Investir sur le thème de la sécurité

Par Yves Kramer & Alexandre Mouthon – Senior Investment Managers -Pictet-Security

Evolution of risks and threats support long-term trends: Security Opportunities


Innovation

Innovation requires TRUST !
New technologies open new security needs: cloud computing – safety of personal data – electronic payments – advanced driver assistance systems (ADAS)

 

Urbanization
EM opportunities : faster trend of urbanization, social differences exacerbating security needs: mass transit, critical infrastructures and major public events are increasingly secured

 

Regulation
Security is benefiting from strengthening regulation across the board: which favors testing, analysis, and inspection needs

 

1. INNOVATION – INCREASINGLY CONNECTED DEVICES AND CYBER-THREATS

 

Exponential number of connected devices …

The IoT represents the next big computing cycles. Over the next 6 years, the number of connected devices will triple

 

… meaning more possibilities for data breaches

… And it is getting more costly for enterprises

 

IT SECURITY – PALO ALTO NETWORKS

Company profile
The company offers firewalls that identify and control applications, scan content to stop threats, prevent data leakage, integrated application, user, and content visibility
Segment: IT Security /Cyber security
Headquarters: USA
Market Capitalization: USD 23.0bn.

 

INDUSTRY DYNAMICS BUSINESS FRANCHISE & STRATEGY
› A growing number of malicious threats coupled with ramping user demand for mobile devises, cloud-based apps and IoT have driven a growing priority of cybersecurity
› Cybersecurity market should continue to outpace growth in IT spend
› Broader platform providers will likely be winners as they roll up best of breed technology, offering a broader set of products and services
› Market share to be less than 10% now, and could reach roughly 25% by 2025 as corporations continues to migrate their network security over the next-generation firewalls
› First company to establish itself as a security platform vendor (WildFire, Traps, Firewall)
› Endpoint security provides another leg of growth

 

2. URBANIZATION HAS A MASSIVE IMPACT ON SECURITY NEEDS

By 2050, 66% of the world’s population is projected to be urban, megacities will require massive investments to secure infrastructure (mass transit, airports, power plants…)

Developing economies security market growths will be around 9%, more than 2x those in developed markets Costs of insecurity are too important to bear

 

PHYSICAL SECURITY – ALLEGION PLC

Company profile
Allegion is the number three player in the access control industry. The company has leading brands with significant install base, a focus on specification-driven sales with spec writers in Americas and a deep and complex channel partnerships worldwide
Segment: Physical security / Access Control
Headquarter: Ireland
Market Capitalization: EUR 8.5n

 

INDUSTRY DYNAMICS BUSINESS FRANCHISE & STRATEGY
› A high shares in niche markets geared to a structurally growing industries.
› The most attractive end-markets as it combines low volatility of earnings and solid pricing
› US non-residential construction continues to be strong in 2018
› Current low penetration rates of electromechanical solutions offer massive opportunities
› In a multi-year transformation phase shifting from mechanical component supplier towards a digital access control
› Focus on improving margins, with strong restructuring efforts in Europe and high margin in the US
› Innovation in existing & new product categories
› M&A opportunities in the extremely fragmented global access control market

 

3.REGULATION – TESTING, INSPECTION & CERTIFICATION INDUSTRY (TIC)

 

The TIC Industry Characteristics

An immature industry
• Highly fragmented industry
• Low level of outsourcing penetration
• High EM growth opportunity

 

Strong structural growth drivers
• Regulation
• Technological innovation
• Globalization

 

High barriers to entry
• Quality of service
• Reputational risk

 

M&A opportunities
• Need for more integrated
solutions
• Consolidation

 

SECURITY SERVICES – SGS

Company profile
Global leader in inspection, verification, testing and certification. They are recognized as the global benchmark for quality and integrity. With more than 97,000 employees, they operate a network of more than 2,600 offices and laboratories around the world.
Segment: Security Services / TIC
Headquarters: Geneva
Market Capitalization: CHF 19.4bn

 

INDUSTRY DYNAMICS BUSINESS FRANCHISE & STRATEGY
› Solid structural drivers:
– strengthening regulation
– increase in global trades
– ageing of industrial infrastructure in mature economies
› Fragmented industry with strong consolidation potential
› Massive network of laboratories around the world
› Leading market position in the majority of its markets
› Strong track record in M&A and integration should fuel growth
› Most diversified business model

 

MAJOR M&A TRANSACTIONS

 

WHY INVEST IN SECURITY?

Well define LT drivers
Innovation
Urbanization
Regulation
Leading to strong revenue growth
Sales CAGR 7-9%¹
Security is seen as «a must have» vs. «a nice to have»

 

Strong financials
Strong op margin
High cash flow generation
Solid balance sheet
Thanks to
High barriers to entry
Premium pricing

 

M&A opportunities
Solutions integration
Search for growth
Technology transfer synergies
and economy of scale

 

SECURITY DEFINED

 

Providers of physical and IT based products & services help maintain the integrity, health, safety and protection of individuals, companies and governments

 

Physical Security
Products

› Transportation Safety, ADAS
› Video surveillance camera
› Helmets and protective lenses
› Police and forensic tools and kits

 

Security
Services

› Guard-services and person protection
› Hazardous waste management
› Security electronic payment
› Testing and controlling

 

IT Security Products

› End-point security
› Network monitoring
› Biometry
› Identification solutions

 

We exclude controversial weapons or offensive military contracting companies

 

INVESTMENT TARGET

Broad investment themes, strong growth and low accessible stocks

CYBERSECURITY : SOME DEVELOPMENTS

 

More and more cyber attacks!

WannaCry ransomware has infected more than 200,000 systems in over 150 countries, crippling goverment agencies, hospitals, banking systems

Yahoo mail: Largest cyber attack in 2016 impacting more than 1bn user accounts

Swift: Hackers used the system to attack the Central Bank of Bangladesh – $81mil stolen

 

GDPR Measures taken by global governments

Donald Trump to sign a cybersecurity executive order to implement specific measures to protect critical infrastructure

GDPR directive making mandatory for European companies to disclose cyber attacks and protection measures taken. Fine up to 3% of company annual turnover.

China has implemented new cybersecurity law in June which focuses on protecting personal information and individual privacy

Singapore parliament adopted on 5.02.18 a similar directive than GDPR (obligation to disclose and remediate to cyberattacks). Penalty of up to SGD 100’000 or jail.

 

 

 

 

 

 

 

 

 

 

A propos de Stocks Future 64 Articles
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