Seeing a CES bonanza for Fovio

This year’s CES show in Las Vegas has demonstrated strong interest in driver monitoring systems (DMS), from automotive manufacturers and their Tier 1 suppliers. All good news for Seeing Machines’ Fovio division, which is fast becoming the dominant supplier of driver monitoring systems to guard against driver fatigue and distraction.

It was at CES in 2015 that Seeing Machines first showed its driver monitoring car technology with Jaguar. In addition, Seeing Machines has confirmed that Bosch, Takata and Volkswagen are showcasing Fovio tech at this year’s CES.

  • Bosch’s vehicle demonstrates new intelligent driver interaction capabilities enabled by Fovio
  • Volkswagen demonstrates a vehicle cockpit concept with integrated Fovio DMS
  • Takata demonstrates steering-wheel integrated DMS

I think it is only a matter of time before many other OEMs and Tier 1 suppliers are linked with Seeing Machines as the auto industry introduces advanced semi-autonomous vehicles, then fully autonomous vehicles.

As Mike McAuliffe, ceo of Fovio has noted: “We’re seeing a groundswell of demand in the industry for our Driver Monitoring technology.”

Tesla, Jaguar, Land Rover and Porsche are all marques that I personally think are likely to adopt its technology. For instance, Elon Musk would be in ‘ludicrous’ mode if he didn’t appreciate what Seeing Machines DMS could do to enhance safety features in his cars.

Ludicrous valuation

What is undeniably ludicrous is that this stock languishes at a market cap of £45m when it is about to crack not only the auto market with Fovio but the fleet market with its Guardian product. (Caterpillar liked its driver monitoring product for the mining industry so much it bought the whole operation in return for an upfront payment and ongoing license and royalty stream for Seeing Machines).

Seeing Machines now has only to lie back and wait for the money to roll in from the Caterpillar sales team. Similarly, holders of this stock who hold it for a couple more years should make a stellar return.

According to projections from Lorne Daniels, a well respected analyst at house broker FinnCap, Seeing Machines will deliver sales of Aussie Dollars 141m (£84m) in 2019 with pre-tax profits of A$22m (£13m). I expect this figure to be revised sharply upwards along with his target price of 12p by the end of this year.

Any lingering doubts about the take up Seeing Machines offering in the fleet space were certainly dispelled with its tie up with Mix-Telematics, a global telematics provider in late December.

Following its fundraise this month, I’m convinced Seeing Machines is set to rise steadily.

However, don’t take my word for it. Do your own research and then make your own mind up.

The writer holds stock in Seeing Machines

Seeing Machines gains global partner to boost fleet sales

Today’s announcement by Seeing Machines (AIM: SEE) that it has signed a non-exclusive global distribution partnership with telematics provider Mix Telematics is great news on a number of levels.

Firstly, it provides a ringing endorsement of SEE’s Fleet technology, designed to drastically reduce accidents due to driver fatigue and distraction. Moreover, as a major player in the global fleet industry, with 578,000 subscribers across 120 countries MiX Telematics will enable SEE to leverage its global distribution and installation network.

As Lorne Daniels, analyst at house broker FinnCap notes: “Fatigue and distraction is a huge and growing issue for both private drivers and fleets, particularly with the growing mobile functionality and dependency. Telematics is vital for modern fleet management. Yet installing and subscribing for a number of different in-cab systems is difficult for fleet managers. Combining telematics and driver monitoring solutions in one device and from one supplier clearly makes sense, reducing cost and complexity.”

It should be a win for customers of both customers and Lorne confidently states: “…we expect a substantial increase in Guardian sales volumes over the next few years.”

I’m therefore very optimistic that within the next 6-12 months we should see substantial upward revision of sales estimates for Fleet.

Exclusive interview

Today, in an exclusive interview with Paul Angelatos, Chief Operating Officer at Seeing Machines, I put a few questions to him regarding this latest development. I’ve provided the full text in Q&A format below:

Chris Menon:  Given the amount of injuries and deaths caused by driver fatigue and distraction in trucks/lorries etc, how great an impact do you think the combined offering will have in reducing accidents among your customers?

