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


The long term economic and investment implications of the Brexit vote

While the short term ramifications of the Brexit vote on 23 June are still working themselves out, the likely long term economic and investment impact is arguably clearer.

Economic implications

Many prominent economists appear to agree that Brexit need not have a long-lasting detrimental affect on the UK economy.

Official trade statistics show that the European Union (EU) is the destination for about half of all British exports. Specifically, about 44% of UK exports in goods and services went to the EU in 2015 (£220 billion out of £510 billion total exports).

However, the UK also forms an important export market for Europe so there are commercial advantages for both sides in continuing a close commercial arrangement.

Moreover, economist Professor Steve Keen argues that leaving Europe won’t result in sky-high barriers to economic trade as overt discrimination would breach World Trade Organisation rules. He believes the UK is unlikely to end up with a deal much worse than that of the USA with Europe, where the average tariff is 2%.

This average disguises differences across a variety of products, where some products have no tariff (laptops), some have a 10% tariff (cars) and a few have a 30% tariff (clothing). Thus, the impact upon specific industries will naturally vary.

Given that most of world demand is generated outside of Europe, and the UK’s trade with other areas has been growing at a faster pace, Brexit could actually help British exports in the long run if the UK  is able to negotiate favourable terms with these areas.

Certainly, it is difficult to disagree with the assessment of macro economic consultancy Capital Economics, in a report examining the long-term economic implications of Brexit, when it states: “Although the impact of Brexit on the British economy is uncertain, we doubt that Britain’s long-term economic outlook hinges on it.”

In the long term, foreign inward investment into the UK need not suffer unduly as access into the single market is not the sole reason firms invest here. Being the fifth or sixth largest global economy (depending on the strength of sterling) is sufficient reason for overseas investors to invest, while ease of doing business here with the legal and financial expertise available may be further encouraged by tax incentives.

There are some concerns that the financial services sector may shrink slightly in the long term. While Professor Keen believes such fears are overblown, such an outcome might be no bad thing if it forces the UK to successfully rebalance an economy that has relied too heavily on credit creation and increasing private debt to fuel consumption-led growth.

He argues that it was an inevitable slowdown in the growth of private debt (see chart) that led to the ‘Great Financial Crisis’ (GFC), and considers that an unsustainable level of private debt, “is the main threat to the UK’s economic prosperity, not Brexit”.

Private debt

Again, Capital Economics is similarly sanguine in its assessment of the long term impact of Brexit:

“Things have changed a lot since 1973, when joining the European Economic Community was a big deal for the United Kingdom. There are arguably much more important issues now, such as whether productivity will recover. The shortfall in British productivity relative to its pre-crisis trend is still over 10%, so regaining that lost ground would offset even the most negative of estimates of Brexit on the economy.”

The panicked reaction of many will produce outstanding opportunities for patient investors with cool heads prepared to take a longer view.

As Warren Buffett famously quipped, “Price is what you pay, value is what you get”, and it’s a maxim to be borne in mind before investing in any asset. It’s vital to conduct thorough research, evaluating the risks before investing, while working to a sensible timeframe. Rushing in or out of investments driven purely by greed or fear in increasingly volatile markets is a sure recipe for serious errors.

Long term investors (in contrast to traders adopting a short term view) can be confident that the normal investing rules still apply post-Brexit. Indeed, careful portfolio construction matters in all market environments, especially during periods of increasing volatility. This is because an over reliance on any single asset class introduces the risk that investors may miss out on potentially attractive returns and increases the risk of losses.

European impact

The long term impact of Brexit upon the European Union may be profound if it leads to the eventual break-up of the European Union itself.

Given the economic problems and high unemployment levels faced by the citizens of Greece, Spain, Portugal, France and Italy a successful Brexit is likely to encourage similar moves by an electorate already disillusioned with failed EU economic policies.

A one-size fits all monetary policy for countries within the Eurozone, alongside a policy of austerity, appears to have benefited Germany at the expense of its economically weaker European partners. It’s quite likely that some of the disillusioned countries will eventually follow the UK lead, leaving a ‘core’ Europe centred around Germany.

That said, such moves might in the longer term lead to faster rates of growth for those countries leaving. For example, it is difficult to argue that the Greek economy could be any worse off if it were to quit the euro and leave the EU.

Such changes naturally present risks and opportunities for long term investors, and again a diversified portfolio seeking out quality assets with a long term horizon would be key to reducing risk while seeking to maximise the benefits of a sound investment policy.

Global perspective

While news of Brexit did unsettle global financial markets, it will probably have a negligible long-term economic impact at a global level. After all, the UK gross domestic product represents only around 2.35% of the global total, according to the Institute of Economic Affairs.

In that respect long term investors can look forward to a continuing world of opportunity.

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. 


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. 


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:


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.”


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

Polar Capital Technology Trust holds SEE

The Polar Capital Technology Trust has a big cap bias and has125 holdings. It has delivered Net Asset Value returns of 234.84% over the past 10 years, with share price growth of 214.19%

Fund Manager Ben Rogoff has 125 holdings in the £788m fund, the top 5 holdings in the £788m fund are: Alphabet (9.4%), Apple (7.3%), Microsoft (6.5%), Facebook (5.4%) and Amazon (2.9%).

