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WHK gets foothold in Australian cybersecurity market


Published 10-JUL-2024 14:15 P.M.


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A contract!

Our micro cap cybersecurity Investment, Whitehawk (ASX: WHK) today announced a new contract with Tabcorp, marking its first major foray into the Australian market.

WhiteHawk now has greater visibility in the Australian market, with Phase 1 revenues of A$70,800 and potential for additional fee-paying services throughout 2024.

It’s been a long road for us as WHK Investors, but today we got a glimpse of what the company might be able to achieve, this time with some traction in the Australian market.

We have held an Investment in WhiteHawk since its 2018 IPO and want to see more from WHK across its substantial sales pipeline, particularly in the US market.

We think that if WHK can land a few big US contracts it will quickly change the market's perception and re-rate the company from a low ~$7M market cap.

We think WHK is trading at a lowly 1.7c because of a few years of delays to new contracts being signed.

While we are most interested in WHK’s contracts in with large Fortune 500 companies, government and defence in the US, we’re pleased that the contract announced today has the potential to lead to additional work with the ASX 100 company (Tabcorp), ideally for more material revenues to WHK.

Cybersecurity has once again been in the news, with prominent headlines coming out that discuss state-sponsored cybersecurity threats.

We’re hoping today’s news helps WHK establish a foothold with major Australian corporates and opens the door for additional services and expansions in 2024.

How does today’s WHK news impact our Investment Memo?

Objective #1: More Contracts, follow through
WHK management has proven they can sign contracts and partnerships with top tier large organisations, but so far new deals have taken a long time to get signed. We want to see the effort of the last few years in building the pipeline come to fruition, with WHK delivering the following:

- At least one contract worth more than $1.5M annually
- Increase the contract size of an existing contract
- Win a new large organisation contract
Source: 18 December 2023 WHK Investment Memo

This contract with Tabcorp opens the door to a new large organisation contract, part of our #1 Objective for WHK.

Cybersecurity continues to be a strong thematic
In the 2024 Australian CEO survey, “Cyber risk” was classified as the number one thing keeping CEOs awake at night.

The rate and frequency of cyber attacks is increasing, and we expect that large organisations will be allocating more resources to cyber protection.

Source: 18 December 2023 WHK Investment Memo

Today’s news shows that WHK’s macro theme in the domestic market here in Australia resonates with a large corporate, a good sign.

What is our investment plan?
We have been holding WHK for a few years now, increasing our position on multiple occasions since we announced it to our Portfolio in May 2019.

While it has been a disappointing journey over the last two years, we believe WHK can finally turn things around, and deliver a re-rate on one or more large long term contracts and follow through with increased sales from its large pipeline.

Our plan is to increase our position if WHK do another equity capital raise, “averaging down” on our Entry Price, and we will look to top slice if WHK can deliver a re-rate from these lows.

Source: 18 December 2023 WHK Investment Memo

Our investment plan hasn’t worked yet, but hopeful some contracts from WHK are around the corner.

We put ~$200k into the 2.25c placement in February of this year, hoping a string of material contracts from WHK can rerate the share price.

What’s next for WHK?

  • Execution on the Tabcorp contract, with potential for additional service phases
  • Continued conversion of the US$22M sales pipeline into contracted revenue
  • Securing further contracts with large Australian enterprises to build scale