Paul Angelatos: We have shown (peer reviewed paper written by Prof Mike Lenne and presented at this years ITS Conference in Melbourne) that when our Guardian solution is implemented, coupled with real time monitoring, we can reduce the occurrence of fatigue events and distraction by up to 91%.  When we integrate with MiX telematics, who are industry leaders in fleet safety in their own right, we will also have a greater understanding of what is occurring in front of the vehicle, how the vehicle is being driven (based on data MiX take from the vehicle), and then provide detailed analysis of a whole range of factors, including the driver’s state, in a single report.  This is a powerful tool for fleet operators who are focussed on safety.

Chris: What are the projected sales of the new offering over the next 1-2 years?

Paul: That is difficult to put a figure on this. What both companies know is that we are independently increasing our sales each year and both companies have identified demand for the other parties services with current and prospective customers. We already have overlapping customers that present opportunities for integration and we have a product that is complementary (rather than competing with each other). Even small percentages of the addressable market (both companies existing sales pipelines) will lead to solid returns.

Chris: Is it an exclusive global agreement across the world or is it restricted to certain territories?

Paul: It is a Global non-exclusive agreement. This is the first stage in our relationship and it is important for both companies to pursue opportunities as they see fit. As we progress and demonstrate our relative value to each other, the relationship may take a different shape.

Chris: Have you committed to a minimum order immediately?

Paul: There is no minimum commitment from either party.  This is an agreement that has been a long time in the making. We have developed a strong degree of trust with each other and are comfortable that our cultures a well aligned and we share the same motivation. An arbitrary minimum commitment from either party wasn’t deemed necessary.

Chris: What will be the approximate cost of the combined product in terms of upfront purchase and then monthly fees?

Paul: We will shortly be undertaking some joint marketing with MiX. We will save the release of our pricing for that occasion.  Needless to say, our customers will receive greater value by installing our combined integrated offering than they would by taking the two solutions independently.

The writer holds stock in Seeing Machines.

Seeing Machines at a crossroads

Regular readers of this blog will know I’m very keen on Seeing Machines. However, its would-be spin-off, Fovio has been delayed for a few months now (it was intended to spin it off by July 1, 2016) and the costs are still being borne by the main business. Therefore, while Monday’s results show great progress in many areas I wanted to concentrate on the likelihood of its being ‘forced’ to raise cash in the very near future.

From my discussions with management it appears that the cash position is now A$11m. The present cash holding will be boosted by an in principle agreement with CAT to bring forward  US$7M by Christmas (for although the revenue was recognised in the 2016 accounts, the actual cash is spread out). In addition, there should be around A$4-$5m coming in from fleet sales to assist working capital.

Even if SEE were to carry the full cost of auto, which is estimated by the Lorne Daniel, analyst at house broker finnCap as A$14m, overall net spend will be A$25m in FY 2017. This means that although finance would be tight by next June the company isn’t compelled to fundraise immediately. 

According to SEE’s interim CFO, James Palmer: “The plan is still to spin off Fovio by Christmas. However, we can comfortably carry Fovio until June 30, 2017, which would give us ample time to go to a plan B if we need to. That is if plan A wasn’t working in the best interests of the shareholders and we had to look at an alternative structure.”

Chief Executive Ken Kroeger stressed: “The only thing that would change that is if we decided that a spin-out isn’t the best thing for current shareholders. We have invested another A$4m into automotive since year end and we’re not necessarily going to get more equity for that. In parallel to that, that $4m has delivered a whole lot of outcomes that we might not want to give away to somebody else and we are out there pursuing business that we could win between now and Christmas that would increase the value of the company, and which we might not want to give away at the current valuation.”

“Our view is that the delay, while consuming cash, is increasing the value of our business and unless that is properly recognised in the spin out, we have the ability to reshape that if we choose to,” added Kroeger.

Certainly, SEE seems keen to let potential investors know that it isn’t desperate for cash and its trump card is that the auto industry is desperate for its technology. Indeed, among auto OEMS, I understand that it’s only the Koreans that are not using its DMS technology. All the rest they are doing something with.

Fleet

Fleet is very important as aside from CAT it is the only part of the business currently generating revenues. In the year, ended 30 June 2016 it sold 1,666 units and already in the first quarter of its 2017 financial year it has managed to ramp up sales by approximately 3000 units, with a cumulative total of now 6,000 units sold.

Moreover, its pipeline of assessments continues to grow. At the end of June it had 34 on the go but when I sat down with Chief Operating Officer Paul Angelatos this week he joked: “We’ve not been sitting on our hands since the year end and in fleet we now have 45 assessments underway.” The total number of units this potentially represents is roughly 160,000. 

