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First of all, the Restricted Offer Shares are being sold in the company. Restricted shares defines that the class of securities with the certain restrictions which facilitate them to be incurred less value in the open market. Besides that, the restricted shares normally offer to the workers of the company who is issuing the shares and will limit or not involved the voting right of the shareholders and in the dividend participation. It means that no dividend will be allotted to the shareholders or the amount of dividend they get in the end will be limited compared to the past.
To be continued, the number of 1,065,174,516 of shares are being sold in the period at RM1.76, which it is payable upon the full application. The company, IOIC, IOI Corporation Berhad is doing the selling of securities.
Reliance on the Directors and key management personnel: The fact shows that employees depend to an important level of upon the experience, capabilities, competency and efforts of the Directors and the key management team which disclosed in Section 6 of the Prospectus. Hence, there also have our Executive Chairman, Tan Sri Lee, who have ample leadership skills and experience also disclosed in the Section 6.12(II) of the Prospectus. Due to his talent, he makes the Group become one of the property group In Malaysia.
Tan Sri Lee is also the Executive Chairman of IOIC. His position in IOIC and IOIPG have the potential to influence the business operation of the Group in event his duties are not performed effectively and in a timely manner. Nevertheless, the management of IOIPG trusts that Tan Sri Lee able to perform his duties effectively because our Executive Chairman already have many experiences during the period that the IOIP was a listed company on the Main Market of Bursa Securities. A good, dedicated and separate group of management teams for both businesses, supports the Tan Sri Lee, all of whom that have a wealth of experience in the plantation of property industry.
However, any sudden loss of the services of the Director or the key personnel without any appropriate and timely replacement or not able to attract and retain a qualified and skilled key management that have an effect on the Group’s Business operations. The employees will continue in contributing their hard work, by developing the younger members of management team that supposed to have a greater responsibilities to prepare the long –term expansion and the related succession plan. In addition, the Group has undergone the succession plan and training programmes in order to decrease the dependency on senior management the related key personnel. Besides, the management also make sure that related workers are being delegated a recognition and all are being rewarded for their effort and contribution to the success of the Group.
The profitability may be affected by cost fluctuation and demand for properties: The profitability may be influenced by any increment in the land acquisition costs and fluctuation of the construction costs which are inherent to the industry. The higher cost of materials which comprises of the cement, tiles and steel, overheads , contractor fees and labour costs will lower the profit margin that we cannot pass the increased cost to customers in the form of higher selling prices. Hence, the prices of properties are decided by the product differentiation in terms of their places, reputation , design , and the quality and the conditions of property market which located in Malaysia and also the countries which company undergo the business at the countries.
Therefore, there will be no any assurance that any alterations in the development cost that doesn’t impact the financial performance. A persistent uptrend in costs will have a permanent effect on the profit margins even though the contractors have the responsibility to bear the risk of fluctuation of the prices of construction materials. Hence, the risk has limited by the management by continuing to closely to control and manage the construction costs which make all reasonable efforts to keep the quality of the goods. The demand of the properties is influenced by several factors .For example, the surroundings , the economic climate, circumstances of the property market, the purchasers’ perception and the negative consumer sentiment, that the alterations in the market which yields the interest rates , that the management cannot manipulate it over. The company will also find lighten these risks in some ways: reviewing the development and marketing strategies frequently in response to the ever-changing market conditions and applying different development concepts and techniques which placed the Group in order to meet the needs of target markets.
Delay in completion of projects: Most of the properties which prior to the completion of their construction that sold by the management. Hence, the management influenced by most of the external factors which will delay the delivery of the properties to their customers. The external factors are regulatory approvals and permits from various authorities, unsatisfactory performance of the contractors, stop work orders issued by local authorities, labour disputes and availability of quality of materials and labour. In Section 4.11 of this Prospectus, the company have not faced any material interruptions or the delay in the completion of the projects.
The company might involve independent contractors include in the projects , and the management also will also involvement in the delay due to the failure of the contractors in order to complete their work based on an agreed timetable and to the specifications required. In addition, the company will limit the risk by inviting the bid from the panel of registered and experienced contractors with their track records and the proven capabilities. Moreover, the company also able to claim from the contractors in the event of such delays, subject to the terms and conditions to set out our contracting arrangements. These terms and conditions which involve failure by the contractor in delivering the projects without prior approval for extension time in accordance with the Malaysia Institute of Architects’ Building Contract PAM2006 guidelines. There have not been many occurrence of such claims because we have put in place a stringent contractor selection process, intently control and administrate the all contractors to make sure timely delivery of projects though the company have been successful in the claims that against the contractors in the past.
