Corero Network Security Plc (LON:CNS) H1 results release (14/092017) showed strong progress, with revenue up 51% for the flagship SmartWall product. Perhaps even more importantly the recurring revenue element for SmartWall was up 177%. This reinforces the growth profile going forward because licence fee income grows cumulatively as new customers are added. We believe these results demonstrate that the company has essentially completed its transition from a software generalist to a DDoS protection specialist, and that the SmartWall DDoS protection product continues rapidly gaining traction in the market. In this report we review the progress of the group. We also revisit some of the fundamental drivers, and how the DDoS protection market functions. We argue that SmartWall’s real-time threat mitigation represents a disruptive new presence in the space.
A highly differentiated product in SmartWall which offers game-changing performance compared with anything else in the market place. Substantial headroom for further market share gains, within a continuously growing end market for DDoS protection. An expanding range of channels to market, and technology partners including Juniper Networks, Gigamon, and McAfee to extend Corero Network Security Plc (LON:CNS) market reach. Support of a shareholder base that includes specialist institutions such as Miton and Herald Investment Management, and also the Chairman and principal shareholder Jens Montanana.
The shares have gained 81% since the successful fund raising in April. Still, looking forward we believe the company could reach revenues of $50m in 3-5 years. This would imply a market cap of £115m based on peer-group multiples (e.g. Radware, RDWR:NSQ), with no further fundraising required in our view, or 4x upside from the current level. If Corero continues to deliver on milestones, there is still everything to play for here for investors.