 shares of HK$0.01 each by the
creation of an additional 4,962,000,000 shares of HK$0.01 each to rank pari
passu in all respects with the existing shares. On 23 June 2015, the directors of the
Company were authorised to capitalise the amount of HK$3,190,000 from the
amount standing to the credit of the share premium account of the Company and
applying such sum to pay up in full at par 319,000,000 shares for allotment and
issue to the person(s) whose name(s) appears on the register of members of the
Company at the close of business on 23 June 2015, pro-rata (or as nearly as
possible without involving fractions) to its/their then existing shareholdings in the
Company. On the same date, it’s resolved to issue 80,000,000 new shares being
offered by the Company for subscription under a placing exercise.
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –
D. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements of the Group, the Company or any of its subsidiaries
have been prepared in respect of any period subsequent to 31 December 2014.
Yours faithfully
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –
The information set forth in this appendix does not form part of the Accountants’ Report
on the financial information of the Group for the two years ended 31 December 2014 prepared
by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting
accountants of our Company, as set forth in Appendix I of this prospectus (the ‘‘Accountants’
Report’’), and is included herein for illustrative purposes only. The unaudited pro forma
financial information should be read in conjunction with the section headed ‘‘Financial
Information’’ in this prospectus and the Accountants’ Report set forth in Appendix I of this
prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE
ASSETS
The following is an illustrative unaudited pro forma statement of adjusted net tangible
assets of the Group which has been prepared in accordance with paragraph 31 of Chapter 7
of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The
Stock Exchange of Hong Kong Limited for the purpose of illustrating the effect of the
Placing as if the Placing had taken place on 31 December 2014 and based on the audited net
tangible assets of the Group as at 31 December 2014 as shown in the Accountants’ Report
set out in Appendix I of this prospectus and adjusted as described below.
This unaudited pro forma statement of adjusted net tangible assets of the Group has
been prepared for illustrative purposes only and, because of its hypothetical nature, it may
not give a true picture of the net tangible assets of the Group following the Placing.
Audited net
tangible assets of
the Group as at
31 December
2014
Estimated net
proceeds from the
Placing Shares
Unaudited pro
forma adjusted
net tangible assets
of the Group
Unaudited pro forma
adjusted net tangible assets
of the Group per share
S$ S$ S$ S cents
(Equivalent to
HK cents)
(Note 1) (Note 2) (Note 3) (Note 4)
Based on a Placing Price
of HK$0.5 per
Placing Share 5,013,867 4,106,675 9,120,542 2.28 12.99
Notes:
(1) The amount of audited net tangible assets of the Group as at 31 December 2014 amounting to
S$5,013,867 is extracted from the Accountants’ Report of the Group set out in Appendix I of this
prospectus.
(2) The estimated net proceeds from the Placing are based on 80,000,000 New Shares at the Placing
Price of HK$0.5 per Placing Share, after deduction of the estimated underwriting fees and other
related expenses expected to be incurred by the Group subsequent to 31 December 2014 and does
not take into account of any shares which may be issued or repurchased pursuant to the Company’s
general mandate. The estimated net proceeds from the New Shares are converted from Hong Kong
Dollars into Singapore Dollars at an exchange rate of HK$5.6963 to S$1, which was the rate
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –
prevailing on 10 April 2015. No representation is made that Hong Kong Dollars amounts have been,
could have been or may be converted to Singapore Dollars amounts, or vice versa, at that rate or at
any other rates or at all.
(3) The unaudited pro forma adjusted net tangible assets of the Group per share is calculated based on
400,000,000 shares, assuming the Placing of 80,000,000 New Shares and the Shares to be issued
pursuant to the Reorganisation and the Capitalisation Issue were in issue on 31 December 2014. It
does not take into account of any shares which may be issued or repurchased pursuant to the
Company’s general mandate.
(4) The unaudited pro forma adjusted net tangible assets of the Group per share is converted from
Singapore Dollars to Hong Kong Dollars at an exchange rate of HK$5.6963 to S$1, which was the
rate prevailing on 10 April 2015. No representation is made that Singapore Dollars amounts have
been, could have been or may be converted to Hong Kong Dollars amounts, or vice versa, at that
rate or at any other rates or at all.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –
B. ASSURANCE REPORT FROM THE REPORTING ACCOUNTANTS ON
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of the assurance report received from Deloitte Touche
Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants of our
Company, in respect of the Group’s unaudited pro forma financial information prepared for the
purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OF KPM HOLDING LIMITED
We have completed our assurance engagement to report on the compilation of
unaudited pro forma financial information of KPM Holding Limited (the ‘‘Company’’) and
its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the directors of the
Company (the ‘‘Directors’’) for illustrative purposes only. The unaudited pro forma
financial information consists of the unaudited pro forma statement of adjusted net tangible
assets as at 31 December 2014 and related notes as set out on pages II-1 to II-2 of Appendix
II to the prospectus issued by the Company dated 30 June 2015 (the ‘‘Prospectus’’). The
applicable criteria on the basis of which the Directors have compiled the unaudited pro
forma financial information are described on pages II-1 to II-2 of Appendix II to the
Prospectus.
The unaudited pro forma financial information has been compiled by the Directors to
illustrate the impact of proposed shares placing on the Group’s financial position as at 31
December 2014 as if the proposed shares placing had taken place at 31 December 2014. As
part of this process, information about the Group’s financial position has been extracted by
the Directors from the Group’s financial information for the two years ended 31 December
2014, on which an accountants’ report set out in Appendix I to the Prospectus has been
published.
Directors’ Responsibilities for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the unaudited pro forma financial
information in accordance with paragraph 7.31 of the Rules Governing the Listing of
Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited
(the ‘‘GEM Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro
Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the
Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –
Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the
GEM Rules, on the unaudited pro forma financial information and to report our opinion to
you. We do not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the unaudited pro forma financial
information beyond that owed to those to whom those reports were addressed by us at the
dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus’’ issued by the HKICPA. This standard
requires that the reporting accountants comply with ethical requirements and plan and
perform procedures to obtain reasonable assurance about whether the Directors have
compiled the unaudited pro forma financial information in accordance with paragraph 7.31
of the GEM Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the unaudited
pro forma financial information, nor have we, in the course of this engagement, performed
an audit or review of the financial information used in compiling the unaudited pro forma
financial information.
The purpose of unaudited pro forma financial information included in the investment
circular is solely to illustrate the impact of a significant event or transaction on unadjusted
financial information of the Group as if the event had occurred or the transaction had been
undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do
not provide any assurance that the actual outcome of the event or transaction at 31
December 2014 would have been as presented.
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly compiled on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used by the
Directors in the compilation of the unaudited pro forma financial information provide a
reasonable basis for presenting the significant effects directly attributable to the event or
transaction, and to obtain sufficient appropriate evidence about whether:
. The related unaudited pro forma adjustments give appropriate effect to those
criteria; and
. The unaudited pro forma financial information reflects the proper application of
those adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgment, having regard
to the reporting accountants’ understanding of the nature of the Group, the event or
transaction in respect of which the unaudited pro forma financial information has been
compiled, and other relevant engagement circumstances.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Opinion
In our opinion:
(a) the unaudited pro forma financial information has been properly compiled on the
basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma
financial information as disclosed pursuant to paragraph 7.31(1) of the GEM
Rules.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
30 June 2015
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
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Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of our Company and of certain aspects of Cayman Islands company law.
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 10 March 2015 under the Companies Law. Our Company’s
constitutional documents consist of its Amended and Restated Memorandum of
Association (the ‘‘Memorandum’’) and the Amended and Restated Articles of Association
(the ‘‘Articles’’).
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum provides, inter alia, that the liability of members of our
Company is limited and that the objects for which our Company is established are
unrestricted (and therefore include acting as an investment company), and that
our Company shall have and be capable of exercising any and all of the powers at
any time or from time to time exercisable by a natural person or body corporate
whether as principal, agent, contractor or otherwise and since our Company is an
exempted company that our Company will not trade in the Cayman Islands with
any person, firm or corporation except in furtherance of the business of our
Company carried on outside the Cayman Islands.
(b) By special resolution our Company may alter the Memorandum with respect to
any objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Articles were adopted on 23 June 2015. The following is a summary of certain
provisions of the Articles:
(a) Shares
(i) Classes of shares
The share capital of the Company consists of ordinary shares.
(ii) Share certificates
Every person whose name is entered as a member in the register of members
shall be entitled to receive a certificate for his shares. No shares shall be issued to
bearer.
Every certificate for shares, warrants or debentures or representing any other
form of securities of our Company shall be issued under the seal of our Company,
and shall be signed autographically by one Director and the Secretary, or by 2
Directors, or by some other person(s) appointed by our Board for the purpose. As
regards any certificates for shares or debentures or other securities of our
Company, our Board may by resolution determine that such signatures or either
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of them shall be dispensed with or affixed by some method or system of
mechanical signature other than autographic or may be printed thereon as
specified in such resolution or that such certificates need not be signed by any
person. Every share certificate issued shall specify the number and class of shares
in respect of which it is issued and the amount paid thereon and may otherwise be
in such form as our Board may from time to time prescribe. A share certificate
shall relate to only one class of shares, and where the capital of our Company
includes shares with different voting rights, the designation of each class of shares,
other than those which carry the general right to vote at general meetings, must
include the words ‘‘restricted voting’’ or ‘‘limited voting’’ or ‘‘non-voting’’ or some
other appropriate designation which is commensurate with the rights attaching to
the relevant class of shares. Our Company shall not be bound to register more
than 4 persons as joint holders of any share.
(b) Directors
(i) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Law, the Memorandum and
Articles and without prejudice to any special rights conferred on the holders of
any shares or class of shares, any share may be issued with or have attached
thereto such rights, or such restrictions, whether with regard to dividend, voting,
return of capital, or otherwise, as our Company may by ordinary resolution
determine (or, in the absence of any such determination or so far as the same may
not make specific provision, as our Board may determine). Any share may be
issued on terms that upon the happening of a specified event or upon a given date
and either at the option of our Company or the holder thereof, they are liable to
be redeemed.
Our Board may issue warrants to subscribe for any class of shares or other
securities of our Company on such terms as it may from time to time determine.
Where warrants are issued to bearer, no certificate thereof shall be issued to
replace one that has been lost unless our Board is satisfied beyond reasonable
doubt that the original certificate thereof has been destroyed and our Company
has received an indemnity in such form as our Board shall think fit with regard to
the issue of any such replacement certificate.
Subject to the provisions of the Companies Law, the Articles and, where
applicable, the rules of any stock exchange of the Relevant Territory (as defined in
the Articles) and without prejudice to any special rights or restrictions for the time
being attached to any shares or any class of shares, all unissued shares in our
Company shall be at the disposal of our Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times, for such
consideration and on such terms and conditions as it in its absolute discretion
thinks fit, but so that no shares shall be issued at a discount.
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Neither our Company nor our Board shall be obliged, when making or
granting any allotment of, offer of, option over or disposal of shares, to make, or
make available, any such allotment, offer, option or shares to members or others
whose registered addresses are in any particular territory or territories where, in
the absence of a registration statement or other special formalities, this is or may,
in the opinion of our Board, be unlawful or impracticable. However, no member
affected as a result of the foregoing shall be, or be deemed to be, a separate class
of members for any purpose whatsoever.
(ii) Power to dispose of the assets of our Company or any subsidiary
While there are no specific provisions in the Articles relating to the disposal
of the assets of our Company or any of its subsidiaries, our Board may exercise all
powers and do all acts and things which may be exercised or done or approved by
our Company and which are not required by the Articles or the Companies Law to
be exercised or done by our Company in general meeting, but if such power or act
is regulated by our Company in general meeting, such regulation shall not
invalidate any prior act of our Board which would have been valid if such
regulation had not been made.
