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6 reasons why SEE gets bought in 2024

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Iā€™m convinced that next year is set to be the year that Seeing Machines finally gets bought.

Hereā€™s why: 

  • In the next few months Seeing Machines will prove to even the most sceptical observer that its DMS/OMS land grab has been successful, with it taking over 75% of the global market by value. The partnerships it has formed with the likes of Qualcomm, Magna, Valeo, etc. are unrivalled and its tech and implementation are clearly a cut above any other provider.
  • The launch of the third generation of its Guardian product for trucks and buses will see that business slash box costs and times for installation, enabling it to go ten times on that business in short order. Mobileye marketing it for Aftermarket should be a game changer.
  • Aviation will have been proved as a lucrative business that has legs, thanks to its partnership with Collins and the first of many huge, long-term contracts.
  • It is also clear that its technology has applications in other transport verticals, marine, and rail for instance, not to mention other industries such as robotics, entertainment, and security.
  • Profitability will become a certainty with the above contracts, leading to more funds investing and the price rising substantially, making it more attractive and fuelling the greed of a potential buyer.
  • There are just too many huge companies who now have a direct interest in acquiring this market leader, not to mention a huge amount of Private Equity capital available to fund a takeover. Moreover, if it were to go for $5bn, they could be fairly confident of it rising in value to $15bn-Ā£20bn within a three-year horizon.

While the bulk of investors (including fund managers) are only now beginning to understand the strengths and potential of Seeing Machines, that canā€™t be said of the industry players, the chip companies and Tier 1s, who regularly work with Seeing Machines or come across its technology. Moreover, the likes of Alphabet, Amazon, and Apple know Seeing Machines and must like what they see.

Great business

A much smarter man than me, an investor, business manager, and experienced entrepreneur who has sold businesses, once told me: ā€œGreat businesses get bought NOT soldā€. 

While some may hanker after a Nasdaq listing, I think market conditions over the next year and beyond will mitigate against this and leave an opportunity for a competitive bidding situation to arise.

I donā€™t know when exactly this will happen nor who will win but a bid is coming, of that Iā€™m fairly certain. After all, Bosch was interested 5 years ago and Seeing Machines’ business is incomparably stronger now. Moreover, the dream of widespread adoption of autonomous vehicles has been shown to be just that, a dream that will take decades to be realised. Thus leaving the field to those who want to make driven cars safer.

Great value

In view of all the above, there is just too much value here at a sickeningly cheap price. (Iā€™d be saying that even if the price was 35p, not 5p). The market abhors cheap value, as much as nature abhors a vacuum.

The writer holds stock in Seeing Machines.

Take your seat for the ā€˜Battle of the Titansā€™

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Ladies and Gentlemen, please take your seats. The ‘Battle of the Titans’, the heavyweight takeover of the decade, is about to begin. The winner will be the champion of interior vehicle monitoring for the next decade, opening up billions in new revenue streams in vehicles while also preventing accidents. It should also be able to help robots care for us humans long after that. 

With the news that Mobileye has been granted non-exclusivity to market SEE technology in the Aftermarket sector, itā€™s clear that the company (majority owned by Intel) needs SEEā€™s driver monitoring technology to complement its Advanced Driver Assistance Systems (ADAS). It is now able to offer a one-stop active auto safety solution to its truck and bus customer base (who according to one source currently deploy over 2m vehicles). 

I’m even willing to bet that Mobileye wanted exclusivity, but Seeing Machines preferred to play the field, as it possesses the world’s most effective driver monitoring system (DMS).

Now that the dream of fully autonomous vehicles on all our roads has been seen to be just that, a reality that is decades away, DMS has come centre stage. As Colin Barnden, analyst at Semicast, astutely realised a while back: Mobileye needed DMS, the best DMS. And it now has access to it.

With Gen 3 Guardian likely to be available from Q1 of this calendar year, it opens up the possibility of a one-stop solution for Aftermarket being available in H2 of this financial year for millions of existing Mobileye customers as well as millions more truck and bus operators in Europe who arenā€™t.