In addition, part of the strategy is to work with telematics providers in order to get sales in very large volumes as he explained: 

“Most of the large fleets we are working with already have a telematics solution installed, (tracking the vehicle, tracking driver behaviour in terms of harsh braking, cornering, acceleration, etc., with GPS and an ability to transmit data)…Our product development is now focused on being able to integrate with the existing technology, stripping further cost out of our product, reducing the complexity of installation but more importantly allowing us to access existing customer bases with these partners.”

SEE now has memorandums of understanding (MOU) with 3 telematics providers and is having preliminary discussions with a fourth. As Angelatos commented: “The strategic telematics partners that we are now talking to effectively give us access to an installed base of over 2m vehicles.”

“We should be able to return some revenue from these strategic partnerships this financial year. It won’t be significant but it does set us up for FY18, where we have the new product, we’ve proven the integration, we’ve proven that our technology works together, so we’ll be able then to access that volume market.”

In this financial year (2017), fleet revenues will be derived largely from direct sales and distributors.

“Typically our model now is selling as a service, so we are looking at a bundled subscription fee per vehicle each month which is in competitive with other Mobile Resource Management (MRM) solutions. This provides a customer with a hardware solution and the full suite of analytics and monitoring of their fleet,” added Angelatos.

“We have expectations of a certain number of units this financial year and next financial year it is an exponential increase based on the fact that we are going to be able to access some existing installed base with those partners plus new sales, ” he concluded.

Conclusion

It appears to me that that there is a possibility that if SEE doesn’t get the deal it wants for the auto spin-off very soon, one option could be to fund this division itself with a smallish capital raise in order to retain more value and control.

While this might appear fanciful, if revenues from Fleet continue to increase over the next few months, the amount to be raised for auto needn’t be hugely dilutive to existing shareholders. 

There certainly wouldn’t be any shortage of Silicon Valley VC capital willing to invest in SEE itself, not to mention mutual funds and private investors.

Moreover the upside it would be capturing and retaining for investors might well outweigh the short term effect of any dilution. Indeed, if a fund or company bought in at a premium that would be a very bullish sign.

What I would hate to see would be a dilutive fundraise followed by a share consolidation that wipes out long term private investors such as myself. Yet, I get no indication such a move is on the cards.

Certainly, concerns over cashflow have been holding it back for a good while now and it makes strategic sense to keep Fovio in-house, in my opinion.

An eventual flotation of the whole company on Nasdaq could then set it up for a meteoric rise. For example, just look at the mouth watering (US$9.2bn) valuation of Mobileye and ask yourself where SEE is likely to be a year from now.

This last thought is pure speculation on my part and there are a lot of hurdles to be surmounted before then. Still, whichever plan SEE chooses to  follow it is very much undervalued at its current share price.

As always, I’d advise that investors do their own research and not rely on the thoughts of others.

The writer holds stock in Seeing Machines.

Seeing Machines develops hardware chip

Seeing Machines’ announcement today that it has launched its first generation ‘Fovio’ embedded hardware chip has sent the share price flying. The reason being it appears strengthen its technical leadership in transport tech for fatigue and distraction monitoring while also broadening its reach, towards a diverse range of Artificial Intelligence and ‘Internet of Things’ applications.

Lorne Daniel, analyst at house broker FinnCap, commented: “The latter is new, and hints at an even broader market than previously supposed. Current contracted OEM vehicle deliveries (assumed to mean GM 2017 CT6 Cadillac with SuperCruise) are on track to launch in 2017 as software; however, the FOVIO chips are likely to be used in the second generation rollout to the entire GM range as agreed in the follow-on OEM contract. Embedding the software in a chip reduces the cost and time to market for OEMs and their tier-1 suppliers, facilitating mass market rollout since driver distraction is becoming a critical issue for the industry.”

There has been no update on its automotive spin-out, although technical progress clearly continues. Ken Kroeger, chief executive officer of Seeing Machines, commented in the RNS: “I am delighted to announce the introduction of our FOVIO DMS Chip which, as a World first, further cements Seeing Machines’ position as global leader in the Driver Monitoring industry. The FOVIO Chip will greatly reduce the cost of DMS deployment, helping to accelerate not just our growth but mass market uptake of DMS technology in general. This product will become the key offering of FOVIO, our new stand-alone automotive business that is currently being structured and staffed.” 

