React cleans up after Covid-19

In an exclusive interview with Safestocks, Shaun Doak CEO of AIM minnow React (AIM:REAT) reveals that this specialist cleaning and decontamination company has benefitted from the high demand for its decontamination and infection control services to eliminate the virus responsible for the coronavirus.

Currently, React is carrying out Covid-19 decontamination clean-ups from everything from police vehicles to offices to manufacturing plants. “I can’t give you much detail, because it’s commercially sensitive IP, however the way we carry out our decontaminations is lot more thorough than many of our competitors, that is for sure. We do ‘before’ and ‘after’ testing to ensure we have decontaminated property to a high standard and certify swabbed areas are clear from traces of the virusWe use the correct chemicals and equip our operators beyond the standards required to ensure their health & safety. We set ourselves apart by doing things the right way.”

He continues: “Just to give you a little flavour of that, we do a lot of Covid-19 decontaminations that have already been decontaminated, allegedly, 2-3 days before. But they haven’t been done properly. The ATP-testing we apply hasn’t been done, which we do in order to certify the property as clear.

Not only have its 90 staff been working flat out to meet demand for its specialist decontamination services but he also foresees that this pandemic may alter the mindset of people as to the importance of regular deep cleaning. “We’ve all worked in offices that have never experienced a deep clean but I think that moving forwards things may be very different. I think it has to be.”

“Once lockdown is relaxed I think there will be an increased sensitivity towards hygiene in the workplace.  More specifically, there will likely be pushback from employees that won’t readily wish to go back to their place of work until the premises have been decontaminated. That may not necessarily be a Covid-19 decontamination, it may be just a deep clean. However, any incidents of property being exposed to the virus will be dealt with rapidly until such time that COVID-19 no longer remains a threat. That is certainly some of the information I am receiving from customers out there, anyway.”

Indeed, just as London bus drivers have hit out at lack of protection and are demanding that their buses are properly deep cleaned, it would be surprising if employees (especially unionised ones) across the whole of the UK don’t want to ensure premises are safe before returning to work after the lockdown. Indeed, I believe employers will wish to eliminate the risks to their employees, visitors and the business of repeat infections as a result of contaminated property.

For its part, React provides its employees the best PPE equipment available and certainly to a higher standard than your average deep cleaner, as Doak explains. “When Covid-19 reared its ugly head, people who were working on contract work for us, including  hospital work and rail sector, we went above and  beyond Public Health England and the World Health Organisation requirements to protect our staff. The reason I did that was firstly, I have a background in construction and place a heavy focus on health and safety. Secondly, we are only as good as the staff out there carrying out their job. As a brand we have a strong reputation for the excellent standard of work carried out by our staff. The last thing I wanted to do was to risk exposing them to danger in any shape or form.”

React goes after difficult work with decent margins and therefore its employees are also paid well, which certainly seems fair and makes for a well-motivated workforce. “We pay our specialist operatives well, a lot higher than most would appreciate, but we appreciate what they do is unpleasant stuff that no one else wants to do.

Beyond Covid-19

Doak is at pains to stress that React is not just a provider of Covid-19 decontamination services. “We are not just a Covid-19 clean-up company, we are a specialist deep cleaner. I believe the best out there.”

“We carry out specialist cleaning and decontamination work that other companies just don’t want to, or aren’t qualified to do. Because of that our customers value what we do and pay us appropriately. Likewise, we pay our staff well and appropriate for the specialist work they carry out.”

Thus, it gets involved in everything from deep cleaning within the healthcare sector, hospital trusts, cleaning up after road traffic accidents, picnic sites after a bank holiday, huge fly tips by the side of the road, drug dens knee-deep in needles, flea invested properties as well as train fatality clean ups for the majority of train companies. All of this takes place right across England, Scotland and Wales using its partnership/sub-contractor network.

It is also important to appreciate that the React business is divided into 2 parts: of approximately equal size of revenues; reactive cleaning services – which is supporting the deep cleaning requirements; and regular maintenance services.

What has become clear with the £500k contract in the rail sector that was won in January is that React is now able to leverage relationships that it has built up, to be a one-stop shop for a variety of complex cleaning jobs, a sort of facilities management house for specialist cleaning services. 

I therefore believe that the increase in demand for its services isn’t just a flash in the pan and that it is set to be profitable from here on in — something of a rarity for a growth stock.

