WhiteHawk (ASX:WHK), Tesserent (ASX:TNT) Under Spotlight as Cybersecurity Stocks Continue to Boom

  • November 08, 2020 12:20 AM AEDT
  • Kunal Sawhney
    Kunal Sawhney
    CEO Kunal Sawhney
    2781 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

WhiteHawk (ASX:WHK), Tesserent (ASX:TNT) Under Spotlight as Cybersecurity Stocks Continue to Boom

Summary

  • In the backdrop of the COVID-19 pandemic, the demand for digital technologies and cybersecurity solutions has skyrocketed.
  • Government's total funding for the cybersecurity strategy stands at AUD 1.7 billion, including AUD 201.5 million to deliver the 2020 Cyber Security Strategy.
  • Cybersecurity company WhiteHawk collected USD 320K in sales receipt from customers and won multiple deals from government departments or agencies in Q3.
  • Tesserent's Q1 FY21 revenue stood at AUD 15.1 million, up 42.5 per cent from the previous quarter.  

The COVID-19 pandemic has dramatically altered our way of life, forcing almost everyone to shift entirely to digital platforms. This unprecedented high demand for remote collaboration and virtual processes has also led to an unwanted side effect – an increase in the  threats of cyberattacks. Since the onset of the pandemic, there has been a spurt in the number of cyberattack cases.

A cyberattack can have severe implications on the economy and can also result in job losses. Going by an estimate, a major cyberattack impacting Australia for a four-week period can cost around 163,000 jobs and approximately AUD 30 billion, according to the Economic Recovery Plan for Australia report, Budget 2020-21.

Must read: Digital technologies revamping businesses

Consequently, cybersecurity has become paramount to continue our daily work uninterruptedly and safely via digital platforms. The Federal Government is investing AUD 128.1 million to counter cybercriminals.

The Government's total funding for the cybersecurity strategy stands at AUD 1.7 billion, with AUD 201.5 million earmarked to deliver the 2020 Cyber Security Strategy for more secure online world in the country, as per the report. The strategy also involves an investment of an additional AUD 37.7 million towards growing Aussies' cybersecurity skills to make them industry ready.

Also read: Cybersecurity and the Requirement of a Resilient Environment in Australia

Against this backdrop, let's discuss two stocks from this space covering their quarterly updates.  

 

WhiteHawk Limited (ASX: WHK)

On 30 October 2020, WhiteHawk Limited (ASX: WHK) released its quarterly activities report for the period ended 30 September 2020. Its revenues remain consistent, with WHK registering revenue in each of the last nine months.

Sales receipt from customers stood at USD 320,000. Invoicing for Q3 2020 was USD 948,000, almost double from Q2 2020 (USD 502,000). WHK was expecting to collect USD 861,000 in receivables in October from Q3 invoicing. The company ended Q3 with a cash position of USD 926,000.

Awards and CertificatesWhiteHawk completed 5 Cyber Risk Radar Cybersecurity Maturity Model Certification (CMMC) focused Proof of Values (POV) engagements, three with US Government sector and two with major manufacturers. Moreover, POVs are being scoped, one each with the financial sector, US Government Agency and US Defence Industrial Base (DIB) Company.

Also read: WHK secures 5-year Cyber Risk Radar contract from the US Government; Share price Skyrocketed above 70%

The company was awarded Phase 2 of the current contract with the US Department of Homeland Security (DHS) CISA, as sub-contractor to Guidehouse (formerly PWC Federal) for USD 1.5 the million. The contract is to develop, test and refine the QSMO Cybersecurity Marketplace. It completed Phase 1 worth USD 400,000 from April to September 2020.

It has also been awarded the first sole source US Federal Government CISO Cyber Risk Radar contract, work on which started from August 2020.

WHK completed Phase 2 of the Cyber Risk Program through a Global Consulting Firm, including risk validation by Red-Team. Also, WHK inked a partnership agreement with Global Insurance Group to explore its online platform and virtual Cyber Risk Service options for their business clients.

OutlookAcross the US Federal Government and the industry, WHK intends supply chain cyber risk monitoring & scorecard Proofs of Value (POV). It will focus on the timeliness and scalability of the offerings, remote and virtual implementation, and effectiveness of the risk identification and mitigation results. 

On 6 November 2020, WHK stock traded flat at $0.190.

  

Tesserent Limited (ASX: TNT) 

On 30 October 2020, cyber security and networking solutions provider, Tesserent Limited (ASX: TNT) released its September 2020 quarterly activities report and operational update. In Q1 FY21, TNT collected customer receipts of more than AUD 14.2 million, up by 21.3 per cent on the previous quarter. 

Financial Performance: Q1 FY21 revenue stood at AUD 15.1 million, up 42.5 per cent from the previous quarter. The Group's current revenue run-rate is more than AUD 100 million due to the addition of full quarter revenue from Airloom, Ludus, Seer Security and full quarterly revenue from the recent acquisition of iQ3, subject to audit.

Also read: Tesserent Shares Zoom ~5x in 2020 Driven by in-demand Cybersecurity Services and Strategic Acquisitions

In Q4 FY20, TNT achieved quarterly EBITDA and operational cash flow positivity for the first time. Maintaining the trend, the operational profit increased to AUD 405,000 for the quarter, up by AUD 17,000 from the previous quarter. In September 2020 quarter, TNT achieved AUD 138,000 in positive cash flow from operations. Its cash reserves were boosted by AUD 4.1 million from shareholders.

The company has headed into Q2 with a strong financial position. The available cash at the end of September 2020 stood at AUD 13.76 million.

The company completed three strategic acquisitions and announced a fourth in Q1; several future acquisitions are at an advanced stage. 

Business Integrations: Tesserent reported new contract wins worth over AUD 6 million with the federal, state and local governments. Moreover, it highlighted significant enterprise contract wins in aggregate of more than AUD 4 million, along with 14 cross-selling wins from the recent new members of the Group.

Outlook:

  • Focus on delivering Cyber 360 capabilities to an increasing number of companies in Australia.
  • Emphasis on strengthening foothold in the markets of Government (including Defence), Banking & Finance, and Critical Infrastructure.
  • Building high-value recurring annuity revenue streams and integrate acquisitions to maximise synergy efficiencies and achieve organic revenue through cross-sales. 
  • Explore international opportunities and expand the proprietary intellectual property.

On 6 November 2020, TNT stock traded at $0.355.

 

Good read: Can Cybersecurity Industry Be a Part of New Defensive Strategy of an Investment Portfolio?

 


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