TNT - Tesserent Limited

[System]

Tesserent provides Internet Security-as-a-Service to a wide range of Australian and international customers, including education providers, corporate enterprises, and government customers.

Tesserent has also appointed a number of international resellers (Channel partners) that licence the MSSP Platform to deliver Security-as-a-Service to their own customers.

TNT listed on the ASX on 15 February 2016.

http://tesserent.com

 

[Dona Ferentes]

Well, this one didn't go off with a bang. Probably a good thing that no-one has showed an interest over the last 4 years. IPO'ing at 20c, TNT had dropped to 5c a share by the end of 2017, and has bounced along there until it announced a new Chairman, Geoff Lord, on Friday, after CoB. Then today, a Trading Halt in the afternoon, but not before putting on 1.3c or 29% during the day (mainly in the last hour before T/H).

Cause of all the fuss? The usual reboot, with an article in AFR spelling out the new line:

[Mr Lord] has set the ambitious goal of taking the company from $5 million in revenue to a $50 million revenue run rate by June 30. To achieve this, Mr Lord intends to shake up the company's management team, cut costs, continue its recent acquisition spree and achieve a positive cashflow. One of his first cost-cutting initiatives will be to ask board members to go without payment or incentives for the next 12 months. The company has already terminated all external consultancy services.

"There's quite a detailed [turnaround] program and to be successful we have to implement the program properly," he said."The most tangible showing of my faith [in the business] is the amount of money I've put in. We control about 80 million of the shares and own a sizeable portion."

Geoff Lord was founder of UXC (sold to Computer Sciences Corp in 2016) and currently Belgravia Group chief executive.

"I think [TNT] were victims of the technology bubble," Mr Lord said. "They thought that providing they were out there, the market would make an assumption about growth and would look after them. But you can't work that way. You have to work on delivering and letting the share price follow." "There was a lot of gross expenditure in the company. But we've taken out a few million now, like with the directors not being paid."

Tesserent's latest strategy is to buy up small cyber security players and form a larger business with a varied offering. It will be focused on the mid market. To date, Tesserent has acquired Melbourne-based Splunk partner Rivium for $3.2 million, the security businesses within ASX-listed PS&C Group for $16 million and is waiting on shareholder approval to buy Canberra-based security consulting firm north BDT for $5.3 million. Of the $50 million revenue target, Mr Lord believed Tesserent would be able to generate 25 per cent of the growth needed organically, while the remaining 75 per cent would come through acquisitions.

Now in Trading Pause. First the acquisition, then the Capital Raise?

 

[Dona Ferentes]

But things are changing in "cyber security land" (space?). The Notifiable Data Breaches scheme started in Feb 2018 and makes cyber breaches compulsorily reportable and subject to fines for non-compliance.

Consolidation in what is a rag-tag and sub-scale collection of providers of cyber security will follow as companies grapple with managing their risk exposure. Before, tech issues were managed by the IT department; now they are business risk issues that needs to be managed by the executive and board.

Perhaps a sophistication is needed for growth to come, and Mr Lord on the Board will bring experience + oversight to this company.

 

[Dona Ferentes]

And got an ASX speeding ticket. Response as follows:

In the interview given by Mr Lord, he referred to his view that the targeted revenue run rate at 30 June 2020 should be $50m. This view is based on successful implementation of the Cyber 360 acquisition strategy adding further revenue, and the organic growth of the business.

Mr Lord’s statements in the interview are his own personal view and are not a forecast that has been made by Tesserent in accordance with ASICR Guide 170. Therefore the statements should not be relied upon.

naughty, naughty. Ructions in the board to follow? And a spill?

 

[Dona Ferentes]

Back trading after TH and Chairman's Letter to Shareholders released at 11am. He stated that $40mill revenue was achievable, a bit of a backpedal from yesterday's thought bubble. There was actually a trade or two under 6.0c before steady buying interest during the day..... Made it to 8.8c, but now below 8c with a bit of profit-taking, and some 27mill shares changing hands.

 

[Dona Ferentes]

seems to have digested the 'early leavers' efficiently, and pushing higher (no recent news)

 

[Dona Ferentes]

up 18% with big volume driving it, on Friday.... probably as a response to the revelations of alleged 'state sponsored' cyber hacking

A foreign government has escalated "malicious" cyber attacks against Australian businesses and government agencies including critical infrastructure, Prime Minister Scott Morrison has revealed.