This company is flying beneath the radar of most investors, both because of its tiny £3m market cap and the lack of forecasts in the market. That said, it is expected to be profitable at the interims and for the full year. As it said in a Trading Update RNS published on April 6th: “At the start of the financial year, which runs to 30 September 2020, management expectations had been for the business to move into profitability after reporting annual losses for the last four-years.  Recent trading, notably in March, has been ahead of management expectations and as result the Group is likely to have delivered a small operating profit in the six months to 31 March 2020, which puts the Group in a good position to meet or exceed management expectations for the full year.”

Another positive is that aside from CEO Shaun Doak, who appears to be doing a fine job selling the services of the company with some big contract wins recently, there appears to be a surprising amount of in-depth management expertise within this micro-cap. These include a new Financial Director and a new Operations Manager. 

In summary, React is much more than a Covid-19 play and I believe the business will continue to grow profitably. As it does, the share price should appreciate substantially. Indeed, in time, I’d hope to see a dividend.

The writer holds stock in React.

Coronavirus mania is overdone

Can I be the only person who thinks the state-encouraged Coronavirus panic is overdone to an absurd degree?

Before you label me a ‘nut job’, deep clean your computer and order a few more face masks, please hear me out.

I admit Coronavirus exists. I admit it is fairly virulent and does kill people just as flu does. However, it is not nearly as deadly as the ebola virusAccording to the World Health Organisation (WHO) the average ebola virus disease case mortality rate is around 50%. Case fatality rates have varied from 25% to 90% in past outbreaks.

With Corona virus the mortality rate is only around 1%. It does not appear to kill people who aren’t already suffering from underlying health conditions. Generally, people who are older than 60, or have a weakened immune system or chronic illnesses like lung disease, heart disease or diabetes, have the highest risk of becoming severely ill if they contract the coronavirus or the flu.

Flu kills more

One crucial factrshould not be forgotten; the numbers who are dying from it appear to be far less than die from seasonal flu each year.

According to the WHO across the globe up to 650,000 people die from respiratory diseases linked to seasonal flu each year. So far, approximately 13,600 have died from Coronavirus worldwide. (While every death is regrettable we need to keep a sense of proportion).

Public Health England estimates that on average 17,000 people have died from the flu in England annually between 2014/15 and 2018/19. However, the yearly deaths vary widely, from a high of 28,330 in 2014/15 to a low of 1,692 in 2018/19.

Those who are still terrified should ask themselves: do I personally know anyone who has died from the coronavirus? 

So why the utter panic in the West? Why the shutting down of everyday life in the UK?

Boris using coronavirus

I personally think that there are multiple reasons in the UK:

Firstly, this Government doesn’t want to be seen not to be taking the threat seriously. It certainly doesn’t want to be blamed for austerity-related lack of NHS resources (nurses, hospital beds, respirators) to cope with the extra strain put on an underfunded health service.

Secondly, the economy both here, (as in the US and EU) was in trouble before coronavirus. The Government would most likely have had to create billions of pounds to support the economy in the months ahead and stave off a deflationary spiral. The coronavirus has hastened that process. Moreover, it offers a perfect opportunity to kill 2 birds with a big bazooka of money. If the result is economic growth and inflation that shrinks our already debt burden, that is a perfect outcome.

Boris Johnson has cleverly decided to turn what could have been a PR disaster (public at risk from underfunded NHS, pollution and inadequate social care for the elderly) into an opportunity. He is using this pandemic scare and the fears of the population to try to unite a divided country, bail out failing businesses and a weak economy and secure the mantle of Churchill, something he has long craved.

Now I’m not saying that Coronavirus isn’t real. What I am saying that the health emergency we face is a direct result of underfunding of the National Health Service. Also, the economy and stock market was likely to crash very soon anyway, Coronavirus just acted as a catalyst to hasten the process.

Of course, most of the mainstream media is happy to go along with this charade. Just as they failed to acknowledge how weak the UK economy was before Coronavirus occurred, they want the British public to act herd-like and follow the current orthodoxy.

Soon, we’ll read in our press and the  BBC and ITV how Boris saved the country from Coronavirus with his extreme measures and rescued the economy. Readers, you need to dig a little deeper and understand how you are being manipulated.

