Take your seat for the ‘Battle of the Titans’

Posted on 8th February 2023 by Admin

Ladies and Gentlemen, please take your seats. The ‘Battle of the Titans’, the heavyweight takeover of the decade, is about to begin. The winner will be the champion of interior vehicle monitoring for the next decade, opening up billions in new revenue streams in vehicles while also preventing accidents. It should also be able to help robots care for us humans long after that.

With the news that Mobileye has been granted non-exclusivity to market SEE technology in the Aftermarket sector, it’s clear that the company (majority owned by Intel) needs SEE’s driver monitoring technology to complement its Advanced Driver Assistance Systems (ADAS). It is now able to offer a one-stop active auto safety solution to its truck and bus customer base (who according to one source currently deploy over 2m vehicles).

I’m even willing to bet that Mobileye wanted exclusivity, but Seeing Machines preferred to play the field, as it possesses the world’s most effective driver monitoring system (DMS).

Now that the dream of fully autonomous vehicles on all our roads has been seen to be just that, a reality that is decades away, DMS has come centre stage. As Colin Barnden, analyst at Semicast, astutely realised a while back: Mobileye needed DMS, the best DMS. And it now has access to it.

With Gen 3 Guardian likely to be available from Q1 of this calendar year, it opens up the possibility of a one-stop solution for Aftermarket being available in H2 of this financial year for millions of existing Mobileye customers as well as millions more truck and bus operators in Europe who aren’t.

As the scale of the market it will capture becomes crystal clear to players (and investors) Seeing Machines’ share price should rise substantially. Explosive growth in its Aftermarket revenues will also be coupled with sizeable Auto contracts and the much-anticipated Aviation deal. Financial analysts (commonly referred to as City scribblers) will then finally start producing broker notes with spiraling upgrades, as Fund Managers pile in. Professional investors can exhibit Fear of Missing Out (FOMO) just like private investors.

What’s the timeline? It’s starting now and will be increasingly apparent with every passing month. Notably, I’m expecting a trading update on the 22nd of February with a US investor show on the 8th March. Not to mention some big contract news between now and June.

Battle of the Titans

It seems my ‘Battle of the Titans‘ prediction is slowly (oh, so slowly) coming to pass.

However, unlike a boxing contest, the battle to acquire Seeing Machines won’t be a 2-person contest with Marquis of Queensbury rules. It’s set to be a bare-knuckle bout involving strategy and multiple bidders, more akin to a contest in an episode of Alice in Borderland. As I see it, there are at least 4 main contenders:

Intel (majority holder in Mobileye).
AMD (owner of Xilinx)
Qualcomm
Nvidia – the dark horse?

However, lurking in the shadows are many more players who must covet the technology that Seeing Machines possesses. Some are subsidiaries of Chinese companies, such as Omnivision, but I doubt that Australia (one of the Five Eyes intelligence alliance) would allow a Chinese company to acquire such sensitive technology which could have military applications. Do the remainder have the financial muscle and nerve to outbid the above chip companies? That remains to be seen.

Once the contest really gets going, I expect one of the three ‘A’s; Apple, Alphabet and Amazon to show their hand. They have the nerve, nous and financial strength to not only outbid the above chip companies but take Seeing Machines technology to the consumer market in a huge way.

I believe that this year is finally going to be fun for holders of Seeing Machines shares. Let the contest commence.

The writer holds stock in Seeing Machines.

Mobileye IPO is positive for Seeing Machines

Posted on 7th December 2021 by Admin

News that Intel plans to float Mobileye for around US$50bn in 2022 is very positive for Seeing Machines in a number of ways.

Intel a possible bidder for Seeing Machines?

Firstly, it would provide Intel with funds to take over Seeing Machines, which is the leading global player in the driver monitoring/occupant monitoring space. Intel would gain additional revenue lines in aviation and other transport verticals. It would also stymie Qualcomm’s strategy of dominating interior sensing within auto.

Even if the acquisition turned out a mixed success for Intel, it could do what is plans to do with Mobileye; IPO it a few years later for multiples of that value. Remember Intel paid $15bn for Mobileye and that acquisition has arguably turned out to be a very mixed blessing.

