Frost & Sullivan Publishes Update Coverage Report on Safe-T Group: Capital rising strengthens equity structure; growth in revenues and backlog but also an increased burn rate from expansion of operations; stock target price remains at NIS 9.38.

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Summary of Highlights

Safe-T released its annual report on 29 May, 2018 detailing the following:

Growth in the company's revenues and in the backlog as well as an increase in the rate of cash burn in view of the increase in its activity in the US and Asian markets.

• Revenues for the first quarter of 2018 grew by 44% compared to the corresponding quarter last year and totaled $458,000;
• Orders backlog also grew by 47% to $631,000 compared to those received in the first quarter of 2017.
• On the other hand, sales and marketing expenses grew due to the Company's expansion in the Asia-Pacific and the US, leading to an operating loss and an increase in cash used for operating activities, approximately three times that for the corresponding quarter last year.

Safe-T recently completed a financing round, with participation from leading institutions and entities. The round totaled NIS 10.6 million (NIS 9.5 million net), part of which was closed at a premium.

• Capital was raised from investment bodies in both Israel and abroad at a price of NIS 1.28 per share for institutional investors (similar to the share price at the time) and for private investors, at NIS 1.5 (a 10% premium on the share price in the three days prior to the fundraising).
• Investors include; an Canadian hedge fund, and Infinity investment house, the latter of which increased its holdings in the company. Infinity's decision aims to further increase public interest in the company and strengthen its capital structure, the choice to reinvest is a testament to its trust in the company.
• As of the date of the report, the Company's capital raising and cash volume is expected to be sufficient till the end of 2018 without the need for additional funding.
• The company's auditors gave an "on going" warning concern to the company in its Q- 2018 report prior to the capital raising.

We retain our previous estimate with an estimated value of $53 million / NIS 188 million, a target price of between NIS 8.91 and NIS 9.88; a mean of NIS 9.38.

• New data security laws in Europe (GDPR) came into force on May 25 and provide a tailwind for the company's operations in these markets on the basis of favorable regulation.
• In our view, the relative simplicity of Safe-T's product provides for competitive advantage in Europe and the US in the short term.

About the company - Safe-T Group ("Safe-T"), listed on the Tel Aviv Stock Exchange since 2016, is a cybersecurity company that was founded in 2013 in Israel.  The company develops and markets its Software Defined Access Solution, which is designed to mitigate attacks on business-critical services and data for a wide range of industries, including financial, healthcare, government, and manufacturing organizations. Deployed globally, HDS protects thousands of employees in enterprises and governments, securing their data, services, and networks from insider and external data threats. HDS mitigates data threats such as un-authorized access to data, services, and networks, as well as data-related threats that include data exfiltration, leakage, malware, ransomware, and fraud. Headquartered in Israel, Safe-T is active in North America, APAC, Africa, and Europe.

See full report here.

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Kristi Cekani 
Corporate Communications - Frost & Sullivan, Europe
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