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Email This Print This Competitive Strengths

We believe that our competitive strengths are as follows:-

The barriers to entry for tier-one gas distributors are high

The conduct of import and wholesale distribution business in the LPG industry requires a specific licence in the PRC. Pre-conditions for the grant of such licence include approval for the establishment of port terminals and refrigerated storage tanks, the employment of the requisite number of qualified technical staff, and the implementation of requisite safety measures and business contingency plans. The approval for the establishment of the port terminals and refrigerated storage tanks requires stringent criteria imposed by the relevant provincial government authority to be met. Hence, this creates a barrier to entry and makes it difficult for potential new entrants to penetrate our industry, allowing us to enjoy the significant market share status as one of the only few tier-one gas distributors in the PRC.

We have a strong customer base and wide distribution network

We have access to a strong customer base comprising tier-two and tier-three gas distributors in the PRC. Our customer base had grown gradually for the last three financial years and up to FP2006, from more than 60 in FY2003 to more than 200 in FP2006. In particular, we have long-term written contracts with our contract distributors, each of whom owns at least one LPG retail station, hence collectively forming a wide and diversified network of LPG retail stations mainly in the Guangdong province, providing endusers with easy access to LPG. We are able to leverage on our contract distributors' established sales network for wider end-user reach. Our Directors believe that our Group is not overly dependent on any single customer.

We have, over the years, built up significant goodwill and believe that we have earned a reputation for quality, consistency and safety and enjoy strong recognition in the PRC. With our commitment to product and service quality, we have garnered substantial customer confidence in our product and services. We foster and maintain good relationships with our customers. We maintain regular contacts with our customers and invite them to our premises for monthly meetings in order to obtain feedback about our products and services, as well as to discuss latest issues and developments relating to the LPG industry. This will allow us to understand our customers better and to serve them better.

We offer quality products and services

We have in place stringent quality procedures and the capabilities to customise our products to meet our customers' various specifications (such as temperature and composition). Our quality controls seek to ensure that the quality of our products and services meet the expectations of our customers. Our internal quality controls comply with the PRC quality standards and adhere closely to the ISO9000 guidelines. Our commitment to quality is evidenced by the ISO9001:2000 certification for quality management system awarded to Huafeng Refining (whose Relevant Business was transferred to Chaozhou Ouhua pursuant to the Restructuring Exercise) by CQC on 25 June 2004. Although our customers do not require us to have ISO certification, we are in the process of applying for the ISO9001:2000 certification for Chaozhou Ouhua.

In addition, we are able to deliver our products directly to our customers, especially those customers without logistics functions, either by land or sea transportation. We are committed to delivering our products to our customers on time. For the last three financial years and up to the Latest Practicable Date, we have not experienced any cancellation of orders or incurred any penalties due to late delivery. We also have a customer service centre where our customers can contact us via our hotline or email directly should they have any queries, encounter any problems or have any complaints relating to our products. If we are unable to resolve our customers' queries through telephone or email, we will, where necessary, send our personnel to our customers' premises to provide assistance.

For the last three financial years and up to the Latest Practicable Date, we had not received any major complaints or rejections from customers of our products and services.

Our production facility is well equipped with adequate port terminals and storage facilities

In our production facility, we have the use of a 50,000 tonne port terminal, which allows us to berth large LPG ship tankers of up to 50,000 tonnes, and a 2,000 tonne port terminal. As at the Latest Practicable Date, we had refrigerated and high pressure storage tanks with a combined LPG storage capacity of 104,000 cbm and an annual designed production capacity of 750,000 tonnes. An additional refrigerated storage tank was put to use with effect from 1 October 2006 and our annual designed production capacity has increased to approximately 900,000 tonnes. Please refer to the "Our Production Facility and Utilisation" section of the Prospectus for more details on our production facility and its utilisation. With such comprehensive facilities, our raw materials can be efficiently imported, stored, processed and delivered. In addition, our port terminals facilitate sea transportation from and to places where it is not easily accessible by land transportation. Given the different sizes of our port terminals, we also have the flexibility in the quantity of raw materials that we may purchase from our suppliers. To the best of our Directors' knowledge, we believe that we are one of the largest importers of LPG in the PRC, in terms of the size of our port terminals and the storage capacity of our storage tanks. This gives us the competitive edge over our competitors who have smaller facilities.

We have an experienced management team and competent technical staff

Our management team has extensive experience in the LPG industry. Our management team is led by our Executive Chairman, Liang Guo Zhan, and supported by our Executive Director, Guo Shao Kai, and a team of dedicated and experienced Executive Officers. They possess in-depth knowledge of our business and industry, and understand our customers' needs and requirements. In addition, Liang Guo Zhan has received several awards and accreditations in recognition of his contributions to the business and industry. For details of our Executive Chairman, Executive Director and Executive Officers, please refer to the "Directors, Management and Staff" section of the Prospectus. In addition, we have technical staff who possess the necessary qualifications and specific industry experience.