Presssure on Qualcomm to bid increases

A further positive for Seeing Machines is that the timing of Intel’s move increases the pressure on Qualcomm to make a bid for Seeing Machines, while the former’s hegemony in DMS/OMS is still rumour not fact. By June 2022 multiple wins in auto DMS/OMS will be known to all market participants and Seeing Machines market value will have risen significantly.

By acting soon, on its knowledge of guaranteed wins by Seeing Machines that have not yet been officially signed, Qualcomm could save itself billions and avoid a strategic denouement at the hands of Intel.

Yes, Qualcomm would have to come up with at least US$5bn but that is a relative bargain, given that Seeing Machines profits from fleet, auto and aviation would earn that back by 2030.

The writer holds stock in Seeing Machines

Time to re-rate SEE 2.0

Posted on 24th September 2019 by Admin

Seeing Machines’ (AIM: SEE) full year results indicated strongly that the issues that affected its fleet division are fixed and I expect news flow over the next few months to drive a significant re-rating.

In a note issued yesterday, house broker Cenkos upgraded its price target to 12p. Analyst John-Marc Bunce explained: ‘We believe the turnaround in fleet will drive the company to profitability in under 2 years with the cash runway looking sufficient even before accounting for licensing deals or financing against recurring revenues.”

This was reiterated in a webcast from CEO Paul McGlone today in which he assured investors: “Fleet is fixed and starting to perform”. He added that there were no plans for a dilutive equity fundraise in his 3-year plan. Moreover, an aviation licence deal (expected to happen before year end) would effectively mean the company is funded to profitability.

Fortunately, the new CEO seems to have pressed the reset button and confirmed that over the past 6 months he has made significant changes: “The business is now focused on profitable revenue, we don’t chase strategic business.”

Cenkos has pencilled in a conservative (how I dislike that word) A$47.5m revenue figure for the full year to June 2020, with a pre-tax loss of A$35.9m. Thereafter losses fall in 2021 to A$10.6m and SEE reaches profitability in 2022 (A$47.5m).

I think these estimates will be revised over the course of the coming year, bringing forward breakeven by at least a year.

After so many years of disappointment and failure to deliver against financial targets I think this will be a transformational year for Seeing Machines. It will hinge on these 3 things happening:

Acceleration in the installation of Guardian in fleets and cheaper units produced in H2.
More auto OEM contract wins.
Aviation licence deal by the year end.

Positives

Fortunately, signs look good for all three.

Fleet growth should accelerate further this year as Cenkos confirms: “We believe the guidance for 27k-30k connections at the end of FY2020 is conservative and underpinned by a strong pipeline.” Moreover, the unit costs of Guardian are due to come down significantly from the the second half of this financial year, driving more profit. In addition, McGlone today revealed that SEE is expecting solid growth in the US market.
I’m expecting two existing US customers to extend their existing contracts and Seeing Machines to win two more OEMs in Europe very soon. This is aside from continued progress in Asia over the course of this financial year.
We now know (after the webcast) that Aviation licence deals are coming soon. That will improve the bottom line without involving significant risks and costs.

Lest we forget, there is also a bigger game afoot, as Bunce pointed out in his note:

“… one could argue that Seeing Machines has greater strategic value than Mobileye has as we highlight the ever-increasing importance for reliable face, eye and emotion tracking in the real world for many applications beyond automotive and transportation; from retail, medical, personal robots and personal computing devices. This value would be seen not just but major chip and software platform providers like Intel, but also the world’s tech giants.”

I’d advise all investors to do their own research and the above is my opinion only.

The writer holds stock in Seeing Machines.

Toyota or bid announcement?

Posted on 22nd June 2018 by Admin

The good news for investors in Seeing Machines is that I’m hearing from multiple sources that Seeing Machines is set to win a contract with Toyota next.

Apparently, it’s the only driver monitoring system (DMS) that is being specified in multiple Tier 1 bids – as was the case with the big BMW win recently. If true – and I see no reason to doubt my sources’ information – it just goes to further reinforce the global domination of Seeing Machines’ Fovio DMS in the auto industry.

Bid coming?

For that reason, I’m not surprised that there are now 10 market makers for the company on the London Stock Exchange, up from 4 a year ago. Most recently, Berenberg have started broking them. The better news is that I think this German bank may be acquiring shares for a company that plans to bid for Seeing Machines.