One assumes that any hard negotiations taking place with potential investors in the auto spin-off should be made easier by this announcement. Certainly, it can only make SEE a more attractive target for any cash-rich company wishing to dominate this space.

With all the talk about Apple buying McLaren recently, one wonders if this company is on its radar? Certainly, See’s market cap is too small given its leadership in the DMS space.

Q&A with Ken Kroeger

Below is a brief Q&A that Ken Kroeger, chief executive officer of Seeing Machines replied to late today (Australian time). Unlike a robot he still has to sleep – still, I am sure SEE are working on that.

1) Why was the news announced now, 2 weeks before the results? Is it to strengthen the hand of SEE in negotiations with the spin-off partners for Fovio and telemetric partners re. Guardian?

We demonstrated the chip to the first tier-1 this week and our Nomad felt that the market should be informed at the same time considering the quantum of the investment that has been made in the design, development and first runs of samples, which is now in the millions of dollars as it’s been two years of work from a sizeable team.

   

2) How does this news affect the auto spin-off? I’d assumed that a chip manufacturer/designer such as Intel or Arm might be a possible investor – does it make that more or less likely now?

The chip has been in development for two years. The semiconductor companies are all interested in our business and would all like us to migrate to their silicon in order to drive sales of their offering. We have a current silicon strategy working with an unnamed major partner that delivers not only the required hardware performance, but also the margins that are essential to the long term success of the auto business. The technical team has been built specifically around this particular silicon technology so a change would require additional investment.

3) How would you describe the significance of this move?

It’s an amazing step when you think about the fact that until two years ago everything we had ever sold ran on a very expensive computer and that everything ran on the Windows platform. Here we are today, running higher performing software on a device that we can sell for a tenth of the cost of that older processor and still have healthy margins in the business.

   

 4) Do you have any information on how much cheaper it will make the cost of DMS deployment?

We can say that if it was available for the first generation OEM automotive product, it would deliver a greater than 15% saving to the end price of the system. A significant number when you’re buying things such as millions of cars.

My Conclusion

As it’s well known that the growing ambitions of this company require more funding I’m very keen to hear more about how this development plays into Seeing Machines’ overall strategy.

Its results presentation will be on October 3rd, which should be a very interesting day.

The writer holds stock in Seeing Machines

   

Analyst very positive on Seeing Machines

As the UK was voting to leave the EU I was speaking with Lorne Daniel, the analyst at house broker FinnCap who covers Seeing Machines.

It was Lorne who first opened my eyes to the enormous potential of this AIM-listed company.

Like me, he’s very much looking forward to the automotive spin-off, expected to raise up to US$50m, perhaps in two tranches. Interestingly, he feels confident that SEE will maintain a high stake, around 75% in the initial funding round, perhaps dropping to around 50% in the second round.

This is what he said: “In the initial round, I was thinking Seeing Machines would have 75% and the investors will have about 25%. Then it would drop to around 50% for the second round.  Nothing has been confirmed yet but that was my thinking.

“I guess we will find out but as I understand it they need around US$50m. So, however that comes in, (for example, $25m and then $25m), I would be disappointed if they didn’t value their own IP at US$50m plus. I think it is worth, far more than that by any sort of calculation.”

“But to be fair, these initial investors are likely to be industry giants taking a big stake and they will want their cut. That’s fine.

“The template is Mobileye which has a US$8bn valuation on the US market with revenue of just US$240m. If Seeing Machines’ automotive spin off gets anywhere near that rating nobody will worry what that initial valuation was.”

Now my belief is that GM Ventures is the cornerstone investor and that VS Industries is investor number two. I don’t know who the third might be but I’m hoping it may be Intel. 

We shouldn’t have to wait too much longer to find out, given that Seeing Machines announced that lead investor had signed a term sheet on May 16. 

Fleet

Not only is SEE getting 15% of the growing royalty stream and monthly revenues  from sales of its product by Caterpillar, but it involves virtually no cost. Moreover, as soon as a telematics deal gets announced, and we already have MOUs, this will have forecasts upgraded substantially. This is turn should lead to a significant price rise and a further re-rerating. 

