Cyber Security

Why North American investors are flocking to this Israeli cyber stock (TASE: HUB)

Why North American investors are flocking to this Israeli cyber stock (TASE: HUB)
Written by ga_dahmani
Why North American investors are flocking to this Israeli cyber stock (TASE: HUB)
  • On March 23, Hub Security agreed to a deal to go public by merging with SPAC Mount Rainier Acquisition Corp.
  • Isreal-based Hub Security provides confidential IT solutions for both businesses and security agencies.
  • The company appears to be well positioned to grow with the help of favorable macroeconomic developments.

HUB Cyber ​​Security Limited, an Israeli company that develops confidential IT solutions for businesses and agencies, is at the forefront of cyber defense technology. The company has a first-mover advantage in a fast-growing niche market for confidential computing. According to Everest Group Inc., the market opportunity for confidential computing will reach $54 billion by 2026, growing at a compound annual growth rate (CAGR) close to 100% at best. Even in the worst case scenario, Everest Group predicts that this industry will grow at a compound annual growth rate of more than 40%, giving reason to believe that the confidential computing market is one of the fastest growing technology industries. growth today. On March 23, Hub Security agreed to a deal with special purpose acquisition firm Mount Rainier Acquisition Corp. to take the company public through a merger, a deal that is valued at approximately $1.2 billion. Upon completion of this transaction, Hub Security will receive approximately $198 million in additional cash, assuming no redemptions from Mount Rainier shareholders, and the company will also receive gross proceeds of $50 million through a PIPE investment underwritten by Israeli institutional investors and Americans. Once Hub Security shares become available on Nasdaq, growth-oriented investors are likely to find Hub shares an interesting bet for the future of the cybersecurity industry as the company moves steadily toward commercialization of advanced and innovative cyber security systems.

The macroeconomic outlook is promising

Artificial intelligence plays a crucial role in the development of advanced, automated security systems and autonomous detection of threats, and the use of AI and machine learning is likely to drive the growth of the cybersecurity industry in the coming years. years. These technologies enable considerably faster data processing, which is beneficial for both large companies dealing with large amounts of data and small and medium-sized businesses with limited resources. The global cyber security services market is estimated to reach $178 billion by 2027, with a compound annual growth rate of 9.8%, according to ReportLinker. Many factors are driving the growth of this market, including the increased need for cost-effective data management services, data protection, and intelligent security software solutions. The cybersecurity market is estimated to generate $146.30 billion in revenue this year.

Cybersecurity market revenue by segment

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Source: Statista

Recent geopolitical events such as Russia’s invasion of Ukraine and the rise in cybercrime resulting from the growth of cryptocurrencies are also positively contributing to the growth of the cybersecurity industry as many businesses and consumers understand the need to have advanced threat detection systems to prevent catastrophic events.

Hub Security is in a unique position to grow

Hub Cyber ​​Security, which was established in 2017 by veterans of the elite intelligence units of the Israel Defense Forces (8200, 81, MOD, C4I-IDF), is redefining cyber security using confidential computing with quantum technology. . The company has developed an innovative set of data theft protection technologies, as well as a sophisticated encrypted computing solution aimed at preventing hostile attacks at the hardware level. The company operates through various business segments.

  1. Consulting software.
  2. Training.
  3. Software Testing and Outsourcing.

In these business segments, the company works in more than 30 countries and offers revolutionary cybersecurity computing appliances as well as a wide range of cybersecurity services, including professional consulting and training services. Through RAM Commander, HUB’s proprietary hardware solution, the company offers solutions to protect sensitive IT data, resulting in a Trusted Execution Environment (TEE). Hub Security offers end-to-end data security across all phases of the data lifecycle, as well as next-generation encryption solutions such as powerful quantum computing defense. The company has been awarded FIPS 140-2 Level 3 certification, the highest level of security for cryptographic modules in the United States. The company’s solutions and services are typically offered through long-term contracts to corporations such as insurance companies, commercial banks, payment companies, telecommunications operators and government entities.

The fusion

Following completion of the merger with Mount Rainier Acquisition Corp., the combined company will operate under the name “Hub Security” and is scheduled to trade on Nasdaq under the new ticker symbol “HUBC” upon completion of the proposed transaction. The business combination will result in an enterprise value of $1.28 billion and an equity value to Hub shareholders of $933 million (excluding vested and non-vested HUB options). This transaction is expected to close in the third quarter of this year.

Recent Partnerships to Drive Growth

Hub Security announced a strategic alliance with Getronics, a global ICT integrator, in December 2021 to provide secure IT protection to banks and businesses in Europe, Latin America and Asia Pacific. Through this partnership, the company aims to improve current solutions such as Secure-by-Design IoT & Smart Spaces, Ransomware & IR, and SOC.

On February 15, Radiflow and Hub Security announced a partnership to integrate Radiflow’s OT ICS intrusion detection software (IDS) into Hub Security’s private computing platform for sensitive industrial environments. The new alliance will enable the protection of sensitive IDS data at all phases of the data lifecycle, significantly reducing the risk of superficial attacks on both the OT network and existing security mechanisms.

The company is also expanding its services in the healthcare industry, which could be a catalyst for future growth. HUb Security and Enlitic established a partnership on March 14 at the HIMSS Global Health Conference & Expo, and the company aims to protect health data to enable professionals to make faster and more accurate diagnoses. As more data is collected and stored every day, data security becomes critical to the healthcare industry. In 2021, the US Department of Health and Human Services revealed data breaches involving more than 40 million people. In the first two months of 2022, the trend continued, with more than 3.7 million people affected. Given the growing cyber risk in healthcare, Hub Security’s confidential computing platform is likely to gain momentum as it could protect data inside and outside companies, while protecting privacy and ensuring compliance with regulatory requirements. normative standards. Under the aforementioned partnership, the company will evaluate data from imaging systems and archives to aid in medical decision-making, resulting in the world’s first real-time clinical recommendation platform.

The business model is scalable.

Ransomware attacks on individuals, businesses and governments are becoming more common and require large public and private investments to protect sensitive data. According to Gartner, Inc., global cybersecurity spending increased 13% to $172 billion in 2021, up from 8% in 2020. Hub Security, as one of the fastest growing companies in the field of sensitive computer hardware, is will benefit from this continued growth of the industry.

The company has a recurring revenue model that includes a professional services business and a unique Confidential Computing hardware solutions business. This recurring revenue model will allow the company to scale economically and profitably similar to software companies that have taken full advantage of this type of business model. With an 80% annual early booking rate, a strong new product pipeline and a positive industry outlook, the company believes operating margins could improve to around 50% in the coming years. With its sensitive IT solutions, Hub Security could build competitive advantages around its advanced cyber security solutions, and it has a portfolio of intellectual property that enables the successful monetization of its technology. The company also benefits from its human capital, as senior executives have many years of experience and industry knowledge that is difficult to replicate. Hub Security expects to capture 1.5% of the entire addressable market by 2026, with operating margins in excess of 25%. From 2020 to 2026, the company expects a 50% CAGR and EBITDA increase of 4 cents to 25 cents for every dollar of sales.

Bring

The cybersecurity industry is attracting investor attention amid favorable macroeconomic developments promoting industry growth, and Hub Security is poised to be the last kid on the block once it goes public through a deal. SPAC with Mount Rainier. The company is already attracting institutional investors in the United States, and it would be reasonable to assume that the investing public would pay close attention to the company once it goes public. The company has a long way to go, and if Hub Security can develop and retain competitive advantages, early investors stand to gain.

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