I know a few investors thought I was ramping when I wrote in a previous blog post ‘Seeing Machines wins BMW contract worth between US$125m to US$250m‘ that this AIM-listed minnow was worth £2bn (89p a share).
My reasoning is simple: it’s currently the leading specialist supplier in the global automotive market. (Read that slowly and ponder the implications as automotive is one of the hottest tech sectors in the world).
You want proof? Fovio, Seeing Machines’ world leading driver monitoring technology is currently being used by General Motors in its Super Cruise system for semi-autonomous cars, and is set to go into production in Mercedes and BMW cars within the next couple of years.
Note that even before the BMW win, house broker Canaccord Genuity affirmed Seeing Machines was worth 21p in note dated 9th January. Analyst Caspar Trenchard also indicated that “the Fovio ‘platform’ technology might well be of specific additional worth to a corporate acquiror.”
Increased regulation is driving this adoption and many other car manufacturers and Tier 1s are queuing up to use Seeing Machines over the next year. I fully expect Subaru, VW, Audi and a host of others to follow in due course. (Tesla really ought to be banging on Seeing Machines’ door to get their kit into its cars.)
Lorne Daniel, Head of Research at FinnCap, is a well respected tech analyst who has previously compared Seeing Machines to Mobileye, which was bought by Intel for US$15.3bn.
I needed a sanity check to ensure I wasn’t deluding myself as to its intrinsic value, so I asked Lorne Daniel a simple question: “Do you think a £2bn valuation on Seeing Machines is unrealistic, given its increasing dominance in the auto OEM market?”
His reply: “Absolutely it’s a realistic valuation. The end markets are enormous and time and again the company is delivering on its promise with very big companies.”
Of course, I can imagine many readers moaning, “But its price is less than 5p!”
Well, as Warren Buffet once famously said: “Price is what you pay, value is what you get.”
Given the fact the stock is currently languishing below 5p, my own concern is that there is a distinct possibility an opportunistic bidder may soon seek to take advantage of this valuation anomaly with a low-ball bid.
Should that event materialise, my hope is that the management and quality institutional investors, such as Herald’s Katie Potts and Miton’s Gervais Williams (who’ve been invested here for years and fully realise what it is now worth), would resist any such offer and seek a price that fully reflects its value.
After all, the likes of Apple, Google, Samsung and Tesla — not to mention a host of Tier 1 automotive suppliers (Autoliv, Bosch, Aptiv, Denso and Continental etc)— are likely to be keen to acquire Seeing Machines’ technology.
Think about it. £2bn is a realistic valuation for Seeing Machines. Moreover, £2bn for some of these companies is money that they can easily afford to spend in order to build market share in the automotive market.
The writer holds stock in Seeing Machines.