As the scale of the market it will capture becomes crystal clear to players (and investors) Seeing Machinesā€™ share price should rise substantially. Explosive growth in its Aftermarket revenues will also be coupled with sizeable Auto contracts and the much-anticipated Aviation deal. Financial analysts (commonly referred to as City scribblers) will then finally start producing broker notes with spiraling upgrades, as Fund Managers pile in. Professional investors can exhibit Fear of Missing Out (FOMO) just like private investors.

Whatā€™s the timeline? Itā€™s starting now and will be increasingly apparent with every passing month. Notably, Iā€™m expecting a trading update on the 22nd of February with a US investor show on the 8th March. Not to mention some big contract news between now and June.

Battle of the Titans

It seems my ‘Battle of the Titans‘ prediction is slowly (oh, so slowly) coming to pass.

However, unlike a boxing contest, the battle to acquire Seeing Machines wonā€™t be a 2-person contest with Marquis of Queensbury rules. Itā€™s set to be a bare-knuckle bout involving strategy and multiple bidders, more akin to a contest in an episode of Alice in Borderland. As I see it, there are at least 4 main contenders:

  • Intel (majority holder in Mobileye). 
  • AMD (owner of Xilinx)
  • Qualcomm
  • Nvidia – the dark horse? 

However, lurking in the shadows are many more players who must covet the technology that Seeing Machines possesses. Some are subsidiaries of Chinese companies, such as Omnivision, but I doubt that Australia (one of the Five Eyes intelligence alliance) would allow a Chinese company to acquire such sensitive technology which could have military applications. Do the remainder have the financial muscle and nerve to outbid the above chip companies? That remains to be seen.

Once the contest really gets going, I expect one of the three ‘A’s; Apple, Alphabet and Amazon to show their hand. They have the nerve, nous and financial strength to not only outbid the above chip companies but take Seeing Machines technology to the consumer market in a huge way.

I believe that this year is finally going to be fun for holders of Seeing Machines shares. Let the contest commence.

The writer holds stock in Seeing Machines.

Magna-ificent performance from Seeing Machines

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Following recent announcements relating to Magna, reinforced by analysis from CEO Paul McGlone at an investor event in London, Iā€™m confident that Seeing Machinesā€™ technology lead across, auto, fleet and aviation will soon start to be reflected in its share price.

The recent news that auto Tier 1 Magna is paying US$17.5m for the exclusive rights to use Seeing Machines technology in its rearview mirrors until the end of 2025, while also agreeing to invest up to an additional US$47.5m, just confirms its global leadership position in Driver and Occupant Monitoring Systems (DOMS). 

Crucially, the cash injection removes any concerns that Seeing Machines needs to raise cash. It is now fully funded to profitability in 2024.

The Canadian Tier 1 Magna has gone exclusive with Seeing Machines in rearview mirrors because it aims to the vast majority of that market, 100% has been suggested by one expert, as no real rival to their DOMS offering currently exists. By partnering with Seeing Machines it has a product that is apparently superior to that of its competitors in terms of price, performance, and time to market. Thatā€™s presumably why it won the huge A$125m VW contract in December 2021. 

By 2026, itā€™s likely that Magna will have won as much as 50% of the overall auto DOMS market in partnership with Seeing Machines – since half of DOMS is forecast to be delivered via rearview mirrors. Thus it will have done to its main rival Gentex what Qualcomm has done to Intel in auto. The huge VW win with Magna should have confirmed this, future wins certainly will. 

Itā€™s no coincidence that both Magna and Qualcomm have chosen to partner exclusively with Seeing Machines. These moves should be seen as part of a strategic land grab that I expect to deliver Seeing Machines at least 75% of the auto DOMS market by volume by 2026.

That is because its competitors (Smart Eye, Cipia, and Jungo) arenā€™t winning anywhere near the number or volume of RFQs that Seeing Machines is. For example, Smart Eye appears to have effectively been replaced by Seeing Machines in forthcoming BMW models. The 10 BMW models featuring Smart Eye technology are from past wins, such as the X5 (2015) and M8 (2018). 

Of course, OEMs may do some dual sourcing. Speaking to Smart Eye last week its CEO Martin Krantz tentatively said that Smart Eye ā€œwill probably be in future BMWsā€. I wish him luck but I donā€™t think it is going to be a threat to Seeing Machines going forward. 

