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ASX:WHK

WhiteHawk Ltd

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ASX:WHK
- WhiteHawk Ltd
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$0.025

Last Price

Investment Memo:

WhiteHawk Ltd (ASX:WHK)

- LIVE

Opened: 25-Feb-2022

Shares Held at Open: 4,385,547


What does WHK do?

WhiteHawk (ASX:WHK) is an ASX-listed, USA based cybersecurity company, providing cyber risk products, services and solutions.

What is the macro theme?

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.

Why did we invest in WHK?

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

What do we expect WHK to deliver?

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:

  • 3x new contracts with large organisations (governments or global enterprise)
  • 3x new partnerships
  • 15+ new Proofs of Concept

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).

What could go wrong?

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

What is our investment plan?

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.

Our Investment Summary

Date of Initial Coverage

01-May-19

Inital Entry Price

$0.097

Returns from Initial Entry

-74%

High Point

94%

WHK 3 cent rights issue, we are participating.

Jul 26, 2023

WHK 3 cent rights issue, we are participating.

WHK Quarterly: We are pleasantly surprised - here’s why

Jan 31, 2023

WHK Quarterly: We are pleasantly surprised - here’s why

WHK to Thrive as Cybersecurity Takes Centre Stage

Dec 9, 2022

WHK to Thrive as Cybersecurity Takes Centre Stage

US braces for Russian Cyber Attacks in Response to Sanctions

Feb 25, 2022

US braces for Russian Cyber Attacks in Response to Sanctions

WHK comes out of hibernation with US$1.185M contract with the US Federal Government

Aug 20, 2021

WHK comes out of hibernation with US$1.185M contract with the US Federal Government