Be in no doubt, there will be a reckoning. When the UK public wakes up and realises it has been had, it won’t be happy. Then again, aided by the servile and unquestioning British media Boris Johnson may very well get away with it. At least until some historian comes to examine the facts many years from now.

React should benefit from coronavirus concerns

With today’s announcement by Prime Minister Boris Johnson that the spread of coronavirus in the UK “will get worse before it gets better” the impact of this global pandemic is starting to be felt here in the UK.

As the number of infected people hits 40, businesses are losing contracts, the stock market is falling, schools are closing and there is a general air of unease as the Government attempts to stop the spread of this virus.

Yet, it isn’t all doom and gloom, particularly for savvy investors.

Golden opportunity

For those seeking a hitherto overlooked stock that can benefit from measures to prevent the spread of Coronavirus, yet offers downside protection when the virus is eventually subdued, React could provide a golden opportunity.

Although this specialist cleaning company has almost tripled in price since first tipped here last year, the impact of the coronavirus means that its specialist deep cleaning services to eradicate infection in schools, hospitals, businesses and public transport will be very much in demand. For example, it has been reported that 15 schools have closed, all of which are likely to require deep cleaning.

The quality of React’s deep cleaning was recognised as recently as February when it was awarded a £121k contract to deep clean a prestigious health sector site in central London over a 7-month period. It also is experienced in maintaining high standards of hospital hygiene.

Admittedly, there isn’t even a broker note on the company but it is backed by two big funds, Helium Rising Stars (23.74%) and Octopus Investments (18.52).

Turnover for the year ended 30 September 2019 was £3.10m (2018: £3.30m) as unprofitable work was discontinued. Gross margins were 750-basis points higher at 28.5% (2018: 21.0%) and operating performance has materially improved to a loss of £183,000 (2018: loss of £1,951,000).

Investors should note that it is fairly illiquid, so that even slight buying/selling can move the price significantly.

At only 0.8p at the time of writing, React is definitely worth some deep research.

The writer holds stock in React.

Winner Wameja overlooked in market meltdown

Finally, the market is starting to wake up to the fact that stock markets are over-valued. It could be said that the Emperor (I have this crazy image of Donald Trump in  my mind) has sneezed and people can finally see he is sick and stark naked. Unfortunately, even when the Coronavirus scare is over he will still be naked, whatever he does with those golden locks of his.

What should investors do? Hold their nerve and go for value, not stocks pumped up on false expectations. A competent, trustworthy management is also key.

Wameja overlooked

One of the companies I’m keenest on is Wameja. Under the skilled management of John Conoley it has made the transition to a fintech in the lucrative payments space. It has a 35.68% stake in a global platform called Homesend, which is used by Mastercard under the name ‘Mastercard Send’ as a cross-border payments platform.

This platform is used by Paypal and Bank of America, as well as dozens of other banks in a multi-trillion dollar market. Volumes are starting to ramp up as is clear from the latest set of Key Performance Indicators.

Lorne Daniel, Director of Research at house broker FinnCap, has previously written how it is has effectively been de-risked as an investment. In his latest note, published today, he writes: “We continue to see this business as hugely valuable to Mastercard. Its recent Q4 results revealed that cross-border volumes were up 16%, continuing a trend of mid-teen% growth, and representing revenue of $1.4bn (of a $4.4bn total). In an analyst call, Mastercard management said it sees double-digit cross-border growth across most of its regions. And had “good, solid, steady performance” coming out of the US. In Middle East, Africa, and Asia Pacific it continues to see solid growth. It also noted Bank of America will now use Mastercard Send – based on HomeSend – for their business to consumer card disbursements in the US on an exclusive basis.”

He then concludes: “Cross border remains a key area of growth for the US financials giant. Mastercard shares currently trade on a multiple of 28x 2022E earnings. Wameja’s share of the HS earnings in that year would be €3.6m, valuing that stake on simply financial benefit at over €100m or £85m. Beyond that, there is the value of full control over a key element of its digital money strategy as well as greater confidentiality (since Wameja’s public listing somewhat exposes HS performance). We remain confident that Mastercard will bid a substantial sum for that stake, whether or not it is the final buyer.”

In spite of volatile markets  I expect this to be bought this year for at least Lorne’s Daniel’s price target of 20p, perhaps significantly higher.

Of course, I could be wrong so any investor should do their own research.

The writer holds stock in Wameja.