(iii) Compensation or payments for loss of office
Payments to any present Director or past Director of any sum by way of
compensation for loss of office or as consideration for or in connection with his
retirement from office (not being a payment to which our Director is contractually
or statutorily entitled) must be approved by our Company in general meeting.
(iv) Loans and provision of security for loans to Directors
There are provisions in the Articles prohibiting the making of loans to
Directors and their close associates which are equivalent to provisions of Hong
Kong law prevailing at the time of adoption of the Articles.
Our Company shall not directly or indirectly make a loan to a Director or a
director of any holding company of our Company or any of their respective close
associates, enter into any guarantee or provide any security in connection with a
loan made by any person to a Director or a director of any holding company of
our Company or any of their respective close associates, or if any one or more of
our Directors hold (jointly or severally or directly or indirectly) a controlling
interest in another company, make a loan to that other company or enter into any
guarantee or provide any security in connection with a loan made by any person
to that other company.
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(v) Disclosure of interest in contracts with our Company or with any of its
subsidiaries
With the exception of the office of auditor of our Company, a Director may
hold any other office or place of profit with our Company in conjunction with his
office of Director for such period and, upon such terms as our Board may
determine, and may be paid such extra remuneration therefor (whether by way of
salary, commission, participation in profits or otherwise) in addition to any
remuneration provided for by or pursuant to any other Articles. A Director may
be or become a director or other officer or member of any other company in which
our Company may be interested, and shall not be liable to account to our
Company or the members for any remuneration or other benefits received by him
as a director, officer or member of such other company. Our Board may also
cause the voting power conferred by the shares in any other company held or
owned by our Company to be exercised in such manner in all respects as it thinks
fit, including the exercise thereof in favour of any resolution appointing our
Directors or any of them to be directors or officers of such other company.
No Director or intended Director shall be disqualified by his office from
contracting with our Company, either as vendor, purchaser or otherwise, nor shall
any such contract or any other contract or arrangement in which any Director is
in any way interested be liable to be avoided, nor shall any Director so contracting
or being so interested be liable to account to our Company for any profit realised
by any such contract or arrangement by reason only of such Director holding that
office or the fiduciary relationship thereby established. A Director who is, in any
way, materially interested in a contract or arrangement or proposed contract or
arrangement with our Company shall declare the nature of his interest at the
earliest meeting of our Board at which he may practically do so.
There is no power to freeze or otherwise impair any of the rights attaching to
any Share by reason that the person or persons who are interested directly or
indirectly therein have failed to disclose their interests to our Company.
A Director shall not vote (nor shall he be counted in the quorum) on any
resolution of our Board in respect of any contract or arrangement or other
proposal in which he or his close associate(s) is/are materially interested, and if he
shall do so his vote shall not be counted nor shall he be counted in the quorum for
that resolution, but this prohibition shall not apply to any of the following
matters namely:
(aa) the giving of any security or indemnity to our Director or his close
associate(s) in respect of money lent or obligations incurred or
undertaken by him or any of them at the request of or for the benefit
of our Company or any of its subsidiaries;
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(bb) the giving of any security or indemnity to a third party in respect of a
debt or obligation of our Company or any of our subsidiaries for which
our Director or his close associate(s) has/have himself/themselves
assumed responsibility in whole or in part whether alone or jointly
under a guarantee or indemnity or by the giving of security;
(cc) any proposal concerning an offer of shares or debentures or other
securities of or by our Company or any other company which our
Company may promote or be interested in for subscription or purchase,
where our Director or his close associate(s) is/are or is/are to be
interested as a participant in the underwriting or sub-underwriting of
the offer;
(dd) any proposal or arrangement concerning the benefit of employees of our
Company or our subsidiaries including (i) the adoption, modification or
operation of any employees’ share scheme or any share incentive or
share option scheme under which our Director or his close associate(s)
may benefit; or (ii) the adoption, modification or operation of a pension
fund or retirement, death or disability benefits scheme which relates
both to Directors, his close associates and employees of our Company or
any of its subsidiaries and does not provide in respect of any Director,
or his close associate(s), as such any privilege or advantage not generally
accorded to the class of persons to which such scheme or fund relates; or
(ee) any contract or arrangement in which our Director or his close
associate(s) is/are interested in the same manner as other holders of
shares or debentures or other securities of our Company by virtue only
of his/their interest in shares or debentures or other securities of our
Company.
(vi) Remuneration
Our Directors shall be entitled to receive, as ordinary remuneration for their
services, such sums as shall from time to time be determined by our Board, or our
Company in general meeting, as the case may be, such sum (unless otherwise
directed by the resolution by which it is determined) to be divided amongst our
Directors in such proportions and in such manner as they may agree or failing
agreement, equally, except that in such event any Director holding office for only
a portion of the period in respect of which the remuneration is payable shall only
rank in such division in proportion to the time during such period for which he
has held office. Our Directors shall also be entitled to be repaid all travelling,
hotel and other expenses reasonably incurred by them in attending any Board
meetings, committee meetings or general meetings or otherwise in connection with
the discharge of their duties as Directors. Such remuneration shall be in addition
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to any other remuneration to which a Director who holds any salaried
employment or office in our Company may be entitled by reason of such
employment or office.
Any Director who, at the request of our Company performs services which in
the opinion of our Board go beyond the ordinary duties of a Director may be paid
such special or extra remuneration (whether by way of salary, commission,
participation in profits or otherwise) as our Board may determine and such extra
remuneration shall be in addition to or in substitution for any ordinary
remuneration as a Director. An executive Director appointed to be a managing
director, joint managing director, deputy managing director or other executive
officer shall receive such remuneration (whether by way of salary, commission or
participation in profits or otherwise or by all or any of those modes) and such
other benefits (including pension and/or gratuity and/or other benefits on
retirement) and allowances as our Board may from time to time decide. Such
remuneration shall be in addition to his ordinary remuneration as a Director.
Our Board may establish, either on its own or jointly in concurrence or
agreement with other companies (being subsidiaries of our Company or with
which our Company is associated in business), or may make contributions out of
our Company’s monies to, such schemes or funds for providing pensions, sickness
or compassionate allowances, life assurance or other benefits for employees
(which expression as used in this and the following paragraph shall include any
Director or former Director who may hold or have held any executive office or
any office of profit with our Company or any of its subsidiaries) and former
employees of our Company and their dependents or any class or classes of such
persons.
In addition, our Board may also pay, enter into agreements to pay or make
grants of revocable or irrevocable, whether or not subject to any terms or
conditions, pensions or other benefits to employees and former employees and
their dependents, or to any of such persons, including pensions or benefits
additional to those, if any, to which such employees or former employees or their
dependents are or may become entitled under any such scheme or fund as
mentioned above. Such pension or benefit may, if deemed desirable by our Board,
be granted to an employee either before and in anticipation of, or upon or at any
time after, his actual retirement.
(vii)Appointment, retirement and removal
At any time or from time to time, our Board shall have the power to appoint
any person as a Director either to fill a casual vacancy on our Board or as an
additional Director to the existing Board subject to any maximum number of
Directors, if any, as may be determined by the members in general meeting. Any
Director appointed by our Board to fill a casual vacancy shall hold office only
until the first general meeting of our Company after his appointment and be
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subject to re-election at such meeting. Any Director appointed by our Board as an
addition to the existing Board shall hold office only until the next following
annual general meeting of our Company and shall then be eligible for re-election.
Any Director so appointed by our Board shall not be taken into account in
determining our Directors or the number of Directors who are to retire by
rotation at an annual general meeting.
At each annual general meeting, one third of our Directors for the time being
will retire from office by rotation. However, if the number of Directors is not a
multiple of three, then the number nearest to but not less than one third shall be
the number of retiring Directors. Our Directors who shall retire in each year will
be those who have been longest in the office since their last re-election or
appointment but as between persons who become or were last re-elected Directors
on the same day those to retire will (unless they otherwise agree among
themselves) be determined by lot.
No person, other than a retiring Director, shall, unless recommended by our
Board for election, be eligible for election to the office of Director at any general
meeting, unless notice in writing of the intention to propose that person for
election as a Director and notice in writing by that person of his willingness to be
elected shall have been lodged at the head office or at the registration office. The
period for lodgment of such notices will commence no earlier than the day after
the despatch of the notice of the meeting appointed for such election and end no
later than 7 days prior to the date of such meeting and the minimum length of the
period during which such notices to our Company may be given must be at least 7
days.
A Director is not required to hold any shares in our Company by way of
qualification nor is there any specified upper or lower age limit for Directors
either for accession to our Board or retirement therefrom.
A Director may be removed by an ordinary resolution of our Company
before the expiration of his term of office (but without prejudice to any claim
which such Director may have for damages for any breach of any contract
between him and our Company) and our Company may by ordinary resolution
appoint another in his place. Any Director so appointed shall be subject to
retirement by rotation provisions in the articles of association. The number of
Directors shall not be less than two.
In addition to the foregoing, the office of a Director shall be vacated:
(aa) if he resigns his office by notice in writing delivered to our Company at
the registered office or head office of our Company for the time being or
tendered at a meeting of our Board;
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(bb) if he dies or becomes of unsound mind as determined pursuant to an
order made by any competent court or official on the grounds that he is
or may be suffering from mental disorder or is otherwise incapable of
managing his affairs and our Board resolves that his office be vacated;
(cc) if, without special leave, he is absent from meetings of our Board for six
(6) consecutive months, and our Board resolves that his office is
vacated;
(dd) if he becomes bankrupt or has a receiving order made against him or
suspends payment or compounds with his creditors generally;
(ee) if he is prohibited from being a director by law;
(ff) if he ceases to be a director by virtue of any provision of law or is
removed from office pursuant to the Articles;
(gg) if he has been validly required by the stock exchange of the Relevant
Territory (as defined in the Articles) to cease to be a Director and the
relevant time period for application for review of or appeal against such
requirement has lapsed and no application for review or appeal has been
filed or is underway against such requirement; or
(hh) if he is removed from office by notice in writing served upon him signed
by not less than three-fourths in number (or, if that is not a round
number, the nearest lower round number) of our Directors (including
himself) then in office.
From time to time our Board may appoint one or more of its body to be
managing director, joint managing director, or deputy managing director or to
hold any other employment or executive office with our Company for such period
and upon such terms as our Board may determine and our Board may revoke or
terminate any of such appointments. Our Board may also delegate any of its
powers to committees consisting of such Director or Directors and other person(s)
as our Board thinks fit, and from time to time it may also revoke such delegation
or revoke the appointment of and discharge any such committees either wholly or
in part, and either as to persons or purposes, but every committee so formed shall,
in the exercise of the powers so delegated, conform to any regulations that may
from time to time be imposed upon it by our Board.
(viii) Borrowing powers
Pursuant to the Articles, our Board may exercise all the powers of our
Company to raise or borrow money, to mortgage or charge all or any part of the
undertaking, property and uncalled capital of our Company and, subject to the
Companies Law, to issue debentures, debenture stock, bonds and other securities
of our Company, whether outright or as collateral security for any debt, liability
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or obligation of our Company or of any third party. The provisions summarised
above, in common with the Articles of Association in general, may be varied with
the sanction of a special resolution of our Company.
(ix) Register of Directors and officers
Pursuant to the Companies Law, our Company is required to maintain at its
registered office a register of directors, alternate directors and officers which is
not available for inspection by the public. A copy of such register must be filed
with the Registrar of Companies in the Cayman Islands and any change must be
notified to the Registrar within 30 days of any change in such directors or officers,
including a change of the name of such directors or officers.
