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Universal Security Instruments Inc. Message Board

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  • mmmparsley mmmparsley Nov 30, 2007 12:45 AM Flag

    Things will get worse rather than better

    In a bull market - or if UUU can spread out into more countries - Universal can pump out 36 million smoke alarms from the HKJV. Beyond that, potential sales from Canada after a potential US dollar recovery is around 40-50 million$ in revenue a year.

    At 8$ per smoke/CO2 alarm - am I wrong in assuming that the HKJV has the potential to bring in 280 million in revenues from smoke alarms/CO2 alarms alone - if that is the case - all they need to do is get licenses in new markets to fully leverage the HKJV operation - and that's what they are working on doing right now.

    IN addition to this revenue potential, UUU is introducing a whole new product line in just 2 months.

    There is potential growth coming from all different directions here, and currently every market UUU is in right now is bearish. As long as one of them turns around, earnings will accrue nicely over the coming years.

    The best possible scenario in a few years could play out like this....

    1. The HKJV earns 250 million at 12% margins...
    =25 million earnings - 12.5 million of which is Universal's share - or 3.1 M per quarter bringing after US tax income to 2.3 million.

    2. The company sells 6 million a quarter to Home Depot at 5% marings adding 300,000$ quarterly.

    3. The USD rises against the CAD and UUU is able to triple capacity selling 14 million$ of conduit a year at 8% profit margins adding 1.0 million to the bottom line.

    4. Housing picks up and UUU is able to sell 10 million dollars in alarms to US customers at 10% margins, adding 1M to the bottom line.

    5. Carbon Monoxide Alarm legislation is adopted by various states driving demand for CO2 alarms.

    ------------------------------------------------

    In this scenario it shows UUU has the potential of bringing in 4.5-5 milllion a quarter and 18-20 million per annum, considering everything goes their way. Given a 12x PE at those figures, is it not impossible to assume UUU may hit a market cap of 210-240 million dollars or around 85$ per share within 3-4 years?

    Although that scenario is unlikely to play out perfectly, one has to figure that possibility into the equation.

    My conclusion is that a worst possible scenario brings UUU down to 6$-7$ for a few years. The best scenario would merit UUU to be as much as 100$ per share in a few years.

    SO what is fair value? My guess - 20$.

    Dave

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