IPO Launch Presentation by Philip Lim Megachem Limited 1
Our Vision A Leading One-Stop Specialty Chemicals Solutions Provider 2
Presentation Outline The Specialty Chemicals Industry Our Business Investment Proposition Prospects and Growth Strategies Financial Highlights Summary 3
Specialty Chemicals A Brief Sector Overview They re Everywhere, Everyday 4
Sector Overview Specialty Chemicals are used in everyday products - Industrial products such as: - coatings, polymerisation, electronics, water treatment, metal finishing, petrochemicals - Consumer products such as: - food and beverage, flavour and fragrance, pharmaceutical 5
Sector Overview Benefits: Higher value than commodity chemicals Relatively inelastic demand Relatively stable prices Value and Profitability INDUSTRY POSITIONING Specialty Chemicals Commodity Chemicals Volume 6
Sector Overview In the specialty chemicals segment, buying decision based on: - Quality - Technical support - Delivery lead time - Level of customer service 7
Our Business 8
A One-Stop Specialty Chemicals Solutions Provider Established since 1987 A network of 8 distribution and warehousing points in 7 countries - Singapore, Malaysia, Indonesia, Thailand, Philippines, China (Shanghai and Guangzhou) and the United Kingdom Large base of reputable and reliable suppliers In-house manufacturing capabilities 9
Key Milestones Founded In Singapore Thailand Operations Indonesia Operations Philippines Operations Contract Manufacturing Malaysia Operations Shanghai Operations UK Operations Guangzhou Operations 1987 1989 1992 1993 1999 2000 2001 10
Our Business Distribution and Stocking of Specialty Chemicals Distribute and sell over 800 types and grades of specialty chemicals - Extensive list of reputable, quality suppliers Established and diversified base of about 1,200 industrial customers - Approximately 450 customers are MNCs - Accounted for approximately 70% of our Group s sales in FY2002 Primary Markets direct presence : Singapore, Malaysia, Indonesia, Thailand, Philippines, United Kingdom and China - Accounted for over 80% of FY2002 sales Secondary Markets direct sales / local sales agents : South Asia, Middle East, South Korea and Australia 11
Our Business Manufacturing Contract Manufacturing - Manufacture of specialty chemicals to fulfil customer specifications - Provision of value-added service Manufacture of our own Specialty Chemicals - Production of specialty chemicals using formulations developed in-house - e.g. wetting agents and emulsifiers for the rubber and plastics, polymerisation and the metal finishing industries 12
Investment Proposition 13
Investment Proposition Reputable Market Player Established Customer Base Extensive Regional Distribution Network Strong Relationships with Suppliers Established Infrastructure - Laboratory - E-Commerce - Logistics Experienced and Dedicated Team 14
Investment Proposition Reputable Market Player - Well regarded as a reliable distributor - Quality products at competitive prices - Timely delivery - Understand customers needs - Strong market and product knowledge - Strong technical support 15
Investment Proposition Awards & Achievements Responsible Care 16
Investment Proposition Established Customer Base - Long and established customer relationships - Spread across different industries including Polymerisation, Paint & Ink Coatings, Electronics, Food & Beverage, Water Treatment, Metal Finishing etc - Strong repeat business - 57% of existing customers accounted for approximately 89% of sales in FY2002 - MNCs accounted for approximately 70% of Group s sales in FY2002 17
Investment Proposition Some of Our Key Customers: The Shell Group Hitachi Chemical Asia-Pacific Fuji Hunt Photographic Chemicals Private Limited STAHL Asia Pte Ltd MTK Chemicals Pte Ltd PT Latexia Indonesia Revertex (M) Sdn Bhd The Sicpa Group 18
Investment Proposition Extensive Regional Distribution Network - Wide geographical coverage through our network of 8 distribution and warehousing points in 7 countries - Direct presence - Close proximity to customers enables quick response 19
Investment Proposition Strong Relationships with Suppliers - Large base of approximately 200 reliable suppliers - Source only from reputable suppliers - MNCs and specialty chemical manufacturers from Japan, Europe and the US - Channel for up-to-date information on new products / latest technologies 20
Investment Proposition Some of Our Key Suppliers Bayer (South East Asia) Pte Ltd Nippon Polyurethane Industry Co., Ltd Shell Eastern Chemicals (S) Sumitomo Seika Chemicals Co., Ltd. Mitsui Chemicals Asia Ltd Lyondell South Asia Pte Ltd Dupont Textiles and Interiors (S) Pte Ltd Dow Corning Singapore Pte Ltd Asahi Denka Co. Ltd 21
Investment Proposition Established Infrastructure - Fully Integrated ERP system - Semi-automated warehousing - increase efficiency - E-commerce website - provides convenience to customers in conducting business with us - Strong technical support provides value-added services - qualified chemists - well-equipped laboratory 22
Investment Proposition Experienced and Dedicated Team - Our 3 founders are actively involved in the business - Combined experience of more than 50 years in the chemical industry - Supported by a strong team of professionals 23
Prospects and Growth Strategies 24
Prospects Growth Strategies Regional customers largely dependent on specialised distributors Opening up of China market post WTO Broaden geographical coverage to other parts of Asia Establish direct presence in other parts of China Manufacturing and industrial sectors continue to be key economic drivers Enlarge market share - explore opportunities in new industries - build product leadership - source for leading products Seek strategic alliances Make inroads into specialty chemicals manufacturing 25
Financial Highlights 26
Sales S$M 65.0 55.0 45.0 57.2 54.4 58.6 Steady sales turnover despite global economic downturn 35.0 25.0 15.0 5.0 FY2000 FY2001 FY2002 Financial Year ended December 27
Sales (Geographical) FY2000 64% FY2002 31% 5% 27% Increasing sales contribution from Indonesia, UK, Philippines and China 51% 3% 8% 11% Singapore Malaysia Indonesia UK Others Others include China and Philippines 28
Gross Profit S$M 14 12 11.9 12.3 13.3 25% 10 8 20.8% 22.6% 22.7% 20% 6 4 15% 2 0 FY2000 FY2001 FY2002 10% Gross Profit Gross Profit Margin Financial Year ended December 29
Net Profit S$M 5.0 4.0 3.6 3.1 3.0 2.0 1.9 1.0 0.0 FY2000 FY2001 FY2002 Financial Year ended December 30
Key Financial Data FINANCIAL INDICATORS ROE (NP/Shareholders equity) FY2002 17.1% ROA (PBIT/Total Assets) 14.7% Inventory Turnover (days) 92 Debtors Turnover (days) 83 Gearing ratio 0.6 31
Summary A One-Stop Specialty Chemicals Solutions Provider Established Supply and Distribution Infrastructure Large and Established Customer Base Experienced and Dedicated Team Strong Financial Position Industry shows Good Growth Prospects 32
Thank You Q&A 33