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 Teo Hwee Ching, you wrote:

I've noticed North Asia in 1H13 was down 21% compared to 1H12. It is also down 25.8% compared to 2H12. How is the demand from China? Is the credit crunch in China increasing the credit risk for MegaChem?

In line with slower economic growth in China, we faced a decline in demand for our products. In June there was concern of a credit crunch in China after interest rates spiked up before it stabilised following reassurance from the Chinese government. Given that things are constantly in a flux, we will remain vigilant in assessing the market conditions and the credit standing of our customers there.

2. Dear George Chen, you wrote:

The USD is surging against ASEAN currencies like RM, IDR , THB and SGD. It seems that you sell your product in USD hence your losses in 1H13 is less than 2H12. Rather than hedging against the unknown future currency movement, why don't you report your financial statement in USD? Can you also pay the interim dividend in USD? My view is the USD is going to continue to appreciate. Thanks.

This is a very relevant question in today's environment where currency movements can be very volatile. While we have made some FX gains in USD in 1H 2013, we have lost in other currencies such as the Rupee. On a net basis, we have a small FX loss in the 1H 2013.

We try to buy and sell in the same currency. However in some countries we are not allowed to sell our products locally in foreign currencies. Thus we do not sell in USD in all the countries in which we operate. On your question of whether we should report our financial statements in USD, a company should not change its reporting currency unless there are strong justifications to change. We can explore this at an appropriate time.

Paying dividend in USD will have foreign exchange implications since our accounts are reported in SGD and our share price is also quoted in SGD.

3. Dear Frank Tan, you wrote:

Do you think interest rate is going to rise? Why don't you use the money to repay the debt than give to shareholders? Why don't you issue script dividend instead? Feel it is better for the company to save up money in a rising interest rate environment.

When US started injecting liquidity through Quantitative Easing during the 2008 crisis, interest rates fell. Now that there is talk of QE tapering and perhaps followed by withdrawal, one can expect interest rates to rise. We will explore with our bankers to hedge the interest rate risk.

Our aim is to strike a balance between conserving cash to meet our financial obligations and rewarding our shareholders. Whenever we have the surplus cash after meeting our financial obligations, we will pay dividend to provide a consistent payout to our shareholders. Conversely if we do not have the cash to do so, we may explore other options such as a scrip dividend.

4. Dear Jasmine Yeo, you wrote:

The government is going to move all the ports to Tuas where you are located. Will it reduce the logistic cost? Will you expand your operation in Singapore even thou the labour cost is rising? Many manufacturing companies have decided to move to Malaysia. Will you do the same?

Yes the moving of our ports to Tuas will certainly reduce our logistic cost assuming other cost factors being the same.

We have just expanded our production facility in 2012 and are not likely to expand our manufacturing operation in Singapore or move our production facility to Malaysia at the present time. However we will be actively monitoring the cost issue and will constantly review the options available.

5. Dear David Koh, you wrote:

How come you don't have operation in Myanmar? Have you send anyone there to look for business opportunities?

Yes we have been to Myanmar to explore business opportunities. As Myanmar is just opening up, it is still lacking in infrastructure, regulatory and financial framework. However, with the improving political climate, it is expected to lead to an upturn in construction activity, both in the public sector (such as infrastructure projects) as well as the private sector (such as residential, industrial, commercial and hospitality). At this point in time, we do not have intention to enter the market in a big way.

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) 6221 5590) at 1 Robinson Road #21-02 AIA Tower Singapore 048542.