I could be wrong about that last assumption: Berenberg may be buying for a German fund. Nevertheless, various sources are warning of an imminent low ball bid – somewhere around 25p-30p a share for Seeing Machines.

Some of my sources believe it is a Tier 1 auto supplier, others discount that theory. Interestingly, when asked about this in a previous interview back in March, Ken Kroeger did tease: “I agree it is either someone like that who can see the full value or a really diverse Tier 2 or Tier 1, as opposed to the OEM.”

While traders might be impressed by that figure, anyone with any knowledge of the auto industry and even an average understanding of Seeing Machines proven technological global dominance in driver monitoring systems shouldn’t be.

If such a bid should materialise I’ve been told by multiple sources that certain chip manufacturers (Intel/Nvidia, Xilinx and Qualcomm) would most likely be prepared to offer a lot more than a measly 30p. So I fully expect a competitive bidding situation to materialise if the rumour turns out to be fact.

Seeing Machines house brokers haven’t issued any upgrades in a long while. Still, based purely on old figures from Canaccord Genuity’s Caspar Trenchard note of Jan 9, (which excludes any figures for the huge Ford win as well as the big BMW win) it must be worth at least 59p a share. That is 30 times forecast revenues for 2019 of A$79.5m = 59p a share.

You could even argue that SEE should be on a higher multiple, such as the 42 times revenue multiple that Intel paid for Mobileye when it went for US$15.3bn. That would equate to roughly 83p a share for Seeing Machines. (This obviously ignores any value for Fleet, Rail and the Caterpillar business).

Yet, the strategic importance of Seeing Machines to the future of transport (never mind vision for robotics) will have been noted far and wide. In such a situation, I’ve been told that the chip companies are often prepared to pay up without months of haggling over the odd US$1bn. It’s small change to them when global domination is at stake.

Even Apple and Alphabet (parent of Waymo) can surely see the sense in DMS, so for what is petty cash for them they could also come in.

The writer holds shares in Seeing Machines.

Seeing Machines set to win 75% of global DMS market

Posted on 16th May 2018 by Admin

Multiple industry sources are telling me that Seeing Machines’ Fovio technology is so advanced compared to rival systems that it is set to dominate the global auto market for DMS.

This market is growing fast and last year was estimated by ABI Research to be around 65m cars a year by 2020. Although I personally think this figure is now likely to prove an underestimate, given the fact that a driver monitoring system is becoming a standard feature in forthcoming car models. This trend is being driven (I love my puns) by increasing autonomy in cars, higher safety standards and legislation to reduce road deaths caused by driver inattention and drowsiness.

By my calculations, just using the 65m figure for 2020: Fovio will have at least 75% of that. As Seeing Machines (SEE) gets approximately US$25 for each car that uses its Fovio chip it should obtain annual revenues from autos of US$1.2bn.

How can I be so sure of this 75%+ figure?

Ford, Volvo and Audi

Admittedly, it is an estimate. But based on research.

I’m being told that Fovio will soon be contracted to Ford, Volvo and Audi. (That’s in addition to General Motors, Mercedes and BMW). Moreover, those same sources are telling me that by the end of this calendar year Toyota will definitely be committed to using it and, most likely, Honda.

Don’t expect absolute confirmation immediately. When they are eventually announced these contracts will be released as nameless wins, contracts for ‘premium’, ‘mass market’ country-specific OEMs. Seeing Machines will also have to be very conservative about the revenues forecast.

For those who know Seeing Machines as a perennial disappointment, a ‘jam-tomorrow’ stock, I urge them to look again at its growing dominance in the global automotive sector. This dominance in DMS now rivals that of Mobileye in external auto vision.

Fund Manager

If you don’t believe a dumb ‘ol journalist, maybe a super smart fund manager may make you look again at Seeing Machines?

Max Ward, Manager of The Independent Investment Trust, recently took a 4.46% stake in SEE. I wanted to know why and he kindly furnished me with the answer: “What attracted me to the business is the scale of the potential in the automotive division together with the evidence of clear market leadership in the DMS field.”

Previously, SEE successfully flew beneath the radar. This was partly helped by its not having a PR agency in London, the harsh non-disclosure terms prevalent in the auto industry and the fact it was an AIM-listed minnow.

