Singapore, October 8, 2003 - Megachem Limited ("Megachem"), a regional one-stop specialty chemical solutions provider, launched its initial public offering ("IPO") of 20.8 million shares at S$0.28 per share today. Megachem will be listed on the SGX-ST Dealing and Automated Quotation System ("SGX-Sesdaq").

 

Said Mr Sidney Chew, Executive Chairman of Megachem : "Our listing marks a significant milestone in our corporate history and heralds the beginning of our next phase of growth.

 

We believe our listed status will lend Megachem greater credibility as we continue expanding our geographical coverage to increase market share. We intend to tap on the exciting prospects for the Asia Pacific region, especially in the PRC where we are now well positioned to seize any opportunities that may arise.

 

We also plan to further strengthen our manufacturing capabilities while broadening our product range to serve a wider range of industries."

 

UOB Asia Limited is the Manager, Underwriter and Placement Agent for Megachem's listing.

 

The Offer

 

The offer of 20,800,000 new shares represents 15.6% of Megachem's enlarged share capital. Of this, 3,120,000 new shares will be offered by way of public offer, with the remaining 17,680,000 new shares to be offered by way of placement, comprising :

-                     16,180,000 Placement Shares;

-                     1,500,000 Reserved Shares for management and employees who have contributed to the Group's success.

 

At S$0.28 per share, Megachem is priced at a net price earnings ratio of 10.04 times, based on its historical net earnings for the financial year ended December 31, 2002 ("FY2002").

Use of Proceeds

 

Megachem intends to use the estimated net proceeds of S$4.6 million from its IPO as follows:

-        approximately S$1.0 million for its geographical expansion in China and Vietnam;

-        approximately S$0.5 million to expand its manufacturing activities;

-        approximately S$1.2 million for the upgrading of its existing ERP system;

-        approximately S$0.5 million to repay certain hire purchase liabilities; and

-        the balance for general working capital purposes.

 

Reputable specialty chemicals provider in the region

 

Since the start of operations in 1987, Megachem has progressively expanded its footprint in the region, from one distribution point in Singapore to eight offices in seven countries today. The Group is primarily in the specialty chemicals distribution business, offering over 800 different types and grades of products that span a wide range of applications. In line with Megachem's commitment to add value to its services, the Group went into the contract manufacturing business in 1997 to tailor solutions to meet its customers' requirements. In 2002, Megachem made inroads into manufacturing its own specialty chemicals using formulations that the Group develops in-house.

 

Megachem boasts a diverse and quality customer base of approximately 1,200 customers, of which approximately 450 are MNCs that accounted for approximately 70% of the Group's sales in FY2002. Because of its extensive product range, Megachem is able to serve industries ranging from polymerisation, paint and ink coatings, electronics, rubber and plastics to water treatment. Its strong level of repeat business, which contributed approximately 89.0% to the Group's sales in FY2002, attests to the high level of customer satisfaction with Megachem's quality products and service.

 

Said Mr Philip Lim, Managing Director of Megachem : "We are able to maintain long working relationships with our customers because of the excellent technical support we can provide from our in-house laboratory. Our emphasis on responding promptly to customers' needs and timely product delivery also led us to establish eight distribution and warehousing points in Singapore, Malaysia, Indonesia, Thailand, Philippines, Shanghai, Guangzhou and the United Kingdom. All these help to build our position as a one-stop specialty chemical solutions provider."

 

While the Group serves its primary markets directly through its regional network, it also exports directly or markets through sales agents to customers in South Asia, the Middle East, South Korea and Australia.

 

In order to meet the individual needs of various industries, Megachem sources specialty chemicals from a quality network of approximately 200 reputable suppliers, including leading manufacturers such as Bayer (South East Asia) Pte Ltd, DuPont Textiles and Interiors (S) Pte Ltd, Lyondell South Asia Pte Ltd, Dow Corning Singapore Pte Ltd and Nippon Polyurethane Industry Co., Ltd.

 

 

Prospects and Strategies

 

To fuel its growth, the Group plans to increase its distribution network to cover markets where it currently does not have a direct presence, such as Vietnam, South Asia and other parts of China. This will enable the Group to provide close support to its MNC customers who are expected to enter these markets.

 

Commented Mr Lim : "Although the contribution from our China operations to the Group's turnover is relatively small at present, we believe there is huge potential for our Group in the PRC, especially after its entry into the World Trade Organisation. While we already have operations in Guangzhou and Shanghai, we are likely to increase the number of subsidiaries in other parts of China, which will place us in a stronger position to seize opportunities there."

Besides China, Megachem believes the manufacturing and industrial sectors in the region represent growing prospects for the Group. As the number of specialty chemical manufacturers in the region is relatively small, customers in the region are and will continue to be reliant on specialised regional distributors like Megachem in the foreseeable future.

 

As such, Megachem has devised three strategies to enlarge its market share. The Group aims to attain market leadership in existing products that enjoy higher sales as well as to source for new products that are in leading positions in their respective areas of applications. In addition, Megachem will look into widening its product range to penetrate other industries.

 

"We will continue to develop and grow our manufacturing activities to complement our core business in specialty chemicals distribution. Moreover, we believe this will enhance our value-added services to our customers as well as strengthen our market position. In this respect, we will pursue opportunities for collaborations with strategic suppliers to make further inroads into the specialty chemicals manufacturing business," added Mr Lim.

 

 

Financials

 

For FY2002, Megachem recorded a profit before tax of S$4.7 million on revenue of S$58.6 million. Since incorporation, the Group has achieved a compounded average growth rate per annum of 21.0% in its turnover for the past 13 years.

 

The issue opens at 9.00 am on October 9, 2003 and will close at 12.00 noon on October 15, 2003. Trading for the shares is expected to commence at 9.00 a.m. on October 17, 2003.

 

 

BY : Citigate Dewe Rogerson, i.MAGE Pte Ltd

55 Market Street

#11-01 / 03 Sinsov Building

SINGAPORE 048941

CONTACT : Mr Herman Phua / Ms Lisa Heng

at telephone

DURING OFFICE HOURS : 6534-5122 (Office)

049/03/049/MCL

October 8, 2003