Mr Morrison said investigations so far had found there had been no large scale breaches of personal data.

Australian security agency chiefs and government officials have been actively monitoring the spike in domestic and global cyber hacking during the COVID-19 pandemic, and were working closely with Five Eyes and NATO countries reporting similar online threats.

Companies and state governments are being advised by the Australian Signals Directorate and Australian Cyber Security Centre on defence strategies to thwart the industrial-scale cyber hacking campaign.

 

[Dona Ferentes]

going by the maxim that "no-one ever got fired for buying IBM" ('80s corporate thinking), I'm tipping TNT for July. There's a big move into cyber security and thus Oz players such as TNT should do OK. In a field where there are numerous home-grown small to middling players, Tesserent has grown by acquisition, recently stating "our strategic goal [is] to become Australia’s #1 ASX-listed Cyber Security provider."

'State players' are cited as increasing their attacks, and the Aust response has identified our National departments as fair but State govts and corporatised infrastructure (power, water, etc) are seen as being weak and vulnerable to attack.

From P1 of today's AFR, and building on PM Morrison's Thursday statement:
Tough cyber security rules loom for business as attacks surge
A lack of minimum standards for cyber security is seen as a crack in the wall of the nation's defences

....x.x....x.x....x.x.....
".....also, as announced on 10 December 2019, we are expecting to be cash flow positive and profitable, delivering a forward revenue run-rate of $40m on a month-to-month basis by the June 2020 quarter"

 

[Dona Ferentes]

while the TNT announcement sounds positive, especially as Cyber Security and defence are in the news; it has

... significantly strengthened its Canberra business in recent days through north security | digital’s appointment to the Defence Industry Security Program (DISP) together with a strong teaming agreement signed between Tesserent and McArthurAssociates Pty. Ltd.
The Department of Defence’s DISP Program is a mandatory accreditation required by firms wishing to gain access to Defence security services. north’s appointment to DISP has significantly increased TNT’s opportunities and access to work within the Australian Defence industry.

I'm not sure opportunity is flowing just yet, as DISP membership doesn't imply business

The Department of Defence, in consultation with industry, has reformed DISP to provide industry increased opportunities to work with Defence and easier access to Defence security services.

Industry is now able to self-nominate for DISP membership without the need for a Defence contract. Allowing greater access to DISP membership supports industry to become Defence-ready.

https://www.defence.gov.au/dsvs/industry/

All this as it may, it's probably news of Cyber security measures taken by the Govt and likely spending that has helped TNT rise 15% today (one day ahead of the July comp start <grrrr>)

 

[Dona Ferentes]

previously announced FY20 financial objectives have been met:
- $40M rev run rate achieved (being revenue during the June 2020 quarter annualised).
- EBITDA positive in June (unaudited, subject to audit)
- Cash flow positive from operations in June (unaudited, subject to audit).

Also signed an agreement with its existing debt provider, PURE Asset Management (PURE), for a new $15M Facility. The new Facility replaces the Company’s existing $5m loan and has been struck on improved terms of 8.9% per annum, well below the current interest rate of up to 11.5%. The funds will be drawn down as required to support earnings-accretive acquisitions (three of which are well progressed), as previously set out in TNT’s Cyber-360 Strategy.

(don't hold, but is my July tip)

 

[Sdajii]

I bought a couple of parcels of TNT earlier this month(first thing I've bought all year), very happy with today's announcement and price action. It looks like a symmetrical triangle played out (I was expecting this to play out this week after seeing it last week). It began just a few minutes before today's announcement, and not surprisingly after the announcement hit the technical target of 10c. As expected, profit taking is going on, but with this announcement and what it implies for next week's quarterly, we should consolidate between 9-10c (unless we do better) and hopefully head further early next month after the report.

 

[Dona Ferentes]

https://www.homeaffairs.gov.au/cybe...s/2020-cyber-security-strategy-iap-report.pdf

The 56-page report calls for increased government investment in the Joint Cyber Security Centre program. Federal agencies spend on average about 6 per cent of their ICT budget on security. Leading jurisdictions, such as Singapore and Israel, spend about 10 per cent.
The panel also said there was a clear need for a mechanism between industry and government for real-time sharing of threat information, beginning with critical infrastructure operators. "The government should also empower industry to automatically detect and block a greater proportion of known cyber-security threats in real time."..

