I was slightly surprised at the timing of the revenue warning this week from Seeing Machines, as it has been clear for some time that Fleet has not being doing as well as expected with delays to Gen 2 and no news of business via Mix Telematics.
It was a point that was succinctly made in the note from John-Marc Bunce, analyst at house broker Cenkos, when he wrote: “The news released yesterday regarding the fleet business is clearly disappointing, especially considering the issues with the Gen2 were first raised in May 2018”.
Given that Fleet (and Rail) have been perennial disappointments there will be a lot of pressure on Chief Executive Ken Kroeger to sacrifice someone. This might go some way to assuaging the anger of investors who’ve seen paper profits evaporate.
Yet, for me, it’s the timing of this announcement that’s of paramount importance. For by smashing the share price down It conveniently clears the way for a low ball bidder to come in and look like a white knight to investors.
I know that such a bid won’t immediately deliver anywhere near the full value that resides in this business – given the importance of its DMS technology to increasingly autonomous cars.
Still, many long-suffering shareholders would probably jump at the opportunity to sell at a very decent profit. Moreover, it ought to ignite a bidding war.
New contract wins
In any case, let me confirm that it is my belief that Seeing Machines:
1) Is set to win auto contracts with Toyota and FCA (news on the former is overdue).
2) Will be supplying its technology to one or more of these companies: Apple, Waymo and GM Cruise. (They’ll want more advanced systems than the non eye-tracking ones used by Uber, I’m sure).
3) Will see its tech used by Canadian Pacific Railway.
The writer holds stock in Seeing Machines.