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:

MegaChem fall in sales seems to be due to the reduced demand in Singapore. Why is this so? Is it because your competitors are offering cheaper or better products?

Your markets outside Singapore are growing especially in Malaysia and UK, what plans do management have to capitalise on these growth trends?

We are not able to narrow it down to any one particular factor as there was a combination of factors contributing to the fall. The decline in sales was not broad-based as it was limited to only certain industries in which we serve while in some other industries we experienced growth. Note also that there was a one-off sale of $0.4 million in the same period last year.

The growth areas in our geographical markets are likely to come from the relatively new markets such as China, India and Vietnam.

Dear Marcus Ng, you wrote:

It seems that management isn't too optimistic in prospect of the company going forward because of the rising price of oil and falling USD rates.

What strategies do management have in place to tackle the problem of rising cost?

Do the company hedge against currency risk?

One of the measures we are taking to mitigate the risk of rising oil prices is to enter into some kind of tripartite pricing and inventory arrangement with our suppliers and customers. This works as a form of hedge for our customers as it ensures certainty of supply at prices that they are comfortable with.

As for currency risk, we actively hedge our exposure. For the current period, we actually had realised foreign exchange gain. However, there were also unrealised foreign exchange losses arising mainly from translation of foreign currency denominated items in our balance sheet.

Dear Kristine Tan, you wrote:

It has been almost a year since MegaChem set up aLiaison Office in India. Has any deals been made since then?

How the experience in doing business in India so far?

The liaison office in India was started just recently in December 2005 and we have started our marketing activities to penetrate the market. So far, sales have kicked off at a pace within our expectation.

As soon as the regulation allows, we would like to convert the liaison office into a subsidiary which will enable us to have a bigger presence there.

Dear Albert, you wrote:

You've got a product called Megafuel. I've read about it from your website? Where can I find it in Singapore? How the sales from this product since it was launched a year back?

Our strategy with regards to Megafuel is to launch it in China first due to its huge market size and the government’s growing efforts to reduce pollution. We have achieved a certain level of success in some provinces in China and hope to duplicate this success in other provinces. Megafuel is also being introduced in Malaysia, Indonesia and Singapore.

Our primary target customer segment includes transporters and ferry operators where sales are usually in larger quantities. In terms of marketing channels, we are also using well established distributors in these countries to help push our products. At the present moment, our products are not sold in retail outlets in Singapore yet.

Dear James Tan Kim Hock, you wrote:

Your share price have been declining over the years probably due to declining margins and stiff compeitition in your industry. Any plans to diversify into other business?

Your counter is seldom traded. Do the company have plans to do a private placement or issue more shares to boost liquidity?

We do not have plans to diversify into unrelated businesses but rather we would like to develop businesses that will complement our existing business to make us an even more integrated chemical player. Our manufacturing activity is in tandem with this strategy.

At an appropriate time and given the right market conditions, we will consider increasing the liquidity of our shares.

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