Below are some of my research notes on TNT.
AboutTesserent provides full service, enterprise-grade Cyber Security and networking solutions targeted at mid-market customers in Australia, and internationally in the UK and Korea. The company’s Cyber 360 strategy delivers integrated solutions covering identification, protection and 24/7 monitoring against Cyber Security threats. Tesserent has been transformed via the acquisition of several high-quality Cyber Security businesses including Pure Security, Rivium and North, making it Australia’s largest listed dedicated Cyber Security firm.
Strategy
Tesserent have grown at over 800% this financial year from a mix of revenue generated through organic + acquisitions. This is highlighted by Q3 revenue of 7.1m which is greater than the whole of FY19 for the company (5.3 million). Their recent acquisitions in Pure.Security and north has enabled them to provide a full security suite which have helped them to win over 3m of federal contract wins in the last quarter. The organisation have re-affirmed their guidance (in the midst of COVID-19) of cash flow positive by next quarter.
Management
The Company is chaired by renowned businessman, Geoff Lord, who is best known for his time at $UXC, which was acquired by DXC Technology for over $430 million in recent years. He is well experienced with acquisitions, having made over 50-60 of them across his career.
The Company also has two CEO's, this is due to the rapid growth, Kurt Hansen has strong record of integrating acquisitions (integrated 4 companies to form Pure.Security, resulting in over 3 million EBITDA for them in 2019), has a technical background and was previous MD of Checkpoint Software Technologies Australia division (NASDAQ:CHKP). Julian Challingsworth, the other CEO is reponsible for identifying acquisition opportunities and corporate affairs, having a strong background in consulting work.
The most recent management addition was Patrick Flannigan, ex-CEO of Service Stream (ASX:STR) and NBN construction chief.
Management holdings
Geoff Lord, non-executive chairman, is the largest shareholder of the company. Patrick Flannigan also holds a large amount of shares.
Outlook and valuation:
Tesserent have re-affirmed their guidance of achieving $40m revenue per annum and profitability on a monthly basis by Q4 this financial year. It secured ~3m in federal contracts last quarter and as of 19/06/2020, additionally, it has secured a further ~1.3m this quarter (as disclosed via https://contracts.disclosurelo.gs/displaySupplier.php?supplier=39613493584-North+BTD). I recently spoke with management and noted down that consulting work have taken a hit (like any other company), however, with North BDT doing well, a new acquisition soon and new tailwinds from our Australia's recent cyber attack, it now has the mother of all tailwinds. If the Company can achieve this figure above as suggested, I believe it is undervalued compared to it's peers and upgraded my valuation to 9-10 cents. Recent chart actions suggest uptrend is now once again intact.
Disclaimer: I held TNT shares since October 2019 and have recently topped up in the 6-7 cents range.
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