Industrial Alliance maintains BUY rating, $13.75 target on AlarmForce

Industrial Alliance analyst Steven Li says that even if Alarmforce’s strategic review does not result in the consummation of a sale, the company trades at a slight discount to its peers and is therefore a value.Yesterday, AlarmForce (TSX:AF) reported its fiscal 2012 results. The company earned $1.16-million on revenue of $44.83-million, up 8% over 2011’s $40.85-million topline.

CEO Joel Matlin said the company, which is undergoing a strategic review, is in good shape.

“Despite a reduction in cash flows from operations by 46 per cent to $4.6-million in 2012, we continue to fund all our costs of growth, including marketing and research and development, from internal cash flows.” He added: “We look ahead to growth in subscribers and in earnings over the long term, as our brand continues to offer leading-edge technology and the best affordable value to consumers in the home alarm and video markets.

Industrial Alliance Securities analyst Steve Li says slower subscriber rates in Canada are being offset by gains in the US. He points to the company’s Q4 gross margin, which increased to 79.4%, beating his estimate of 73.8%. Q4 EBITDA came in at $2.0M, also besting his estimate of $1.2M estimate. Li says that even if the strategic review does not result in the consummation of a sale, AlarmForce trades at a slight discount to its peers and is therefore a value. In a research update to clients this morning, Li maintained his Speculative Buy rating and $13.75 target on AlarmForce.

Founded in 1988 by current CEO Matlin, home security systems manufacturer AlarmForce has grown to more than a quarter-million subscribers in Canada and the US. In October of last year the company launched VideoRelay, a video surveillance system with live two-way voice.

Shares of AlarmForce closed today up 3% to $12.20

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