The bad, the good and the ugly

Seeing Machines put out a half year trading update yesterday that for entertainment value rivalled a Spaghetti Western. All that was lacking was a thumping soundtrack by Ennio Morricone, though many investors’ racing hearts would have supplied that as they read the announcement and accompanying broker note.

Certainly, the update was a slight disappointment, albeit a massive improvement on the first half a year earlier.

The Bad

Although the company’s guidance for the full year to June 30th 2020 remains unchanged, house broker Cenkos (in a note littered with errors – see page 3) took the opportunity to downgrade revenue projections, increase losses, indicate that SEE could need cash by end of financial year 2021, all while lowering its valuation to 11.4p from 12.1p. No wonder the price dropped!

Here are the changes for the current financial year:

  • Estimated revenues for financial year 2020 reduced from A$47.5m to A$45.5m.
  • Adjusted pre-tax loss increased to A$39.2m from A$35.9m

In FY 2021, according to Jean-Marc Bunce’s own figures this leads to a funding shortfall of A$4.4m.

The concern in investors minds must therefore be how might SEE deal with this if these figures turn out to be accurate? It’s certainly worth keeping an eye on.

The good

Still, both SEE and Cenkos hint that it may be a problem that will soon find a solution. After all, Seeing Machines “remains in advance (sic) discussions with parties for a licensing deal” say Cenkos, quoting Paul McGlone. It assumed that this is for aviation and cranes/ferries but may also be for gaming via Qualcomm.

There are also long overdue OEM auto deals that haven’t yet been announced that I believe SEE has won as well as many more due this year. For example, I’m in the camp that believes SEE have already won Volvo and I am hoping that Veoneer will announce a win its forthcoming quarterly update.

Thus, while panicked investors and canny traders have recently been selling, an announcement on a material deal that puts to bed funding concerns will see a huge and immediate rise in the share price. That is surely why Volantis 1798 have been buying up shares as weak hands let go. They are big and active investors and seek to make huge gains. I expect them to continue buying up to 19.99% and obtain a boardroom seat.

I am sure that they, like me, believe See is fundamentally undervalued and potentially worth billions. Those who doubt this statement need to do more research and then decide for themselves. In the words of Warren Buffett: “Price is what you pay; value is what you get.”

The ugly

I don’t believe Paul McGone would risk his reputation saying deals are expected if they weren’t coming. He has already lost some credibility with the delay over the ‘imminent’ Aviation licensing deal. As a result he can’t be said yet to be ‘walking the walk’, although fleet does seem to be largely fixed. If SEE fails to close the Aviation deal and announce some OEM wins in the next 3 months, he’ll be looking as if he is walking like Max Wall (watch from 3m 50secs). The best option then might be to follow in the footsteps of previous management and say, ‘Auf Wiedersehen’.

What annoys me is the lack of transparency as per the fleet 20k installations saga.  I also don’t like the underplaying of contract sizes and Seeing Machines’ likely share of the automotive market. Yet, stealth has its advantages when your share price makes you vulnerable to a low-ball bid. 

The writer holds stock in Seeing Machines

Seeing Machines storms CES

All the news coming out of CES is very positive for Seeing Machines and I’m more confident than ever that it’s on target to take 75% of the global DMS market over the next few years. (Naturally, Seeing Machines itself and its broker Cenkos prefer to state a target of 30-40% publicly).

The tie-up with Qualcomm was probably the highlight of the show for me and it’s great to hear that they’re both working with a “global premium automaker”. It has been suggested it is a new OEM, if it is I assume a more detailed RNS will eventually be published.

Yet the partnership with Qualcomm, apparently at the latter’s instigation, may also be much more significant than many realise. It opens the possibility of marrying industry leading eye-tracking with chips that can go inside mobile devices and VR/AR headsets. It is potentially a huge opportunity and some speculate that a lucrative licence deal is possible for Seeing Machines. (If so, let’s hope it arrives sooner than the “imminent” Aviation licencing deal that we are still waiting for!).

Further out, robots/cars should soon be capable of displaying empathy using eye-tracking that can also interpret cognitive load/read facial gestures.

With EU safety legislation now law, and other countries set to follow Europe’s lead, the near-term future is increasingly bright for SEE. Indeed, this is a company that should be worth billions right now.

Volvo

Strangely, though, there has been silence re. Volvo. My industry contacts tell me it has finally decided who will be supplying its DMS and I’m pretty confident it will be Seeing Machines as it’s the only system that can accurately tell if a driver is incapacitated – a feature teased by Volvo in early 2019.