Any delay in completion will give rise to the potential claims for the potential claims for liquidated damages from the customers pursuant to the terms of the sale. Besides that, it also include the purchase agreements which entered to the claims that may influence the Group’s reputation and financial performance. To be continued, the wealth of experience in dealing the contractors will serve to mitigate the above risk. The track record as set out in Section 4 of the Prospectus is a will that the company capable to deliver, monitor, and complete the large proportion projects punctually.
Competition from other property developers: The management exposure to the intense competition from now currently players and beginner that respect the Landbank , supply of raw material and labour and also the selling prices of property although there consists the barriers of entry into property industry. There consists of many of local and overseas property developers who undertakes the property development and the relevant investment projects in both Malaysia and other nation that the company operate then also putting downward pressure on the price and creates the material and labour scarcity. When we find to retain the competitive in terms of their quality, design, pricing, and strategic marketing, here is no any assurance that the proactive gauge can effectively reduce the potential adverse effects of the competition on future financial performance and position. There have the further details about the market that disclosed in Section 5 in the Prospectus.
Inherent risks in the property development industry : The company are subject to the inherent risks in the property development industry. It involved inter-alia ,the alterations in the economic conditions ,inflation ,alterations in business situation. For example, the deterioration in prevailing market conditions, raise in labour and raw material costs, lack of the labour supply,fluctuating the demand for real estate properties and alterations in the policies from government on lending by banks . As a property developer, the management also depend on the continous provision of serviced by the whole experienced contractors with the proven capabilities and track records. The Group have minimise the risks by developing the quality properties in order to fullfill demand and needs of the target markets .then deliver value to the existing and potential clients to maintain the strong relationship ties with the contractors. Even though the company had undergone many steps to reduce the business risks,there can be no assurance that changes to the factors referred above will not have any significant influence on the financial performance.
Inherent risks in the leisure and hospitality industry: In Malaysia,the leisure and hospitality segment include golf courses and hotels. The management are subject to the risks inherent to the leisure and hospitality industry. For example , the competition from the peers who have same products, alterations in the business situation , decrease in the level of tourism and alterations in the consumer trends and the fluctuation in demand of leisure and hospitality sevices.The company serve the risks by continuously controling the market trends and encouraging response from the customers in order to enhance the performance. Notwithstanding, no assurance that any variations to the factors that refered above will not have any significant influence on the financial performance.
Besides that, the leisure and hospitality industry is susceptible to the effects of the outbreak of infectious diseases that tend to inhibit the arrivals of tourist and travel. If an outbreak of the infectious diseases such as severe acute respiratory syndrome(SARS) or swine flu or avian flu were likely to occur , the financial performance , the situations and operating results of the leisure and hospitality business will be adversely influenced.
Non-renewal of failure to obtain permits, licences and certificates: The permits ,licences and certificates ,such as CIDB or construction licences, housing development licences ,which involve the developer’s licences and related government authorities. Moreover, the company will comply the standards from time to time that subject to the alterations, To be continued, fail to gain the renewal of permits and licences or certificates of the abolishment of the permits , licences or certificates or changes that used on the terms and conditions of licensing will make the delay that related to the business operations, breakdown , and the subsequent financial loss to the Group. The Group does not expect that the possible issues that arising from the renewal of the existing permits and licences even though the Group has zero experience the hardness in gaining and retaining the requisite licences and permits at past.
The operations may be affected by material litigation, claims or arbitration: As at LPD, which revealed in Section 14.5 of the Prospectus, The Group , is not currently engage in any material litigation or the arbitration proceedings that have or may have significant influence on the business overall operation or financial position . Furthermore, the higher level management , Directors not aware about any relevant proceedings threatened or any fact that to give rise any proceedings that will influence the business operations . Nevertheless, there can be no any assurance that there will be no proceedings in the future that will influence the business operations and profitability of the Group.
Business Dictionary.com. (n.d.). Restricted Shares. Retrieved from http://www.businessdictionary.com/definition/restricted-shares.html#ixzz3MtITLv8i