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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.
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3. Risk of dilution on share ownership of the shareholders in the event that the said shareholders do
not participate in the limited public offerings that may be conducted by the Company in the future Based on Rule No. IX.D.1, Annex to the Decree of Chairman of Bapepam and LK No. Kep-26PM2003 dated 17
July 2003 regarding Pre-emptive Rights Hak Memesan Efek Terlebih Dahulu ―HMETD‖, a publicly listed company must offer its shareholders the pre-emptive rights to proportionally order the offered share in advance,
in order to retain their respective shareholding percentages prior to issuance of the new shares. In the event that the respective shareholders choose not to exercise their pre-emptive rights in the limited public offerings that
may be conducted by the Company in the future, the aforementioned shareholders may experience dilution of their share ownership in the Company.
4.
Risk of the Company‟s inability to pay dividends
The Company’s ability to announce dividend distribution in relation to the Company’s Offered Shares will be dependent on the Company’s future financial performance, which will also be dependent on the success of the
growth strategy implemented by the Company; and on factors such as competition, regulations, technical, environment and other factors; on the economic condition in general; and certain factors inherent in the sea
transportation services industry or certain projects undertaken by the Company, which are mostly beyond the Company’s control. Recognition of loss on operating result in the Company’s financial statements may serve as a
ground not to distribute dividends. 5.
Risk of global, regional and domestic changes, which may have adverse impact to business activities in Indonesia.
The economic crisis that gripped South-East Asia in mid-1997, including Indonesia, resulted in the weakening of currencies, decrease in Gross Domestic Product ―GDP‖, increase in interest rate, social problems and political
instability. This situation adversely affects the business activities in Indonesia, including the Company. Indonesia entered into a recession between 1999 to 2002, which was marked by slow economic growth. Indonesia’s GDP
growth based on World Bank Data in 2012, 2011, 2010, 2009, 2008, 2007, 2006 and 2005 were 6.2, 6.5, 6.1, 4.5, 6.1, 6.3, 5.5, and 5.6, respectively.
The global financial market experienced disturbance and instability as a result of shortage in liquidity due to defaults of the United States subprime mortgages in 2007, which resulted in the bankruptcy of several financial
institutions. Global crisis affected the credit facilities availability, resulted in reduced foreign investments, bankruptcy of several global financial institutions, the crash of stock prices in global market, weakening of global
economic growth and the decline in demand for several commodities. Furthermore, the dispute in Middle East and natural disasters, such as earthquake and tsunami that hit Japan in March 2011, also contributed to the
decline in global economic condition. Indonesia and other countries incorporated in the Association of Southeast Asian Nations ―ASEAN‖, as well as
other developing countries, were also adversely affected by the global economic and financial condition. Although the government has taken the necessary measures to maintain economic stability and public trust on the
Indonesian economy, the impact of crisis may still adversely affect the economic growth, fiscal position, foreign exchange currency and other economic problems.
The government continues to experience fiscal deficit, additional debentures, low level of foreign exchange reserve and the Rupiah remains fluctuated and illiquid, whereas the banking sectors experience non-performing
loans. The government funding needs are hindered by natural disasters, increase in oil price and the increase in fiscal deficit. The economic problems faced by Indonesia during the Asian economic crisis since 1997 is reflected
in interest rate fluctuation, which adversely affects Indonesian companies that are in debts. Although the interest rate of Certificate of Bank Indonesia has significantly decreased from 70.8 in July 1998 to 6.8 in March 2011,
there is no guarantee that Indonesia’s economic condition will continue to improve or that the slowdown in Indonesia’s and Asia Pacific’s economies will not occur in the future.
The loss of investor confidence in the developing countries’ monetary system may increase the volatility in the financial market and hinder Indonesia’s economic growth. The Company’s ability to maintain operating activities
and profit and pay its debts as they fall due will depend on factors beyond the Company’s control, for example, the effectiveness of fiscal activities and other government’s actions to solve the economic problems. The
slowdown in global, regional and economic conditions may have material adverse effect to the Company’s business activities and prospects, financial condition and operating results.
THE COMPANY‟S MANAGEMENT HAS DISCLOSED ALL BUSINESS RISKS FACED BY THE COMPANY THAT WERE PREPARED BASED ON THE EXPOSURE OF SUCH RISKS TO THE COMPANY‟S
FINANCIAL PERFORMANCE.
