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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 Steve Goh, you wrote:

How come you increased the interim dividend to 0.5 cents when your profit dropped to 0.59 cents?

We had earlier made an announcement that our Thailand associated company is planning to list its shares in the Thai Stock Exchange. In relation to its proposed listing on the stock exchange of Thailand, more dividends were paid. Correspondingly, we are of the view that it is appropriate to share some of this with our loyal shareholders. Hence a higher interim dividend was declared.

2. Dear Daisy Ong, you wrote:

Are you having problems with trade receivable? It is causing your operating cashflow to become negative. The impairment of trade receivables has increased to S$385K.

A large part of the trade receivables impairment is attributed to our receivables from Venezuela where there has been stricter exchange control. For prudence, we have therefore decided to make some provision for a portion of the trade receivables from this country. Other than that there are no major issues with collection of our trade receivables.

3. Dear Alex Ng, you wrote:

You have S$17 million in borrowings due soon. How are you going to refinance it?

Our borrowings are mostly trade related borrowings and short-term revolving loans. In addition, there is a property loan which we took to finance the purchase of an industrial property. We have been servicing this loan promptly. This loan has a bullet repayment of S$2 million which will be due in April 2017. The bank, which granted this loan, is considering the renewal of this loan. As this loan is well-secured by the property, we do not foresee the problem of getting the renewal.

4. Dear Luke Seah, you wrote:

Has Brexit affected your business? The low oil price no longer seems to be helping your bottom line this time. Why is it so?

We currently have more purchases than sales in UK and EU zone. Hence as far as business is concerned, there has been minimal impact. However the immediate impact from Brexit was increased currency volatility which has made the managing of our foreign exchange exposure increasingly challenging.

On your question of oil price impact, a differentiation should be made between commodity and specialty chemicals. We are operating more in the specialty chemical space where the oil price fluctuation has less impact on its prices as compared to commodity chemicals, due to the lower oil content and its lower usage in our customers' product formulation. Hence you can see that we have been able to maintain our gross profit margin at a healthy level of above 20% in general. In fact there was an increase in gross profit margin in 1H 2016.

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