 

[Sdajii]

Amazing action over the last few days!

I've chosen TNT for the August competition. The timing might not be perfect as we're getting so much appreciation late in the month, Dona Ferentes may well win July (fingers crossed for you!), but things are looking very positive.

Cybersecurity is obviously an area which is increasingly in focus and presumably will continue to grow. TNT is the largest cybersecurity gig on the ASX, recently announced it became cashflow positive with a very favourable financial position implied (the details of the quarterly next week will be critical, and if they're as good as the recent announcement implies we should get another rerate early next month) and the technicals are looking fantastic, other than perhaps the rise being overextended; I'm up over 50% and only started buying recently, I bought my most recent parcel less than a week ago and it's up 64%, so profit taking becoming an issue is likely, but having said that volume has been huge so profit takers are largely being dealt with.

 

[wabullfrog]

Another acquisition

"Tesserent Limited (ASX:TNT) is pleased to announce the strategic acquisition of Seer security’s Melbourne and Canberra-based businesses with the signing of a binding Share Purchase Agreement executed between both parties."

https://www.asx.com.au/asxpdf/20200723/pdf/44ks150zb7xh1d.pdf

 

[Dona Ferentes]

- Acquisition servicing Federal Government departments and agencies (including Defence and Law Enforcement agencies)
- Tesserent now Canberra’s largest pure cybersecurity provider
- Acquisitions targeting the newly announced $1.35B “Cyber Enhanced Situational Awareness and Response” budget
- Immediately revenue and earnings accretive with FY20 revenue of $7.6M and $2.2M EBITDA
- Significant fixed long-term contracts with multiple Federal Government departments and agencies

... the first of three that were telegraphed as 'in progress'.

 

[Sdajii]

This acquisition is brilliant and clearly sets us as the dominant player in this rapidly growing industry. It's also just the first of three promised acquisitions!

Amazing reaction from the market, we were already up around 50% for the week and today a further 25% or so. I'm absolutely rapt, I just bought in this month, my first purchase of the year and it's already a double bagger for me.

Congratulations in advance to Dona Ferentes for winning the July tipping contest

 

[Purple XS2]

Congratulations in advance to Dona Ferentes for winning the July tipping contest

(cough). Many a slip twixt cup and lip.
As for Tesserent, I remember looking at them a long while back. Haven't taken any further interest.
I did once upon a moon work for a entity that was assimilated into the Borg of the empire run by Mr Geoff Lord. Perhaps that jaundiced my opinion.

 

[Dona Ferentes]

(cough). Many a slip twixt cup and lip...

should I give up drinking?

As for Tesserent, I remember looking at them a long while back. Haven't taken any further interest...

I don't hold TST; just a tip in a Monthly. Serendipitous timing (so far).

Having had a job (!) in financial services, and see the change over the years as tech got more complex, multiple software each doing a function but needing to get data feeds, platforms needing maintenance, clients migrating from postal system to accepting online, the commensurate demands of IT were always problematic. It was either have someone in-house who had the IT smarts and got the feed, the patches https://www.cyber.gov.au/acsc/view-all-content/alerts/small-and-medium-businesses
or a small outfit that was local that could fulfil both hardware and software upgrades, or a big corporate.

None were entirely satisfactory, but the cost of being down or, worse, compromised, was worse. Ultimately, like many things, it is all about relationships. And speed of reaction. Usually, the upgrades would happen overnight (don't get a job in FinTech IT if you want your weekends free !!). The Corporates failed on the service, the billing was opaque, there was no sense of a value proposition. But the smaller, neighbourhood outfit (some which have grown and are now TNT targets) could be stretched and, often, the competent person would be poached elsewhere. Tricky space. Trying to find the optimal provider was fraught.

(( Sadly, Mr Lord and govt departments are made for each other))

(DNH)

 

[jbocker]

TNT. That's appropriate the price went bang today for you Dona in the tipping competition! well picked.

 

[barney]

my first purchase of the year and it's already a double bagger for me. Congratulations in advance to Dona Ferentes

Your shout @Sdajii Nice when they behave quickly!

I've been preoccupied and not reading enough ASF lately. Well done @Dona Ferentes . Good call