Strong Existing Revenue Drives Future Growth in Cyber Security
Strong Existing Revenue Drives Future Growth in Cyber Security
Melbourne, Feb 23, 2018 AEST (ABN Newswire) - Tesserent Limited (ASX:TNT) an ASX-listed company, provides cyber security services ('Managed Security as a Service' or SECaaS) to a range of highly regarded Australian and international corporate clients. TSI estimates that Tesserent is on track to generate revenue of around $6 million this financial year.

Recently, Tesserent launched CyberBiz, targeting the two million small- to medium-sized businesses ('SMBs') in Australia. Tesserent has identified a growing need for cyber security services for these sizes of enterprise, which hackers are increasingly targeting due to the generally lower levels of cyber protection among SMBs.

More specifically, Australia's Privacy Amendment Act 2017 (which takes effect on 22 February 2018) is likely to significantly impact SMBs. The Act requires that all Australian government agencies and businesses with an annual turnover of $3 million (or more) per annum notify the Office of the Australian Information Commissioner, as well as any potentially impacted clients, should a significant data breach occur. Aside from the damage of such a breach to a business's reputation, the Act's strict reporting requirements mean that any lack of adherence to them can attract significant fines.

Analyst comment: recently, a number of high profile, large-market-capitalisation technology companies on the ASX have created high expectations that were not subsequently delivered upon. The results were twofold: a sell-down of those companies, and closer questioning by investors of the claims of other entities in the sector.

Tesserent, on the other hand, has neither hyped its products nor generated unrealistic expectations. Rather, the company has focused on expanding its business, achieving strong growth in revenue year on year ($5.4 million FY17 (actual), $6.5 million FY18 (TSI estimate)).

With its foundation firmly in place, Tesserent has now embarked on a growth strategy with CyberBiz, targeting the two million SMBs increasingly in need of cyber protection for the reasons outlined above.

Given the significant market potential, we believe that CyberBiz - even on a conservative view - could be a long-term driver for Tesserent (TSI 5-year forecast = 5,000 clients = $20 million in revenue). CyberBiz being a mainstream product, it is also likely that the company will enjoy increased market exposure over time.

Industry: cyber attacks on governments, corporations and individuals are now so commonplace that the cyber security industry as a whole is approaching revenue of US$86 billion per annum.

The largest subsector of this industry is MSaaS (US$12 billion per annum and growing at 14% a year), which involves outsourcing cyber security to professionals who specialise only in the provision of this service.

Privacy Amendment Act 2017: this legislation could cripple a company lacking sufficient cyber protection, since not only would public disclosure of a breach harm its reputation but failure to adhere to the stringent requirements of the Act in reporting a breach could result in it receiving a substantial fine.

The information should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.

Valuation: we initiate coverage on Tesserent with a valuation of $0.25/share (current SP $0.08).

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About Tesserent Ltd

Tesserent Ltd (ASX:TNT) is a specialist in managed cybersecurity and networking. Tesserent provides enterprise-grade managed cybersecurity and networking services to corporate customers in Australia and internationally in the UK and Korea. Tesserent provides a 24/7 Security-as-a-Service offer to small and large organisations', giving customers peace of mind that their networks and critical data are protected. Tesserent also provides innovative cybersecurity solutions to small-medium businesses via the CyberBiz suite of services. In July 2018 Tesserent announced the intention to acquire Asta. Together, the companies will offer a powerful suite of end-to-end managed IT security solutions. http://www.tesserent.com


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Adam Kiley
TSI Capital Pty Ltd
E: adam.kiley@tsicapital.com.au

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