Information Request

Online Q&A

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.

Rgds,
The Management Team
MegaChem Limited

Dear Jayster, you wrote:

MegaChem has set up a new subsidiary in India in July 2009.

May I know how the decision came about to expand in India in the middle of a recession?

How compeititive is MegaChem compared to the local chemicals traders in India given the subsidiary was established without a local partner?

We first started a representative office in India to establish market contacts in the country. When the regulation changes which allow wholly-owned foreign trading/distribution enterprise, we decided to convert the representative office to a subsidiary.

Our Indian subsidiary is headed by an Indian national who has had many years of experience in the Indian chemical industries. We believe that we are in a competitive position as India continues to import most of their chemicals.

Dear Serene Lim, you wrote:

Has MegaChem considered moving to the Mainboard instead of the Catalist?

What is the listing cost difference between a Catalist and Mainboard listing?

	Catalist	Mainboard
Continuing sponsor fees	50,000 - 250,000 *	-
Annual Listing Fees (to SGX) - Fees varies according to market capitalisation	Waived for 1st 3 years (15,000-50,000 from 4th year)	25,000-100,000
Total	50,000-250,000 for 1st 3 years (65,000-300,000 from 4th year)	25,000-100,000

* estimates are extracts taken from newspaper

The decision on whether to upgrade to mainboard or not will not be based on cost alone. Other factors such as corporate visibility and trading liquidity will also need to be considered. We will make the necessary announcements when appropriate.

Dear David Loh, you wrote:

The Australia market grew the most despite the ongoing recession. Why is that so?

We believe that the Australian market is less competitive for the type of products that we supply as most of the chemical demand from this market is imported.

Dear Gerald Toh, you wrote:

a. Oil prices has been rising lately. Will this impact MegaChem's profit in the 2nd half of the year?

b. I've noticed you've repaid quite abit of your short term debt. Will it affect your cashflow?

a. An increase in oil prices has in general the following impact on chemicals:

Higher raw material costs affect companies that produce basic chemicals, commonly known as the commodity chemicals, as the content of oil in such upstream products are high.
While companies that produce specialty chemicals are not immune to increases in oil prices, they are slightly less susceptible to the pressures faced by commodity chemical companies as they are more focused on targeted applications and markets. These include downstream products whose oil contents are smaller.

As we are mainly in the specialty chemical business, the direct impact of higher oil prices on MegaChem is less as compared to a commodity chemical company, as evident in the past. In general, we have been able to maintain gross profit margins at about 20%. In addition, we are able to adjust to any oil price changes fairly quickly, allowing us to avoid any significant impact from increases in oil prices.

b. The reduction in borrowings had no impact on our cashflow. In fact positive cashflow from reduction in inventory enabled us to reduce borrowings.

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.

Rgds,
The Management Team
MegaChem Limited