With deep connection to US government organisations, proven ability to sign big contracts with big organisations
Last Price:
Date of Initial Coverage
01-May-19
Initial Entry Price
$0.097
Returns from Initial Entry
-13%
Opened: 25-Feb-2022
Shares Held at Open: 4,385,547
WhiteHawk (ASX:WHK) is an ASX-listed, USA based cybersecurity company, providing cyber risk products, services and solutions.
Global cybersecurity threats are growing and businesses and governments are ramping up spending on their cybersecurity defences. Increasingly state sanctioned, or state-tolerated actors are involved in major attacks, meaning cybersecurity has never been more important.
Strong management team
With deep connection to US government organisations, proven ability to sign big contracts with big organisations
Large contract sizes
WHK is slow to progress deals, but when they happen they are generally for large $ contracts, with big organisations that are sticky customers.
Partner deals to deliver revenue
Key partner deals signed with more in the pipeline, yet to deliver revenue
Tiny market cap
Around $25M with US$2.3M revenue in 2021 and a growing presence in a high-growth industry, the share price could re-rate if WHK announces sizeable contracts with major partners
Objective #1: More contracts, partnerships and proofs of concept
WHK management has proven they can sign contracts and partnerships with top tier large organisations, but the deals are slow to be delivered. We want to see the effort of the last few years in building the pipeline come to fruition in 2022, with WHK delivering the following:
Objective #2: First revenue from channel partnerships
WHK has already signed some interesting partnerships deals (Dun & Bradstreet, Amazon web services) which have great potential, we want to see the first revenue coming in from these partnerships.
Objective #3: Proofs of Concept (POC) increase to full, multi-year contracts
WHK is signing proofs of concept (small paid contracts to try the product, that lead to bigger contracts if successful) - we want to see WHK successfully convert several POCs to large contracts.
Objective #4: Double revenue in the next annual report
Objectives 1, 2 and 3 will lead to the ultimate goal of growing revenue, for a strong share price performance we want to see WHK double its revenue this US financial year - targeting a topline revenue of US$4.6M (which is double the recently released US FY21 financials at US$2.3M).
Sales Risk
Deals continue take a long time and investors lose interest, alternatively loss of key contracts
Market Risk
Covid resurgence delays government spending once again
Competition Risk
The cybersecurity industry is a competitive space. Other companies may step in and take key clients
We have been holding WHK for a few years now, we announced it to our portfolio in May 2019. We really back the management team to deliver and are happy holders into 2022 despite recent share price weakness.
We will likely look to further increase our position in WHK over the next few months if prices remain around current levels.
We will hold a position in WHK for at least another 3 years. If the share price reaches near previous highs we will look to take some profit and reduce total position by up to ~25%
Disclosure: Disclosure: The authors of this memo and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 4,385,547 WHK shares at the time of writing. S3 Consortium Pty Ltd has been engaged by WHK to share our commentary on the progress of our investment in WHK over time.
✅ Initial Investment: @ 9.7c
✅ Top Slice
✅ Free Carry
✅ Increase Investment: @ 11.4c
✅ Free Carry
✅ Increase Investment: @ 13.31c
🔲 Free Carry
✅ Increase Investment: @ 16.77c
🔲 Free Carry
✅ Increase Investment: @ 10c
🔲 Free Carry
🔲 Take Profit
✅ Price increases 300% from initial entry
✅ Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years
Apr 29, 2022
Announcement
Our cybersecurity investment, WhiteHawk (ASX:WHK), released its quarterly report today and with the stock up ~20% this afternoon, it seems the market liked what it contained.
WHK reported that it invoiced US$1.8M during the quarter — a 4X increase on the US$442k invoiced in the same period in 2021.
The company collected US$2.2M relating to sales receipt from customers, and was owed US$505K in receivables as of 31 March.
This solid result saw WHK end the first quarter with a cash position of US$2.1M and no debt.
Its year on year revenue continued to grow to US$2.3M for 2021 up from US$1.9M for 2020, while it has put in place Master Service Agreements (MSA), Proof Of Concepts (POCs) and new strategic opportunities to support ongoing revenue growth.
In our 2022 WHK Investment Memo our fourth key objective was to see WHK double its revenue in its next annual report. Being US-based, WHK reports on a calendar year basis so with US$2.1M in revenue in this first quarter we may see WHK reach our targeted US$4.6M top line revenue figure if it continues along this path.
WHK has a number of high level objectives relating to product improvement, growing its reach across new and existing pipelines, and further advancing and executing on current contracts.
In the near term, WHK has four clear objectives:
Newsflow from the company has been fairly quiet for some time now, so we await confirmation that the team is progressing partnerships and contracts behind the scenes.
We do know that WHK’s large, sticky, and often sensitive contracts take some time to finalise, but are well worth the effort once they are locked away.
For all of the objectives that we set for WHK in 2022 see our WHK Investment Memo.
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