(x) Proceedings of our Board
Subject to the Articles, our Board may meet anywhere in the world for the
despatch of business and may adjourn and otherwise regulate its meetings as it
thinks fit. Questions arising at any meeting shall be determined by a majority of
votes. In the case of an equality of votes, the chairman of the meeting shall have a
second or casting vote.
(c) Alterations to the constitutional documents
To the extent that the same is permissible under Cayman Islands law and subject
to the Articles, the Memorandum and Articles of our Company may only be altered or
amended, and the name of our Company may only be changed by our Company by
special resolution.
(d) Variation of rights of existing shares or classes of shares
Subject to the Companies Law, if at any time the share capital of our Company is
divided into different classes of shares, all or any of the special rights attached to any
class of shares may (unless otherwise provided for by the terms of issue of the shares of
that class) be varied, modified or abrogated either with the consent in writing of the
holders of not less than three-fourths in nominal value of the issued shares of that class
or with the sanction of a special resolution passed at a separate general meeting of the
holders of the shares of that class. To every such separate general meeting the
provisions of the Articles relating to general meetings shall mutatis mutandis apply,
but so that the necessary quorum (other than at an adjourned meeting) shall be not less
than two persons together holding (or in the case of a shareholder being a corporation,
by its duly authorised representative) or representing by proxy not less than one-third
in nominal value of the issued shares of that class. Every holder of shares of the class
shall be entitled on a poll to one vote for every such share held by him, and any holder
of shares of the class present in person or by proxy may demand a poll.
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Any special rights conferred upon the holders of any shares or class of shares shall
not, unless otherwise expressly provided in the rights attaching to the terms of issue of
such shares, be deemed to be varied by the creation or issue of further shares ranking
pari passu therewith.
(e) Alteration of capital
Our Company may, by an ordinary resolution of its members, (a) increase its
share capital by the creation of new shares of such amount as it thinks expedient; (b)
consolidate or divide all or any of its share capital into shares of larger or smaller
amount than its existing shares; (c) divide its unissued shares into several classes and
attach thereto respectively any preferential, deferred, qualified or special rights,
privileges or conditions; (d) subdivide its shares or any of them into shares of an
amount smaller than that fixed by the Memorandum; and (e) cancel shares which, at
the date of the passing of the resolution, have not been taken or agreed to be taken by
any person and diminish the amount of its share capital by the amount of the shares so
cancelled; (f) make provision for the allotment and issue of shares which do not carry
any voting rights; (g) change the currency of denomination of its share capital; and (h)
reduce its share premium account in any manner authorised and subject to any
conditions prescribed by law.
Reduction of share capital — subject to the Companies Law and to confirmation
by the court, a company limited by shares may, if so authorised by its Articles of
Association, by special resolution, reduce its share capital in any way.
(f) Special resolution — majority required
In accordance with the Articles, a special resolution of our Company must be
passed by a majority of not less than three-fourths of the votes cast by such members
as, being entitled so to do, vote in person or by proxy or, in the case of members which
are corporations, by their duly authorised representatives or, where proxies are
allowed, by proxy at a general meeting of which notice specifying the intention to
propose the resolution as a special resolution has been duly given.
Under Companies Law, a copy of any special resolution must be forwarded to the
Registrar of Companies in the Cayman Islands within 15 days of being passed.
An ‘‘ordinary resolution’’, by contrast, is defined in the Articles to mean a
resolution passed by a simple majority of the votes of such members of our Company
as, being entitled to do so, vote in person or, in the case of members which are
corporations, by their duly authorised representatives or, where proxies are allowed,
by proxy at a general meeting of which not less than 14 clear days’ notice has been
given and held in accordance with the Articles. A resolution in writing signed by or on
behalf of all members shall be treated as an ordinary resolution duly passed at a
general meeting of our Company duly convened and held, and where relevant as a
special resolution so passed.
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(g) Voting rights (generally and on a poll) and right to demand a poll
Subject to any special rights, restrictions or privileges as to voting for the time
being attached to any class or classes of shares at any general meeting on a poll every
member present in person or by proxy or, in the case of a member being a corporation,
by its duly authorised representative shall have one vote for every share which is fully
paid or credited as fully paid registered in his name in the register of members of our
Company but so that no amount paid up or credited as paid up on a share in advance
of calls or instalments is treated for the foregoing purpose as paid up on the share, and
on a show of hands every member who is present in person (or, in the case of a member
being a corporation, by its duly authorised representative) or by proxy shall have one
vote. Notwithstanding anything contained in the Articles, where more than one proxy
is appointed by a member which is a Clearing House (as defined in the Articles) (or its
nominee(s)), each such proxy shall have one vote on a show of hands. On a poll, a
member entitled to more than one vote need not use all his votes or cast all the votes he
does use in the same way.
At any general meeting a resolution put to the vote of the meeting is to be decided
by poll save that the chairman of the meeting may, pursuant to the Listing Rules, allow
a resolution to be voted on by a show of hands. Where a show of hands is allowed,
before or on the declaration of the result of the show of hands, a poll may be demanded
by:
(i) at least two members present in person or, in the case of a member being a
corporation, by its duly authorised representative or by proxy for the time
being entitled to vote at the meeting; or
(ii) any member or members present in person or, in the case of a member being a
corporation, by its duly authorised representative or by proxy and
representing not less than one-tenth of the total voting rights of all the
members having the right to vote at the meeting; or
(iii) a member or members present in person or, in the case of a member being a
corporation, by its duly authorised representative or by proxy and holding
shares in our Company conferring a right to vote at the meeting being shares
on which an aggregate sum has been paid equal to not less than one-tenth of
the total sum paid up on all the shares conferring that right.
Should a Clearing House or its nominee(s), be a member of our Company, such
person or persons may be authorised as it thinks fit to act as its representative(s) at any
meeting of our Company or at any meeting of any class of members of our Company
provided that, if more than one person is so authorised, the authorisation shall specify
the number and class of shares in respect of which each such person is so authorised. A
person authorised in accordance with this provision shall be deemed to have been duly
authorised without further evidence of the facts and be entitled to exercise the same
rights and powers on behalf of the Clearing House or its nominee(s), as if such person
were an individual member including the right to vote individually on a show of hands.
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Where our Company has knowledge that any member is, under the Listing Rules,
required to abstain from voting on any particular resolution of our Company or
restricted to voting only for or only against any particular resolution of our Company,
any votes cast by or on behalf of such member in contravention of such requirement or
restriction shall not be counted.
(h) Annual general meetings
Our Company must hold an annual general meeting each year other than the year
of our Company’s adoption of the Articles. Such meeting must be held not more than
15 months after the holding of the last preceding annual general meeting, or such
longer period as may be authorised by the Stock Exchange at such time and place as
may be determined by our Board.
(i) Accounts and audit
Our Board shall cause proper books of account to be kept of the sums of money
received and expended by our Company, and the matters in respect of which such
receipt and expenditure take place, and of the assets and liabilities of our Company
and of all other matters required by the Companies Law necessary to give a true and
fair view of the state of our Company’s affairs and to show and explain its
transactions.
The books of accounts of our Company shall be kept at the head office of our
Company or at such other place or places as our Board decides and shall always be
open to inspection by any Director. No member (other than a Director) shall have any
right to inspect any account or book or document of our Company except as conferred
by the Companies Law or ordered by a court of competent jurisdiction or authorised
by our Board or our Company in general meeting.
Our Board shall from time to time cause to be prepared and laid before our
Company at its annual general meeting balance sheets and profit and loss accounts
(including every document required by law to be annexed thereto), together with a
copy of the Directors’ report and a copy of the auditors’ report not less than 21 days
before the date of the annual general meeting. Copies of these documents shall be sent
to every person entitled to receive notices of general meetings of our Company under
the provisions of the Articles together with the notice of annual general meeting, not
less than 21 days before the date of the meeting.
Subject to the rules of the stock exchange of the Relevant Territory (as defined in
the Articles), our Company may send summarised financial statements to shareholders
who has, in accordance with the rules of the stock exchange of the Relevant Territory
(as defined in the Articles), consented and elected to receive summarised financial
statements instead of the full financial statements. The summarised financial
statements must be accompanied by any other documents as may be required under
the rules of the stock exchange of the Relevant Territory (as defined in the Articles),
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and must be sent to the shareholders not less than 21 days before the general meeting
to those shareholders that have consented and elected to receive the summarised
financial statements.
Our Company shall appoint auditor(s) to hold office until the conclusion of the
next annual general meeting on such terms and with such duties as may be agreed with
our Board. The auditors’ remuneration shall be fixed by our Company in general
meeting or by our Board if authority is so delegated by the members.
The auditors shall audit the financial statements of our Company in accordance
with generally accepted accounting principles of Hong Kong, the International
Accounting Standards or such other standards as may be permitted by the Stock
Exchange.
(j) Notices of meetings and business to be conducted thereat
An annual general meeting of our Company must be called by at least 21 days’
notice in writing, and a general meeting of our Company, other than an annual general
meeting, shall be called by at least 14 days’ notice in writing. The notice shall be
exclusive of the day on which it is served or deemed to be served and of the day for
which it is given, and must specify the time, place and agenda of the meeting, and
particulars of the resolution(s) to be considered at that meeting, and, in the case of
special business, the general nature of that business.
Except where otherwise expressly stated, any notice or document (including a
share certificate) to be given or issued under the Articles shall be in writing, and may
be served by our Company on any member either personally or by sending it through
the post in a prepaid envelope or wrapper addressed to such member at his registered
address as appearing in our Company’s register of members or by leaving it at such
registered address as aforesaid or (in the case of a notice) by advertisement in the
newspapers. Any member whose registered address is outside Hong Kong may notify
our Company in writing of an address in Hong Kong which for the purpose of service
of notice shall be deemed to be his registered address. Where the registered address of
the member is outside Hong Kong, notice, if given through the post, shall be sent by
prepaid airmail letter where available. Subject to the Companies Law and the Listing
Rules, a notice or document may be served or delivered by our Company to any
member by electronic means to such address as may from time to time be authorised by
the member concerned or by publishing it on a website and notifying the member
concerned that it has been so published.
Although a meeting of our Company may be called by shorter notice than as
specified above, such meeting may be deemed to have been duly called if it is so agreed:
(i) in the case of a meeting called as an annual general meeting, by all members
of our Company entitled to attend and vote thereat; and
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(ii) in the case of any other meeting, by a majority in number of the members
having a right to attend and vote at the meeting, being a majority together
holding not less than 95% of the total voting rights at the meeting of all
members of our Company.
All business transacted at an extraordinary general meeting shall be deemed
special business and all business shall also be deemed special business where it is
transacted at an annual general meeting with the exception of the following, which
shall be deemed ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and the auditors;
(cc) the election of Directors in place of those retiring;
(dd) the appointment of auditors;
(ee) the fixing of the remuneration of our Directors and of the auditors;
(ff) the granting of any mandate or authority to our Board to offer, allot, grant
options over, or otherwise dispose of the unissued shares of our Company
representing not more than 20% in nominal value of its existing issued share
capital (or such other percentage as may from time to time be specified in the
rules of the Stock Exchange) and the number of any securities repurchased by
our Company since the granting of such mandate; and
(gg) the granting of any mandate or authority to our Board to repurchase
securities in our Company.
(k) Transfer of shares
Subject to the Companies Law, all transfers of shares shall be effected by an
instrument of transfer in the usual or common form or in such other form as our Board
may approve provided always that it shall be in such form prescribed by the Stock
Exchange and may be under hand or, if the transferor or transferee is a Clearing House
or its nominee(s), under hand or by machine imprinted signature or by such other
manner of execution as our Board may approve from time to time.
