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 ‘BUY’ 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: “Perhaps 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.”

McNally also pointed out: “Today’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.”

He also expects the acceleration in auto to continue, stating: “We expect August’s Q4 KPI update (to June) to show significant q/q growth in OEM production as OEMs approach 100% fitment in Europe.”

Shore Capital’s Young is similarly bullish: “As 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.”

The writer holds stock in Seeing Machines.