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There’s a new frontier in the war, and these ASX cybersecurity stocks are suddenly back in the spotlight
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As heavy fighting in the Ukraine continues into its third week, the world is bracing for a major spillover from the conflict – cyber attacks.
Over the last two weeks, Western governments have warned that geopolitical tensions could trigger massive cyber attacks from Russia or its supporters.
Even the notorious hacker group ‘Anonymous’ has declared war on Russian targets, prompting experts to predict that we could be in for an all-out global cyber warfare for years to come.
In the US, big banks are already preparing their systems for such attacks, following the Biden government’s decision to slap a raft of stringent sanctions on Russia.
Among the threats they’re anticipating are ransomware and malware attacks, denial-of-service attacks, data wiping and theft – possibly all simultaneously.
In the worst case, it could even end up being the “cyber-Pearl Harbor” the US has been warning for years – a situation where an enemy uses cyberattack to shut down critical infrastructure such as passenger trains, water supply or even the power grid.
In Australia, PM Scott Morrison said the risk of cyber attacks is becoming more imminent now that Russia has been pushed into a corner economically.
Speaking to Channel 7, the PM urged Australian businesses to immediately review and adopt enhanced cybersecurity measures such as malware detection, mitigation and response.
“There’s no physical way that Russia would be able to attack Australia, just because of the geography, so cyber is really the only way they could punish us,” the PM said.
Tesserent at the forefront of Ausrtralia’s cyber defence
The cybersecurity space has already been one of the best performers during the pandemic, but the present frightening scenario has magnified the spotlight on to the sector once again.
Kurt Hansen, the CEO of ASX-listed cybersecurity company Tesserent (ASX:TNT) and a 30-year veteran of the tech industry, said that like all criminals, cyber criminals are very opportunistic.
“The best analogy I can use is, criminals are always attracted to something called looting,” Hansen told Stockhead.
“Whenever there’s a major problem like a storm, riots or a war, you always have looters.”
“They go and kick the shop window door and loot the grocery store, and it’s the exact same thing with cyber crime. What’s happening right now in the world has created opportunities for those criminals,” he added.
And it’s already happening. In a rare joint release on Friday, the US and UK cyber security agencies warned that a group known as MuddyWater, quite possibly based in Iran, has instigated a range of cyberattacks on American and European infrastructure.
This, the statement said, included attacks on government organisations, small private businesses and critical sectors such as transportation and health care.
“They don’t have to send us emails or soldiers, they can attack all that critical infrastructure through the backdoor,” explained Hansen.
“All of those systems nowadays are connected to the internet and are controlled electronically. So there’s actually a large attack surface that’s available to cyber criminals, especially state sponsored ones,” he said.
As the largest provider of cybersecurity services to the Australian federal government, Tesserent has been at the forefront of Australia’s cyber defence.
The company focuses on three market verticals – federal government agencies, critical infrastructure, and financial organisations.
Hansen says that one of the problems facing the Australian government to combat cyber attacks is skills shortage.
“The government struggles more than anything else to attract the skill set they need to provide the cyber defences required,” Hansen says.
“Tesserent has now got over 160 people focused purely on cyber in Canberra. We do some work on cyber defence across all seven government agencies, as well as the Attorney General’s department,” he added.
Banks are a major target
Given its central role within an economy, the financial sector has always been one of the first industries to be targeted in any state-sponsored cyber attack.
Cyber criminals know that a banking collapse could create a knock-on effect that could cripple other industries, possibly even the whole economy.
Fortunately for the mum and dad savers, the Australian government provides a protection of up to $250k per account-holder per bank in the event our deposit is lost during a cyber attack.
Hansen says the top tier banks usually have a large cyber team, so Tesserent provides just one or two additional service lines for those big banks.
“But when you get to the mid tier banks, particularly some of the newer banks, they haven’t been able to scale up their resources to meet the skill sets they need to protect themselves,” he added.
“So increasingly, Tesserent has found a really good space where we help the mid tier, and companies that are in the process of applying for a banking license where they need a strategy around cyber, or to meet some of the industry standards.”
Good time to invest in cyber stocks?
“First of all, if you’re an investor, you got to decide whether investing in cybersecurity is a thematic that you’re interested in,” Hansen explained.
“Because there’s obviously a lot of things that you could invest in right now, such as lithium for example.”
“However, having spoken to many institutional investors, they all still see a lot of growth in cyber,” he said.
In Australia, the cyber industry is expected to grow to a $7.6bn market by 2024, representing an 8% growth per annum.
“The market is growing at two Tesserents a year, so when people ask me about our business and if we’re going to lay off staff, my answer is No, the market is growing and we’ve got plenty of opportunity,” said Hansen.
According to him, there are larger cybersecurity companies around globally, but if you want to invest in an ASX stock, they are very slim pickings.
“I would think that in terms of having the ability to scale up a cyber business that could become an iconic Australian and New Zealand success story, you’ve got to pick Tesserent every time,” Hensen said.
Tesserent share price today:
Other cybersecurity stocks on the ASX
This data-centric security technology company will prevent malicious and accidental loss of information for its clients.
archTIS products NCProtect and Kojensi, are multi-government certified platforms for the secure access, sharing and collaboration of sensitive and classified information.
The company’s latest quarter showed that its licencing revenue has grown over 1,100% from the previous corresponding quarter, as it continues to drive key pipeline opportunities with Microsoft, Thales, and Raytheon.
Whitehawk offers an online tool that enables small and midsize businesses to take immediate action against cybercrime, fraud, and disruption.
Last week, the company had landed a US$1.5m contract for a “Fortune 100 US-based global social media company”, following a proof-of-concept period, but had announced the deal on its website, not on the ASX.
The company’s shares have continued to rise following the release of its preliminary final report, where the company flagged a 180% lift in annual revenues to US$3.4m.
The company’s subsidiary Votiro owns the software tools that protect against malware and ransomware attacks.
Founded in Israel, Votiro has developed the technology that has the ability to proactively eliminate all known and unknown threats hidden in files.
According to Senetas, Votiro’s secure file gateway is the only SaaS-based file security solution that ensures all files coming into an enterprise are safe from malware threats and particularly ransomware.
Seneta’s customer orders are significantly ahead of any other time in the past 12 month, but it anticipates that global electronic component shortages are causing delays to customer network upgrade projects – increasing the lead time for shipment of Senetas’s products.
Despite the obstacles, Senetas continues to build a pipeline of proof of concept (POC) trials in both the US and Asia Pacific regions.
Hubify specialises in business connectivity across mobile, data, voice, cloud solutions, and of course, cyber security.
Its other offerings include managed networks, global wi-fi, and hosted voice.
The company has confirmed its strategy to expand its cybersecurity’s business, as it rapidly grows strongly along with its enterprise customer offerings.
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