ALARMFORCE INDUSTRIES $9.59 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $117.0 million; No dividends paid) sells two-way voice alarm systems and monitoring services in Canada and the U.S.
AlarmForce’s system differs from others because it lets operators verify an alarm by establishing immediate two-way voice contact with homeowners. It then dispatches security personnel. If intruders are present, the two-way contact can scare them off.
The company has used radio and TV advertising to gain a high profile. It gives its system away to gain new subscribers. Users then sign a three-year contract to pay $25 a month for monitoring service.
In the three months ended October 31, 2011, revenue rose 10.5%, to a record $10.6 million from $9.6 million a year earlier. Earnings fell to $10,851, or nil per share, from $1.2 million, or $0.10 a share.
The company’s earnings fell because it spent more on advertising as it expanded into Florida. It also invested more in its VideoRelay system, which it launched in October 2011. VideoRelay lets subscribers watch their homes through their computers and smartphones.
AlarmForce now has 124,100 subscribers in Canada, up 9.3% from 113,500 a year earlier. In the U.S., its customer base jumped 22.8%, to 22,100 from 18,000.
AlarmForce’s expansion into the U.S.—a market with huge potential—has shown results, but it does add risk. To mitigate that risk, the company aims to take a steady, disciplined approach.
Demand for security systems is growing steadily. As well, VideoRelay could further add to AlarmForce’s growth prospects.
AlarmForce is still a hold.