I expect it will first feature in the 2021/22 Volvo XC90 but Volvo are staying tight lipped as are Seeing Machines and the likely Tier 1, Bosch.

While the share price has been motoring, the next trading update (expected in a week or so) should provide further proof that fleet is set to comfortably beat full-year estimates.

This is a stock on the move and I’m increasingly confident that a huge re-rating is just a matter of weeks away.

The writer holds stock in Seeing Machines.

Resistance isn’t futile: it is crucial

As I watched this historic victory for the Conservative party unfold, I felt a mixture of emotions: disbelief, incredulity and anger, soon overcome by a wave of despondency. Sitting here in a cold dimly lit room in the early hours it was easy to become hopeless, imagining oneself alone and in minority.

Yet, despite romping home with a thumping Parliamentary majority the Tories don’t have a majority of the electorate. They were backed by a minority of electors across the UK (43.6%). They won in England and Wales because of our first-past the-post election system. A majority of the country still oppose their policies. That point should be remembered.

The platform the Labour Party stood on was a progressive one that made sense and seems to have been well received. However, its changed Brexit stance was unpopular in its northern heartlands. 

What have we learnt?

My initial takeaways from this are the following:

  • This ‘Brexit’ election was a freak and those in Labour heartlands who voted Tory this time around will regret their actions when they realise they’ve been conned by Boris Johnson, one of smartest, most deceitful politicians in British electoral history. (Disraeli, eat your heart out).
  • The Labour right wing will try and reverse the progressive moves made under Corbyn. This must be resisted. Labour didn’t lose because its social, economic and climate change policies were unpopular. It lost because a large chunk of voters in its traditional heartlands in England & Wales didn’t like its Brexit stance.
  • Scotland has spoken out as clearly as England & Wales: it wants the SNP and to have an independence referendum. That has to be respected. All progressive people should support this wish as Boris Johnson will try and avoid doing so. Indeed supporting the right of Scotland to have a democratic independence referendum is a touchstone for every progressive. Scottish resistance in the event of the Tories refusing to allow an Independence Referendum should be fully supported.
  • We must change the electoral system to some form of Proportional Representation, as the current system isn’t fair. I’d be saying that even if Labour had won a majority.
  • Re. climate change, I doubt Boris Johnson will do what needs to be done. Time is short, so mass civil peaceful disobedience has to be one means to push for change in the future. Again, progressives should fully support these actions.
  • We need to develop our own media to communicate progressive ideas to the masses. BBCNews and the mainstream media is effectively controlled by the establishment. It was able to effectively influence this election.

Remain is now dead for England, Wales and Northern Ireland. That has to be accepted. But resistance to the policies that penalise the poor, increase division and racism in our society should be resolutely opposed.

This morning Labour is down as are the Greens and Lib Dems, but never out. Millions are relying on Jeremy Corbyn and his successor to continue to resist the forces of oppression and neo-liberal economic policies as they fight against climate change.

Resistance isn’t futile, it’s crucial if we are to get progressive change. That’s what enabled people to win the vote from the grasping hands of the establishment.

This is a battle lost but the fight for a fairer, more environmentally-friendly world must continue if we are to win the war.

Jeremy Corbyn

I am sure Jeremy Corbyn knows that much better than me.

Personally, I’d like to say thank you to him for staying the course and putting up with an unprecedented vilification campaign. He’s the reason I rejoined the Labour Party after disillusionment over the the Iraq War. He is a wise man.

Remember, resistance isn’t futile: it is crucial. We must keep fighting for what we know to be right. 

Good luck.

Investors express annoyance with Seeing Machines

Following my last blog, institutional investors have fired a shot across the boughs of management by voting against the remuneration package of CEO Paul McGlone.

Approximately 31% of votes cast were against his ‘Termination Benefits’ package, which had rather soft targets. Still, if good news isn’t forthcoming in the very near future I think he may be glad to have got them in the bag.

In my experience if several IIs are prepared to publicly vote against such a package, many more would have been annoyed by the CEO getting a bonus before delivering the goods.

Fleet fixed

Speaking of deliveries, I firmly believe that fleet is fixed and upwards of 20,000 Guardian units have been installed worldwide. However, the company insists on not releasing this material information to all investors – though it was inadvertently leaked by a distributor in Chile.

