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MegaChem Limited

Management Online Q&A With Investors

Dear Investors,

Thank you very much for your questions and the opportunities to respond to them.

We hope you have a better understanding of our business through this online exchange.

Your questions are reposted in blue followed by our replies in black.

Best Regards,
The Management Team
MegaChem Limited

1. Dear George Chen, you wrote:

How has the sudden plunge in oil prices affected your business?

In general, the decline in oil price can have the following impact on the chemical industry:

  • When oil prices fall, cost for manufacturing activities typically decreases. The lower cost of production is then expected to lower product prices and hence boost consumer spending and that of the overall economy. As our chemicals are sold to a wide spectrum of industries, it should benefit us;

  • Prices for chemicals in general may fall in tandem with lower oil prices. A distinction can be made between basic chemicals (or commonly known as commodity chemicals) and specialty chemicals. Specialty chemicals are considered products which are further downstream whose oil content and usage in finished products are smaller as compared to commodity chemicals. As such the prices and demand of specialty chemicals are less sensitive to oil price fluctuations; and

  • Purchases of chemicals from the oil and gas sector may fall. However, our sales to this sector is not significant.

We are, to a large extent, more involved in specialty chemicals. As such, the overall impact, taking all factors into consideration, has not and is not likely to affect us significantly.

2. Dear David Koh, you wrote:

You mention higher receivables from South America. Do you foresee higher impairment from this region?

Our auditor has reviewed and is satisfied with the level of provision for our receivables from customers in South America. We will continue to monitor our receivables across all the regions where we have a presence, including South America, and review the adequacy of the provision closely.

3. Dear Teo Hwee Ching, you wrote:

If the Fed do raise interest rate, will you reduce your borrowings and cut back on dividend?

We explored various ways to hedge against a potential rise in interest rates but found the hedging costs too high to derive meaningful benefits for Megachem. We will instead try to factor potential fluctuations of interest rates into the pricing of our products and continue to explore further strategies to mitigate this risk.

Our aim is to provide shareholders with consistent total shareholders' return. However, the dividend payout for each year depends on factors such as our current cash position, future cash need, profitability, retained earnings and business outlook.

4. Dear Alvin Tan, you wrote:

Will you be applying to transfer to the mainboard of SGX since your counter is trading above S$0.20?

There are various factors to consider in deciding whether to stay in Catalist or to seek a transfer to the Mainboard. Being listed on either of the platforms has its set of advantages and disadvantages and we have to weigh them carefully. Although we do not rule out the possibility of transferring to the Mainboard in the future, there are currently no plans to do so.

5. Dear Ng Ting Ling, you wrote:

Will you be selling Megalatexs given the uncertain political situation in Thailand?

The decision for a sale will not be solely dependent on a single factor such as the political situation in the country. Although our operations in Thailand have been impacted, the uncertain political climate has affected the overall economy across all industries and sectors. In the second half of FY2014, with the improvement of the Thai economy and the cooling of the political situation, the performance of our Thai associated companies improved marginally compared to the first half of FY2014. We hope the economic conditions there will further normalise and improve in the near future.

Dear Investors,

Thank you for all your questions and your interest in MegaChem Limited. We have come to the end of this Q&A session.

We have enjoyed the session and have learnt much from your questions. We hope that through this Q&A, you have gained better insights to our Company and our operations.

Best Regards,
The Management Team
MegaChem Limited

This announcement has been prepared by the Company and the contents have been reviewed by the Company's Sponsor, SAC Capital Private Limited, for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited ("Exchange").The Company's Sponsor has not independently verified the contents of this announcement.

This announcement has not been examined or approved by the Exchange and the Exchange assumes no responsibility for the contents of this announcement, including the correctness of any of the statements or opinions made or reports contained in this announcement.

The contact person for the Sponsor is Ms Alicia Kwan (Tel : (65) 6532 3829) at 1 Robinson Road #21-02 AIA Tower Singapore 048542.