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While the Group’s operations are labor intensive, machinery and technology is also required to efficiently produce furniture and building components. Should the Group’s competitors be able to adopt new
technology more quickly, the Group may lose its ability to price its products competitively.
6.3. GENERAL RISK FACTORS
Risk relating to macroeconomic and global economic conditions
Macroeconomic or global economic conditions have an influence on the performance of companies operating in Indonesia, including the Company. The strengthening or weakening of the economy may
directly affect the level of demand and supply for retail products in the country. In addition, it may indirectly affect countries that trade with the country undergoing changes in economic condition.
Accordingly, if there is a change in the economic condition of Indonesia and countries that trade with Indonesia, it may have an impact on the financial performance of the Group.
Risk relating to the benchmark interest rate for loans
The interest rate risk of the Group primarily arises from loans for working capital and investment purposes. These loans have various variable interest rates, indicating the Group to the fair value of
interest rate risk. Increased lending rates will therefore also have significant adverse impact to the Company’s performance.
Risk relating to claims or legal suits
The Group may be exposed to disputes and legal proceedings in the course of conducting their business activities, including those relating to the Group’s products, employee claims, labor disputes or contractual
disputes or any other disputes that may have material and adverse impact on the Group’s reputation, operational and financial condition. The Group is not currently involved in legal disputes or material
investigations by the Government and the Group is not aware of any ongoing material claims or legal proceedings. In the event that the Group is engaged in a material and prolonged dispute or legal
proceeding, there is no assurance that the outcome of such proceeding will be favorable and the settlement or outcome of such proceeding may adversely affect the financial condition of the Group. In
addition, any litigation or legal proceeding may result in substantial court cost and the time and attention of the Group’s management, which may have a material adverse impact on the Group’s financial
performance.
6.4. RISK FACTORS FOR INVESTORS
Risk relating to the fluctuation of the Company’s share price
The market price of the Company’s shares subsequent to the Initial Public Offering may be volatile and could fluctuate significantly. The market price of the Company’s shares may also be traded at a price
lower than the Offering Price, as determined during the preliminary offering process and pursuant to the agreement between the Company and the Joint Lead Underwriters. The fluctuation in the Company’s
share price may be the result of one or more of the following factors:
• differences between the actual financial and operating performance of the Company and those
expected by investors and analysts; •
changes in securities analysts’ recommendations or perceptions or estimates of the Company’s and Indonesia’s performance;
• disclosure of information on material transactions by the Company;
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• changes in the condition of the Indonesian Capital Markets as a result of domestic factors or the
influence of the international capital markets; •
changes in the macroeconomic, industry, political and social conditions in Indonesia; and •
the Company’s involvement in legal proceedings or disputes.
Risk relating to foreign exchange rate fluctuations for foreign investors
Fluctuations in the exchange rates between Rupiah and other currencies may affect the foreign currency equivalent value of the Rupiah price of investments made by foreign investors. Such fluctuations may
also affect the amounts that the foreign investors will receive in foreign currency upon conversion of any cash dividends or other distributions paid in Rupiah by the Company, and any Rupiah-denominated
proceeds from any sale of the Company’s shares.
Risk relating to the Company’s shares liquidity
There is no assurance that a market for the Company’s shares will develop or, if the market for the Company’s shares develops, that the Company’s shares will be liquid. The Indonesian capital market is
relatively less liquid and more volatile relative to the capital markets of developed countries. Prices in Indonesian capital market are also relatively more unstable compared to other capital markets.
Therefore, the Company can not predict that the Company’s liquidity of shares will be maintained.
There may be a risk of delay in the ability to sell and trade on the IDX. As such, there is no assurance that the Shareholders will be able to sell their shares at a certain price or time that the shareholders will
be able to do so in a more liquid stock market or at all.
Risk relating to the Company’s ability to pay dividends
The dividend payout will be determined based on the GMS by considering several factors including retained earnings, financial condition, cash flow, working capital requirements, capital expenditures,
contractual agreements and expenses related to the expansion plan of the Company. In addition, funding needs for future business development plan as well as the risk of losses recorded in the financial
statements may influence the Company’s decision in the payment of dividends.
There is no assurance that the Company will be able to pay dividends or that the Directors of the Company will announce the distribution of dividends.
Risk relating to minority share ownership
The obligations of the Company and majority shareholders of the Subsidiaries, Board of Commissioners and Board of Directors under Indonesian law with respect to minority shareholders may be more limited
than those in other jurisdictions. Consequently, minority shareholders in Indonesia may not be able to protect their interests under current Indonesian law to the same extent as shareholders and companies
domiciled in other countries. Principles of corporate law that apply to the Group relating to matters such as the validity of corporate procedures, the fiduciary duties of management, commissioners, directors
and controlling shareholders, and the rights of minority shareholders are governed by the Companies Law and the Articles of Association of each of the Group entities.
Such principles of law may differ from those that would apply if the Group entities were incorporated in a jurisdiction other than Indonesia. In particular, concepts relating to the fiduciary duties of management
have yet been tested in Indonesian courts. Derivative actions brought in connection with the activities of directors and commissioners are rarely brought on behalf of companies or tested in Indonesian courts. In
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addition, minority shareholders’ rights have only been defined since 1995 and have yet been enforced in practice. Even if a particular conduct was actionable under Indonesian law, the absence of judicial
precedence could make the prosecution of such conduct under civil proceedings considerably more difficult. Accordingly, there is no assurance that legal rights or remedies of minority shareholders will be
equal or similar to those available in other jurisdictions with sufficient protection of minority shareholder interest.
6.5. RISK MITIGATION
