Art of Investments


Publish date: Sat, 18 Nov 2023, 02:55 PM

Results have started to come out and one company stood out on Thursday after it doubled its profit to its highest ever and released new details on its capacity expansion that was never shared previously. 

The name of the company is Unique Fire.

What does Unique Fire do?

As the name might suggest, Unique Fire is mainly involved in the assembly and manufacturing of fire protection systems, equipment and accessories. Assembly and manufacturing contribute around 70% of revenue. The other 30% comes from distribution of 3rd party fire protection products. Unique Fire has done projects for all kinds of buildings (MRT stations, schools, malls, offices etc) and their business follows the construction industry closely. As many would know, the construction industry had started to boom a few months back.

On Thursday, Unique Fire released their 2nd quarter results. They recorded a record high revenue and profit as seen below:

But it was not so much their results which caught my attention. The eye opener was the details of their expansion plans which they never shared before in the past. In the prospects section, Unique Fire mentioned this:

We all knew that Unique Fire was building 2 new manufacturing lines that is due to commence production sometime between January-March 2024. But yesterday was the first time they disclosed that the 2 new manufacturing lines would increase their capacity by 3.2x! With their expansion into Johor and Penang, Unique Fire has a high chance of doubling or tripling their assembly and manufacturing revenue in 2024. 

If we were to annualise this quarter's assembly/manufacturing revenue and group profit (we can assume that most of their profits come from manufacturing/assembly as distribution margins are usually very thin), Unique Fire's annual assembly/manufacturing revenue and group profit would be RM76 million and RM9.6 million respectively. With a tripling in capacity, Unique Fire has the potential to triple their revenues and profits.

How to value Unique Fire?

There is no comparable as the closest comparable Fitters Diversified recently diversified into many businesses such as property development. We have to use how Unique Fire had been valued in the past. Based on historical numbers, we can see that Unique Fire had been trading at 20-24sen with annualised EPS of 0.5-1.2sen. This translates to a PE of 17-48x. If we were to take the lowest PE of 17x and conservatively assume a doubling of profits in 2024 (instead of tripling, we assume that Unique Fire will only double their output), Unique Fire would be valued at a market capitalisation of RM326 million (9.6 x 2 x 17) or RM0.815 per share. At the current share price of RM0.25, Unique Fire has a potential upside of 226%.

Unique Fire also has a bonus issue of free warrants coming up in 1-2 months. This will surely provide a boost to the share price. 

It is a matter of time before Unique Fire's share price reflects the undervaluation and future potential of the company.