FireAngel Safety Technology Group PLC (LON: FA.)  

FireAngel Safety Technology Group PLC is an FTSE AIM All-Share index listed Company focused on the business of design, sale and marketing of smoke and carbon monoxide (CO) detectors and accessories. The Company was formerly named as Sprue Aegis PLC.

FA. will release the FY21 trading update in late January 2022.

Growth Prospects

• Strong Regional Performance: FA. had delivered strong trading performance across both UK and Benelux as these geographies demonstrated the best trading performance during H1 FY21. The UK trade sales went up by around 87% during H1 FY21 when compared with the prior-year levels.
• Significant Collaborations: The Company had made accelerated progress with regards to the partnership with Ealing Council as it managed to install 18,000 devices across 11 blocks. Moreover, it will roll out hardware and connectivity continuing during the remainder of the year. Furthermore, the Company had also collaborated with German energy and efficiency service provider.
• Business Model: The Company remained committed to saving lives with innovative, cutting-edge home safety technology and pursuing growth ambitions.

Key Risks

• Supply Chain Disruption: The recent shortage of lorry drivers in the UK had created supply chain disruptions and escalated the freight cost.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Rise in Interest Rates: New Zealand came up with a second interest rate hike in the last two months. Moreover, rising inflation worldwide had put pressure on several Central Banks as they struggled to curb it.
• Covid-19 Pandemic: The new variant of the Covid-19 pandemic, Omicron, had caused a significant decline in the UK Equities.
  

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of FireAngel Safety Technology Group PLC.

Downing LLP is the most significant shareholder as it holds nearly 29.63 million shares as of 30 September 2021. 

H1 FY21 Financial & Operational Highlights (for six months ended 30 June 2021, as of 27 September 2021)

(Source: Company result)

• Robust Increase in Revenue: Driven by the robust trading momentum throughout the period, FA. managed to drive revenue higher by around 35.0% from £16.5 million during H1 FY20 to £22.2 million for H1 FY21.
• Favourable Turnaround in Profitability: On the profitability front, the Company had demonstrated a favourable turnaround and reported a positive EBITDA of £0.2 million during H1 FY21, while it had reported an EBITDA of negative £0.80 million for H1 FY20.
• Resilient Financial Position: With regards to the balance sheet, FA. had reported net cash of £2.2 million at the end of H1 FY21, while it had reported a net debt of £1.50 million as of 30 June 2020.

Financial Ratios (H1 FY21)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 02 December 2021, at 08:00 AM GMT, FA.’s shares were trading at GBX 13.50, same as the previous day closing price. Stock 52-week High and Low were 28.63 and GBX 9.64, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~1.43 fell in the oversold territory, supporting an upside momentum in the stock price.

Over the last one year, FA.’s stock price has delivered a positive return of ~25.74%, and it has outperformed the FTSE AIM All-Share index (benchmark index) with a return of approximately 12.08%. 

Valuation Methodology: EV/EBITDA Approach (NTM) (Illustrative)

Business Outlook

The Company had reported decent H1 FY21 results with robust top-line revenue growth and posted a positive EBITDA. Moreover, the Company would focus on longer-term margin expansion. Meanwhile, the Company had highlighted of business challenges arising from factory restrictions, port closures, driver shortages, sea freight delays, lost efficiency opportunities, missed collaboration opportunities with partners, component shortages, and ensuing complexity. Nonetheless, the Company remained on track to meet market expectations for the year. The stock price may undergo sizeable corrections amid multiple risk factors such as the new Covid-19 variant, Omicron, and rising inflation worldwide. Thus, it depends on the investors to take a reasonable position on this industrial player having strong fundamentals based on their risk appetite.

Considering the solid revenue growth during H1 FY21, improvement in profitability on EBITDA level, strong balance sheet, recent collaborations, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on FireAngel Safety Technology Group PLC at the current price of GBX 13.50 (as on 02 December 2021 at 08:00 AM GMT), with lower-double digit upside potential based on 6.61x EV/NTM EBITDA (approx.) on FY22E EBITDA (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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