Fortunately, all that hasn’t prevented the global auto industry rushing to knock on its doors as increasing automation and safety concerns have led to tightening regulation, making its Fovio technology a vital ‘must have’ feature in future car models.

Now, at last, Seeing Machines is about to have the spotlight focused directly upon it. For dominance in global DMS makes it a very attractive strategic acquisition for big industry players.

Takeover time

Just as Mobileye was snapped up by Intel for US$15.3bn, Seeing Machines is likely to be bought fairly soon.

Indeed, I believe numerous companies now have Seeing Machines in their sights as a target this year. Who will pull the trigger first, I wonder? Names that have been mentioned to me recently include: Intel, Nvidia, Xilinx, Autoliv and Bosch.

Let the takeover battle begin.

The writer holds stock in Seeing Machines.

Is Seeing Machines a takeover target?

Posted on 17th March 2017 by Admin

Seeing Machines interims yesterday were slightly disappointing in so far as Fleet sales have yet to take off, although they are progressing.

I’m not going to rehash the numbers here, except to say that with nearly A$40m in cash it isn’t in any immediate danger of needing a fundraise to fund the further development of Fovio.

My hope is that the V2 version of Guardian which apparently costs around US$625 vs US$1000, together with Mix Telematics’ product incorporating the integrated SEE system should boost Fleet sales. I anticipate both will be ready within 3-6 months.

Still, I could be wrong about the timeframes and therein lies the risk. Although the spending on Fovio is capable of being scaled back SEE is trying to grab OEM automotive market share in the hottest sector of the automotive market. The funding to cover this is intended to come from Fleet and Mining sales.

Only if Fleet doesn’t scale up and make a substantial contribution, might SEE require a further fundraise before it reaches profitability — unless it chose to scale back spending on Fovio.

That said, I don’t expect this will happen. I believe that an imminent deal with Progress Rail, along the lines of the it struck with Caterpillar should provide short term funding to avoid even the slight risk that they might need to raise more money further down the line, before it becomes profitable.

That a deal with Progress is close at hand was confirmed in the interim statement yesterday, when SEE stated: “The company is in final negotiation stage for a global agreement with Progress Rail. We expect an agreement to be in place during 2017.”

Lorne Daniels

Analyst Lorne Daniels, in a note issued yesterday from house broker finnCap, reduced his sales estimates for Financial Year (FY) 2017 to A$13.4m with a pre-tax loss of A$33m, with estimated sales of A$52m for FY2018 and a pre-tax loss of A$17.3m. Only in FY 2019 is SEE forecast to deliver a pre-tax profit of A$2.8m on sales of A$117.8m.

I’d urge caution on the numbers as there are a lot of unknowns, but the direction of travel is clear.

More importantly, I think investors need to appreciate the bigger picture here, as Lorne Daniels eloquently stated:

“The struggle with Fleet sales is disappointing but solvable and should not detract from the overall focus on the goal Seeing Machines is working towards. While new competitors like Tobii, SmartEye and EyeTech are seeking entry to the market, Seeing Machines remains well ahead in terms of product development, routes to market, experience and proof of success in the field; already deployed in thousands of mining vehicles where its rivals can point to no real-world use at all. Seeing Machines is deliberately investing heavily to capitalise on its leadership by deploying its cheap and easy to adopt SiP solution. This will entrench its market leadership across a wide range of operator monitoring markets but primarily that huge automotive market.”

Nevertheless, as SEE’s share price languishes at a pitiful 3.5p, despite all the progress made in a variety of end markets, the company is easy prey for a speculative offer.

Indeed, given the recent purchase of Mobileye for $15bn by Intel, you have to wonder how long it will be before one of the big players (perhaps Google, Apple?) will make Seeing Machines an offer they can’t refuse.

Lorne Daniel estimates that applying the 42x sales multiple (on which the Intel bid for Mobileye was based) to Seeing Machines’ 2017 sales forecast provides a valuation of A$563m (£353m) or 24p a share.

I’m sure that would satisfy many private investors frustrated at the current share price. And yet…apply that to the projected sales for only one year later in 2018 and you end up with A$2184m (£1,370m) or 92p a share.

In my view, a little more patience is required while realising that investing isn’t risk free.