US$32m Stellantis win boosts intrinsic value of Seeing Machines

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The latest auto contract awarded to Seeing Machines carries “an initial lifetime value of US$32M (A$45M)” and brings the official initial cumulative lifetime value of the auto contracts won to US$321m. Opinions may vary as to who the OEM is, but I’m confident it’s Stellantis, marking an impressive follow-up on an earlier contract win in June with the European headquartered car manufacturer.

Of course, followers of this blog won’t be surprised to learn that the actual lifetime value of all these contracts is likely to be multiples of the so-called ‘initial lifetime value”, as car manufacturers make Driver/Occupant Monitoring a standard feature and these initial contract values expand.

Bizarrely, Mr Market hasn’t yet properly priced in the value of SEE’s stated auto pipeline, never mind its likely long term value, which I’d judge to be approximately US$1bn. Seeing Machines adopts a very conservative stance on the value of its auto contracts, which also hasn’t helped investors understand the intrinsic value here.

It may take a short while longer before the market cottons on, so investors must remain patient. Although, the Consumer Electronics Show (CES) in early January should bring announcements that will make SEE’s value in automotive clearer.

Catalysts

Fortunately, there are two catalysts that I expect will make Mr Market re-evaluate SEE’s value in the second half of this financial year.

  1. I expect the transformational aviation license deal that has long been anticipated will soon materialise, triggering upgrades from all brokers.
  2. I expect the Gen 3 Fleet product to be available in Q4 of this financial year, enabling huge Fleet contract wins. This will also trigger broker upgrades.

I’d urge all holders of Seeing Machines to have faith in their research and the intrinsic value of Seeing Machines. Never forget that price does not equal value, for as Warren Buffett noted: “Price is what you pay. Value is what you get.” In my opinion, at its current share price Seeing Machines is laughably undervalued.

Of course, all investors should do their own research and be prepared to suffer the slings and arrows of outrageous fortune for a little while longer. Covid, Ukraine and market jitters have previously held its share price back and, while I do fear the effects of a global recession and a possible market crash, Seeing Machines progress as a business appears unstoppable. Ultimately, a takeover will unlock the true value here regardless of overall market conditions.

The writer holds stock in Seeing Machines.

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