It’s significant that Seeing Machines is now leveraging insurers and telematics companies to roll out its technology in a cost-effective way. 

As it starts to grow you can also expect momentum traders and larger funds to start getting interested in the company, which would drive the price up further.

Of course, all this supposes that things go smoothly, which is never the case in business. 

Price target

Lorne Daniel currently has a price target of 12p on SEE and I’d expect that to rise following either the launch of the auto-spin-off or a significant fleet contract. 

Takeover

I’d be concerned that as the company is so undervalued, particularly given the limited downside and the virtually unlimited upside, an attempt to take it over on the cheap can’t be ruled out. This could be a direct competitor, or possibly a partner on the telematics front, or even Mobileye whose technology offering would be significantly enhanced.

In fact, I could reel off half a dozen companies that might logically seek strategic advantage by buying SEE.

However, the auto spin-off (by providing independent valuation of its IP far in excess of its current market value) will make this eventuality less likely. Certainly, any company then wishing to takeover Seeing Machines will have to pay a significant sum. I personally don’t think US$1bn would be an unrealistic sum to expect at that stage.

As the auto spin-off is very likely to be completed this side of Christmas (key management should definitely be in place by then), I’m prepared to stick my neck out and say that within 18 months I expect SEE to have a valuation of between 50-75p. That’s quite a rise from 3.25p at the time of writing.

Of course, you should always do your own research before investing.

The writer holds stock in Seeing Machines.

Seeing Machines share price

This is just an update following the unusual movements in the Seeing Machines share price.

Yesterday I contacted Ken Kroeger, Chief Executive of Seeing Machines, to try and find out if he or FinnCap knew of any reason for the recent falls. What he told me was: “Everyone’s view is that it’s Dixon’s selling of the original holding from the IPO”.

Hopefully, that should put some minds at rest. There is a natural tendency to jump to the wrong conclusions when trying to reason why a share price is so volatile, particularly as ‘buys’ are often reported as ‘sells’ with this share.

Certainly, the business is progressing and I don’t believe long term holders (investors) should be concerned – though day traders will have to have their wits about them.

Re. Fleet I’ve had it confirmed by Kroeger that Seeing Machines has “responded to a taxi tender in Dubai and expects a response in the next few weeks”. I also believe a similar process is underway with the Public Transport Authority in Dubai and that a response to that tender will likely follow along a similar timeframe.

The reason for the tendering process is that as government agencies they are required to put contracts out for tender.

In addition, See is also close to appointing 2 more distributors for the Fleet product, but they are not signed up yet.

As to how this week’s retail roadshow has been going, the feeling is that it has been very “positive”.

The writer holds shares in Seeing Machines.

Seeing Machines making progress

Seeing Machines produced a positive trading update today and I firmly believe that this company is very undervalued at its current price of 3.25p.

What was lacking was hard detail on contracts won in fleet and more detail on its share of the auto spin-off. Yet, if only half of the fleet trials convert and the auto spin-off goes ahead smoothly it should multi-bag by Christmas.

The company is making great strides, communication as to how well it is doing is increasing and I’m confident that positive news flow will drive the share price forward to reflect the growth in business.

Some of the following update is based on a very recent, exclusive interview with CEO Ken Kroeger. In it he was at pains to stress that he’s going to be making a big effort keeping investors informed about developments. For example, Seeing Machines is in the process of revamping its website and he explained: “What I am trying to do is create an ongoing, regular conversation with investors through our website. The Seeing Machines website will become the portal for investors and if they want to drill down into the companies they can.”

He’s slightly hamstrung by the fact that trials of such an innovative product take time to convert and confidentiality is an issue that often prevents disclosure.

I can see that the company is light years ahead of where it was only 3 years ago. It is now converting its computer vision based IP into commercial product and starting to promote these product brands/companies: CAT, Guardian, Auto, Nucoria etc.

Yet, that is probably of scant consolation for shareholders who have seen the share price sink over the past few months.

From my most recent conversation with him and today’s RNS, I’ve put together the following:

Caterpillar

As the update explains, here Seeing Machines is moving “from a low-volume, high-value hardware business to an annuity and licensing-based revenue, high volume, lower unit cost product business model. Aside from the A$21.85m one-off Caterpillar licence fee that will boost revenues for the current financial year, there should also be recurring and growing revenues from product and services. These amounted to US$420,000 from Jan-March 2016 and are expected to grow in the quarter from April-June 2016.

