Sino Hua-An's 3Q09 revenue registered a growth of 15.9% to RM 349.8 million because of higher average selling price ("ASP") of coke & its main by-products. In 3Q09 ASP of coke was RMB 1,646 per ton vs 2Q09 ASP of coke was lower at RMB 1,460 per ton. Also, in 3Q09 the ASP of crude benzene which is oil-based fared well in line with higher international crude oil price (exceeding USD 65 per barrel). ASP of crude benzene recorded an increase of 18.0% to RMB 4,233 per ton as compared to 2Q09. As for tar oil, the ASP in 3Q09 and 2Q09 was rather stable and remained on the higher average of RMB 2,350 per ton. FYI, 1Q09 ASP of tar oil was lower at RMB 1,613 per ton.

Sino Hua-An finally made a turnaround and returned to the black (profitable) again in 3Q09 after 3 consecutive quarters of losses in 4Q08 (incurred huge losses of RM 83.6 million), 1Q09 (incurred losses again of RM 22.8 million) 2Q09 (incurred smaller losses of RM 13.3 million). In 3Q09, Sino Hua-An made PAT of RM 18.4 million or EPS of 1.65 sen following the aggressive roll-out of infrastructure projects in China on the RMB 4.0 trillion stimulus package and supported by unprecedented growth in new bank loan disbursements seen as sustaining China's rebound amid signs that export may start to recover as the global recession eases.

Summary on financial highlights:
As at 30 September 2009, Sino Hua-An is in net cash position of RM 34.7 million. (Sino Hua-An has no gearing since 4Q07). Our average utilization rate/ capacity in 3Q09 was 92.6% (2Q09: 90.6%). Debtors' day and creditors' day are healthy which are less than 30 days for both. Stock turnaround period is 18 days.

Industry update:
According to China Iron & Steel Association ("CISA"), China's steel exports to the US and Europe plunged in the 1st eight months of 2009 because of global recession. Export to the US and European Union in the 1st eight months of the year dropped by 73% and 85% respectively. In a recent report by China's National Development & Reform Commission (the country's top economic planner), it was highlighted that steel, cement, glass, coal, chemical and wind power industries were categorized as 6 major industries facing severed over capacity issues. The global financial crisis has slowed down China's economic growth rate and hurt global demand, causing the overcapacity problem. However, the Chinese government aggressive, quick roll-out of major infrastructure projects and the expanding of domestic industrial output are mitigating its slower export. Resilience in retail sales, Purchasing Manager Index ("PMI") and industrial production are seen as helping China's economy from its falling export. The PMI in China, was reported robust in October 2009, showed an increase 0.9 pts to 55.2. The manufacturing sectors especially auto industry is in full recovery mode as China's car sales up 84% in Sept09 which augurs well for the steel demand in China. Since May09, steel rebar price has gradually pick up from a low of RMB 3,300 per tons and reached a peak of RMB 5,000 per ton in mid-Aug09. However, the momentum could not sustain and by end-Aug09 the steel prices started to correct. In Oct09 the steel rebar witnessed a fall of 25-30% from its peak of RMB 5,000 per ton. Main reason was because the crude steel output was high in July09, Aug09 and Sept09 in which a total of more than 150 million tons of crude steel was produced in these 3 months. The oversupply situation in the domestic steel industry is perceived to be temporary and we believe the situation will improve beginning of 2010. The Chinese Government has taken various proactive steps to address the situation which among others, include curbing of capacity expansion in the steel and coke industries. In fact, some bigger steel mills in northern China, led by Hebei Steel, Benxi Steel, Baotou steel are reported to have pared output from mid-October. Also, maintenance work is being aggressive planned for Nov09 & Dec09 as these periods are considered as lower demand season there. In the 1st 9 month of 2009 China produced 253.7 million tons of coke, y-o-y +1.4%. As for September 2009, China produced 31.5 million tons of coke which depicted a +24.7% y-o-y. The growing coke production figure in China is in line to support the increasing steel production output in China. Since end-Oct09 both steel price and coke price have rebounded by approximately 3.0-5.0%. The current steel rebar and coke prices are RMB 3,600 per ton and RMB 1,600 per ton respectively.

Moving forward:
In early-November 2009, World Bank revised upwards China's 2009 GDP growth from earlier 7.2% to 8.4% as the Chinese economy is apparently in its full recovery mode. As for 2010, the World Bank has projected an 8.7% growth in China's economy. We are cautiously optimistic and acknowledged that the full recovery of China's economy coupled with recovery of global economy in very near future should bode well for Sino Hua-An, which is one of the raw material supplier to the steel industry in China.