Execution of the instrument of transfer shall be by or on behalf of the transferor
and the transferee provided that our Board may dispense with the execution of the
instrument of transfer by the transferor or transferee or accept mechanically executed
transfers in any case in which it in its discretion thinks fit to do so, and the transferor
shall be deemed to remain the holder of the share until the name of the transferee is
entered in the register of members of our Company in respect thereof.
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Our Board may, in its absolute discretion, at any time and from time to time
remove any share on the principal register to any branch register or any share on any
branch register to the principal register or any other branch register.
Unless our Board otherwise agrees, no shares on the principal register shall be
removed to any branch register nor shall shares on any branch register be removed to
the principal register or any other branch register. All removals and other documents
of title shall be lodged for registration and registered, in the case of shares on any
branch register, at the relevant registration office and, in the case of shares on the
principal register, at the place at which the principal register is located.
Our Board may, in its absolute discretion, decline to register a transfer of any
share (not being a fully paid up share) to a person of whom it does not approve or any
share issued under any share option scheme upon which a restriction on transfer
imposed thereby still subsists, and it may also refuse to register any transfer of any
share to more than four joint holders or any transfer of any share (not being a fully
paid up share) on which our Company has a lien.
Our Board may decline to recognise any instrument of transfer unless a fee of such
maximum sum as the Stock Exchange may determine to be payable or such lesser sum
as our Board may from time to time require is paid to our Company in respect thereof,
the instrument of transfer is properly stamped (if applicable), is in respect of only one
class of share and is lodged at the relevant registration office or the place at which the
principal register is located accompanied by the relevant share certificate(s) and such
other evidence as our Board may reasonably require to show the right of the transferor
to make the transfer (and if the instrument of transfer is executed by some other person
on his behalf, the authority of that person so to do).
The register of members may, subject to the Listing Rules (as defined in the
Articles), be closed at such time or for such period not exceeding in the whole 30 days
in each year as our Board may determine.
Fully paid shares shall be free from any restriction with respect to the right of the
holder thereof to transfer such shares (except when permitted by the Stock Exchange)
and shall also be free from all liens.
(l) Power of our Company to purchase its own shares
Our Company is empowered by the Companies Law and the Articles to purchase
its own shares subject to certain restrictions and our Board may only exercise this
power on behalf of our Company subject to any applicable requirement imposed from
time to time by the Articles, code, rules or regulations issued from time to time by the
Stock Exchange and/or the Securities and Futures Commission of Hong Kong.
Where our Company purchases for redemption a redeemable Share, purchases not
made through the market or by tender shall be limited to a maximum price, and if
purchases are by tender, tenders shall be available to all members alike.
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(m) Power of any subsidiary of our Company to own shares in our Company
There are no provisions in the Articles relating to the ownership of shares in our
Company by a subsidiary.
(n) Dividends and other methods of distribution
Our Company in general meeting may declare dividends in any currency to be
paid to the members but no dividend shall be declared in excess of the amount
recommended by our Board.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide:
(i) all dividends shall be declared and paid according to the amounts paid up on
the shares in respect whereof the dividend is paid, although no amount paid
up on a share in advance of calls shall for this purpose be treated as paid up
on the share; and
(ii) all dividends shall be apportioned and paid pro rata in accordance with the
amount paid up on the shares during any portion or portions of the period in
respect of which the dividend is paid. Our Board may deduct from any
dividend or other monies payable to any member all sums of money (if any)
presently payable by him to our Company on account of calls, instalments or
otherwise.
Where our Board or our Company in general meeting has resolved that a dividend
should be paid or declared on the share capital of our Company, our Board may
resolve:
(aa) that such dividend be satisfied wholly or in part in the form of an allotment
of shares credited as fully paid up, provided that the members entitled
thereto will be entitled to elect to receive such dividend (or part thereof) in
cash in lieu of such allotment; or
(bb) that the members entitled to such dividend will be entitled to elect to receive
an allotment of shares credited as fully paid up in lieu of the whole or such
part of the dividend as our Board may think fit.
Upon the recommendation of our Board, our Company may by ordinary
resolution in respect of any one particular dividend of our Company determine that
it may be satisfied wholly in the form of an allotment of shares credited as fully paid up
without offering any right to members to elect to receive such dividend in cash in lieu
of such allotment.
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Any dividend, bonus or other sum payable in cash to the holder of shares may be
paid by cheque or warrant sent through the post addressed to the holder at his
registered address, but in the case of joint holders, shall be addressed to the holder
whose name stands first in the register of members of our Company in respect of the
shares at his address as appearing in the register, or addressed to such person and at
such address as the holder or joint holders may in writing so direct. Every such cheque
or warrant shall be made payable to the order of the person to whom it is sent and shall
be sent at the holder’s or joint holders’ risk and payment of the cheque or warrant by
the bank on which it is drawn shall constitute a good discharge to our Company. Any
one of two or more joint holders may give effectual receipts for any dividends or other
monies payable or property distributable in respect of the shares held by such joint
holders.
Whenever our Board or our Company in general meeting has resolved that a
dividend be paid or declared, our Board may further resolve that such dividend be
satisfied wholly or in part by the distribution of specific assets of any kind.
Our Board may, if it thinks fit, receive from any member willing to advance the
same, and either in money or money’s worth, all or any part of the money uncalled and
unpaid or instalments payable upon any shares held by him, and in respect of all or any
of the monies so advanced may pay interest at such rate (if any) not exceeding 20 % per
annum, as our Board may decide, but a payment in advance of a call shall not entitle
the member to receive any dividend subsequently declared or to exercise any other
rights or privileges as a member in respect of the share or the due portion of the shares
upon which payment has been advanced by such member before it is called up.
All dividends, bonuses or other distributions unclaimed for one year after having
been declared may be invested or otherwise made use of by our Board for the benefit of
our Company until claimed and our Company shall not be constituted a trustee in
respect thereof. All dividends, bonuses or other distributions unclaimed for six years
after having been declared may be forfeited by our Board and, upon such forfeiture,
shall revert to our Company.
No dividend or other monies payable by our Company on or in respect of any
share shall bear interest against our Company.
Our Company may exercise the power to cease sending cheques for dividend
entitlements or dividend warrants by post if such cheques or warrants remain uncashed
on two consecutive occasions or after the first occasion on which such a cheque or
warrant is returned undelivered.
(o) Proxies
Any member of our Company entitled to attend and vote at a meeting of our
Company is entitled to appoint another person as his proxy to attend and vote instead
of him. A member who is the holder of two or more shares may appoint more than one
proxy to represent him and vote on his behalf at a general meeting of our Company or
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at a class meeting. A proxy need not be a member of our Company and shall be entitled
to exercise the same powers on behalf of a member who is an individual and for whom
he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to
exercise the same powers on behalf of a member which is a corporation and for which
he acts as proxy as such member could exercise if it were an individual member. On a
poll or on a show of hands, votes may be given either personally (or, in the case of a
member being a corporation, by its duly authorised representative) or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the
appointor or of his attorney duly authorised in writing, or if the appointor is a
corporation, either under seal or under the hand of an officer or attorney duly
authorised. Every instrument of proxy, whether for a specified meeting or otherwise,
shall be in such form as our Board may from time to time approve, provided that it
shall not preclude the use of the two-way form. Any form issued to a member for use
by him for appointing a proxy to attend and vote at an extraordinary general meeting
or at an annual general meeting at which any business is to be transacted shall be such
as to enable the member, according to his intentions, to instruct the proxy to vote in
favour of or against (or, in default of instructions, to exercise his discretion in respect
of) each resolution dealing with any such business.
(p) Calls on shares and forfeiture of shares
Our Board may from time to time make such calls as it may think fit upon the
members in respect of any monies unpaid on the shares held by them respectively
(whether on account of the nominal value of the shares or by way of premium) and not
by the conditions of allotment thereof made payable at fixed times. A call may be made
payable either in one sum or by instalments. If the sum payable in respect of any call or
instalment is not paid on or before the day appointed for payment thereof, the person
or persons from whom the sum is due shall pay interest on the same at such rate not
exceeding 20% per annum as our Board shall fix from the day appointed for the
payment thereof to the time of actual payment, but our Board may waive payment of
such interest wholly or in part. Our Board may, if it thinks fit, receive from any
member willing to advance the same, either in money or money’s worth, all or any part
of the money uncalled and unpaid or instalments payable upon any shares held by him,
and in respect of all or any of the monies so advanced our Company may pay interest
at such rate (if any) not exceeding 20% per annum as our Board may decide.
If a member fails to pay any call or instalment of a call on the day appointed for
payment thereof, our Board may, at any time thereafter during such time as any part of
the call or instalment remains unpaid, serve not less than 14 days’ notice on him
requiring payment of so much of the call or instalment as is unpaid, together with any
interest which may have accrued and which may still accrue up to the date of actual
payment. The notice will name a further day (not earlier than the expiration of 14 days
from the date of the notice) on or before which the payment required by the notice is to
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
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be made, and it shall also name the place where payment is to be made. The notice shall
also state that, in the event of non-payment at or before the time appointed, the shares
in respect of which the call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in respect
of which the notice has been given may at any time thereafter, before the payment
required by the notice has been made, be forfeited by a resolution of our Board to that
effect. Such forfeiture will include all dividends and bonuses declared in respect of the
forfeited share and not actually paid before the forfeiture.
A person whose shares have been forfeited shall cease to be a member in respect of
the forfeited shares but shall, nevertheless, remain liable to pay to our Company all
monies which, at the date of forfeiture, were payable by him to our Company in respect
of the shares together with (if our Board shall in its discretion so require) interest
thereon from the date of forfeiture until payment at such rate not exceeding 20% per
annum as our Board may prescribe.
(q) Inspection of corporate records
Members of our Company have no general right under the Companies Law to
inspect or obtain copies of the register of members or corporate records of our
Company. However, the members of our Company will have such rights as may be set
forth in the Articles. The Articles provide that for so long as any part of the share
capital of our Company is listed on the Stock Exchange, any member may inspect any
register of members of our Company maintained in Hong Kong (except when the
register of member is closed) without charge and require the provision to him of copies
or extracts thereof in all respects as if our Company were incorporated under and were
subject to the Hong Kong Companies Ordinance (Cap 622).
An exempted company may, subject to the provisions of its articles of association,
maintain its principal register of members and any branch registers at such locations,
whether within or outside the Cayman Islands, as its directors may, from time to time,
think fit.
(r) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present
when the meeting proceeds to business, and continues to be present until the
conclusion of the meeting.
The quorum for a general meeting shall be two members present in person (or in
the case of a member being a corporation, by its duly authorised representative) or by
proxy and entitled to vote. In respect of a separate class meeting (other than an
adjourned meeting) convened to sanction the modification of class rights the necessary
quorum shall be two persons holding or representing by proxy not less than one-third
in nominal value of the issued shares of that class.
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(s) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles concerning the rights of minority members
in relation to fraud or oppression. However, certain remedies may be available to
members of our Company under Cayman Islands law, as summarised in paragraph 3(f)
of this Appendix.
(t) Procedures on liquidation
A resolution that our Company be wound up by the court or be wound up
voluntarily shall be a special resolution.
Subject to any special rights, privileges or restrictions as to the distribution of
available surplus assets on liquidation for the time being attached to any class or
classes of shares:
(i) if our Company shall be wound up and the assets available for distribution
amongst the members of our Company shall be more than sufficient to repay
the whole of the capital paid up at the commencement of the winding up,
then the excess shall be distributed pari passu amongst such members in
proportion to the amount paid up on the shares held by them respectively;
and
(ii) if our Company shall be wound up and the assets available for distribution
amongst the members as such shall be insufficient to repay the whole of the
paid-up capital, such assets shall be distributed so that, as nearly as may be,
the losses shall be borne by the members in proportion to the capital paid up,
on the shares held by them respectively.
