Research note10 May 2021 22:33
From Pretax ADVFN - —Tennyson Research Note from 21st March 2021BrandShield Systems plc is an Israeli-based cybersecurity specialist, whose AI-powered solutions provide comprehensive online brand protection to corporate clients across the world. The company's unique online monitoring solutions target, identify and remove a range of potentially damaging threats to a client's online brand, including social phishing, counterfeit sales, trademark infringement and brand abuse. Unlike traditional endpoint cybersecurity solutions, BrandShield's technology actively searches for these threats outside of companies' firewalls, thereby avoiding complex integration and ensuring shorter sales cycles.The company has seen rapid revenue growth deploying its SaaS model. BrandShield operates a subscription-based Software-as-a-Service ("SaaS") model, where clients gain access to a suite of its threat intelligence and takedown tools. Since 2017, the company has seen compound annual average revenue growth of over 114%. By the end of 2020, the company's Annualised Revenue Run-Rate ("ARR") had grown to $3.28 million, supported by record levels of new business. Contract wins in 2020 included Bristol-Myers-Squibb and Pharmaceutical Security Institute. By the end of the year, 77 corporate clients were subscribing to BrandShield solutions with an average spend of over $40,000 pa.Threat detection and takedown represents a multi-billion-dollar market opportunity.Market research suggests over 85% of corporations have experienced phishing attacks in the last twelve months, with the damage from an average attack on a large company amounting to over $1.4 million. With an estimated $2 trillion of counterfeit goods being sold annually, and e-commerce continuing to grow rapidly in a post-COVID economy, corporate spending on threat intelligence is expected to continue to grow rapidly, reaching over $12 billion by 2023.BrandShield is poised to enter a high-growth marketing phase in its development. Having developed in-house a comprehensive suite of threat detection & takedown solutions, we expect the company to focus aggressively on marketing in coming years. After raising £3.2 million (gross) through a reverse takeover of Two Shields International plc (TSI) in December 2020, management is in a strong position to accelerate top-line growth, and move beyond the largely word-of-mouth marketing on which it has been hitherto reliant.We expect the company to grow its ARR by 61% per annum over the next three years. With a beefed-up marketing effort, we forecast ARR to grow from $3.28 million in 2020 to over $21.95 million by 2023. Based on its peer group of global cybersecurity SaaS plays, we believe a 2023 revenue multiple of 5x represents fair value. As a consequence, we are initiating coverage on BrandShield with a 37 pence target price and a BUY recommendation.
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