No sale, but AlarmForce’s future is bright, says Industrial Alliance analyst Li

Industrial Alliance analyst Steve Li says despite the fat that its strategic review did not produce a buyer, AlarmForce’s (AlarmForce Stock Quote, Chart, News: TSX:AF) future is bright.

Yesterday, AlarmForce announced that a special committee of the board of directors of the company had explored opportunities, including the potential sale of the company, but hadn’t found a transaction it felt adequately reflected the value of the Canadian security concern. The company said the committee will be dissolved, and it will focus on growth.

Li says the eleven month process demonstrated that management felt a transaction wasn’t necessary to unlock value for shareholders, and was not prepared to give away the company at a discount.

The Industrial Alliance analyst’s target price on AlarmForce was affected by the potential for a premium that the review might bring. He raised his pre-review target of $11 to $14.75. Today, with that potential now swapped for longer term organic growth, Li lowered his target price on AlarmForce to $12.75, while raising his rating to STRONG BUY from his previous SPECULATIVE BUY. He cites the lessened risk associated with a slide in the company’s share price recently.

Li says that during the course of its strategic review AlarmForce actually improved as a company. He notes that the company added 7700 subscribers, has achieved stronger penetration for its new VideoRelay service, and has a better profitability outlook. He also points out that the company is cheap compared to its peers, which are trading at $1,785-$2,828 EV per subscriber, compared to just $815 EV for AlarmForce.

Shares of AlarmForce closed today down 3.1% to $9.64.

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