Following today’s news that Seeing Machines is to receive a lump sum royalty payment of US$14.1m from a Tier 1 auto company, house broker Stifel has raised its price target to 10.5p from 9.6p.

Stifel’s analyst Peter McNally explained : “This benefits revenue, profitability and cash in the current year by pulling forward payments that would ordinarily have been received in future years. As this is a payment for royalties, the benefit to revenue falls through directly to cash as it is 100% gross margin.

“While we had little concern for the company’s cash resources given the recent revenue trends combined with its cost reduction programme, this provides further resources and benefits our discounted cash flow valuation with nearerterm cash flows. It also is a testament to the company’s commercial foresight to negotiate minimum guarantees when its customer contracts were signed. 

“We raise estimates for the current year and slightly reduce outer years to reflect early receipt and due to the benefit of the timing of cash flows. We raise our DCF-based target price to 10.5p from 9.6p. 

“We still expect the company to have reached cash flow run-rate break even by the end of 2025 (December) and look forward to the release of the fiscal Q226 KPIs, which are likely to be released in early-to-mid February. The shares now trade on 24.0x FY26E EV/cash EBITDA or 19.8x FY27E (or PE of 20.9x). Buy”

In his note McNally forecasts revenues of US$93.7m and adjusted pre-tax profits of US$8.6m for the current financial year, ending 30th June 2026.

The writer holds stock in Seeing Machines.