Electronic Locks for All Market Niches
In 2014, providers of locking and identity systems generally found the security landscape to be less chaotic and more receptive than in recent time. The year was led, interestingly enough, by stocks that performed strongly at opposite ends of the technology spectrum.
ASSA ABLOY (OM: ASSA B) saw demand recover from previous quarters, mainly in the United States, but recently also in its biggest market, Europe, where the debt crisis weighed on demand for years. ASSA ABLOY’s stock has been on a growth spurt for almost three years. Part of that is due to scarcity value in Europe for companies that are exceeding expectations.
Several factors at the commercial/industrial enterprise level, among other larger verticals, are driving demand — not least of which is an uptick in capital expenditures. But the locking sector’s more rosy performance in 2014 can also be attributed in part to the networked-based technology evolution hitting the residential space, as well as the commercial monitoring arena.
Clearly, these are not your father’s locks. There has been impressive growth in the amount of electronic interoperable locks that will eventually be commonplace on doors. These devices, for example, can be controlled from a central location in the wake of shootings at institutions and similar scenarios.
The number of companies that can design, manufacture and market electronic locks really well is small compared to the wider pool of lock companies. Among the firms solidifying a presence in the electronic and wireless lock market are privately held SaltoSystems, Kaba (FRA: KABN), Stanley Black & Decker(NYSE: SWK) and others.
In terms of wireless digital lock manufacturers, analysts are bullish on the long-term prospects for companies such as Allegion (NYSE: ALLE), which is the second-largest provider of locks and access control systems in the world. The company is targeting 4%-5% top-line growth and 10%-12% bottom-line growth. Its U.S. sales, which accounted for 62% of FY14E revenues, appear to be picking up with increasing backlogs in institutional, education and health-care markets.
Previously moribund through the recessionary years, these verticals are now forecast to accelerate into 2016. As an example of how far locks have progressed, Allegion markets a Schlage-branded electronic device that can provide audit trails for cost-sensitive school systems to migrate from nonelectronic to electronic locking systems. Allegion’s “Engage” wireless technology provides an easy path to those small- to medium-size businesses (SMB) trying to find a cost-effective and uncomplicated way of moving to electronic locks, replacing a $300-$4,500 lock at significantly lower price points.
The use of Near-Field Communication (NFC) and Bluetooth are also projected to surge in the next three to four years. These keyless technologies, along with biometrics, are finally catching up with marketing hyperbole and allowing access control to be much more easily used by both the end user and monitored by the corporate security department and other stakeholders.
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