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39 all costs and work in progress that are already underway. In extreme cases, the customer may cancel the order
and terminate the previously agreed contract. The foregoing may affect the Company’s financial condition as all cost and components as well as spare parts
purchased will not be immediately sold. In certain cases, considering ship orders generally have very specific use, the work in progress may need to be reworked or adjusted in order to sell the ship to another customer who
requires the ship. 4. Risk of work accidents
Shipbuilding and ship works carry with it the risk of work accidents, which may result in claims from third parties, which may eventually delay the completion of the project in progress and affect the Company’s revenue. Although
the Company has insurance policies for work accidents, there is a possibility that certain work accidents are not covered by the Company’s insurance policies.
5. Risk of social community and environment
Shipyard construction may face substantial disruptions from communities in the surrounding areas of the project. The community may have negative reactions to changes in their environment, particularly if the Company does
not provide any benefit to their quality of life. Although the Company strives to meet proper environmental management standard, there is a possibility of damages to the natural ecosystem and environment that may
affect the relationship with its surrounding communities. 6. Risk of human resources
The Company’s activities in building and operating shipyards require a large number of labor. Therefore, labor management must be conducted properly to avoid undesirable turmoil.
7. Risk of delays in completion of shipbuilding projects
On-site project execution highly depends on site condition, rainfall, material availability and project management. The construction work must be supported by contractors and supervisors experienced in executing shipyard
projects. If all the above factors are not properly managed, the project may not be completed according to schedule, which will result in the decrease of the Company’s revenue projection as well as the risk of fine from
customers as the party injured by the Company’s delay. 8. Risk of shipyard facilities construction
Currently, the construction of the Company’s shipyard has reached the finalization of the first phase phase 1 development and the shipyard is currently available to carry out shipbuilding works. However, there remains the
risk of disruption in the construction of other shipyard supporting facilities, which may result in delays in the completion of shipbuilding or ship maintenance works, which ultimately hinder the accomplishment of the
Company’s business plan. Factors that may give rise to the risk of shipyard facilities construction are, among others, the availability of funding required for the shipyard facilities construction and social and security issues
that may arise in the area where the Company’s shipyard is located.
C. RISKS ASSOCIATED WITH THE SHIPPING INDUSTRY
1. The global and regional economic, social and political condition may lower demand for the Company‟s services
The shipping industry generally depends on the global and regional economic, social and political condition. The slowdown in global economic condition or unfavorable social and political conditions such as terrorist attacks,
wars, riots, trade sanctions and embargoes in general may result in the decline in shipping industry. In vessel charter industry, the slowdown of economy in general may affect demands for certain goods transported by the
Company. Therefore any unfavorable economic, social and political events may affect the Company’s financial performance.
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2. Risk of changes in the Government‟s policies related to national shipping industry and its supporting services
The shipping industry is heavily regulated and the Company’s business activities are affected by the regulations prevailing in Indonesia, such as the implementation of cabotage principle since 2005, which requires domestic
sea transport to be served by Indonesian-flagged vessels and the inclusion of shipping industry in the negative list stipulated in Presidential Regulation No. 362010 under which foreign ownership is limited to 49, provided that
the respective companies owns vessels with gross tonnage of 5,000 tons or more. The Indonesian Government may add or amend the laws and regulations applicable to the shipping industry,
which may limit the Company’s business activities and adversely and materially affect the Company’s financial condition and operating performance.
In addition, the shipping industry must comply with various international conventions, regulations regarding required certifications and permits and operating standards and codes. Compliance to the aforementioned
requirements may require significant amount of cost to modify the vessels, conduct periodical vessels repair, maintenance and inspection, change the operating system, preserve the environment and the crews’ health and
safety and renew the required certificates and permits. In the event that international conventions, certification and permit regulations as well as operating standards and
codes become more rigid and additional regulations are enacted, the Company’s operating cost may increase. In addition, failure to comply with the regulations referred to above may result in sanctions and revocation of
business license. The conditions referred to above may limit the Company’s ability to carry out its business activities and adversely and materially affect the Company’s financial condition and operational performance.
3. Risk of domestic competition The Company’s competitors or new players in the industry may have lower operating expense and better access
of financial, technological andor other resources compared to the Company. Other competitors with less resources and lower capability than the Company may compete by offering aggressively lower prices in order to
gain market share and satisfy customers’ needs. If the Company’s competitors are able to provide the same level of service at a lower price andor shorter preparation time, the Company may have to reduce its charter fee in
order to secure contracts, which will result in lower profit margin. In addition, the Company may fail to secure prospective contracts.
D. RISKS ASSOCIATED WITH INVESTMENT IN SHARES OF THE COMPANY
1.
Risk of illiquidity of the Offered Shares in this Initial Public Offering
Although the Company will list its shares on the IDX, there is no guarantee that the Company’s shares that are traded will be active or liquid since there is a possibility that the Company’s shares will be owned by one or more
parties that do not trade their shares in secondary market. 2.
Risk of fluctuations in price of the Offered Shares
The price of the Offered Shares after the Initial Public Offering may fluctuate, depending on several factors, including:
Difference between realization of the Company’s actual financial and operating performance compared to
that expected by investors and analysts;
Changes in analysts’ recommendations or perceptions on the Company or Indonesia;
Changes in the economic, political or market condition in Indonesia;
Fluctuation in foreign companies’ share prices particularly in Asia and other developing countries;
Final verdict of a litigation that may occur in the future;
Sale of shares offered by the Company’s majority shareholders; and
Prospects of sea transportation industry.
Future substantial sale of the Company’s shares to public, or the perception that such sale may take place, may adversely affect the prevailing market price of the Company’s shares or to the Company’s ability to
raise capital through public offering of additional shares or equity-related securities.
The Offer Price may be substantially higher than the net asset value per share of outstanding shares issued to the Company’s existing shareholders; therefore investors are exposed to substantial decline in value of
their investments.
