Jul 7, 2022

Sentiment: Sideways

Type of Trade: High Growth

Industry: Cyber Security

Sector: Information Technology

Tesserent provides full service, enterprise-grade Cyber Security and networking solutions targeted at mid-market, enterprise and government customers across Australia and other Asian Pacific Countries. The Company’s Cyber 360 strategy delivers integrated solutions covering identification, protection and 24/7 monitoring against Cyber Security threats.

The company has been growing fast throughout multiple acquisitions of different businesses into Cyber Security. These acquisitions were proven to be very effectively, thereby delivering very positive results and sustainable revenue growth across its growth strategy, despite the pandemic desruption.

Key Highlights based on March QTR 2022

Tesserent also has been delivering consistent EBITDA growth despite negative cash flow, essentially due its acquisitions.

This overall EBITDA growth is made up of both organic growth (versus prior year comparative period of 36%) plus growth from acquired EBITDA.

✅ Organic Growth (excluding Acquistions) 36% for the Quarter and YoY. Organic growth is critical for any business, despite acquistion growth method has proven to be effective, companies need to growth organicaly.

✅ Stong Recurring revenew (ARR) of 45% of the overall revue.

✅ Descent cash postion of $10.0m at March 2022.

✅ Signficative Operating EBITDA margin improve.

🚩 Although there is a lots of growth in this company, the value of share holder has been diluted as the company tends to issue more shares to finance further acquistion. This is a strategy that need to be changed by focusing on keep incrasing organic growth as well as further acquistion should be financed with cash from it own revenue.

Anyone looking at investing in TNT for the long term, should be closely looking into whether the company will or not issue more shares in the market.

🚩 The company has declared negative operation cashflow of $1.1 in the third quarter. It needs to be checked in the FY2022 how is operational cashflow is moving. It has been already factored into the current stock price and it is likely that any improvement could bring SP back towards 20c.

Techinical Analysis

As victim of the Tech stock sell off the stock has fallen inevitably its ATH in January 2021, nevetheless Tesserent is a stock that offers great stock price swing and being well suitable for stock trading.

SP is currently trading 75% below its all times high. If you have invested on TNT 52 weeks ago, you would be 53% negative.

✅ Bullish Intersection level 1, potentially to be formed

✅ Bullish intersection level 2, confirmed.

✅ Strong push to the upside with Heiken Ashi green candle based on strong fundamental.

✅ High Volume on the Upside.

✅ Technology Sector is currently undervalued with potential money flowing into the sector as a whole.

Entry Details

BGS 20 Strategy

Buying under 12.5c-13c or lower

Target to sell 16.5c

Top loss must to be setup at SMA which is currently sitting at 10c (note that is a very low liquidity stock, hence the stock price can swing quite widely during trading sessions.

Risk: Very High and it is not suitable for conservative traders.

Conservative traders should be looking at stocks such as XRO, ALU, MP1, APX that has larger market capital.

Lead time: 3 months.

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