VOR - The Most Undervalued out of all the Major Cyber Sec. Plays, page-46

Ijc26 - thanks for your initial post, it makes for a good discussion point.

I appreciate the revenue figures are actual for FY20, but the table can be misjudged based on what has been unfolding since the start of this calendar year and the MC of each company being as of early September 2020.

I'll limit my input to VOR & TNT as they both have the most revenue.

The price to sales figure for VOR (2.9x) seems about right, but the 8.1x for TNT doesn't make as much sense to me (but I understand how it was derived).

TNT had actual FY20 revenue of $25m, but their projected run rate based on acquisitions prior to acquiring Seer was $40m. (They claim they achieved a $43m run rate).

Then in July TNT's acquisition of Seer took their run rate to $50m.

Since then there's been the acquisition of Airloom and the bolt on acquisition of Ludus, giving it an $80m projected run rate. In essence they doubled their run rate in 2 months, from the start of FY21.

For discussion's sake, let's say the TNT revenue run rate for FY21 is $50m.

If you use the projected $50m run rate and measure it against the MC of $154m (@ 23.5c closing on 8/9/20), you get a 3x multiple for price to sales.

If you use the projected $80m run rate and measure it against the MC of $154m (@ 23.5c closing on 8/9/20), you get a 2x multiple for price to sales.

VOR has stated revenue guidance of 20-30% on FY20 $11.5m - so lets say a FY21 revenue run rate of $13.8 to $15m.

After almost 6 months of FY21 VOR has possible revenue of $3.6m (June) plus $2.9m to $3.2m for Sept, so is in the range $6.5 to $6.8m, which is slightly under the 20% guidance figure.

Using the Price to Sales criteria for VOR.

Revenue of $13m at 2.9x gives a MC of $37.7m ($13m based on possible $6.5m to end of Sept and same trend for remainder of FY21)

Revenue of $13.6m at 2.9x gives a MC of $39.5m ($13.6m based on possible $6.8m to end of Sept and same trend for the remainder of FY21).

Revenue of $13.8m at 2.9x gives a MC of $40m (based on Jeffs 20% increase in revenue on FY20)

Revenue of $15m at 2.9x gives a MC of $43.5m (based on Jeff's 30% increase in revenue on FY20).

So looking forward based on what we currently know, I think there is scope to say that both TNT and VOR are fairly measured at approx 3x. If anything TNT could be undervalued assuming it can digest everything it has swallowed to date.

Someone said a while ago VOR can afford to keep doing what they are currently doing and you might see 40c a share in due course. I think that's a fair take on a business as usual basis assuming they actually hit their guidance(*). Thankfully most of the key metrics are all trending in the right direction. Whilst VOR is headed in the right direction and seems pretty solid, quoting record revenue, profit and operating cash flow, whilst its factual and feels good, is a bit hollow given the historical bases they are coming off.

(*) Based on what we know:

• for VOR to hit its 20% revenue increase, it has to earn $7m to $7.3m over the last 6 months of FY21.
• for VOR to hit its 30% revenue increase, it has to earn $8.2m to $8.5m over the last 6 months of FY21.

I too would like to see VOR advance from here, but I think at these levels it's fairly valued and not undervalued.

I believe some of the hot IT sector money moved over to the likes of BRN/WBT/4DS in recent weeks and cyber stocks have in part pulled back as a consequence.

In times of weaker sentiment, I think VOR gets penalised, as its 3 biggest forward looking statements are all taking a while to play out. Namely:

• possible further acquisition(s)
• realisation of TSI
• Nothing has been heard from a year ago on the 3-4 R&D projects underway

As Art said on this thread ...

The reason VOR is lagging it’s peer group is because it’s perceived as having lower growth prospects. On current evidence I have to say I agree. 20-30% organic revenue growth is nice, but it’s not that great when you consider its off a low base off $11m. The market will re-rate VOR if they are able to compliment their organic growth with targeted m&a. That is one of the reasons I invested, I assumed they would be making further acquisitions to enhance their growth profile. Unfortunately it has not played out that way as yet...coming up to 2 years since the last one.

In times of better sentiment, some of the above can get overlooked for a while, whilst the business points to its improving financial figures, which is nice.

* I see AR9 is in a TH pending an announcement on what they deem a "material customer contract win".