In the event that our Company is wound up (whether the liquidation is voluntary
or compelled by the court) the liquidator may, with the sanction of a special resolution
and any other sanction required by the Companies Law divide among the members in
specie or kind the whole or any part of the assets of our Company whether the assets
shall consist of property of one kind or shall consist of properties of different kinds
and the liquidator may, for such purpose, set such value as he deems fair upon any one
or more class or classes of property to be divided as aforesaid and may determine how
such division shall be carried out as between the members or different classes of
members and the members within each class. The liquidator may, with the like
sanction, vest any part of the assets in trustees upon such trusts for the benefit of
members as the liquidator shall think fit, but so that no member shall be compelled to
accept any shares or other property upon which there is a liability.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
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(u) Untraceable members
Our Company may exercise the power to cease sending cheques for dividend
entitlements or dividend warrants by post if such cheques or warrants remain uncashed
on two consecutive occasions or after the first occasion on which such a cheque or
warrant is returned undelivered.
In accordance with the Articles, our Company is entitled to sell any of the shares
of a member who is untraceable if:
(i) all cheques or warrants, being not less than three in total number, for any
sum payable in cash to the holder of such shares have remained uncashed for
a period of 12 years;
(ii) upon the expiry of the 12 years and 3 months period (being the 3 months
notice period referred to in sub-paragraph (iii)), our Company has not during
that time received any indication of the existence of the member; and
(iii) our Company has caused an advertisement to be published in accordance
with the rules of the stock exchange of the Relevant Territory (as defined in
the Articles) giving notice of its intention to sell such shares and a period of
three months has elapsed since such advertisement and the stock exchange of
the Relevant Territory (as defined in the Articles) has been notified of such
intention. The net proceeds of any such sale shall belong to our Company
and upon receipt by our Company of such net proceeds, it shall become
indebted to the former member of our Company for an amount equal to such
net proceeds.
(v) Subscription rights reserve
Pursuant to the Articles, provided that it is not prohibited by and is otherwise in
compliance with the Companies Law, if warrants to subscribe for shares have been
issued by our Company and our Company does any act or engages in any transaction
which would result in the subscription price of such warrants being reduced below the
par value of the shares to be issued on the exercise of such warrants, a subscription
rights reserve shall be established and applied in paying up the difference between the
subscription price and the par value of such shares.
3. CAYMAN ISLANDS COMPANY LAW
Our Company was incorporated in the Cayman Islands as an exempted company on 10
March 2015 subject to the Companies Law. Certain provisions of Cayman Islands company
law are set out below but this section does not purport to contain all applicable
qualifications and exceptions or to be a complete review of all matters of the Companies
Law and taxation, which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
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(a) Company operations
As an exempted company, our Company must conduct its operations mainly
outside the Cayman Islands. Moreover, our Company is required to file an annual
return each year with the Registrar of Companies of the Cayman Islands and pay a fee
which is based on the amount of its authorised share capital.
(b) Share capital
In accordance with the Companies Law, a Cayman Islands company may issue
ordinary, preference or redeemable shares or any combination thereof. The Companies
Law provides that where a company issues shares at a premium, whether for cash or
otherwise, a sum equal to the aggregate amount or value of the premiums on those
shares shall be transferred to an account, to be called the ‘‘share premium account’’. At
the option of a company, these provisions may not apply to premiums on shares of that
company allotted pursuant to any arrangements in consideration of the acquisition or
cancellation of shares in any other company and issued at a premium. The Companies
Law provides that the share premium account may be applied by the company subject
to the provisions, if any, of its memorandum and articles of association, in such
manner as the company may from time to time determine including, but without
limitation, the following:
(i) paying distributions or dividends to members;
(ii) paying up unissued shares of the company to be issued to members as fully
paid bonus shares;
(iii) any manner provided in section 37 of the Companies Law;
(iv) writing-off the preliminary expenses of the company; and
(v) writing-off the expenses of, or the commission paid or discount allowed on,
any issue of shares or debentures of the company.
Notwithstanding the foregoing, the Companies Law provides that no distribution
or dividend may be paid to members out of the share premium account unless,
immediately following the date on which the distribution or dividend is proposed to be
paid, the company will be able to pay its debts as they fall due in the ordinary course of
business.
It is further provided by the Companies Law that, subject to confirmation by the
court, a company limited by shares or a company limited by guarantee and having a
share capital may, if authorised to do so by its articles of association, by special
resolution reduce its share capital in any way.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
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The Articles include certain protections for holders of special classes of shares,
requiring their consent to be obtained before their rights may be varied. The consent of
the specified proportions of the holders of the issued shares of that class or the
sanction of a resolution passed at a separate meeting of the holders of those shares is
required.
(c) Financial assistance to purchase shares of a company or its holding company
There are no statutory prohibitions in the Cayman Islands on the granting of
financial assistance by a company to another person for the purchase of, or
subscription for, its own, its holding company’s or a subsidiary’s shares. Therefore,
a company may provide financial assistance provided the directors of the company
when proposing to grant such financial assistance discharge their duties of care and
acting in good faith, for a proper purpose and in the interests of the company. Such
assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a
share capital may, if so authorised by its articles of association, issue shares which are
to be redeemed or are liable to be redeemed at the option of the company or a member
and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares
to be varied, subject to the provisions of the company’s articles of association, so as to
provide that such shares are to be or are liable to be so redeemed. In addition, such a
company may, if authorised to do so by its articles of association, purchase its own
shares, including any redeemable shares. Nonetheless, if the articles of association do
not authorise the manner and terms of purchase, a company cannot purchase any of its
own shares without the manner and terms of purchase first being authorised by an
ordinary resolution of the company. A company may not redeem or purchase its shares
unless they are fully paid. Furthermore, a company may not redeem or purchase any of
its shares if, as a result of the redemption or purchase, there would no longer be any
issued shares of the company other than shares held as treasury shares. In addition, a
payment out of capital by a company for the redemption or purchase of its own shares
is not lawful unless immediately following the date on which the payment is proposed
to be made, the company shall be able to pay its debts as they fall due in the ordinary
course of business.
Under Section 37A(1) the Companies Law, shares that have been purchased or
redeemed by a company or surrendered to the company shall not be treated as
cancelled but shall be classified as treasury shares if (a) the memorandum and articles
of association of the company do not prohibit it from holding treasury shares; (b) the
relevant provisions of the memorandum and articles of association (if any) are
complied with; and (c) the company is authorised in accordance with the company’s
articles of association or by a resolution of the directors to hold such shares in the
name of the company as treasury shares prior to the purchase, redemption or surrender
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-23 –
of such shares. Shares held by a company pursuant to section 37A(1) of the Companies
Law shall continue to be classified as treasury shares until such shares are either
cancelled or transferred pursuant to the Companies Law.
A Cayman Islands company may be able to purchase its own warrants subject to
and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. Thus there is no requirement under Cayman Islands law that a company’s
memorandum or articles of association contain a specific provision enabling such
purchases. The directors of a company may under the general power contained in its
memorandum of association be able to buy and sell and deal in personal property of all
kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company
and, in certain circumstances, may acquire such shares.
(e) Dividends and distributions
With the exception of sections 34 and 37A(7) of the Companies Law, there are no
statutory provisions relating to the payment of dividends. Based upon English case law
which is likely to be persuasive in the Cayman Islands, dividends may be paid only out
of profits. In addition, section 34 of the Companies Law permits, subject to a solvency
test and the provisions, if any, of the company’s memorandum and articles of
association, the payment of dividends and distributions out of the share premium
account (see sub-paragraph 2(n) of this Appendix for further details). Section
37A(7)(c) of the Companies Law provides that for so long as a company holds
treasury shares, no dividend may be declared or paid, and no other distribution
(whether in cash or otherwise) of the company’s assets (including any distribution of
assets to members on a winding up) may be made to the company, in respect of a
treasury share.
(f) Protection of minorities and shareholders’ suits
It can be expected that the Cayman Islands courts will ordinarily follow English
case law precedents (particularly the rule in the case of Foss v. Harbottle and the
exceptions thereto) which permit a minority member to commence a representative
action against or derivative actions in the name of the company to challenge:
(i) an act which is ultra vires the company or illegal;
(ii) an act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company; and
(iii) an irregularity in the passing of a resolution the passage of which requires a
qualified (or special) majority which has not been obtained.
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Where a company (not being a bank) is one which has a share capital divided into
shares, the court may, on the application of members thereof holding not less than one-
fifth of the shares of the company in issue, appoint an inspector to examine the affairs
of the company and, at the direction of the court, to report thereon.
Moreover, any member of a company may petition the court which may make a
winding up order if the court is of the opinion that it is just and equitable that the
company should be wound up.
In general, claims against a company by its members must be based on the general
laws of contract or tort applicable in the Cayman Islands or be based on potential
violation of their individual rights as members as established by a company’s
memorandum and articles of association.
(g) Disposal of assets
There are no specific restrictions in the Companies Law on the power of directors
to dispose of assets of a company, although it specifically requires that every officer of
a company, which includes a director, managing director and secretary, in exercising
his powers and discharging his duties must do so honestly and in good faith with a view
to the best interest of the company and exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.
(h) Accounting and auditing requirements
Section 59 of the Companies Law provides that a company shall cause proper
records of accounts to be kept with respect to (i) all sums of money received and
expended by the company and the matters with respect to which the receipt and
expenditure takes place; (ii) all sales and purchases of goods by the company and (iii)
the assets and liabilities of the company.
Section 59 of the Companies Law further states that proper books of account shall
not be deemed to be kept if there are not kept such books as are necessary to give a true
and fair view of the state of the company’s affairs and to explain its transactions.
If our Company keeps its books of account at any place other than at its
registered office or at any other place within the Cayman Islands, it shall, upon service
of an order or notice by the Tax Information Authority pursuant to the Tax
Information Authority Law (2013 Revision) of the Cayman Islands, make available, in
electronic form or any other medium, at its registered office copies of its books of
account, or any part or parts thereof, as are specified in such order or notice.
(i) Exchange control
There are no exchange control regulations or currency restrictions in effect in the
Cayman Islands.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-25 –
(j) Taxation
Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman
Islands, our Company has obtained an undertaking from the Governor-in-Cabinet:
(i) that no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits or income or gains or appreciation shall apply to our
Company or its operations; and
(ii) in addition, that no tax be levied on profits, income gains or appreciations or
which is in the nature of estate duty or inheritance tax shall be payable by our
Company:
(aa) on or in respect of the shares, debentures or other obligations of our
Company; or
(bb) by way of withholding in whole or in part of any relevant payment as
defined in section 6(3) of the Tax Concessions Law (2011 Revision).
The undertaking for our Company is for a period of twenty years from 24 March
2015.
The Cayman Islands currently levy no taxes on individuals or corporations based
upon profits, income, gains or appreciations and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to our
Company levied by the Government of the Cayman Islands save certain stamp duties
which may be applicable, from time to time, on certain instruments.
(k) Stamp duty on transfers
There is no stamp duty payable in the Cayman Islands on transfers of shares of
Cayman Islands companies save for those which hold interests in land in the Cayman
Islands.
(l) Loans to directors
The Companies Law contains no express provision prohibiting the making of
loans by a company to any of its directors. However, the Articles provide for the
prohibition of such loans under specific circumstances.
(m) Inspection of corporate records
The members of the company have no general right under the Companies Law to
inspect or obtain copies of the register of members or corporate records of the
company. They will, however, have such rights as may be set out in the company’s
articles of association.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-26 –
(n) Register of members
A Cayman Islands exempted company may maintain its principal register of
members and any branch registers in any country or territory, whether within or
outside the Cayman Islands, as the company may determine from time to time. The
Companies Law contains no requirement for an exempted company to make any
returns of members to the Registrar of Companies in the Cayman Islands. The names
and addresses of the members are, accordingly, not a matter of public record and are
not available for public inspection. However, an exempted company shall make
available at its registered office, in electronic form or any other medium, such register
of members, including any branch register of member, as may be required of it upon
service of an order or notice by the Tax Information Authority pursuant to the Tax
Information Authority Law (2013 Revision) of the Cayman Islands.
