With deep connection to US government organisations, proven ability to sign big contracts with big organisations
ASX:WHK
Last Price:
$0.033
Date of Initial Coverage
01-May-19
Initial Entry Price
$0.097
Returns from Initial Entry
-66%
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:
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.
✅ 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
