Multi-Chem‘s Joint Venture in India, 11th May 2007

Multi-chem's IT distribution arm, M.Tech is its only hope for Multi-chem when its other dominant business segment, PCB drilling, is struggling due the current electronics slump.

I am thus delighted to see that it managed to form a deal to venture into India via a new Joint Venture between Multi-Chem's wholly-owned subsidiary, SecureOneAsia Pte. Ltd. ("SOA") and Virtual Netcomm Pvt Ltd ("VNPL"), the sole distributor of Blue Coat (www.bluecoat.com) products in India. VNPL, wholly owned by Mr Rajendra Shah ("RS") is headquartered in Ahmadabad and has offices in Bangalore, Delhi and Mumbai.

Under the terms of the JV agreement, a new company, to be known as M.Tech-Virtual India Pvt Ltd ("MTIN"), with SOA and RS owning 51% and 49% respectively.

Most importantly, to carry the business strategy that made M.Tech a success, MTIN will also be principally engaged in the distribution of IT products, primarily the best-of-breed IT security products other than Blue Coat. Interesting to note, to avoid any conflict of interest, RS has undertaken that first right of refusal of any products VNPL wishes to take up has to be given to MTIN. I presume this last statement to mean that MTIN can choose to carry products while denying VNPL the right to do so. I will raise this question again in the next AGM or Q & N after the full year results, both scheduled for next year, first quarter 2008.

The joint venture thus extends the reach of M.Tech westwards into India and once fully operational, M.Tech will have a network of 15 offices in 9 countries across Asia. From Singapore, M.Tech extended its market penetration to other parts of Southeast Asia, e.g Indonesia, Malaysia, Thailand, then to China and now into India.

Though the management stated the joint venture will not impact this year's financial results, I believe it will positively lift up the earnings once the MTIN goes into operations and profit can be recognised. I will find out the estimated schedule in the next AGM or Q & N after the full year results too.

Fortunately the expected poor performance of the PCB drilling segment had been clouding the good prospects of IT security product distribution segment to result in low share price (last traded at 22.5 SGD cents at 18th May 2007). Thus I could snap up more of Multi-chem with my combined retirement fund I just setup with my wife (wholly managed by me).