Indeed, investors need to beware of looking in the rearview mirror at market share unless they want to crash their prospects for significant financial gains. For those paying attention to the road ahead, itā€™s Seeing Machines that is in the fast lane to market dominance. 

Over the past year, Seeing Machines states that it has won 80% of the RFQs for which it has bid. Iā€™m confident it will maintain that win rate with the $A1-2 billion of contracts for which it is currently bidding.

Looking at design wins, Smart Eye currently boasts 94, while Seeing Machines has 120. However, even this figure fails to reflect the latterā€™s dominance. Not all of Smart Eyeā€™s 94 ā€˜winsā€™ made it into production, in contrast, every Seeing Machines design win has hit the road. 

Iā€™ve long admired the Smart Eye people – not least for their PR bravado – but it canā€™t blind me as to where I should invest my hard-earned dough. Iā€™d also be doing readers a disservice if I didnā€™t state what I honestly believe. 

Following the Seeing Machines investor presentation Friday, (when the video is posted I will provide a link) Iā€™m very confident that an inflection point has been reached.

Increased margins

From now on license revenues for vehicles hitting the roads will begin to ramp up for Seeing Machines. This is a very high-margin business as the main costs have already been borne in the development phase. It currently has a pipeline of A$395m in auto but this is expected to grow substantially over the next few years on the back of further wins.

Similarly, in aftermarket more large enterprise customers such as Shell are coming along. These margins for selling the product and the monitoring service are much higher than selling indirectly via distributors.

It should also be noted that Seeing Machines Gen 3 Guardian will be launched by the end of this financial year, opening up the prospect of huge scale-up in Fleet sales. The product has apparently been re-engineered to reduce costs yet will be better, with automotive-grade additions and much faster install times. In addition, there is huge money to be made from the service element of monitoring the drivers.

Thus, now there is clear visibility of increasing revenues and cashflows with SEE set to make huge profits over the next few years.

In addition, Iā€™m still confident that a lucrative license deal will soon be struck to deliver Seeā€™s pilot monitoring technology into the cockpits of aircraft. Being early is the same as being wrong but I hope by Christmas Iā€™m proven right.

Bids coming

As readers know, Iā€™ve long believed that SEE will face a near-term bid. To that view some have argued that such is its success that it really doesnā€™t need a takeover to prosper, unlike some of its rivals who hope to be saved by one. Iā€™d certainly agree with the assessment that Seeing Machines could perfectly well prosper as an independent.

However, even if Seeing Machines isnā€™t ā€˜up for saleā€™, it doesnā€™t mean that it cannot be bought. A wise man recently told me: ā€˜Great companies get bought NOT soldā€™. Well, I believe Seeing Machines is a great company.

Ask yourself, how badly must some company want what Seeing Machines has? Its technological lead, data, and market leadership would take years and many billions to replicate for even a company of the stature of Google, Apple, or Amazon. If you had the money (and they do) why wouldnā€™t you just buy it?

If Magna is prepared to pay millions for the exclusive use of SEE technology for a couple of years, why wouldnā€™t they want it permanently? Qualcomm, AMD, Intel, and Nvidia also have reasons to enter a bidding war when the starting gun is fired. Indeed, even Gentex does if it wants to win future DOMS rear-view mirror contracts and protect its market share from rivals such as Magna.

Thereā€™s even the argument that a consolidator might want Cerence and Seeing Machines to create something very special.

Value stock

As legendary value investor Irving Kahn taught, investing is an art rather than a science but I think were he alive today, heā€™d take an interest in Seeing Machines as it ticks many of the criteria he looked for in an investment.

The good news for investors is that they can now sit back and enjoy the ride. It has been substantially de-risked, which is why Cenkos upgraded to 25p last week. I expect the other analysts following the company to do likewise in short order as the contracts and license deals roll in. 

The writer holds stock in Seeing Machines.

Seeing Machines wins A$21m Japanese auto contract

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Seeing Machines has won its first Japanese car manufacturer, rumoured to be Honda, in a deal initially worth A$21m (US$14.6m). The cars will go into production in 2025.

