Information Request

Online Q&A

MegaChem Limited

Management Online Q&A With Investors

Dear Investors,

Thank you very much for the questions and the opportunity for us to respond. We hope you have a better understanding of our business through this online exchange.

Your questions will be reposted in blue italics followed by our replies in black.

Rgds,
The Management Team
MegaChem Limited

Dear Jayster, you wrote:

Hi,

Congrats on doubling your half year results.

Your company has been making money for the past few years. Do you have Section 44 tax credit to pass on to shareholders?

Your counter faces a liquidity problem with little free float in the market, is the company planning to increase the free float of the share by placing out shares?

MegaChem has been profitable since we began business in 1988. We therefore have fair amount of Section 44 credit which explains the good dividend payments over the last 3 years. However it is not possible for us to clear all the Section 44 credit as we need to reserve some cash for expanding our business. Following our half-year result announcement, we are declaring an interim dividend of 0.36 cents per share less tax. You may refer to our website www.megachem.com.sg for details of the book closure and payment date.

The small free float reflects the confidence the founding shareholders have in the future of this company. We have stated in much of our communication with shareholders our efforts in building the foundation for the next phase of growth which we believe we are beginning to see now. So far these expansion plans have been funded internally. However we do not rule out the possibility of raising equity funds to fund further expansion if the market conditions are right. With that the free float will then increase.

Dear Serene Lim, you wrote:

There was a sale of land mentioned in your financial statement. Why was the land sold? Was the land for investment or manufacturing/storage purposes? What do the management intend to do with the proceed of land sale?

This is an industrial land our subsidiary in Malaysia bought some years ago. We decided to sell it because it is a non-productive asset and because of the price appreciation.

The proceeds have been used to reduce borrowings and pay dividend to shareholders.

Dear Marcus, you wrote:

Your company exports chemicals to almost all the countries in the world. Which region or which specific country do you see MegaChem grow the fastest? Which product do you see margins growing and sales increasing over the next 5 years for the company.

According to some chemical industry report, countries such as China, India and Middle-east will enjoy the highest growth rates in the coming years. We have already established our presence in China and India and are in the process of setting up a subsidiary in Dubai, Middle-east. We are therefore well-positioned to ride on the growth of these markets.

Our manufacturing operation has been enjoying compounded annual growth rate of 143% from FY2002 to FY2006 and in the first half continued to grow at 109%. We believe this trend will continue and that the manufacturing operation will become a significant part of our revenue over the next 5 years.

Dear Investors,

Thank you for all your questions and interest in MegaChem Limited. We have come to the end of this Q&A session and hope that you have a better insight of our company and our operations.

Regards,
The Management Team
MegaChem Limited