Seeing Machines delivering on long-term strategy

In an exclusive interview with Seeing Machines interim Chief Executive Ken Kroeger, he has confirmed that the company remains on track to hit its first half financial targets and is making no adjustments to its full year figures.

Following the departure of former chief executive Mike McAuliffe, who had only been in place a few months, private investors have been concerned as to whether there was likely to be any strategic change of direction. Happily, as Ken Kroeger confirmed: “The strategy that we’re executing is exactly the same one that we were executing when he arrived. Moreover, the executive team that is delivering that strategy remains the same.”

It’s a point that was well made by Lorne Daniel, analyst at house broker FinnCap a week ago, when he wrote: “We know that the second tier of management in this business is particularly strong and will continue to follow the strategy and deliver on the milestones as expected.”

The business certainly seems to be making steady progress across fleet, auto and aviation and Kroeger stressed the efforts of the executive team in having built them up. “These are businesses that didn’t even exist a few year ago and Paul Angelatos (Fleet), Nick Di Fiore (automotive) and Pat Nolan (Aviation) have done a great job in creating and building these markets for Seeing Machines.”

Auto industry

Not only is Seeing Machines working with GM to deliver driver monitoring systems for its cars (most notably the Cadillac CT6 whose Supercruise system uses it), but on October 30, 2017 its Fovio Driver Monitoring System was chosen by a premium German OEM (who I believe to be Mercedes).

Kroeger wouldn’t comment on who the German OEM is but did confirm: “It is extensively pushing the boundaries in driver monitoring, taking it to a whole new level. That is underway. That is a real state of the art delivery, very technically challenging but it sets a completely new performance standard for DMS.”

Given recent bulletin board discussions as to the respective merits of Seeing Machines technology vs. SmartEye, Kroeger was happy to explain: “We have the best technology, there is no doubt about that at all. SmartEye has an okay technology, which is cheaper…we’re much better positioned to take the premium car models that are interested in performance, who need this to work because it is a safety critical feature. For models that are being rolled out where it is nice to have comfort features in the car, which only require rudimentary head and eye-tracking, SmartEye is a viable option.

He added: “Right now we definitely have a leadership position from a technical perspective. That is very much respected by the auto OEMs.”

In addition, I’m optimistic that other OEMs will select Seeing Machines DMS technology, doubtless driven by the NCAP requirement for any car model wishing to have a 5 star safety rating from 2020 to have a DMS in place.

In Japan strong market opportunities are being helped by the effort of Kevin Tanaka working out of the West Coast in the US. Also Kroeger confirmed: “There is a very strong alignment with Xilinx in Japan, who are doing a lot of our on the ground marketing for us. It is definitely getting well received by the Japanese.”

Fleet

While a comprehensive Fleet update is due this week that should provide much awaited news on further wins, Kroeger did reveal that the Guardian 2.0 device will start shipping by the end of March. The upgraded system is significantly cheaper to manufacture, smaller and easier to install, which should also help increase penetration rates.

Takeover

Given the much higher profile of Seeing Machines since the launch of the Cadillac CT6 and the most recent CES show, where it was showcased by both Bosch and Autoliv speculation is increasing daily over whether it is being tracked for takeover, whether by a Tier 1, a telematics company, or even Google or Apple.

Asked about this Kroeger coyly replied: “There is always interest. We would never say ‘no’ to a conversation but we also recognise that there will a time when the time is right to return the best value to shareholders. We’re very cautious about the conversations we do have and, if we were to contemplate selling the company, we would have to find somebody who valued the entire organisation to obtain the full value for it.”

When pressed further about Google, Apple or Amazon seeing the long term value in Seeing Machines technology, which has applications far beyond transport alone, given it can enable robots to see and perhaps eventually even empathise with humans, Ken Kroeger commented: “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. The Tier 1s sell to the OEMs but some of the Tier 2s which sell to the Tier 1s are exceptionally diverse. They might be building stuff for automotive, stuff for aviation and stuff for medical devices, stuff for consumer electronics. They might not just be an automotive-centric supplier. They are really hard to find and pinpoint but they are out there because they are always talking to us.

Of the partners that Seeing Machines currently has some are definite possibles. “Or, it could be someone who sells image processors and wants to start packaging it with software already on it on a smart camera or smart sensor,” teased Kroeger.

Despite being a world leader in DMS tech, a key plank in the forthcoming generation of semi-autonomous cars and increasingly being considered in trains, planes, trams and buses, it’s current share price languishes at approximately 5.5p. This valuation anomaly cannot last much longer, especially as with the recent fundraise it has been largely de-risked as an investment provided sales continues.

Ironically, such a deeply discounted valuation could well be the catalyst for an opportunistic bid from a cash-rich global player before the year end.

The writer holds stock in Seeing Machines.

Seeing Machines secures premium German car manufacturer

Seeing Machines (AIM: SEE) has today announced that it has won a contract with a premium German auto manufacturer in conjunction with a major Tier 1 auto manufacturer.

This is a further striking endorsement of its Fovio Driver Monitoring technology, which is already in the new Cadillac CT6’s Supercruise feature – the car was launched by General Motors this autumn in the US.

The awarded models are scheduled for mass production in 2020. My own guess is the manufacture is probably Mercedes. If it is, the tech is likely to debut in its top of the range S series, which is scheduled for a relaunch in 2020.

Motoroids wrote an interesting article about the Mercedes S Class 2020/21 a few months back.

However, it could equally well be Volkswagen with whom Seeing Machines have been working — they exhibited together at CES in 2017,  or even BMW as there is some evidence to suggest Seeing Machines have been working with them.

What is more important than the actual name of the manufacturer is how much money it is likely to bring into this very undervalued small cap tech play in one of technologies hottest sectors; semi and fully autonomous driving.

This is what Seeing Machines had to say: “According to previously given guidelines, this may be considered a Medium value program (from A$10M-A$25M revenue) based on the initial included models and lifetime volume projections, with the potential to become a Large value program in time (>A$25M revenue).  It is worth noting that volume projections can change materially, up or down, and as is typical in automotive industry contracts, there are no guarantees beyond engineering milestone payments.”

For me, this contract from another of the world’s leading car companies establishes that the Fovio Driving Monitoring system is best in class. Moreover, given the contract could be worth as much as 50% of Seeing Machines current market cap, it looks very undervalued.

Certainly, Seeing Machines seems very confident, as  Nick DiFiore, General Manager of Automotive at Seeing Machines, commented: “We are proud to be awarded this benchmark DMS program from both an OEM and Tier 1 with state-of-the art requirements.  Their confidence in us is a testament to the leading-edge nature of our FOVIO DMS technology, which is the culmination of years of innovative development and hard-earned Automotive application expertise by our team.  We look forward to delivering this leading-edge DMS program and further delivering our new FOVIO platform products to our growing Automotive customer base worldwide.”

Lorne Daniels, analyst with house broker FinnCap, believes that Seeing Machines is now the “go-to supplier for DMS in automotive”.

In a note published today, Daniels wrote: “Euro NCAP’s recent announcement mandating DMS as a key criterion for vehicle safety has sharpened the timeline and focus for OEMs; it takes years to design a model and if they want a 5-star rating after 2020 they will need to integrate a good DMS. Fovio is proven, reliable and quite literally, already on the road; a natural choice for the global automotive industry.”

The writer holds stock in Seeing Machines.