The actual headline figure for the win is highly conservative and is likely to end up many times bigger as the car manufacturer rolls out the technology across an ever-increasing number of models. This is what happened with BMW, Ford and Mercedes and Iā€™m confident it will repeat here. 

Japan turns to Seeing Machines

The really important learning from this win is that SEE has finally cracked Japan, after years of hard work. Marc Bunce, an analyst at broker Cenkos, says: ā€œWe believe todayā€™s win is a first step into the Japanese market and that the cost and performance advantages of Seeing Machines software and embedded systems approach, will enable it to win further business with Japanese OEMs.ā€

Hence, this will prove to be the first of many contracts with Japanese car companies that will confirm Seeing Machines position as the global leader in driver/occupant monitoring (DMS/OMS).

SEE already has a confirmed (conservative) auto pipeline of US$240m, although in all likelihood it is likely to be double that. As Bunce explains: ā€œThe ā€˜cumulative initial lifetime valueā€™ of these award wins now up to A$345m/US$240m which we believe is predominantly based on conservative minimum production commitments for initial vehicle models. However, with actual production volumes usually much greater than minimum commitments, and the technology already being seen on models beyond the initial award win, we believe the likely lifetime value of these awards is already considerably larger.ā€

Global leadership

Itā€™s now clear, as predicted here 4 years ago, that Seeing Machines is set to take over 75% of the global DMS market. Ironically, it seems that the market has de-rated its main rival Smart Eye based on this assumption without re-rating Seeing Machines. It is a position that, while frustrating to those holding the share, canā€™t last much longer.

Seeing Machines very dominance is the reason I donā€™t believe it will be allowed to remain independent much longer. With every auto contract won the importance of Seeing Machines to Qualcommā€™s ambitions in the auto market become more obvious. Given that Qualcomm was keen to swoop on Arriver I expect the time is approaching when Christiano Amon will again reach for his wallet to try and secure the global leader in DMS/OMS.

Qualcomm CEO Cristiano Amon let the cat out of the bag in a recent interview, in which he discussed Qualcomm’s diversification strategy. He confirmed, after boasting of its US$16bn auto revenue pipeline and talking about the Arriver purchase: ā€œClearly M&A is going to be part of Qualcomm as we accelerate those non-handset businesses.ā€

With SEE’s auto-win rate increasing the prospect of an actual A$1bn pipeline isnā€™t very far away. If you also include revenues from its fast-expanding Fleet and Aviation divisions, Seeing Machines is a must-have for a chip company that wants to diversify its revenue stream.

SEE is almost totally de-risked, with earning visibility becoming clearer every month. The future cashflows from auto, fleet and aviation are going to be huge. Moreover, with the continuing investment in its intellectual property to ensure its systems remain far ahead of any rival, it has created a strong moat to fight off any would-be competitors for the foreseeable future.

Takeover target

By the end of its current financial year, all this should be clear to even the most sceptical investor but to savvy industry players, such as Cristiano Amon, it must be obvious now. Amon doesnā€™t strike me as the kind of man who would ever allow a competitor to eat his lunch – as Magna can bear witness.

Only Alphabet, Apple or Amazon would have the financial muscle to separate Qualcomm from its intended target. I’d add in Tesla as a wild card. Elon Musk loves pulling surprises and Tesla needs a decent DMS. Instead of blowing tens of billions creating an in-house solution he might just wake up one morning and decide to buy SEE.

Blue sky valuation?

As to valuation? Well, Iā€™d value Seeing Machines’ Auto division at US$5bn minimum, Fleet about the same. Aviation isnā€™t as advanced but it’s a huge market that it is developing, so say US$2bn. In total, its intrinsic value is approximately US$10-12bn today.

Alternatively, If someone has the nous to offer 50p a share and SEE accept, well done. In 2 years they could probably float the company for 5x to 10x that. 

Some will doubtless say I’m talking nonsense. But the same naysayers said that 4 years ago when I predicted Seeing Machines would grab a 75% share of the global DMS market.

The writer holds stock in Seeing Machines

Seeing Machines delivering on long-term strategy

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In an exclusive interview with Seeing Machines interim Chief Executive Ken Kroeger, he has confirmed that the company remains on track to hit its first half financial targets and is making no adjustments to its full year figures.

