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.

Best Regards,
The Management Team
MegaChem Limited

1. Dear Puar Hai Kuan, you wrote:

The company appears to have been doing well despite the global and regional headwinds. Revenue continues to grow. My question is whether the company will be able to improve on its margins going forward, and also if there could be margin squeeze if oil falls below $40 in terms of the ability of the company to maintain selling prices?
As a result of the capital expenditure required for our plant's expansion in 2012, the higher depreciation expenses incurred have contributed to the narrowing of our gross profit margins. However, our target is to maintain our gross profit margins above the 20% level which we have done so in 2H FY2014 and 1H FY2015. The depreciation period of the plant and equipment relating to our plant's expansion in 2012 is over 5 years and will be completely depreciated by the end of 2017.
Within the chemical industry, we operate mainly in the specialty chemical segment where the prices are less sensitive to oil price fluctuations. This is due to the lower oil content in our products as compared to other general commoditised chemical products. In addition, the specialised nature of our products allows greater flexibility to pass on certain cost increases to customers.
The economy in Thailand has been rather sluggish over the past year. Would this impact your recent announcement regarding the company looking at listing its Thai associate and is there any updates on the latter?
As with any initial public offering, there are many factors that can affect the timing of our Thai associate's listing, including market conditions. We are unable to comment on the impact on the listing of our Thai associate until the target date draws closer. We will make the necessary announcements should there be any significant developments on that front.
Is there a particular reason for the drop in sales from America which was more than 50% for the previous quarter on quarter?
There was a surge in sales to the markets in America in 2H FY2014 due to some sales which were not usually recurring in nature. This can be seen as a blip rather than a normal trend.

2. Dear David Koh, you wrote:

You registered S$68,000 in impairment of trade receivables in Indonesia. Asian economies are being affected by plunging currencies, do you anticipate a further increase in impairment of trade receivables going forward?

Should there be further deterioration in economic conditions in the markets where our trade receivables are tied to, we may potentially provide for impairment. We will continue to actively monitor the situation and take the necessary steps as required.

3. Dear Alvin Tan, you wrote:

Meghmani is doing well, do you plan to increase your stake? Have you considered distributing your stake in Meghmani to shareholders?

Meghmani is one of our suppliers. We subscribed for Meghmani shares at the time of its listing in Singapore in 2004 as a gesture of goodwill and support. We have been holding on to our stakes since then. We currently do not have plans to distribute the Meghmani shares to shareholders, especially given that our shareholding in the company is small.

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.