Panmure Gordon analyst Sanjay Jha has maintained his ‘BUY’ rating on Seeing Machines but lowered his price target from 16.8p to 14.6p.
In a note issued on 31st March he explained how he derived at this valuation: “We continue to use a Sum Of The Parts valuation model to value the shares, which now generates a 13% reduction in Target Price to 14.6p. The main detractors are Automotive, where we expect a lower market share by 2030 and the increase in the number of shares as the convertible loan is fully converted. This is partly offset by increased valuation for Fleet and Off-Road based on EV/sales multiples of SaaS companies.”
According to Jha’s analysis, in Automotive he now expects SEE to gain a third of the available market by 2030 as opposed to 50% previously as it seeks to avoid highly competitive tenders, especially in China. That said, he still calculates that for the year ending June 30th 2030, SEE will generate US$162.7m from Automotive – based on it having a 33.7% share of the market with 32.5m cars in production, 110.2m cumulatively, and an average royalty of US$5.
While it remains to be seen if Seeing Machines really does take less than 50% of the market – something I personally doubt – he does believe the company is fully funded to be cash positive by the second half of the 2025 financial year.
Interestingly, Jha begins the note by stating: “ff the shares have failed to respond to upbeat trading updates followed by a Capital Markets Day in New York, it could be due to lower appetite for growing but loss-making stocks or because there is little confidence that the available cash resources will be enough to reach the long-promised goal of positive free cashflow. We hope it is the latter because it leaves management in no doubt that it must deliver”.
Certainly, over the next 3 months I hope to see proof that management will deliver some of the long-awaited contracts in Aviation, Fleet and Automotive. Surely, some US funds must be watching in anticipation also.
The writer holds shares in Seeing Machines.