recommendation: buy keyw holding corporation

Recommendation: Buy KEYW Holding Corporation

• KEYW Holding Corporation is in a position to capitalize on the growing market of cyber security• Most of the revenue of KEYW comes from

cyber security. • Their competitors have only a fractional

amount of total production in cyber security(Example SAI).

Investment Thesis

• High Growth of Cyber Security Attacks in the Commercial and Government Sectors

• Increased Spending on Cyber Security by the U.S. Government

• Acquisitions

• Project G

Investment Key Points

• Founded in 2008• Provides Cyber Security and Geospatial Intelligence Solutions

to Government agencies ( Defense, Intelligence, and National Security) and Commercial Clients. • In 2012, Revenue was split up into Services(71%) and

Integrated Solutions(29%)• The leadership is well experienced in cyber security (Leonard

Moodispaw(CEO) has over 12 years experience in the cyber security arena. • Over 70% of employees have high level security clearances • Their employees have one many security awards including

Security Global Excellence Award(2013)

Overview of KEYW

Leonard MoodispawPresident and CEO since inceptionFormer President of Essex CorporationFormer Vice President of Northrop Grumman

Kim DechelloChief Administrative officer since 2008Former Chief Administrative officer of Essex Company

Ed Jaehne Chief Strategy OfficerFormerly in the Leadership of Essex and Northrop Grumman companies

Mark WillardChief Impact OfficerFormer Chief Financial Officer of Horne International

John CrobathChief Financial Officer since 2009Former Director of Financial Operations of Kratos Defense & Security Solutions Inc

Management

Growth of Cyber Security Attacks

• KEYW currently has 492 million dollars in backlog projects with the U.S government• According to Market Research Media “The

Cyber security cumulative market is valued at $65.5 billion (2013 – 2018), the U.S. Federal Cybersecurity market will grow steadily – at about 6.2% CAGR(compound annual growth rate) over the next six years.”

Increased Spending by U.S Government

• Since 2008 KEYW has acquired 14 companies. Most recently in (2012) (Poole and Associates) and Sensage which were bought out for 160 million dollars

• Sensage is a security analytics and data warehousing company. It has helped KEYW in its Project G efforts in cyber security

• When they buy companies they do not buy them at auction • Part of the growth of KEYW is in its acquisitions • Some of the recent companies that KEYW has acquired are

Rsignia(cyber security company), Poole and Associates (mission-centric provider of systems and software engineering services to the U.S. Intelligence Community)

Acquisitions

• Project G is a development of cyber security systems for the commercial sector.

• It offers 24 hour automatic protection against cyber attacks.• The launch date is in the 2nd quarter of 2013• They started testing the system in mid 2012(AT&T is one of the companies that started testing the new

system in July 2012) The names of the companies that are on the system will be

released towards the end of 2013. The projected growth in revenue from Project G is 30% of

projected total revenue in 2015.

KEYW Project G

Revenue Growth

EPS Growth

Free Cash Flow (in millions)

The KEYW Holding Corporation

1y Target Est: 17.71

Beta: 1.58

Next Earnings Date: 29-Apr-13

52wk Range: 7.88 - 16.45

Avg Vol (3m): 330,298

Market Cap: 527.02M

P/E (ttm): 492.33

EPS (ttm): 0.03

Div & Yield: N/A (N/A)

Current Price Chart

•

• SAI produces revenue from four areas. ¼ of its revenue comes from cyber security.

KEYW Comparison to SAI

Strengths High level relationship with U.S governmentExperienced LeadershipAgile in response to cyber security attacksSmall company, a lot of room for growth

OpportunitiesGrowth in Cyber Security AttacksProject GNew Acquisitions

WeaknessesMost of the revenue comes from government contracts

ThreatsPossible cuts in Government spendingIncreased Competition by other Security companies

SWOT Analysis

• Sector: IT/Telecom• Industry Group: Cyber Security

Buy 300 shares of KEYW between 13.25 – 13.75, $3975 – $4125

0.7% of Total Portfolio

Possible Strategies