Following the announcement of a new Driver & Occupant Monitoring system programme win for Seeing Machines, Stifel and Shore Capital have issued very positive flash notes. Both reiterated their âBUYâ recommendations.
Peter McNally, analyst at house broker Stifel, focused on the fact that the latest contract with an initial value of $5m is its third auto contract in the past two months, bringing the total value won over this time to $47m.
Personally, I expect the value of these contracts to eventually transpire to be 2-3 times the initial amount, given the benefits of incumbency.
Indeed, in his note Alasdair Young at Shore Capital stated: âPerhaps most importantly, we note that programme awards have historically expanded beyond their initial estimated value as vehicles and platforms are added over time. As such, we continue to view disclosed lifetime revenue estimates as conservative indicators of longer-term opportunity.â
McNally also pointed out: âToday’s order is another rear-view mirror integration. Increasingly, this location appears to be an easy to implement solution and offers an efficient path to scale deployment across multiple vehicle platforms with little or no further development and customisation.â
He also expects the acceleration in auto to continue, stating: âWe expect August’s Q4 KPI update (to June) to show significant q/q growth in OEM production as OEMs approach 100% fitment in Europe.â
Shore Capitalâs Young is similarly bullish: âAs outlined in our recent initiation, our target price of 9.5p (c.111% upside) is underpinned by a regulatory-driven inflection to high-margin royalty revenues, with scope for both earnings upgrades and multiple expansion as OEM volumes ramp. In our view, the current valuation does not yet reflect the step-change in growth, margins and cash generation now emerging. We continue to view the upcoming refinancing and the Q4 KPI update expected in mid-August as the next major catalysts for the shares.â
In a note published today, Peel Hunt analyst Oliver Tipping raises his target price to 6p.
He explains his rationale for doing so as follows: âWe re-assess our automotive assumptions from FY27E after 3Q volumes. Our base case is 9m units, bull 10m, and blue-sky 12m.
âThis expansion should deliver significant cash generation of >$20m in FY27E, increasing further in future years.
âWe de-risk our aftermarket sales forecasts, given their volatility, reducing our FY27E assumption from 18k to 10k units.â
He concludes: âWe believe Seeing Machines holds >50% market share in European automotive DMS and hence increase FY27E EBITDA by 52% to $21m as the EU General Safety Regulation (GSR) is enshrined in law. We use DCF analysis to increase our TP from 4p to 6p, and maintain our Buy rating.â
While the likely terms of any agreement arenât yet known, analyst Peter McNally from joint house broker Stifel is optimistic given todayâs announcement that Seeing Machines has received multiple term sheets.
While term sheets arenât a final agreement, they do prove that Seeing Machines has multiple options open to it. âThis includes bank debt, specialist lenders, strategic entities and amended terms from Magna, its close partner and the noteholder of the existing convertible loan,â according to McNally.
I certainly donât want to see further dilution yet would anticipate that the $62m, due by October 4th 2026, offers some strategic investor/lender an opportunity to make a lot of money quite quickly at minimal risk.
Seeing Machines is, after all, unquestionably the global leader in driver monitoring, with attendant cash flows. Once this CLN hurdle is cleared, with auto royalties climbing, alongside aftermarket ARR the share should climb, provided the growing cashflow isnât accompanied by a ramp in spending by management.
I asked Chat GPT what it thinks about the most likely outcome. Hereâs what it told me:
1. Non-dilutive debt facility â now my clear favourite
I would put this at perhaps 70%+.
The announcement specifically says:
âpotential lendersâ
âmultiple term sheetsâ
refinancing the Convertible Note
completion well ahead of maturity
That language points towards a conventional lending process rather than an equity transaction.
Potential lenders could be:
specialist technology/growth lenders,
private credit funds,
banks comfortable with IP-backed lending,
perhaps a lender familiar with automotive software.
The attraction for SEE:
no dilution,
removes the overhang of the Magna conversion,
keeps upside with shareholders.
The question is interest cost. They may have to pay more than Magnaâs effective economics.
2. Mitsubishi strategic loan
Mitsubishi Electric Mobility is already a major shareholder (around 19.9% according to SEEâs investor information).
A Mitsubishi-backed refinancing would be very logical if:
Mitsubishi views SEE as a strategic asset,
it wants to deepen the relationship,
it wants to prevent another party gaining influence.
A structure could be:
Mitsubishi lends $50â60m
no conversion rights
commercial partnership expanded
perhaps security over certain assets/contracts
That would fit the âavoid dilutionâ message very well.
I would put Mitsubishi/strategic partner debt at 25â30%.
3. Magna itself refinancing
There is an irony here: Magna is the current lender and understands the asset better than anyone.
But Magna already has exposure. If it wanted more ownership, the existing note gives it a route. A refinancing might be more about preserving its strategic position.
A Magna rollover could be:
extend maturity,
remove conversion,
lower/higher interest depending on negotiations.
Probability maybe 15â20%.
4. Waymo
Waymo would be exciting, but I think it is the least likely refinancing source.
If Waymo wanted SEE exposure, I would expect:
partnership,
licensing,
acquisition interest,
rather than acting as a lender.
The thing I find most interesting is that SEEâs bargaining position may have improved materially since the Magna note was signed:
automotive production volumes are scaling,
cars-on-road are now in the millions,
ARR is growing.
A lender in 2022 was financing a promising technology company. A lender in 2026 is financing a company with embedded OEM programmes and recurring revenue.
So my view:
Outcome
Probability
Non-dilutive institutional debt
50â60%
Mitsubishi-backed strategic refinancing
20â30%
Magna rollover
10â15%
New convertible
<10%
Waymo
very low
The more bullish interpretation is: if Mitsubishi or another strategic player provides the refinancing without conversion rights, it could be a quiet signal that they see SEE as strategically valuable and do not want equity dilution to shareholders.
The human writer holds stock in Seeing Machines. (Chat GPT would like to invest but canât).
