EX-99 2 exh_991.htm EXHIBIT 99.1
Corporate Presentation
September 2010
NASDAQ: CFSG
 
 

 
NASDAQ: CFSG
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Safe Harbor Statement
Certain statements in this presentation are forward looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from such statements expressed or implied herein
as a result of a variety of factors, including, but not limited to the Company's
sales and services; the success of the Company's commercialization strategy,
the acceptance by the market of the Company's products; competition and
timing of projects and trends in the future operating performance, as well as
other factors expressed from time to time in the Companies periodic filings with
the Securities and Exchange Commission (the "SEC"). As a result, this
presentation should be read in conjunction with the Company's periodic filings
with the SEC. The forward looking statements contained herein are made only
as of the date of this presentation, and the Company undertakes no obligation
to publicly update such forward looking statements to reflect subsequent
events or circumstances.
 
 

 
NASDAQ: CFSG
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Company Overview
Business
China’s #1 Brand and Market Leader for Industrial Fire
Protection
Organization
Founded in 1995 and headquartered in Beijing, about
430 employees, 30 sales offices nationwide, 2 large manufacturing
plants, 119 patents effective and 24 patents pending
Customers
Tier-1 Customers - Chinese top iron & steel producers;
Power plants, including thermal, hydro, nuclear and transmission;
Subway and other transportation customers;
Petrochemical customers; and
International customers
Capital
Structure
NASDAQ: CFSG
Price (08/09/10): $8.26
52-Week Range: $7.84 - $21.72
Shares Out.: 27.6 million
Trading Vol (Three Month Avg.): 175,152
Market Cap: $235 million
Financials
2010 E: Revenue $118-125 million (45%-54% Y/Y)
                Net Income $34-36 million (39%-47% Y/Y)
2009 A: Revenue $81 million; Net Income $24 million
 
 

 
NASDAQ: CFSG
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Strong Demand from High-end Customers
Market Leader with Sustainable Advantages
New mandatory fire standards
Growing needs for retrofitting solutions and services
Continued spending and consolidation by core Tier-1 customers
Ample expansion opportunities into new markets
Technical and innovation leadership - proprietary products
   with UL Certifications
#1 brand with nationwide distribution
Locked-in customer base
Robust Business Model with High Visibility
Scalable total solution provider
Solid profit margins
Large backlog
Consistent Performance and Proven Leadership
Attractive profit margins with solid balance sheet
Expert management team
Investment Highlights
 
 

 
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Strong Demand
Significant Drivers Include:
New mandatory fire standards
A major amendment of the Fire Prevention Law issued on May 1st, 2009 requires all fire protection
  products to comply with the national standards
Code of Design for Fire Protection and Prevention for Iron & Steel Metallurgy Enterprises and
  Amendment in Fire Services Law emphasized the owner’s liability and the government’s supervision
Nearly 80% of steel plants not fully compliant with new mandatory fire safety requirements
China’s unabated industrialization
Economic growth in China should generate growth in demand for infrastructure investments
China expects 8% GDP growth in 2010 and is poised to become world’s second largest economy*
Government’s continued investments into steel-consuming infrastructure construction projects
* Reuters and Wall Street Journal
 
 

 
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Strong Demand (cont.)
CFSG’s Tier-1 customers have stronger financial resources and continue to spend on
modernizing facilities, requiring new fire protection systems.
CFSG’s leading total solution approach and higher economies of scale provides
comprehensive retrofitting services and solutions for most existing plants to be
compliant with the new fire codes in their respective industries.
CFSG’s superior product offering at favorable price continues to gain additional market
share from fragmented, smaller competitors.
CFSG’s strong track record and integrated products are preferred by high-end customers
and well equip CFSG to capitalize on the industry’s continued consolidation.
Furthermore, demand for CFSG’s leading
solutions continues to outpace the industry’s,
driven by:
 
 

 
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Industry
Estimated Annual Market
Value of Fire Systems
($ M)
Estimated
CFSG Market Share (%)
 
 Iron and steel
300
>20%
 
 Power
200
3-5%
 
 Petrochemicals
200
3-5%
 
Transportation (tunnels,
     subways)
200
<3%
 
 Nuclear power
40
30%
 
Public infrastructure
200
<3%
 
 Other (metals, manufacturing,
     marine)
400
<3%
 
Total
1,500
ca. 7%
 
Source: Company Information, Estimated in 2009
 
 
 
Large Addressable Market for CFSG
 
 

 
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Large Addressable Retrofitting Market for CFSG
- Retrofitting iron & steel plants utilizes China Fire’s same core competence, core
products, and core technologies as in building new iron & steel plants.
 