That said, excluding the one-off revenue for this financial year Seeing Machines expects “other sales and service revenue to be lower than the last full year.”

Fleet

This product became available to customers in September 2015, without a formal launch and minimal marketing. The salesforce, comprising mining experts, eventually had to be replaced by road transport experts.

Since then, it has formally launched an improved product (with front facing camera) at mining shows: 3 in the US and 2 in Australia under the ‘Guardian’ brand.

Following the launch of Guardian, it has built up a very solid pipeline of product assessments with potential customers, “over 30 around the world” according to Kroeger.

To give some idea of the volumes he’s talking about he added: “If we successfully converted all of those assessments we’d probably have somewhere around 120,000 – 150,000 vehicles in those fleets.” Moreover, some of them are apparently very big companies.

While he doesn’t expect a 100% conversion rate, he did reveal that these assessments are going “really well”. In addition, Caterpillar has also made its first fleet sale.

Kroeger also explained: “We are currently designing the second generation solution, again, with VSI and other external expertise. It will be lower cost and modular in design so that it can be sold as a complete stand-alone solution as it is now or it sold as a companion or add-on to an existing telematics solution by only using some of the module (camera, HMI, image processing and not the geo-positioning or telecommunications elements that could be present in an already-installed telematics service); again being lower cost as result.

“The logic in this approach is that we are working with large telematics companies to provide them an affordable technology that they can sell to their customers in high-volume at the lowest possible cost while still providing a direct to market, Guardian solution that is affordable to operators that require the complete technology solution due to not having a telematics solution in their vehicles or where the telematics solution is not compatible with ours. The telematics suppliers are seeing a lot of consolidation and are looking for means of differentiation. Our discussion with them are focused on turing them into  an additional, high volume, channel to market with their existing customers.”

For those seeking names, Kroeger added that he was currently working with 2 global telematics companies (“with over 1m connected trucks combined”) and that, if possible, he’d hope to provide more detail in the next Fleet update — which I expect to be in a couple of weeks.

Naturally, investors may be frustrated that he can’t put those names out immediately. Still, if he says it is happening you can be certain it is. What he can’t control is the marketing sensibilities of huge multinationals that prefer to be named at a time of their choosing.

There’s also been progress in Auto, Aerospace and Rail but I don’t have much to add to the RNS.

Understandably, the lack of detail is a frustration, made harder to bear by the downward moves in the share price. However, I’m very confident that continued patience on the part of investors will be amply rewarded over the next few months.

Of course, there is no substitute for your own research and investors should always take care not to invest more than they can afford to have tied up for a year.

The writer holds stock in Seeing Machines.

Seeing Machines confirms auto spin-off by end of June

In an exclusive interview today,  Seeing Machines’ CEO Ken Kroeger confirmed to me that the innovative developer of eye-tracking technology is on-track for the launch of an spin-off company by the end of June this year, raising between US$60-100m

“We’re trying to close the finance by mid-June. We’re expecting it may slip a little bit but we’re pretty far advanced and have made an offer to the CEO; we’re starting to structure an org chart and plan what the business looks like as it moves beyond this organisation.”

The new entity will employ around 70 people (some part-time), there are likely to be a total of 5 board members including the CEO, with one representative from Seeing Machines on the board.

Kroeger couldn’t reveal who the cornerstone investor is nor the exact percentage stake that Seeing Machines would hold, saying in today’s announcement only that it would retain a “significant equity stake” in the new company.

From my own research, I’d guess that the cornerstone investor, described as a “US-based investment firm with extensive experience in automotive technologies” in today’s announcement, is likely to be GM Ventures. As to the other investors, I’m less sure.

Still, Ken Kroeger confirmed that all will be revealed quite soon: “Within the next 4-6 weeks we should be able to start telling people who these organisations are, how much we own, how much we will own.”

There are two be 2 rounds of investment plus an employee share option scheme and he’s been looking at what the market cap table will look like through those different phases. The initial round of investment will be followed by one further investment 2 years down the line.

“I think we’ve shaped the investment strategy to put us in front of the sorts of organisations we would want as partners and that there is  an expectation that they have the same objectives. So we’ve been looking for people that are strategically aligned in order to make sure that this goes to plan,” he added.