Instead, like a tired politician, they are chanting the mantra of “Let’s get the interims done,” while bandying about a 16k figure that is 5 months old, as if it has any meaning.

Worse, the information on the distributor’s website has been doctored in a rather rough and ready way. It now reads (in translation): “Guardian saves lives in more than 24 countries in the world, monitoring more than 20,000 vehicles in mining and commercial fleet vehicles.”

So all of a sudden we’re supposed to believe no new Guardian units have been installed in 5 months? Also that fleet and CAT are no longer split? It’s the worse cover up since Boris Johnson insisted that the NHS is safe in his hands. 

I appreciate management want to surprise investors with good news but if price sensitive it needs to come out in a timely manner. How about a pre-Xmas trading update? Consider it a stocking filler to your long-suffering investors – who’ve just awarded the CEO the biggest present of his life.

As an aside, it’s worth remembering that institutional investors, being a little old fashioned, really do value integrity and openness. For example, they’d be annoyed if the company held back news on say, a new Tier 1 distributor, if it was deemed material.

The writer still holds shares in Seeing Machines.

Seeing Machines to surprise on upside

I spoke with 2 fund managers last week about Seeing Machines. I won’t reveal their names here but what they said reinforced my opinion that the revelation that fleet is well and truly fixed, coupled with proof that breakeven is imminent (when the Aviation licensing deal is signed), will really move the share price in the very near future.

The first fund manager knew and liked Seeing Machines but, because he runs a large fund, can’t invest in companies below a £200m market cap. 

The second fund manager used to hold Seeing Machines but sold because it appeared to have too many issues and there was no sign of breakeven. 

Their views are probably replicated ten times over with other fund managers, which means that there is a large weight of money ready and willing to come into SEE once it effectively communicates the fact that fleet is fixed and breakeven is coming very soon.

Admittedly, there must also be holders who have lost patience, particularly as the company appears to be in no rush to provide detailed updates on the progress on Fleet. I’m personally tired of hearing the figure of 16,000 fleet installations given out for months on end.

Fleet

My own view, as revealed at the CMD, is that Fleet installations must be at least 20,000 right now. It’s therefore great to discover that this figure appears to be correct, since it has been published on the website of Seeing Machines’ Latin American distributor in Chile. It has on its homepage the words: “Guardian salva vidas en mas de 30 paises del mundo monitoreando mas de 20.000 vehiculos en tiempo real.” Translated into english it means: “Guardian saves lives in more than 30 countries in the world by monitoring more than 20,000 vehicles in real time.”

Screen Shot 2019-11-21 at 13.58.00

Given this is the case, why isn’t Seeing Machines communicating this to investors and the wider market? Moreover, why isn’t Cenkos upgrading its projections?

Instead, the market is still being provided with the laughable estimate from Cenkos that fleet will only deliver revenue of A$20.9m for the full year 2020, based on uber conservative numbers that are even below Seeing Machines unrealistically low estimate of 27k-30k installations.

This is what Cenkos wrote in its note of 23 September, 2019 “….our Fleet connection forecasts are based on connections below the guidance of 27k-30k”.

One might reasonably ask for these projections to be updated. Still the questions remains, why haven’t they been updated? Okay, Cenkos is the house broker and is pretty dependent on Seeing Machines for a steer, so why haven’t they had it?

Reading an old blog post on Safestocks, I was reminded how management priorities differ from those of private investors.

There is an additional reason, I believe. Naturally, a prudent new CEO wants to have something up their sleeve to impress the market. Let’s not forget that Seeing Machines has disappointed investors many times over the past 5 years. The onus really is on him to deliver and keep on delivering.

The good news is that I think that is what is in store for investors in Seeing Machines. In short I expect fleet upgrades by the interims (at the latest) and then again for the finals.  Forget estimates of 27k-30k fleet units for this financial year, backed by uber conservative figures from Cenkos. The actual figures for installations should be nearer the 35k mark, which will blow away the existing estimates.

In addition, I expect such upgrades to be preceded by an RNS announcing an aviation licensing deal with with L3 Harris and/or CAE, that provides an upfront payment and ongoing royalties. If it lives up to the billing from Paul McGlone in a recent interview I expect it to bring forward breakeven from the end of calendar year 2021 to June 2020 this financial year.