However, 7.5% of the fund is invested in small caps, stocks below $1bn. Indeed, he also holds at least one microcap; AIM-listed Seeing Machines, which constitutes 0.1% of his fund. He told me: “We don’t normally invest in companies at this stage of their development. We made an exception for Seeing Machines because we wanted to gain exposure to the automotive safety theme and believe that the company’s Driver Monitoring System (DMS) has great potential, both as an advanced driver assistance system (ADAS) and as a key component in future semi-autonomous vehicles. The company’s size and relative immaturity is reflected in the position size.” 

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.


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.”


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

Seeing Machines gunning for automotive market with spin-off

Seeing Machines (AIM:SEE), the Australian software company specialising in eye-tracking technology using innovative algorithms, looks set for a significant uplift in its share price with confirmation that it is launching a spin-off in the US dedicated to serving the automotive sector by the end of June.

The stated intention is that the company will follow the Mobileye trajectory and eventually IPO in the US, a prospect which is likely to have both institutions and shrewd investors clamouring for shares over the next few months.

Despite recently announcing a maiden interim profit, its share price had been held back by concerns that it would need to raise more funds in order to serve demand for its world-leading technology.

However, in an exclusive interview with Ken Kroeger, CEO of Seeing Machines, he revealed that the company is set to raise between US$50m to US$100m setting up a spin-off that will focus exclusively on the auto industry and develop a new hardware module.

This should produce 3 main benefits:

  1. It will take development costs out of the overall business.
  2. Enable Seeing Machines to move up the value chain by developing hardware (which will be manufactured by a third party). So, instead of getting $10 a car profit, it will be able to get between $25 to $35.
  3. Enable it to work with more Tier 1 suppliers and OEMs.

As part of this Seeing Machines has signed a memorandum of understanding with Takata, that officially ends its exclusivity deal with Takata.

The new company will be called ‘Fovio’ and is expected to be launched by the end of June this year.

Ken Kroeger, CEO of Seeing Machines explained: “It will be a separate, US-based company. It will have about 40 people and take about 35% of the cost out of the parent company. The US company will own 100% of the Australian subsidiary that would house around 40 employees. Seeing Machines, and the current shareholders  will not have to reach into their pockets and write a substantial cheque but will own a substantial portion of that business.”

When pressed as to what “substantial portion” meant, he explained that is how he had to refer to it.

He added: “That business would be completely set up to start its march towards an IPO on the US board, mirroring Mobileye’s journey. It would have a separate board, separate management and we are in the process of recruiting a CEO in the US.”

As to the backers, he revealed: “The investors are at the big end of town (sic), we already have term sheets and they range from automotive OEMs, through the silicon companies into some of the other strategic industrial partners that we want.”

The new module is expected to come to market in late 2018, early 2019.

Until then, Seeing Machines will be continue working with Takata on delivering its software, as Kroeger explained: “The good thing is that we continue working with Takata. It is a new agreement not a divorce, so in the interim we will keep on delivering with Takata.”

Seeing Machines and Takata will be working on another 15 models for the same OEM that it has been working with to deliver a model that will be go into production late this year to be on sale next year. In addition, it is working on another 3-4 requests for quotations expected to happen this year.

That OEM is rumoured to be General Motors and the model that will first use Seeing Machines driver monitoring software, as part of it Supercruise feature, is said to be the Cadillac CT6.

The writer owns shares in Seeing Machines

Crimson Tide issues earnings upgrade

Aim-listed Crimson Tide, issued a very encouraging update today in which it detailed that it expects to beat profit expectations for the year ending 31 December 2015.

It noted: “Profit before tax will be higher than market expectations and significantly higher than for the previous year.”

In addition, analyst Eric Burns at house broker WH Ireland raised his profit forecast for the stock from 2.25p to 3.5p and changed it from a ‘Speculative Buy’ to a ‘Buy’.

The outperformance was due in no small part to the massive win with Tesco that I wrote about on this blog some time ago. (17 September RNS in which Tesco was not named).

In a detailed note out today, Burns confirmed that he expects it to start paying a dividend this year, which coupled with earnings upgrades should lead to a further re-rating of the stock.

He wote: “Forecast risk exists due to the phasing of new customer rollouts (with Tesco being an example of upside risk as it was rolled out faster than anticipated) but recurring revenue is building (65% est of our FY16 revenue forecast) and provided TIDE can continue to build its subscriber base there could be material upside to the shares trading on 12.9x our new FY17 EPS forecast. In our view, the introduction of a dividend in the current year (which we now forecast) will add to the shares’ attractions.”

The EPS for FY16 is estimated at 0.11 putting it on a forward PE of 15.8, dropping to a PE of 12.9 with EPS of 0.22p for 2017.

However, I expect upgrades for 2017 as Tesco and Nestle sign up more users to its subscription-based software as a service.

Just to reiterate, Crimson Tide is a fast growing, profitable, operationally-geared company with great scope for growth. It has no debt and plans to pay a dividend. What’s not to like?

I’d be very surprised if more small cap funds don’t start piling into this very soon. Indeed,  given the illiquid nature of AIM stocks and the fact that the shares are tightly held, this could easily double again in price within 18 months. It is currently around 3.5p to buy.

Of course this is my personal view and not a recommendation to buy. You should do your research before ever investing in a stock and never invest more than you can afford to lose.

The writer holds stock in Crimson Tide.