(o) Winding up
A Cayman Islands company may be wound up either by (i) an order of the court;
(ii) voluntarily by its members; or (iii) under the supervision of the court
The court has authority to order winding up in a number of specified
circumstances including where, in the opinion of the court, it is just and equitable
that such company be so wound up.
A voluntary winding up of a company occurs where the company so resolves by
special resolution that it be wound up voluntarily, or, where the company in general
meeting resolves that it be wound up voluntarily because it is unable to pay its debt as
they fall due; or, in the case of a limited duration company, when the period fixed for
the duration of the company by its memorandum or articles expires, or where the event
occurs on the occurrence of which the memorandum or articles provides that the
company is to be wound up. In the case of a voluntary winding up, such company is
obliged to cease to carry on its business from the commencement of its winding up
except so far as it may be beneficial for its winding up. Upon appointment of a
voluntary liquidator, all the powers of the directors cease, except so far as the company
in general meeting or the liquidator sanctions their continuance.
In the case of a members’ voluntary winding up of a company, one or more
liquidators shall be appointed for the purpose of winding up the affairs of the company
and distributing its assets.
As soon as the affairs of a company are fully wound up, the liquidator must make
a report and an account of the winding up, showing how the winding up has been
conducted and the property of the company has been disposed of, and thereupon call a
general meeting of the company for the purposes of laying before it the account and
giving an explanation thereof.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-27 –
When a resolution has been passed by a company to wind up voluntarily, the
liquidator or any contributory or creditor may apply to the court for an order for the
continuation of the winding up under the supervision of the court, on the grounds that
(i) the company is or is likely to become insolvent; or (ii) the supervision of the court
will facilitate a more effective, economic or expeditious liquidation of the company in
the interests of the contributories and creditors. A supervision order shall take effect
for all purposes as if it was an order that the company be wound up by the court except
that a commenced voluntary winding up and the prior actions of the voluntary
liquidator shall be valid and binding upon the company and its official liquidator.
For the purpose of conducting the proceedings in winding up a company and
assisting the court, there may be appointed one or more persons to be called an official
liquidator or official liquidators; and the court may appoint to such office such person
or persons, either provisionally or otherwise, as it thinks fit, and if more than one
persons are appointed to such office, the court shall declare whether any act required
or authorised to be done by the official liquidator is to be done by all or any one or
more of such persons. The court may also determine whether any and what security is
to be given by an official liquidator on his appointment; if no official liquidator is
appointed, or during any vacancy in such office, all the property of the company shall
be in the custody of the court.
(p) Reconstructions
Reconstructions and amalgamations are governed by specific statutory provisions
under the Companies Law whereby such arrangements may be approved by a majority
in number representing 75% in value of members or creditors, depending on the
circumstances, as are present at a meeting called for such purpose and thereafter
sanctioned by the courts. Whilst a dissenting member would have the right to express
to the court his view that the transaction for which approval is being sought would not
provide the members with a fair value for their shares, nonetheless the courts are
unlikely to disapprove the transaction on that ground alone in the absence of evidence
of fraud or bad faith on behalf of management and if the transaction were approved
and consummated the dissenting member would have no rights comparable to the
appraisal rights (i.e. the right to receive payment in cash for the judicially determined
value of their shares) ordinarily available, for example, to dissenting members of a
United States corporation.
(q) Take-overs
Where an offer is made by a company for the shares of another company and,
within four months of the offer, the holders of not less than 90% of the shares which
are the subject of the offer accept, the offeror may at any time within two months after
the expiration of the said four months, by notice require the dissenting members to
transfer their shares on the terms of the offer. A dissenting member may apply to the
court of the Cayman Islands within one month of the notice objecting to the transfer.
The burden is on the dissenting member to show that the court should exercise its
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-28 –
discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith
or collusion as between the offeror and the holders of the shares who have accepted the
offer as a means of unfairly forcing out minority members.
(r) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of
association may provide for indemnification of officers and directors, save to the
extent any such provision may be held by the court to be contrary to public policy, for
example, where a provision purports to provide indemnification against the
consequences of committing a crime.
4. GENERAL
Appleby, our Company’s legal adviser on Cayman Islands law, has sent to our
Company a letter of advice which summarises certain aspects of the Cayman Islands
company law. This letter, together with a copy of the Companies Law, is available for
inspection as referred to in the paragraph headed ‘‘Documents available for inspection’’ in
Appendix V. Any person wishing to have a detailed summary of Cayman Islands company
law or advice on the differences between it and the laws of any jurisdiction with which he is
more familiar is recommended to seek independent legal advice.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW
– III-29 –
A. FURTHER INFORMATION ABOUT OUR COMPANY
1. Incorporation of our Company
Our Company was incorporated in the Cayman Islands under the Companies Law
as an exempted company with limited liability on 10 March 2015. Our Company has
established its principal place of business in Hong Kong at 19th Floor, Prosperity
Tower, 39 Queen’s Road Central, Central, Hong Kong and has been registered with
the Registrar of Companies in Hong Kong as a non-Hong Kong company under Part
16 of the Companies Ordinance (Cap 622) on 30 March 2015. In connection with such
registration, our Company has appointed Mr. Li Chi Chung of 19th Floor, Prosperity
Tower, 39 Queen’s Road Central, Central, Hong Kong, as the authorised
representative of our Company for the acceptance of service of process and notices
on behalf of our Company in Hong Kong.
As our Company is incorporated in the Cayman Islands, it operates subject to the
Companies Law and its constitution comprising the Memorandum and the Articles. A
summary of various provisions of our Company’s constitution and certain relevant
aspects of the Companies Law is set out in Appendix III to this prospectus.
2. Changes in the share capital of our Company
(a) The authorised share capital of our Company as of the date of its
incorporation was HK$380,000 divided into 38,000,000 Shares of HK$0.01
each, of which one nil-paid Share was allotted and issued to the initial
subscriber and was transferred to Absolute Truth on 12 March 2015 at nil
consideration.
(b) On 23 June 2015, in consideration of Mr. Kelvin Tan and Mr. Peter Tan
transferred the entire issued share capital of Signmechanic Singapore to Sino
Promise (as a nominee of our Company), (i) our Company allotted and issued
999,999 new Shares, credited as fully paid, to Absolute Truth (as a nominee
of Mr. Kelvin Tan and Mr. Peter Tan); and (ii) the one nil-paid Share, which
was registered in the name of Absolute Truth, was credited as fully paid.
(c) Pursuant to the resolutions in writing of the sole Shareholder passed on 23
June 2015, the authorised share capital of our Company was increased from
HK$380,000 to HK$50,000,000 by the creation of an additional
4,962,000,000 Shares.
(d) Pursuant to the Capitalisation Issue, our Company will allot and issue
319,000,000 Shares to Absolute Truth.
(e) Immediately following completion of the Placing and the Capitalisation
Issue, the authorised share capital of our Company will be HK$50,000,000
divided into 5,000,000,000 Shares and the issued share capital of our
Company will be HK$4,000,000 divided into 400,000,000 Shares, all fully
paid or credited as fully paid and 4,600,000,000 Shares will remain unissued.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-1 –
(f) Save as aforesaid and as mentioned in the paragraph headed ‘‘Written
resolutions of the sole Shareholder passed on 23 June 2015’’ below, there has
been no alteration in the share capital of our Company since incorporation.
(g) Save as disclosed in this prospectus, our Directors do not have any present
intention to issue any part of the authorised but unissued share capital of our
Company and, without prior approval of the Shareholders at general
meeting, no issue of Shares will be made which would effectively alter the
control of our Company.
3. Written resolutions of the sole Shareholder passed on 23 June 2015
On 23 June 2015, written resolutions of the sole Shareholder were passed pursuant
to which, among others:
(a) the authorised share capital of our Company was increased from
HK$380,000 to HK$50,000,000 by the creation of an additional
4,962,000,000 Shares;
(b) our Company approved and adopted the Memorandum and the Articles to be
effective conditional on the Listing;
(c) conditional on (A) the Stock Exchange granting the listing of, and permission
to deal in, the Shares in issue and the Shares to be issued as mentioned herein
(including any Shares which may be issued pursuant to the Placing and the
Capitalisation Issue) and (B) the obligations of the Underwriters under the
Underwriting Agreement becoming unconditional and not being terminated
in accordance with the terms of such agreement or otherwise, in each case on
or before the date determined in accordance with the terms of the
Underwriting Agreement:
(i) the Placing was approved and our Directors were authorised to allot and
issue the Placing Shares; and
(ii) conditional upon the share premium amount of our Company being
credited as a result of the Placing, our Directors were authorised to
capitalise the amount of HK$3,190,000 from the amount standing to the
credit of the share premium account of our Company and applying such
sum to pay up in full at par 319,000,000 Shares for allotment and issue
to the person(s) whose name(s) appears on the register of members of
our Company at the close of business on 23 June 2015, pro-rata (or as
nearly as possible without involving fractions) to its/their then existing
shareholdings in our Company;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-2 –
(d) a general unconditional mandate was given to our Directors to allot, issue
and deal with (otherwise than by way of a rights issue or any scrip dividend
schemes or similar arrangements in accordance with the Articles of
Association or the Placing or the Capitalisation Issue) Shares with an
aggregate nominal amount not exceeding the sum of (i) 20% of the aggregate
nominal amount of the share capital of our Company in issue immediately
following completion of the Placing and the Capitalisation Issue; and (ii) the
nominal amount of the share capital of our Company repurchased by our
Company pursuant to the authority granted to our Directors as referred in
paragraph (e) below, 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 the Articles of Association or any laws applicable to
our Company to be held, or the passing of an ordinary resolution by our
Shareholders revoking or varying the authority given to our Directors,
whichever occurs first; and
(e) a general unconditional mandate was given to our Directors to exercise all
powers of our Company to repurchase Shares with an aggregate nominal
amount not exceeding 10% of the aggregate nominal amount of the share
capital of our Company in issue immediately following completion of the
Placing and the Capitalisation Issue, 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 the Articles of Association or
any laws applicable to our Company to be held, or the passing of an ordinary
resolution by our Shareholders revoking or varying the authority given to
our Directors, whichever occurs first.
4. Corporate reorganisation
Please refer to the section headed ‘‘History, Reorganisation and Group structure
— Reorganisation’’ in this prospectus for further details.
5. Changes in the share capital of subsidiaries of our Company
Our Company’s subsidiaries are referred to in the Accountant’s Report for our
Company, the text of which is set out in Appendix I to this prospectus. On 7 April
2015, an additional 750,000 shares in Signmechanic Singapore were allotted and issued
to each of Mr. Kelvin Tan and Mr. Peter Tan and the shares were issued at a cash
payment of S$750,000 each. On 23 June 2015, 9 shares in Sino Promise were allotted
and issued to our Company in the consideration of 2,000,000 shares of Signmechanic
Singapore transferred to Sino Promise under the instruction of our Company. Save for
the aforesaid, there has been no alteration in the share capital of any subsidiary of our
Company within the two years immediately preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-3 –
6. Particulars of Subsidiaries
As at the Latest Practicable Date, our Group has two subsidiaries, namely Sino
Promise and Signmechanic Singapore. Set out below is a summary of the corporate
information of Sino Promise and Signmechanic Singapore:
(a) Sino Promise
Date of incorporation: 12 January 2015
Registered Office: P.O. Box 957,
Offshore Incorporations Centre,
Road Town,
Tortola, British Virgin Islands
Nature: Limited liability company
Principle business activities: Investment holding
Issued share capital: US$10.00
Paid-up share capital: US$10.00
Shareholder: Our Company
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-4 –
(b) Signmechanic Singapore
Date of incorporation: 2 September 1997
Registered Office: 424 Tagore Industrial Avenue, Sindo
Industrial Estate, Singapore 787807
Nature: Limited liability company
Principle business activities: Design, fabrication, installation and
maintenance of signage products
Issued share capital: S$2,000,000
Paid-up share capital: S$2,000,000
Shareholder: Sino Promise
7. Repurchase by our Company of our own securities
This paragraph contains information required by the Stock Exchange to be
included in this prospectus concerning the repurchase by our Company of its own
securities.
