ALARMFORCE INDUSTRIES $11.23 - Toronto symbol AF

ALARMFORCE INDUSTRIES $11.23 (Toronto symbol AF TSINetwork Rating: Speculative) (1-800- 267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $137.0 million; Dividend yield: 0.9%) sells twoway voice alarm systems and monitoring services in Canada and increasingly in the U.S. It’s also adding to its prospects with its VideoRelay system, which it launched in October 2011.

In the three months ended July 31, 2012, Alarm- Force’s sales rose 10.9%, to $11.4 million from $10.3 million a year earlier. Even so, AlarmForce lost $6,589, or nil per share, compared to a profit of $831,342, or $0.07.

AlarmForce’s earnings fell because it increased its advertising spending as it expanded into Florida. It also invested more in its VideoRelay system, which lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. VideoRelay also lets you establish two-way voice communication through the camera.

VideoRelay has a lot of potential for keeping an eye on kids, aging parents and pets, in addition to deterring burglars.

AlarmForce’s shares are up over 25% since early August after the company announced that it is launching a strategic review of business opportunities, including a possible sale of the company.

The company’s ongoing VideoRelay rollout and its U.S. expansion will require considerable capital investment. But at the same time, its strong potential for success could make it an attractive takeover candidate for a well-financed company looking for growth.

AlarmForce is still a buy.

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