Driven by the increasing penetration of value-added services, expect the trend of rising Average Revenue Per User (ARPU) to continue at AlarmForce (TSX:AF), says Industrial Alliance Securities analyst Steve Li.
Tomorrow, after market close, AlarmForce will report its Q1, 2015 results. Li thinks the company will generate EBITDA of $4.1-million on revenue of $13.4-million in the first quarter, a topline that would be a 3% bump over last year’s Q1.
The analyst thinks services such as AlarmCare, AlarmForceConnect, VideoRelay and CellWave will continue to drive the company’s ARPU. Li thinks ARPU will reach $30.63 in Q1, 2015, up from $30.40 in the same period last year.
Li speculates that the improving numbers could make AlarmForce a takeout candidate.
“As previously mentioned, the value of an alarm company for a strategic buyer is based on a multiple of EV/RMR and EV/Subscriber, and the trends for the RMR and the number of subscribers. Clearly, AlarmForce can be attractive to a suitor given its lower multiple; AF trades at 27.6× EV/RMR and 777.5× EV/Subs, comparatively to 53.6× EV/RMR and 2,214.4× EV/Subs for ADT and 59.1× EV/RMR and 2,461.3× EV/Subs for Ascent Capital Group (the holding Company for Monitronics International),” said Li.
In a research update to clients today, Li maintained his “Strong Buy” rating and one year target of $14.50 on AlarmForce, implying a return of 44% at the time of publication.