(a) Provisions of the GEM Listing Rules
The GEM Listing Rules permit a company listed on GEM to repurchase its
securities on GEM subject to certain restrictions, details of which are summarised
below:
(i) Shareholders’ approval
All proposed repurchases of securities (which must be fully paid up in
the case of shares) by a company listed on GEM must be approved in
advance by an ordinary resolution of the shareholders, either by way of
general mandate or by specific approval of a particular transaction.
Note: Pursuant to a resolution in writing passed by the sole Shareholder on 23 June
2015, a general unconditional mandate was given to our Directors authorising
any repurchase by our Company of Shares on GEM or on any other stock
exchange on which the securities of our Company may be listed and which is
recognised by the SFC and the Stock Exchange for this purpose, of up to 10% of
the aggregate nominal amount of the share capital of our Company immediately
following completion of the Placing and the Capitalisation Issue, such mandate
to expire at 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 the Articles or applicable laws to be held, or the passing of an
ordinary resolution by Shareholders in general meeting revoking or varying the
authority given to our Directors, whichever occurs first.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-5 –
(ii) Source of funds
Repurchases must be funded out of funds legally available for the
purpose in accordance with a company’s constitutive documents and the laws
of the jurisdiction in which the company is incorporated or otherwise
established. A listed company may not purchase its own securities on GEM
for a consideration other than cash or for settlement otherwise than in
accordance with the trading rules of the Stock Exchange from time to time.
Under the Cayman Islands laws, any repurchase by our Company may be
made out of profits of our Company, out of the share premium account or
out of the proceeds of a fresh issue of Shares made for the purpose of the
repurchase or, if authorised by the Articles and subject to the Companies
Law, out of capital. Any premium payable on a redemption or purchase over
the par value of the Shares to be repurchased must be provided for out of
either or both of the profits or the share premium account of our Company
or, if authorised by the Articles and subject to the Companies Law, out of
capital.
(b) Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and our
Shareholders for our Directors to have general authority from our Shareholders
to enable our Company to repurchase Shares in the market. Such repurchases
may, depending on market conditions and funding arrangements at the time, lead
to an enhancement of the net asset value of our Company and/or earnings per
Share and will only be made if our Directors believe that such repurchases will
benefit our Company and our Shareholders.
(c) Funding of repurchases
In repurchasing securities, our Company may only apply funds legally
available for such purpose in accordance with the Memorandum and Articles and
the applicable laws of the Cayman Islands.
On the basis of the current financial position of our Group as disclosed in
this prospectus and taking into account the current working capital position of
our Group, our Directors consider that, if the Repurchase Mandate is to be
exercised in full, it might have a material adverse effect on the working capital
and/or the gearing position of our Group as compared with the position disclosed
in this prospectus. However, our Directors do not propose to exercise the
Repurchase Mandate to such an extent as would, in the circumstances, have a
material adverse effect on the working capital requirements of our Group or the
gearing levels which in the opinion of our Directors are from time to time
appropriate for our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-6 –
The exercise in full of the Repurchase Mandate, on the basis of 400,000,000
Shares in issue immediately after the Listing, would result in up to 40,000,000
Shares being repurchased by our Company during the period in which the
Repurchase Mandate remains in force.
(d) General
None of our Directors nor, to the best of their knowledge and belief having
made all reasonable enquiries, any of their associates currently intends to sell any
Shares to our Company or its subsidiaries.
Our Directors have undertaken to the Stock Exchange that, so far as the
same may be applicable, they will exercise the Repurchase Mandate in accordance
with the GEM Listing Rules and the applicable laws of the Cayman Islands.
If, as a result of a securities repurchase, a shareholder’s proportionate
interest in the voting rights of our Company is increased, such increase will be
treated as an acquisition for the purpose of the Takeovers Code. Accordingly, a
shareholder or a group of shareholders acting in concert could obtain or
consolidate control of our Company and become obliged to make a mandatory
offer in accordance with rule 26 of the Takeovers Code. Save as aforesaid, our
Directors are not aware of any consequences which would arise under the
Takeovers Code as a consequence of any repurchases pursuant to the Repurchase
Mandate.
No connected person has notified our Company that he has a present
intention to sell Shares to our Company, or has undertaken not to do so if the
Repurchase Mandate is exercised.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of material contracts
The following contracts (not being contracts in the ordinary course of business of
our Group) have been entered into by members of our Group within the two years
immediately preceding the date of this prospectus and are or may be material:
(a) the option to purchase (commercial) dated 14 June 2013 and granted by
Signmechanic Singapore for a consideration of S$90,000 and accepted by
Sunland Development Pte Ltd on 5 August 2013, in relation to an option to
purchase the property situated at 2B Mandai Estate #01-01, Singapore
729929 for an aggregate consideration of S$9,000,000;
(b) the agreement for sale and purchase of shares in Signmechanic Singapore
dated 23 June 2015 and entered into between our Company, Mr. Kelvin Tan
and Mr. Peter Tan, pursuant to which our Company agreed to acquire the
entire shareholding interests in Signmechanic Singapore from Mr. Kelvin
Tan and Mr. Peter Tan in the consideration of HK$38,106,550, which was
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-7 –
satisfied our Company by (i) the allotment and issue of 999,999 Shares,
credited as fully paid on the date of the agreement, to Mr. Kelvin Tan and
Mr. Peter Tan (or their nominee); and (ii) the crediting of the one nil-paid
Share, which was registered in the name of Reid Services Limited as the
initial subscriber of our Company and was subsequently transferred to
Absolute Truth, as fully paid;
(c) the Underwriting Agreement;
(d) the Deed of Indemnity; and
(e) the Deed of Non-competition.
2. Intellectual property rights
(a) As at the Latest Practicable Date, our Group had applied for registration of
the following trademark which is material to the business of our Group:
Trademark Class
Place of
application
Application/
Registration
number Applicant Application date
37 Singapore 40201504904X Signmechanic
Singapore
24 March 2015
37 Hong Kong 303345930 Signmechanic
Singapore
25 March 2015
16 Hong Kong 303350600 Signmechanic
Singapore
27 March 2015
Notes:
(1) Class 37 : Construction of signs; erection of signs; painting of signs; sign repair;
installation and maintenance of signs; installation and maintenance of road signs;
installation and maintenance of traffic signs; advisory and consultancy services relating
to the aforesaid services.
(2) Class 16 : Printed matter; printed publications; share certificates; share certificate paper.
(b) As at the Latest Practicable Date, we had registered the following domain
name which is material to the business of our Group:
Domain name Expiry date Registrant
www.kpmholding.com 9 March 2020 Signmechanic
Singapore
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-8 –
C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
1. Directors
(a) Interest of Directors and the chief executive of our Company in Shares
Immediately following completion of the Placing and the Capitalisation
Issue, the interests or short positions of each of our Directors and the chief
executive in the share capital, underlying shares and debentures of our Company
and our associated corporations (within the meaning of Part XV of the SFO)
which, once the Shares are listed, will have to be notified to our Company and the
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which he is taken or deemed to have taken under
such provisions of the SFO) or which will be required, pursuant to Section 352 of
the SFO, to be entered in the register required to be kept therein or which, once
the Shares are listed, will be required pursuant to Rules 5.46 to 5.67 of the GEM
Listing Rules to be notified to our Company and the Stock Exchange are set out
as follows:
Name
Long/Short
position
Capacity and nature of
interests
Number of
Shares
Percentage of
shareholding in
our Company
Mr. Kelvin Tan Long Interest of a controlled
corporation
300,000,000
(Note 1)
75%
Mr. Peter Tan Long Interest of a controlled
corporation
300,000,000
(Note 2)
75%
Notes:
(1) Mr. Kelvin Tan is deemed to be interested in the Shares held by Absolute Truth as
Absolute Truth is owned as to 50% by Mr. Kelvin Tan and 50% by Mr. Peter Tan.
(2) Mr. Peter Tan is deemed to be interested in the Shares held by Absolute Truth as
Absolute Truth is owned as to 50% by Mr. Peter Tan and 50% by Mr. Kelvin Tan.
(b) Particulars of service contracts
Each of the Executive Directors has entered into a service contract with our
Company which will become effective on the Listing Date. The terms and
conditions of each of such service contracts are similar in all material respects.
The service contracts are initially for a fixed term of three years commencing from
the Listing Date and will continue thereafter until terminated by not less than
three months’ notice in writing served by either party on the other. Each of our
Executive Directors is entitled to a basic salary set out below (subject to an annual
increment at the discretion of our Directors) and a discretionary bonus. An
Executive Director is required to abstain from voting and is not counted in the
quorum in respect of any resolution of the Directors regarding the amount of the
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-9 –
monthly salary and the discretionary bonus payable to him. The annual
remuneration payable to the Executive Directors under each of the service
contracts are as follows:
Name Amount
Mr. Kelvin Tan S$150,000
Mr. Peter Tan S$150,000
The Executive Directors are entitled to a bonus in respect of each financial
year of our Company in an amount to be determined by the Board in its absolute
discretion.
Each of the Independent Non-Executive Directors has entered into a letter of
appointment with our Company. The terms and conditions of each of such letters
of appointment are similar in all material respects. Each of the Independent Non-
Executive Directors is appointed with an initial term of two years commencing
from the Listing Date subject to termination in certain circumstances as stipulated
in the relevant letters of appointment. The annual remuneration payable to the
Independent Non-Executive Directors under each of the letters of appointment
are as follows:
Name Amount
Mr. Oh Eng Bin S$21,066
Mr. Tan Kiang Hua S$21,066
Mdm. Kow Yuen-Ting S$21,066
Save as disclosed above, none of our Directors has or is proposed to have any
service contract with our Company or any of its subsidiaries (other than contracts
expiring or determinable by the employer within one year without payment of
compensation other than statutory compensation).
Remuneration of our Directors
The aggregate remuneration paid by our Company to our Directors in
respect of each of the two financial years ended 31 December 2014 were
approximately S$0.3 million and S$0.3 million respectively.
Pursuant to the current arrangements, it is estimated that an aggregate
amount of approximately S$0.3 million (excluding discretionary bonus, if
any) will be paid to our Directors as remuneration for the year ending 31
December 2015.
Our Company’s policy concerning the remuneration of our Directors is
that the amount of remuneration is determined by reference to the relevant
Director’s experience, workload and the time devoted to our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –
2. Substantial Shareholders
So far as our Directors are aware, immediately following completion of the
Placing and the Capitalisation Issue, in addition to the interests disclosed under the
section headed ‘‘Further information about our Directors and Substantial
Shareholders — Directors’’ in this Appendix IV above, the persons (not being a
director or chief executive of our Company) who will have interests or short positions
in the Shares and underlying Shares which are required to be disclosed to our
Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part
XV of the SFO are as follows:
Name
Capacity and
nature of interests
Number of
Shares held
Percentage of
shareholding
Absolute Truth Beneficial owner 300,000,000 75%
3. Interest in customers of our Group
As at the Latest Practicable Date, so far as our Directors were aware, no Director
or their respective associates or Shareholder (which to the knowledge of our Directors
owns more than 5% of the issued share capital of our Company) had any interest in the
five largest customers of our Group.
