ALARMFORCE INDUSTRIES $11.23 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800- 267-2001; www.alarmforce.com; Shares outstanding: 11.9 million; Market cap: $134.1 million; Dividend yield: 1.1%) sells twoway voice-alarm systems and monitoring services in Canada and increasingly in the U.S.
In the quarter ended April 30, 2014, the company’s sales rose 8.7%, to $13.2 million from $12.1 million a year earlier. It earned $1.8 million, or $0.15 a share, up 34.3% from $1.3 million, or $0.11.
AlarmForce’s revenue rose along with its subscriber base. Earnings jumped because it spent a lot less on marketing after launching its VideoRelay system. This service lets subscribers watch their homes through computers and smartphones. AlarmForce now has 7,500 VideoRelay subscribers, with 4,400 in Canada and 3,100 in the U.S.
Expansion brings potential—and cost
The company’s U.S. customer base jumped 12.8%, to 35,200 from 31,200 a year ago. In Canada, Alarm- Force now has 108,600 subscribers, up just 2.0% from 106,500. That’s partly because new competitors are entering the Canadian market, including Rogers Communications’ Smart Home Monitoring service.
Alarmforce recently raised its quarterly dividend by 20.0%, to $0.03 from $0.025. The shares now yield 1.1%. It also paid a special dividend of $0.60 a share.
The company’s outlook is positive. In addition, a rising U.S. dollar would boost the amount that Alarm- Force’s U.S. operations contribute to its earnings. However, the marketing of new services and its U.S. expansion still require considerable capital investment.
AlarmForce is a hold.