Kroeger also confirmed that a lot of the recent selling has been by an Australian Superannuation fund (Dixons Advisory), an original investor in Seeing Machines’ IPO that until recently held an 8% stake. Apparently, holders had been advised to sell as the shares were converting from paper to electronic versions.

It certainly seems like an odd time to be selling out of a company making great strides in one of the hottest sectors in automotive.

As this is overhang is cleared, good news flow should propel Seeing Machines’ share price much higher over the next few months.

Incidentally, Kroeger revealed that the company, anxious to keep investors better informed, will also be launching a new investor-focused website in around 7 weeks.

The writer holds stock in Seeing Machines

Seeing Machines accelerates product development

It appears that Seeing Machines (AIM: SEE) is making good progress in bringing its world-leading, eye-tracking technology products to a variety of transport markets.

Re. today’s news that one of the world’s leading contract manufacturers has taken a 12% stake in Seeing Machines, investing A$12.8m (£6.7m) for 129.7m shares at 5.2p, a 20% premium to the recent share price, finnCap analyst Lorne Daniel commented: “In our opinion, VSI, as well as providing as a source of finance, offers a low-cost development and manufacturing partner for the road-going and other devices.”

Following on my previous interview with Ken Kroeger, I also wanted to add some interesting snippets from last Friday’s interview that might be of interest to those investing (or thinking of investing) in the company.

Fleet

Seeing Machines has started designing the next generation fleet product (which it appears will be manufactured by VSI). It will not only be better than previous iteration (with a forward facing camera) but is expected to be about 40-45% cheaper.

In addition, Ken Kroeger revealed: “We are talking to 8 or 9 of the biggest telematics companies in the world now and getting quite a bit of interest from them.”

Asked whether the deal was going to be exclusive or non-exclusive, he replied: “It will be non-exclusive. I think we will have to offer some differentation; maybe it will be region by region. A lot of these companies have 400,000 – 500,000 units under management.”

As to the product Seeing Machines would offer them: “This next generation will remove all the things that the telematics companies have: they all have GPS, telecomms, power. So we are building more of a partner unit that will sit beside the telematics unit and only provide the services that it has to have as opposed to all the services inside. Again offering a lower cost product that will act as a companion to the telematics product.”

In terms of how this business model will operate, he explained: “I think where this is going, we will start looking at more channel type relationships, looking at our own business model almost like software as a service where they get a piece of hardware, pretty much like a mobile phone deal where you pay something for this low cost unit, it is installed and then we are scraping more of a monthly payment – parallel to the telematics model.”

Rail

Not only has a third trial just started on the railway side but Seeing Machines has also submitted a tender to the Transport Authority at a big US city for a safety solution for its commuter trains.

If successful, it will garner a lot of publicity and Ken believes: “It would really launch us into that rail space.”

Fortunately, the improved algorithms resulting from the auto development mean that SEE’s product doesn’t need a lot of re-engineering to be used for rail, thus reducing the cost and time of deploying it. As Kroeger explained: “It re-captures the faces now very quickly. The old mining technology, our previous set of algorithms, took 15-30 seconds to find and lock onto the face, whereas it now takes less than a second. So you can move away and come back without it losing its effectiveness.”

Indeed, its continually improving its algorithms, as Kroeger revealed: “One of the biggest changes inside the business is that there is this new science called Machine Learning. Instead of writing software to do something you write software that can learn as you feed it new information. So we started doing that about a year and a half ago.

“It was as part of a continual push to improve those algorithms, not only for performance but also in the automotive space you have to deliver them on cheaper and cheaper platforms. You have to continually drive your prices down, so in order to do that you go to cheaper and cheaper processing. You have to keep on improving them.”

I had been concerned whether Seeing Machines could maintain its technological lead in this area but it seems that it has the ability to maintain this ‘moat’ around its business.

Again, Kroeger enthused: “What makes us special, why it is so perfect for us is that there is no other company in the world where, literally we walk into the office in the morning and there are thousands of hours of video captured the day before of drivers. We take that information and it goes through a truthing process, where we have people looking at the video very very closely. They identify where people had a fatigue event and they can annotate that video to highlight key parts of the video. They can look at 1 minute before, 10 minutes before, 1 hour before and deep learning starts to look for tell-tale signs that are common across all users to develop a more predictive algorithm.”

The writer holds stock in Seeing Machines