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Financial Highlights

The following table sets out a summary of the combined financial information of the Group for the FYE Under Review.

• ​Revenue decreased from FYE 2019 to FYE 2021 due to the slowdown in construction activities.
• The gross profit margin is above 20% but it decreases year by year. The decrease in GP margin for the FYE 2021 was mainly due to increase steel prices and goods for distribution which were not fully passed on to the customers(Generally, a GP margin of 20% is considered high/ good).
• PAT margin decreased from 12.48% (FYE 2019) to 8.39% (FYE2021)
• The gearing ratio is 0.34 times (FYE 2021) which is still under a healthy range. (A good gearing ratio should be between 0.25 – 0.5).
  

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for FYE 2021

According to the details, the top 5 customers are around 12.96% this is because normally each building/shop lot will only install a fixed amount of fire protection system, it is not daily consumption. Therefore the company was not dependent on any of its customers.

Major Suppliers

The Group’s top 5 major suppliers for FYE 2021

According to the details, the top 5 suppliers are around 32.27%. The management mentioned they are not dependent on individual suppliers. When selecting the suppliers, they consider factors such as the prospective supplier’s reliability, quality of products offered in terms of specifications, and complying with the relevant standard, price, and payment terms, delivery and lead times, and customer services, responsiveness, and flexibility.

Industry Overview

The factors of demand for active fire protection equipment are contributed by the general well-being of the economy, the performance of the construction and property development industries, and the regulatory framework in Malaysia. In 2021, the real GDP of Malaysia’s economy and the construction sector recorded 3.1% and -5.2% respectively compared to 2020. In Q1 2022, the real GDP of Malaysia’s economy and the construction sector recorded 5.0% and -6.2% respectively compared to Q1 2021. In 2021, the future supply of high-rise residential, high-rise commercial, and industrial units recorded -5.8%, 7.1%, and -1.5% respectively compared to 2020. In Q1 2022, the future supply of high-rise residential properties declined by 7.7% while high-rise commercial properties and industrial properties grew by 2.2% and 1.4% respectively compared to Q1 2021.

Any regulatory changes that increase the existing requirement for fire protection equipment, such as the requirement for more types of residential homes or motor vehicles to have fire extinguishers, will facilitate the demand for an active fire protection industry. Furthermore, the requirement that portable fire extinguishers have to be scrapped 10 years after the manufacturing date would also facilitate the replacement market for hand portable fire extinguishers.

The performance of the active fire protection industry is dependent upon, among others, the recovery of Malaysia’s economy as well as the global economies from the COVID-19 pandemic. In addition to the eight economic stimulus packages provided by the Malaysian government which amounted to RM530 billion, a further RM332.1 billion has been allocated to drive the recovery of the economy as indicated in the Budget 2022. Any resurgence of COVID-19 cases and reimposition of containment measures will weigh on the economy's growth. Overall, the economy in Malaysia grew by 3.1% in 2021 with forecasted real GDP growth between 5.3% and 6.3% in 2022 (Source: BNM)

Other considerations that will drive demand include growing public awareness of fire safety, recovery in the construction industry as well as the implementation of stringent regulations for fire protection in buildings. Although the real GDP of the construction industry declined by 5.2% in 2021, it is expected that the construction industry will recover in 2022 with forecasted real GDP growth of 6.10% (Source: BNM).

Source: Vital Factor Consulting
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Business strategies and prospects for UNIQUE FIRE HOLDINGS BERHAD

The business strategies and plans are focused on leveraging the core competencies and strengths in the assembly, distribution, and manufacture of fire protection systems, equipment, and accessories. The company intends to implement the following business strategies and plans between 2022 and 2025.

1. Enhance the manufacturing facilities and develop new fire extinguishers
   1. New hand portable dry chemical fire extinguisher cylinder manufacturing lines.
   2. New hand portable dry chemical fire extinguishers that comply with MS and BS.
2. Enhancing the operational capabilities
   1. Increase storage capacity and implement a warehouse management system.
   2. Digital fire extinguisher identification data system and enhance IT system.
3. Expand the geographical coverage
   1. Establish new sales offices and warehouses in Johor and Penang.
   2. Enhance advertising and marketing activities.
4. Use of renewable energy – install rooftop solar photovoltaic system

MQ Trader View

Opportunities

1. The company established a track record of approximately 25 years as a provider of fire protection systems, equipment, and accessories which will serve as a platform to grow its business. The established track record together with the customer base will provide the company with the platform to sustain and grow its business.
   

Risk

1. Unattractive financial statement. The revenue, gross profit margin, and net profit are decreasing year by year due to the slowdown in construction activities.
2. The company is dependent on the building construction and property development industries. As the perspective mentioned, the demand for fire protection products would be adversely affected if there is a slowdown in the building construction and property development industries.
3. The company is exposed to fluctuations in the market price of steel. The empty cylinders and steel coils and plates collectively accounted for around 1/3 of the purchases of input materials and services for FYE 2019, FYE 2020, FYE 2021, and FPE 2022, respectively. Fluctuations in the market price of steel may harm the business operations and/or financial performance in particular any increases could consequently increase the costs of the fire protection systems, equipment, and accessories that the company assembles, distributes, and manufactures.

Click here to refer back on the IPO - Unique Fire Holdings Berhad (Part 1)
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