- New safety regulations for China’s iron and steel industry require significant
increase in safety spending;
- With a total annual output of 300 million tons from the major iron and steel
companies and strong support from the government, China’s massive iron and
steel industry will likely accelerate retrofitting outdated fire safety systems.
A core market for CFSG, retrofitting iron and steel plants in China could
exceed $2 billion*
*Based on the company’s estimation
 
 

 
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Market Leader
Fire Detectors
Fire System Controllers
Fire Extinguishers
End-to-end Solutions
CFSG is ranked #1 in “System Contracting Enterprises” by the China Fire Protection
Association
 
 

 
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Market Leader
Largest manufacturer of industrial fire protection products in China
Total 200,000 sq. ft. manufacturing facilities located in Beijing and Tianjin
Annual production capacity of 6 million meters (approximately 20 million feet) of
       linear heat detectors
Currently only 35% capacity utilization—ample headroom for additional growth
Large Manufacturing Capability
 
 

 
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Market Leader
•   Experienced advisors, including the former Chief of the
     Fire Prevention Bureau
•   Chief Editor for “Design of Fire Prevention Standards for
     Metallurgy, Iron and Steel Enterprises”
•   Editorial member for the “Linear Type Heat Detectors”
•   Editorial member for the “Standardization for Fire Prevention Designs
     in Thermal Power Generating Plants and Transformer Stations”
•   Major participating units for the provincial fire safety standard in the
     Liaoning, Hubei, Shan Xi, and Guang Dong
CFSG has continued to strengthen its position as a leader in the development of
China’s national fire safety standards.
Technical and Innovation Leadership
•   119 patents and 24 patents pending
•   A well-educated R&D team of 33 persons
•   Two “Best of Class” industrial testing facilities
Strong capability in R&D with core technology innovation
Industry standard setter
 
 

 
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Sustainable Advantages
Industrial fire safety systems demand greater technical specialization, as
compared to general residential and commercial fire safety systems.
Designers must consider complex technologies, safety factors, and unique fire hazard risks
Must address environmental challenges -- humidity, dust, and electro-magnetic interference
Large industrial customers require “end-to-end” turnkey solutions and services
High Technical Barrier
 Typical industrial fire prevention and fighting system contract
Identifying
target projects
Project tendering and
Contract signing
Specialized fire
facilities design
Business contact
and technical service
for target customers
Risk analysis of fire hazard
Technical solution of fire safety system
Testing on fire hazard
Fire detection system
Fire extinguishing system
Fire alarm control system
Maintenance
System integration
(including purchasing of
peripheral products)
Product Manufacture
Quality Control
Installation and
management
 
 

 
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Sustainable Advantages
CFSG is ranked #1 twice in "Top Ten Chinese Fire Protection Brands“ by HC360.com,
the largest commercial website in China's fire protection industry
China’s #1 Indigenous Brand
 
 

 
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Sustainable Advantages
Shanghai
Ningbo
Guangdong
Jiangsu
Hube
i
Jiangxi
Anhui
Shandong
Hebei
Shanxi
Inner Mongolia
Shanxi
XinJiang
Xiquan
Guizhou
Yunnan
Kunming
Urumqi
Chengdu
Guiyang
Jiayuguan
Anshan
Baotou
Guangzhou
Headquarters
Office/ Branches
Customers
Gansu
Heilongjiang
Heilongjiang
Nanchang
Broad customer
       base which spans
       over 20 provinces
       in the PRC
30 branches and
        offices
        throughout PRC
Excellent
       relationships with
       outside partners
Nationwide Sales Network
 
 

 
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Sustainable Advantages
Client Name
Cumulative Contract Value*
Wuhan Iron and Steel Company
$121.6 M
Anshan Iron and Steel Company
$40.6 M
Capital Iron and Steel Company
$31.0 M
Ma An Shan Iron and Steel Company
$18.9 M
Datang Power
$16.2 M
PetroChina
$12.2 M
Jiuquan Iron and Steel Company
$11.6 M
Changjiang Sanxia (“Three Gorges”)
$6.9 M
Sichuan Dongfang Electric
$4.3 M
Huadian Corporation
$2.6 M
 Expensive switching costs after initial installation
 Recurring maintenance revenue
 High repeat revenue opportunities
Locked-in Customer Base
* As of Jun 30, 2010
* As of Jun 30, 2010
 
 

 
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Robust Business Model
Revenue breakdown*
* Results of 1H10
Scalable Total Solution Provider
 
 

 
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High Visibility in Revenue
* Definition of Backlog: the amount of the awarded contract values that
have not been recognized as revenue yet.
* Definition of Backlog: the amount of the awarded contract values that
have not been recognized as revenue yet.
 