4. Related party transactions
Our Group entered into the related party transactions within the two years
immediately preceding the date of this prospectus as mentioned in Note 32 of the
Accountant’s Report set out in Appendix I to this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-11 –
D. OTHER INFORMATION
1. Estate duty, tax and other indemnities
Each of Mr. Kelvin Tan, Mr. Peter Tan and Absolute Truth (collectively, the
‘‘Indemnifiers’’) and our Company entered into the Deed of Indemnity referred to in
the paragraph headed ‘‘Summary of material contracts’’ in the section headed ‘‘Further
information about the Business’’ of this Appendix, under which the Indemnifiers have
given joint and several indemnities in favour of our Group in respect of, among other
things, the amount of any and all taxation falling on any member of our Group
resulting from or by reference to any income, profits, gains earned, accrued or received
on or before the Listing Date or any event or transaction entered into or occurring on
or before the Listing Date whether alone or in conjunction with any circumstances
whenever occurring and whether or not such taxation is chargeable against or
attributable to any other person, firm or company.
The indemnity contained above shall not apply:
(i) to the extent that full provision or reserve has been made for such taxation in
the audited accounts of our Group or the audited accounts of the relevant
member of our Group for each of the two financial years ended 31 December
2013 and 31 December 2014, as set out in Appendix I to this prospectus; or
(ii) to the extent that such taxation or liability would not have arisen but for
some act or omission of, or transaction entered into by any member of our
Group (whether alone or in conjunction with some other act, omission or
transaction, whenever occurring) otherwise than in the course of normal day
to day operations of that company or carried out, made or entered into
pursuant to a legally binding commitment created on or before the Listing
Date;
(iii) to the extent that any provision or reserve made for taxation in the audited
accounts of any member of our Group for each of the two financial years
ended 31 December 2013 and 31 December 2014 which is finally established
to be an over-provision or an excessive reserve provided that the amount of
any such provision or reserve applied pursuant to the Deed of Indemnity to
reduce the Indemnifiers’ liability in respect of taxation shall not be available
in respect of any such liability arising thereafter; or
(iv) to the extent that such taxation liability or claim arises or is incurred as a
result of the imposition of taxation as a consequence of any retrospective
change in the laws, rules or regulations or the interpretation or practice
thereof by the Inland Revenue Department in Hong Kong, the taxation
authority in Singapore or any other relevant authority (whether in Hong
Kong, Singapore, or any part of the world) coming into force after the
Listing Date or to the extent that such taxation claim arises or is increased by
an increase in rates of taxation after the Listing Date with retrospective
effect.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –
Under the Deed of Indemnity, the Indemnifiers have also given indemnities infavour of our Group whereby they would jointly and severally indemnify each memberof our Group against, among others, all claims, actions, demands, proceedings,judgments, losses, liabilities, damages, costs, charges, fees, expenses and fines ofwhatever nature suffered or incurred by any member of our Group (i) as a result ofdirectly or indirectly or in connection with, or in consequence of any non-compliancewith or breach of any applicable laws, rules or regulations of any jurisdiction by anymember of our Group on or before the Listing Date; (ii) as a result of directly orindirectly or in connection with any litigation, proceeding, claim, investigation,inquiry, enforcement proceeding or process by any governmental, administrative orregulatory body which (a) any member of our Group and/or their respective directorsor any of them is/are involved; and/or (b) arises due to some act or omission of, ortransaction voluntarily effected by, our Group or any member of our Group (whetheralone or in conjunction with some other act, omission or transaction) on or before theListing Date.
The indemnity contained above shall not apply to the extent that provision hasbeen made for such claim in the audited accounts of our Group or the audited accountsof any member of our Group for each of the two financial years ended 31 December2013 and 31 December 2014.
Our Directors have been advised that no material liability for estate duty is likelyto fall on any member of our Group in the Cayman Islands, Hong Kong and otherjurisdictions in which the companies comprising our Group are incorporated.
2. Litigation
Save as disclosed in the section headed ‘‘Business — Legal proceedings’’ in thisprospectus, no member of our Group is engaged in any litigation or arbitration ofmaterial importance and no litigation or claim of material importance is known to ourDirectors to be pending or threatened by or against any member of our Group whichwould have a material adverse effect on our business, result of operations or financialconditions.
3. Sole Sponsor
Grand Vinco Capital Limited has made an application on behalf of our Companyto the Stock Exchange for listing of, and permission to deal in, the Shares in issue andShares to be issued as mentioned herein.
The Sole Sponsor is independent from our Company pursuant to Rule 6A.07 ofthe GEM Listing Rules.
The sponsor’s fees payable by us in respect of Vinco Capital’s services as solesponsor for the Listing is HK$4.6 million (excluding any disbursements).
4. Preliminary expenses
The preliminary expenses of our Company incurred or proposed to be incurredare approximately US$6,000 and are payable by our Company.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –
5. Promoter
Our Company has no promoter. Save as disclosed in this prospectus, within the
two years preceding the date of this prospectus, no cash, securities or other benefit had
been paid, allotted or given, nor are any such cash, securities or other benefit intended
to be paid, allotted or given, to the promoter of our Company in connection with the
Placing or the related transactions described in this prospectus.
6. Qualifications of experts
The following are the qualifications of the experts who have given opinion or
advice which are contained in this prospectus:
Name of expert Qualification
Vinco Capital Licensed to conduct Type 1 (dealing in
securities) and Type 6 (advising on
corporate finance) regulated activities under
the SFO
Deloitte Touche Tohmatsu Certified Public Accountants
LPP Law Corporation Legal adviser to our Company as to
Singapore laws
Appleby Legal adviser to our Company as to Cayman
Islands laws
7. Consents of experts
Each of the experts referred to under the heading ‘‘Qualifications of experts’’ of
this Appendix IV has given and has not withdrawn its written consent to the issue of
this prospectus with the inclusion of its report and/or letter and/or the references to its
name included herein in the form and context in which they are respectively included.
8. Selling Shareholder
The particulars of the Selling Shareholder are set out as follow:
Name: Absolute Truth
Place of incorporation: British Virgin Islands
Date of incorporation: 2 January 2015
Registered office: P.O. Box 957, Offshore Incorporations
Centre, Road Town, Tortola, British Virgin
Islands
Number of Sale Shares to be sold: 20,000,000 Shares
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –
9. Compliance adviser
In accordance with the requirements of the GEM Listing Rules, our Company will
appoint the Sole Sponsor as our compliance adviser to provide advisory services to our
Company to ensure compliance with the GEM Listing Rules for a period commencing
on the Listing Date and ending on the date on which our Company complies with Rule
18.03 of the GEM Listing Rules in respect of its financial results for the second full
year commencing after the Listing Date or until the agreement is terminated,
whichever is the earlier.
10. Agency fees or commission received
The Underwriters will receive an underwriting commission, and the Sole Sponsor
will receive a documentation/advisory fee, as referred to under the section headed
‘‘Underwriting — Commission and expenses’’ in this prospectus.
11. Disclaimers
Save as disclosed in this prospectus:
(a) none of our Directors nor any of the persons whose names are listed in the
paragraph headed ‘‘Other information — Consents of experts’’ in this
Appendix IV is interested in the promotion of our Company, or in any assets
which have been within the two years immediately preceding the issue of this
prospectus, or are proposed to be, acquired or disposed of by or leased to any
member of our Group nor will any Director apply for the Placing Shares
either in his/her own name or in the name of a nominee;
(b) none of our Directors nor any of the persons whose names are listed in the
paragraph headed ‘‘Other information — Consents of experts’’ in this
Appendix IV is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to
the business of our Group; and
(c) save in connection with the Underwriting Agreement, none of the parties
whose names are listed in the paragraph headed ‘‘Other information —
Consents of experts’’ in this Appendix IV: (i) is interested legally or
beneficially in any securities of any member of us; or (ii) has any right
(whether legally enforceable or not) to subscribe for or to nominate persons
to subscribe for securities in any member of us.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –
12. Miscellaneous
Save as disclosed in this prospectus:
(a) within the two years immediately preceding the date of this prospectus:
(i) no share or loan capital of our Company or any of our subsidiaries has
been issued or agreed to be issued fully or partly paid either for cash or
for a consideration other than cash;
(ii) no commissions, discounts, brokerages or other special terms have been
granted in connection with the issue or sale of any capital of our
Company or any of our subsidiaries; and
(iii) no commission has been paid or payable (excluding commission payable
to sub-underwriters) for subscription, agreeing to subscribe, procuring
subscription or agreeing to procure subscription of any shares in our
Company;
(b) no founders, management or deferred shares of our Company or any of our
subsidiaries have been issued or agreed to be issued;
(c) no share or loan capital of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option;
(d) none of the experts referred to under the paragraph headed ‘‘Consents of
experts’’ in the section headed ‘‘Other information’’ of this Appendix IV:
(i) is interested beneficially or non-beneficially in any shares in any member
of our Group; or
(ii) has any right or option (whether legally enforceable or not) to subscribe
for or to nominate persons to subscribe for any securities in any member
of our Group;
(e) there has not been any interruption in the business of our Group which has
had a material adverse effect on the financial position of our Group in the 24
months preceding the date of this prospectus;
(f) no company within our Group is presently listed on any stock exchange or
traded on any trading system;
(g) our Company has no outstanding convertible debt securities;
(h) all necessary arrangements have been made to enable the Shares to be
admitted into CCASS for clearing and settlement;
(i) there are no arrangements in existence under which future dividends are to be
or agreed to be waived; and
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –
(j) as at the Latest Practicable Date, there is no restriction affecting the
remittance of profits or repatriation of capital of our Company into Hong
Kong from outside Hong Kong.
13. Binding effect
This prospectus shall have the effect, if an application is made in pursuance
hereof, of rendering all persons concerned bound by all of the provisions (other than
the penalty provisions) of sections 44A and 44B of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Cap 32) so far as applicable.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were the written consents referred to in the
paragraph headed ‘‘Other information — Consents of experts’’ of Appendix IV to this
prospectus, a statement of the particulars of the Selling Shareholder and copies of the
material contracts referred to in the paragraph headed ‘‘Further particulars about our
Business — Summary of material contracts’’ of Appendix IV to this prospectus.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the offices of
Michael Li & Co. at 19th Floor, Prosperity Tower, 39 Queen’s Road Central, Central, Hong
Kong, during normal business hours up to and including the date which is 14 days from the
date of this prospectus:
(a) the Memorandum and Articles;
(b) the Accountant’s Report of our Group from Deloitte Touche Tohmatsu, the text
of which is set out in Appendix I to this prospectus;
(c) the audited financial statements of our Group for each of the two years ended 31
December 2014;
(d) the report on unaudited pro forma financial information from Deloitte Touche
Tohmatsu, the text of which is set out in Appendix II to this prospectus;
(e) the letter prepared by Appleby summarising certain aspects of Cayman Islands
company law referred to in Appendix III to this prospectus;
(f) the Companies Law;
(g) the service contracts and letters of appointment referred to in the paragraph
headed ‘‘Further information about our Directors and Substantial Shareholders
— Particulars of service contracts’’ in Appendix IV to this prospectus;
(h) the material contracts referred to in the section headed ‘‘Further information
about our Business — Summary of material contracts’’ in Appendix IV to this
prospectus;
(i) the written consents referred to in the paragraph headed ‘‘Other information —
Consents of experts’’ in Appendix IV to this prospectus; and
(j) the statement of the name, description and address of the Selling Shareholder.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAROF COMPANIES AND AVAILABLE FOR INSPECTION
– V-1 –