Takeover thesis maintained as Seeing Machines dominates global driver monitoring market

Despite the ongoing market falls, my sources (note the plural) indicate that Seeing Machines is winning ‘everything it goes for’. In particular, I’m expecting confirmation of another sizeable contract win in Japan, another huge one in the US and plenty of very positive Fleet news. Thus, my conviction that Seeing Machines will soon attract a bid remains as strong as ever.

Further contract wins

My sources indicate that another Japan win announcement is very, very close. I hesitate to use the word ‘imminent’ but you get the idea. In addition, I’ve heard a whisper that GM has awarded a huge Lidar contract for Ultra Cruise and thus expect that Seeing Machines will soon be getting confirmation of a huge contract. I anticipate this to occur within a couple of months.

I’m also expecting Seeing Machines to win Toyota and announce further expansions with Ford and Stellantis in due course. Lastly, the significance of the recent win of Renault via Qualcomm’s 3rd Generation Snapdragon cockpit platform shouldn’t be ignored. What it indicates is that Seeing Machines will be in every car that has Qualcomm’s system.

In addition, I hear Fleet is doing very well and there will soon be some significant announcements regarding aftermarket sales and a further partnership that should enable it to scale up the introduction of its driver monitoring technology in Europe to comply with the forthcoming safety legislation. 

Clearly, despite the gyrations in its share price, the business is clearly going from strength to strength. That is certainly a claim made by company executives themselves in recent interviews, such as this one with Nick Di Fiore who heads up automotive but also this video with CEO Paul McGlone. It is backed up by leading independent industry analyst Colin Barnden of Semicast Research, as well as financial analysts from a growing number of brokers; Cenkos, Panmure Gordon, Berenberg, Stifel and Peel Hunt.

In short, my thesis that Seeing Machines takes 75% by value of the global DMS/OMS  auto market remains fully intact, a market that could be worth A$1bn in 2025. That figure ignores the market represented by trucks, trams, trains and aviation – global markets in which Seeing Machines is set to dominate.

I, therefore, maintain that a near-term bid for Seeing Machines is very likely – regardless of the state of the overall stock market. (Regarding macro projections, I’ve been a long-term fan of Albert Edwards insightful analysis and would urge every investor to follow him. He has long been castigated as a ‘bear’ but in my opinion he is a realist, and investors are now coming to realise that.)

Seeing Machines is the global leader in one of the hottest areas in a very hot tech sector. It’s partnering with tech behemoths who are led by very smart people. They won’t pass up the opportunity to acquire Seeing Machines. Though they could well face competition from private equity players with a trillion dollars of dry powder.

Peel Hunt note on M&A activity

This very week Peel Hunt issued a note entitled, ‘Accelerating UK bid activity’, written by Charles Hall, Head of Research and Clyde Lewis, Deputy Head of Research. Although it focuses on companies in the FTSE 250, I think there is a read-across for quality companies on AIM. 

Here’s an extract from the note:

“A classic indicator of a disconnect between short-term concerns and longer-term opportunity is when non-equity investors start to buy the assets. This is clearly happening, with 10 bids for FTSE 250 companies progressing currently. This is unsurprising given the de-rating of the FTSE 250, with the overall index-18% YTD and 80% of the members down on the year. This has driven heightened interest from overseas and private buyers. There have been 14 proposed and announced bids in the past six weeks, adding up to £21bn of equity value.”

Discussing the themes for investors to consider, the note goes on to state: 

“The pace has clearly accelerated after a slow start. There is a clear focus on hard assets, with most of the businesses being acquired having strong market positions with clear and lasting cash flow credentials. The mix of financial and corporate buyers reflects the strength of balance sheets, access to funding, and the ability to look through a tough economic environment. Weaker sterling should also increase the appetite from overseas.” 

I’d urge investors to do their own research as I’m not Nostradamus, just a journalist. That said, it’s undeniable that investors are still ignoring the oh-so-clear value to be had in Seeing Machines.

Cheer up

With all the terrible things going on in the world I’ve found that watching interviews with the legendary journalist and political analyst Anthony Howard has greatly cheered me up this week.

If that doesn’t float your boat, why not watch Queen performing We are the Champions at Live Aid in 1985. It’s a song that will make a fitting anthem for investors in this company when it is bought for billions. I dedicate it to all investors in Seeing Machines and its hardworking and talented staff.

The writer holds stock in Seeing Machines.

3 thoughts on “Takeover thesis maintained as Seeing Machines dominates global driver monitoring market

    • Be warned: I’m certainly not Nostradamus and I’ve been consistently too optimistic on timings. Indeed, the exact timing of a firm bid is contingent upon many factors about which I don’t have sufficient insight. My hope is that one comes in shortly after SEE confirms its market dominance in auto by winning a few more huge auto contracts, proves it can really scale up in Fleet, and has won a very big aviation contract. I’d anticipate that within the next 6 months much of that will have been achieved.

      When it is accomplished, breakeven will be very close, brokers will have upgraded and we should be able to achieve the sort of valuation some of us have dreamt of for many years.

  1. Hence the reason I bought a little more today… now chock-full of this one. Wake me up in a year to spend all the (hopeful) profits… it makes ZERO rational sense that this stock is below the price at which Magna and chairwoman invested (~11 pence) given how much positivity has occurred since then. Time will tell. Please keep up the good reporting/mosaic work!

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