Memstar Technology Ltd.

10 Science Park Road

#02-10 The Alpha
Singapore 117684

Company Registration Number: 197901641K

ANNUAL REPORT 2010


CHAIRMAN’S
STATEMENT
Dear Shareholders
The period 2008 - 2009
was one of unprecedented
challenges for the world
economy including China.
Against this challenging
macro-economic backdrop
and a diffi cult business
environment, our Group
managed to achieve a set of
credible financial results for
the financial year ended
30 June 2009 (“FY2009”).
Not withstanding the financial crisis and economic
slowdown which delayed the pipeline of orders
from project-based customers, our Group
remained profitable and ended the fi nancial year
with a profit after tax of RMB10.0 million, a
decrease of RMB13.1 million or 56.6% from the
comparative period last year (“FY2008”).
The tough market conditions and delays in projects
industrywide had also adversely impacted on our top
line and gross profi t. Revenue and gross profi t
margin were eroded to RMB42.6 million and 71.7%
respectively, a decrease of RMB56.8 million and 0.5
percentage point from FY2008. The lower revenue
reflects lower sales of both industrial and
domestic/commercial membrane products as a result
of customers paring or deferring their expenditures
given the economic uncertainty. The marginally lower
gross profi t margin was due mainly to marginally
higher production costs arising from higher
depreciation expense for new plant and machinery.
SEGMENTAL CONTRIBUTION TO REVENUE
Our Industrial Applications segment continued to be
a signifi cant contributor to revenue and gross profi t.
With sales of RMB40.5 million, this segment
accounted for 95.0% of Group revenue. In terms of
geographical markets, China continued to account
for the lion’s share of sales at 99.2%.
As at 30 June 2009, our Group has no outstanding
bank borrowings except for fi nancial lease
obligations of RMB0.7 million and we remain in an
overall positive net cash position of RMB158.0
million, which is equivalent to RMB6.0 cents per
share. The Group’s net tangible asset per share was
RMB12.69 cents as at 30 June 2009. Earnings per
share stood at RMB0.38 cent as compared to
RMB1.09 cents in FY2008.
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Memstar
Technology Ltd
Annual
Report
2010
DIVIDENDS
During the year under review, we had already
declared an interim tax-exempt (one-tier) dividend
of 0.02 Singapore cents per ordinary share. In
appreciation to our shareholders for their loyal
support, we are recommending a fi nal tax-exempt
(one-tier) dividend of 0.02 Singapore cents per
ordinary share for the fi nancial year ended 30 June
2009, for approval at the forthcoming Annual General
Meeting.
MIANYANG PLANT:
COMPLETED AND COMMENCED RODUCTION
The fi nancial year under review saw the completion
of our Mianyang plant in Sichuan province at a
construction cost of RMB72.9 million excluding the
cost of land use rights of RMB11.2 million and the
commencement of production in second quarter
FY2009. We have increased our investment in our
wholly-owned subsidiary, Memstar (Mianyang) Co.,
Ltd (“Memstar (Mianyang)”) by an additional injection
of US$3.0 million. This brings the total paid-up capital
of Memstar (Mianyang) to US$15.0 million. The
additional investment, which is funded from the
proceeds of the share placement in 2007, will be used
to pay the balance of capital expenditure incurred and
as working capital for the subsidiary.
With the advanced production facilities for the
production of hollow fi bre membranes, membrane
modules and household water purifi ers, it has an
annual designed capacity of 5 million square
meters of PVDF (polyvinylidene fl uoride) and PES
(polyether sulfone) MF/UF (microfi ltration / ultrafi
ltration) membranes and 200,000 units of
household water purifiers.
We believe that our Mianyang production facility is
one of Asia’s largest, which will enable us to compete
cost effectively as well as produce high quality
membrane products on a large scale under stringent
production management systems and processes led
by an experienced management team.

OPERATIONS &
FINANCIAL REVIEW
Company Overview
Main board listed Memstar Technology
Ltd. (“Memstar”) is a Singapore home
grown and leading manufacturer and
supplier of olyvinylidene fluoride
(“PVDF”) hollow fibre membrane and
membrane products and one of the
few manufacturers of high
performance PVDF hollow fibre
membranes in the world today. The
Group’s headquarter and research and
development centre is in Singapore
and production facilities are located in
the PRC. Memstar provides high
quality membrane products for use in
the following applications:
• Industrial applications which include pressurised and submerged
membrane modules that are used in water / wastewater treatment,
water reclamation, seawater desalination, food, pharmaceutical,
chemical, power generation, petroleum, bio-separation and other
separation processes;
• Domestic/Commercial applications which include membrane or
integrated water purifi ers for households, commercial buildings,
small businesses, schools, hotels and hospitals.
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Memstar
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2010
FY2009 RESULTS AT A GLANCE
Following from the previous fi nancial year of initial
expansion and growth, the current fi nancial year
refl ects the impact of the global fi nancial crisis and
economic slowdown. For the fi nancial year ended
30 June 2009, Memstar achieved consolidated
revenue of RMB42.6 million, a decrease of
RMB56.8 million or 57.1% from RMB99.4 million of
previous fi nancial year (“FY2008”).
As the Group continues to grow, it remains focused
Selling and distribution expenses amounted to
on its vision to improve the quality of the
environment and in turn elevate the conditions of
RMB3.3 million, an increase of RMB1.6 million from
hygiene and health by offering quality products and
FY2008 due mainly to the increase in marketing
and promotion expenses, trade exhibition
services in water and wastewater treatment,
reclamation and purifi cation. Memstar aims to be a
expenses, salaries and other related expenses to
complete solution provider supplying not only
expand our distribution network. This has resulted
in our alliances with the Singapore national water
quality membrane products but also integrated
membrane techniques such as cleaning and
agency, Public Utilities Board to collaborate on
maintenance of membranes.
water and wastewater treatment related membrane
research and Sembcorp Industries Ltd to
codevelop and testbed new membrane products
The Group works closely with existing membrane
users who need to replace membranes regularly
for wastewater treatment and water reclamation
such as amongst others, power generation,
system. Administrative expenses were RMB13.4
million, an increase of RMB1.7 million from FY2008
petrochemical, municipal and ironworks,
engineering companies that are continuously
due mainly to the increases in salaries and related
building new membrane-based water treatment
expenses arising from headcount increases on the
completion of the new plant in Mianyang.
plants, as well as distributors who are directly
dealing with small water system integrating
companies. We continue to provide them technical
consultancy, competitive packages
high-performance membrane products. Besides
and
our recurrent customers, Memstar strives to
expand further into other overseas markets to drive
growth and enhance our market position.
With the financial support of the Economic
Development Board (“EDB”) of Singapore,
Memstar has established strong Research &
Development (“R&D”) capabilities in Singapore
which includes advanced research facilities and a
strong R&D team including a number of renowned
scientists in the fi elds of membrane technology
and water treatment technology. The Group’s
intellectual property rights include a number of
application patents and proprietary technologies in
the relevant fi eld. Our strong R&D capabilities
allow us to continually improve on our production
processes and techniques for existing products as
well as expand our product range.