TNT Details

Tesserent Ltd (ASX: TNT) is Australia’s leading player in providing end-to-end cybersecurity services. TNT offers products, services, and strategic advice to over 800 enterprise, government, and critical infrastructure clients.

Completed Investments in TrustGrid™ and AttackBound™

The company, on 16 June 2021, highlighted the completion of investments by Tesserent Innovation in technology companies, namely TrustGrid™ and AttackBound™. Apart from investments in these companies, TNT has formed a strategic partnership with both companies that entails the inclusion of the distribution of these solutions into its Cyber 360 offering for its customers based in Australia and New Zealand.

Q3FY21 Result Performance (For the Quarter Ended 31 March 2021)

The company has delivered a turnover of $21 million in Q3FY21, with a record turnover of $9.1 million generated in the month of March 2021. Further, it has achieved a record quarterly customer receipts of $21.9 million, up by 6.3% from Q2FY21. Despite lower revenue from the seasonally slow Christmas and New Year holiday period, TNT has posted a record operating profitability with operational EBITDA rose to $1.7 million, up by 21.4% QoQ.

Quarterly Turnover Trend (Source: Company Reports)

Key Risks

The company is exposed to the risk of technological advancement. Failure to achieve synergy efficiencies from acquisitions may affect profitability and drain financial resources.

Outlook

TNT remains hopeful of achieving substantial revenue growth in Q4FY21 as compared to the previous quarter driven by its prevailing current recurring revenue as well as considering the strong pipeline of both renewal and new sales opportunities. Further, coupled with the benefit of current turnover from all existing acquisitions, the group is going as per the plan of achieving its target revenue range by the end of FY21. The group recently updated of surpassing its earlier guidance of achieving an annualized turnover run rate of $150 million. Currently, it is hoping of generating an annualized turnover of around $180 million based on June 2021 turnover.

Stock Recommendation

TNT has delivered 9-month and 1-year returns of ~+16.67% and ~+214.10%, respectively. The stock is trading marginally higher than the average of the 52-week low price of $0.068 and the 52-week high price of $0.440. On a TTM basis, the stock of TNT is trading at EV/Sales multiple of 5.1x as compared to the Industry Median of 5.6x (Technology). Meanwhile, the company has generated a record positive operating cash flows of ~$1.8 million in Q3FY21, and it remains hopeful of sustaining a strong earnings growth trend going forward. TNT's prices started to recover from the lower level and now facing the resistance of 50-period SMA on the weekly chart, indicating the possibility of a downside direction again. The leading indicator RSI (14-period) is trading at ~51.78 level, indicating a sideways direction. However, prices are getting support from the 21-period SMA, trading below CMP. An immediate resistance level for the stock is at AUD 0.305 level while support is at AUD 0.185 level. Considering the low scalability and intensively competitive environment, and current trading levels, we advise investors to book profits.

Thus, we give a “Sell” rating on the stock at the current market price of A$0.260, up by ~26.829% on 22 June 2021.

TNT Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart shows RSI (14-period) and the green color histograms represent volumes. The red and sky blue color lines indicate 21-period SMA and 50-period SMA respectively.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

• Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

• Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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