11/12/18
SEN
$0.09
$0.20
BUY
Source: Bloomberg
Company Description
MACRO & THEMATIC DRIVERS:
o Economic Growth Beta: Global economic cycle raises the spectre of caution on all aspects of technology.
MARKET PHASE
The market is currently at a major inflexion point … the high volatility and the break of uptrends of the leading indices points to a risk off strategy garnering momentum.
MICRO:
GROWTH STORY WITH EARNINGS MOMENTUM CATALYSTS?
A new product range and strategy –Senetas is a company in transition. It has moved from being a single product company to being a multiproduct company and has also broadened its technology base and skills.
Senetas remains a world leader in providing encryption technologies both hardware based and software based.
SEN products are now transport independent encrypting data over layer 2. 3 and layer 4 of the telecommunication data transport stack. This significantly opens up their addressable market.
SEN is using its expertise (through acquisitions) to provide additional cyber security technologies for governments and businesses around the world.
SEN aims to leverage its global distribution and business development capability to scale Votiro’s technology.
Future earnings drivers:
Macro
Micro
EARNINGS ESTIMATE MOMENTUM
After a series of earnings downgrades, we believe the market will be revising upward Senetas’earnings estimates as a result of the following:
1. The positive pick up in sales from its new product offering.
2. Analyst coverage has recently been focused on earnings downgrades. We believe that this downgrade phase has been overdone.
3. In terms of sentiment the stock is carrying a fair amount of negative baggage. We believe, once the market understands the virtual encryption opportunity and the company starts to deliver some reasonable growth numbers in its 100Gbps encyptors the overall sentiment will become positive.
SEN specialises in the design, development, and manufacture of data network security and encryption hardware. SEN encryptors are used by government, corporates and cloud/ data centre service providers in over 30 countries.
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