In a note issued today, following Seeing Machines unaudited H1 results, house broker Stifel maintained expectations for the full year alongside its cash forecasts.Â
Stifel analyst Peter McNally noted that H126 revenue was down 7.5% compared to the prior year period due to a decline in NRE revenue as “royalties ramp into GSR”.
“Operating losses (cash/adjusted EBITDA) have reduced c.24% to a range of $13.2-13.7m with cost reductions implemented last year having a positive effect. The company has a big second half ahead but should benefit from rising high margin Royalty revenue and a further ramp in Aftermarket which is expected to exceed 6k units in the current quarter. The company reached its goal of cash flow run-rate breakeven for the month of December, and we expect profitability in Q326 and Q426 ahead of the July regulatory deadline,” McNally explained.
He added: “Cash dropped to $3.4m at period end partially due to a $5.0m inventory build in working capital and $1.0m in deferred consideration but benefits from the $14.1m accelerated payment, post period.”
Pointing out: “Despite a 46% y/y increase in H126 royalty units, the royalty units ASP has remained above $9 ($9.01) declining by only 5% y/y and over H225 which is encouraging to see as large programmes launch and ramp ahead of GSR, as we saw in the recent KPIs.” This appears to be well above its main competitor Smart Eye, which declines to release this information.
Crucially, McNally stated (before this morning’s fall in price to around 3.2p): “We think investors should make the most of the current weakness. We maintain our target price at 10.5p. Buy.”
The writer holds stock in Seeing Machines.
Jan 2019
Safestocks
“Ridiculous as it might sound, when Seeing Machines is currently 4p a share, I believe its intrinsic value is even now well over ÂŁ1 a share. This is because it will continue to dominate the automotive driver monitoring niche for the next few years at least.”
As a long term investor, I have endured the catalogue of issues over the years and the dismal valuation of Seeing Machines.
I often question my investment, and do not understand why the market is not recognising SM as the key player in the DMS market and all the potential associated IP related products.
Maybe Mitsubishi is the first company to really understand what see could be worth.
You have been predicting a take over since 2019.
Maybe this finally will be the year of positive change
and a vindication of our investment.
I totally agree re. the valuation. It came close to being bought in 2018 and I’ve been expecting it to be bought since then, it’s true. When it proves it is profitable I’m confident buyers will step forward. I guess we don’t have much longer to wait.