By the end
of FY 2007
By the end
of FY 2008
By the end
of FY 2009
As of Feb 08,
2010
As of Jun
30, 2010
Backlog *
$62 M
$72 M
$62M
$154 M
$145 M
 
 

 
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Consistent Performance
 
 

 
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Consistent Performance
Financial Performance
Note(1): Sureland Industrial, China Fire’s major operating subsidiary, began to pay 12.5% income tax starting from 2009.
Note(2): To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the
tables, which excludes non-cash option and restricted stock expenses.Our non-GAAP measures are not meant to be considered
in isolation or as a subsititute for comparable GAAP measures, and should be read only in conjunction with our consolidated
financial statements prepeared in accordance with GAAP.
Note(1): Sureland Industrial, China Fire’s major operating subsidiary, began to pay 12.5% income tax starting from 2009.
Note(2): To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures indicated in the
tables, which excludes non-cash option and restricted stock expenses.Our non-GAAP measures are not meant to be considered
in isolation or as a subsititute for comparable GAAP measures, and should be read only in conjunction with our consolidated
financial statements prepeared in accordance with GAAP.
 
2Q2010
2Q2009
YoY
Growth
FY2009
FY2008
YoY
Growth
Revenue
$22.8M
$22.7M
0.4%
$81.2M
$69.1M
18%
Gross Profit
$12.4M
$14.5M
(14.5%)
$47.1M
$39.5M
19%
Gross Margin
54.3%
61.9%
 
58.0%
57.2%
 
Operating Margin
30.5%
42.1%
 
34.0%
34.1%
 
GAAP NET INCOME
$6.3M
$8.3M
(24.0%)
$24.4M
$24.M
(1.2%)
GAAP DILUTED EPS
0.22
0.29
 
$0.86
$0.88
(1.5%)
NON GAAP NET
INCOME
$7.4M
$8.6M
(14.1%)
$25.4M
$24.6M
2.6%
NON GAAP DILUTED
EPS
0.26
0.30
 
$0.90
$0.89
2.3%
 
 

 
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Consistent Performance
Solid Balance Sheet
 
As of Jun 30, 2010
As of Dec 31, 2009
Cash and cash
equivalents
$27.8M
$35.0M
Working Capital
$101.5M
$87.1M
Total Assets
$155.8M
$138.4M
Current Liabilities
$37.3M
$34.0M
Shareholders' Equity
$118.5M
$104.4M
 
 

 
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Consistent Performance
Financial Guidance
 
 

 
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Proven Leadership
Weigang Li, Chairman, Co-Founder, General Manager of Sureland Industrial
 15+ years experience in project sales and sales management in fire protection industry
 Co-founded Sureland Industrial in 1995 and responsible for its overall operation
 Played the key role in winning a number of large, notable contracts since the Company’s inception
 Built China Fire’s strong sales force
 Completed an advanced business program at Tsinghua University
Brian Lin, CEO and Co-Founder
17+ years management skills, technical expertise and financial controls both in the US and China
Previously Worked at Nortel Networks and Motorola in the US and UTStarcom in China
Led the company since 2006 achieving 40%+ growth annually
Master’s Degree in Electrical Engineering from University of Toronto
CFSG’s management team has deep industry experience, knowledge, and relationships.
Expert Management Team
 
 

 
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Proven Leadership
Tongzhou Qin, CFO and Deputy General Manager of Sureland
18+ years experience in accounting, finance and general management
Previously served as senior manager at Ernst & Young
Certified Public Accountant, Certified Public Valuer and Certified Tax Agent in the PRC
Bachelor Degree in Investment Economy Management from China’s Central University of Finance and
Economy
Weishe Zhang, Vice President
15+ years experience in fire protection industry with both technical and management positions
Served as a technical advisor helping the growth of Sureland Industrial since 1995
Inventor of dozens of international and domestic product and technology patents
Master’s Degree in Engineering from Beijing University of Aeronautics & Astronautics
Min Liu, Director of R&D
Has held various positions in Sureland since 2004
Has participated in writing over ten National Codes & Standards for Chinese fire protection industry
In charge of the R&D of numerous innovative products and fire protection solution projects
Ph.D. in Power Engineering & Engineering Thermophysics from Tsinghua University
CFSG’s management team has deep industry experience, knowledge, and relationships.
Expert Management Team
 
 

 
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Solid Growth Strategies
 Continue to develop and capture opportunities in providing fire
 protection total solutions to high end customers
in industrial and
 special purpose infrastructure industries
 Enhance proprietary product research and development,
 standardization, industrialization, and intellectual property
 protection
in order to broaden product portfolio, improve profitability,
 help penetrate new verticals, and increase product sales through direct
 and independent third-party channels.
 Build a strong management platform to support accelerated business
 growth by improving corporate management capabilities
 Pursue strategic and opportunistic targets in Joint Venture, Merger
 and Acquisition
to augment the Company’s strong organic growth
 strategy
Growth Strategy
 
 

 
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Investment Summary
 
 

 
NASDAQ: CFSG
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Amy Gao
Investor Relations
Tel: +86-10-8441-7400 
Email: ir@chinafiresecurity.com
www.chinafiresecurity.com
  
ICR, Inc.
Michael Tieu , CFA
Tel: +86-10-6599-7960
Email: michael.tieu@icrinc.com