That news, when eventually delivered, will cause a huge re-rating as IIs, who’ve lost interest or sat on the sidelines, jump into this stock.

For long suffering investors in Seeing Machines vindication is close at hand.

The writer holds stock in Seeing Machines.

The Pretenders are dead, long live the King of DMS

At yesterday’s Capital Markets Day for Seeing Machines it was standing room only, as Colin Barden an independent analyst at Semicast Research presented the news that investors in Seeing Machines have long waited to hear: though the coronation has been delayed, it will be the King of DMS.

It was hard news for rivals but, in one slide, Barnden presented his projections for the market shares come 2022. He estimates 40-45% for Seeing Machines, followed by 15-20% for Mitsubishi Electric. All other rivals are left lagging far, far behind, with Smart Eye in particular estimated at 5-7%.

That said, I saw no evidence of complacency from the Seeing Machines staff, quite the reverse. McGlone, in particular, came across as a man determined to deliver profitable growth. He certainly doesn’t look like the sort of guy who will let a rival eat his lunch.

Paul McGlone, CEO, Seeing Machines

Paul McGlone, CEO, Seeing Machines

The growing interest in its DMS technology was clear from the host of analysts I met at the event: Sanjay Jha of Panmure Gordon, Lorne Daniel at FinnCap, Caspar Trenchard at Canaccord Genuity and even one from Steifel (there may well have been others). I’m sure the house broker Cenkos was represented but house analyst Jean-Marc Bunce was the invisible man on this occasion.

Fleet

Probably, a wise decision on Bunce’s part as I’ve been trying to find out why he’s taken such a conservative stance on fleet. In his note dated 23rd September he states on page 1: “We believe the guidance for 27-30k connections at the end of FY20 is conservative and underpinned by a strong pipeline.”

Yet on page 4, he contradicts this, becoming ultra conservative, when he writes: “….our Fleet connection forecasts are based on connections below the guidance of 27-30k”.

I wondered why he decided to do this and also upon what number of fleet connections he actually based his projected revenue figure of A$20.9m? By my calculations to arrive at A$20.9m he must have used less than 18,000 installations, which does appear excessively low.

Yesterday the new CEO, Paul McGlone was in combative mood as he faced down attempts to extract projections on the number of Fleet sales for 2020, sticking to guidance of 27-30k. He even declined to provide a current figure. I assume this is because Seeing Machines hopes to upgrade at the interims and doesn’t want to spoil the surprise. Personally, I don’t particularly like surprises even to the upside.

The reduction in the unit cost of Gen 2 Guardian by 21% announced yesterday must surely drive increased uptake from fleets as will the increasing number of distributors and deals with insurers.

Mike Lenne, the Human Factors expert who heads up Fleet does appear to be its secret weapon when it comes to persuading Fleets to use their technology to improve safety. HIs calm, analytical approach should pay dividends and puts Seeing Machines in a league of its own.

It was the first time I’ve met Tim Edwards, one of the original brains behind the technology along with fellow co-founder of the company Sebastien Rougeaux. Edwards comes across as a very modest man, particularly for a genius who jointly developed this life-saving technology.

Aviation

While CEO McGlone and Pat Nolan, who heads up Aviation, were chided slightly for building up expectations re. an aviation licensing deal with CAE and L3 Harris, I got the impression such a deal is at most a 2-3 months away. We’ll see I guess. The great news is that end users (such as Alaska Airlines) are now requesting that manufacturers of full flight simulators now have eye-tracking from Seeing Machines.

Auto

As for Nick DiFiore, who heads up Auto, I’m expecting him to deliver a lot. Volvo for one, VW for another pretty soon. Followed by Japanese OEMs. Oem decision-making has been the main reason for delays up to this point but See does appear remarkably well positioned with Xilinx to grab market share from Nvidia and Mobileye. The fact that Fovio can identify an incapacitated driver makes it a shoo-in for Volvo and parent Geely may well have decided it needs it too.

The US market really needs to hear this in its own accent and so it was good to be told by Paul McGlone that it will be getting a US broker. I do hope it is Morgan Stanley. I’ve long wished to read/hear Adam Jonas extol the virtues of Seeing Machines.

Overall then, while I would have liked more opportunity and time for detailed questions, I feel that further patience will be handsomely rewarded here. Of course, every investor should do their own research.

The writer holds stock in Seeing Machines.