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Hey, Fools.

I saw Brian Lin (CEO of China Fire) again last week at the Roth Capital conference out in California. People who remember CFSG from the Asia Trip report (or who are interested today) may enjoy my notes from our meeting (they follow below).


Brian Lin, CEO, China Fire & Security Group (Nasdaq: CFSG)
Despite China Fire's recent success, it's still not among the hottest names at the Roth Conference. The company that presented prior to China Fire was A-Power and they more than packed the biggest room at the conference. 50% or so probably left when Brian Lin stepped up to the podium.

Brian said the company has seen strong organic growth, but would still like to become a "consolidator" of smaller, regional sales offices. So much of China's business is done through your connections -- and acquisitions would give CFSG the opportunity to broaden theirs. None of this would be to acquire technology…China Fire still has the best stuff.

80% of steel plants are still not in compliance with the 2007 safety regulations, so the big retrofit opportunity remains.

One of my main concerns has been that China Fire doesn't have the capacity to keep growing at such at rates. But he told me the company is operating at just 35% capacity as measured by office and factory space. He said this, rather than machinery or personnel, is the best way to measure capacity in China because while good real estate is scarce and expensive, employees and machinery are plentiful and cheap. He seemed to think they can scale quite nicely going forward.

Forecasting 44% top line growth in 2008 with full-year net income of $22mm.

One of things Brian was most excited about was moving his fire technology into new verticals such as subways, tunnels, exhibition halls, stadiums, and nuclear power plants. Nuclear power plants present a particularly nice opportunity because they are being built at a rate of 4 or 5 per year and 90% of the parts used in their construction are coming from foreign suppliers. The government would like to reduce this ratio to 50% (protectionist purposes), and China Fire is one of the few qualified domestic suppliers than can make that goal a reality.

China Fire continues to search for a distributor to sell its product in India, though there was no additional news on this front.

Another goal this year is to add 10 or so people to the sales force. This will help the company increase its maintenance revenue because the current sales force is somewhat overworked and they concentrate on winning big deals rather than pursue the smaller maintenance contracts. The maintenance work, however, is nice to have because it's recurring, stable, and high margin. Brian would like to see maintenance revenues increase to 5% of the top line.

One concern I have about the company is that Brian continues to be very focused on where his stock is trading. His first question to me was "Tim, why did the stock go down?" He also wondered if people were worried about his recent insider sales, which he explained by saying he wanted to increase liquidity. Someone had told him that there needed to be more float for the stock to be viable and rather than dilute existing shareholders with another offering, he decide to sell into the open market even though he thinks the stock is a promising buy. That's clearly a decision that was made toward managing the stock price, and it's worth making sure that doesn't become a reason for making decisions about the business. (For example, another offering would be dumb, and I told him that).
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