Following the departure of former chief executive Mike McAuliffe, who had only been in place a few months, private investors have been concerned as to whether there was likely to be any strategic change of direction. Happily, as Ken Kroeger confirmed: ā€œThe strategy that weā€™re executing is exactly the same one that we were executing when he arrived. Moreover, the executive team that is delivering that strategy remains the same.ā€

Itā€™s a point that was well made by Lorne Daniel, analyst at house broker FinnCap a week ago, when he wrote: ā€œWe know that the second tier of management in this business is particularly strong and will continue to follow the strategy and deliver on the milestones as expected.ā€

The business certainly seems to be making steady progress across fleet, auto and aviation and Kroeger stressed the efforts of the executive team in having built them up. ā€œThese are businesses that didnā€™t even exist a few year ago and Paul Angelatos (Fleet), Nick Di Fiore (automotive) and Pat Nolan (Aviation) have done a great job in creating and building these markets for Seeing Machines.ā€

Auto industry

Not only is Seeing Machines working with GM to deliver driver monitoring systems for its cars (most notably the Cadillac CT6 whose Supercruise system uses it), but on October 30, 2017 its Fovio Driver Monitoring System was chosen by a premium German OEM (who I believe to be Mercedes).

Kroeger wouldn’t comment on who the German OEM is but did confirm: ā€œIt is extensively pushing the boundaries in driver monitoring, taking it to a whole new level. That is underway. That is a real state of the art delivery, very technically challenging but it sets a completely new performance standard for DMS.ā€

Given recent bulletin board discussions as to the respective merits of Seeing Machines technology vs. SmartEye, Kroeger was happy to explain: ā€œWe have the best technology, there is no doubt about that at all. SmartEye has an okay technology, which is cheaperā€¦weā€™re much better positioned to take the premium car models that are interested in performance, who need this to work because it is a safety critical feature. For models that are being rolled out where it is nice to have comfort features in the car, which only require rudimentary head and eye-tracking, SmartEye is a viable option.

He added: ā€œRight now we definitely have a leadership position from a technical perspective. That is very much respected by the auto OEMs.ā€

In addition, Iā€™m optimistic that other OEMs will select Seeing Machines DMS technology, doubtless driven by the NCAP requirement for any car model wishing to have a 5 star safety rating from 2020 to have a DMS in place.

In Japan strong market opportunities are being helped by the effort of Kevin Tanaka working out of the West Coast in the US. Also Kroeger confirmed: ā€œThere is a very strong alignment with Xilinx in Japan, who are doing a lot of our on the ground marketing for us. It is definitely getting well received by the Japanese.ā€

Fleet

While a comprehensive Fleet update is due this week that should provide much awaited news on further wins, Kroeger did reveal that the Guardian 2.0 device will start shipping by the end of March. The upgraded system is significantly cheaper to manufacture, smaller and easier to install, which should also help increase penetration rates.

Takeover

Given the much higher profile of Seeing Machines since the launch of the Cadillac CT6 and the most recent CES show, where it was showcased by both Bosch and Autoliv speculation is increasing daily over whether it is being tracked for takeover, whether by a Tier 1, a telematics company, or even Google or Apple.

Asked about this Kroeger coyly replied: ā€œThere is always interest. We would never say ā€˜noā€™ to a conversation but we also recognise that there will a time when the time is right to return the best value to shareholders. Weā€™re very cautious about the conversations we do have and, if we were to contemplate selling the company, we would have to find somebody who valued the entire organisation to obtain the full value for it.ā€

When pressed further about Google, Apple or Amazon seeing the long term value in Seeing Machines technology, which has applications far beyond transport alone, given it can enable robots to see and perhaps eventually even empathise with humans, Ken Kroeger commented: ā€œI agree it is either someone like that who can see the full value or a really diverse Tier 2 or Tier 1, as opposed to the OEM. The Tier 1s sell to the OEMs but some of the Tier 2s which sell to the Tier 1s are exceptionally diverse. They might be building stuff for automotive, stuff for aviation and stuff for medical devices, stuff for consumer electronics. They might not just be an automotive-centric supplier. They are really hard to find and pinpoint but they are out there because they are always talking to us.

Of the partners that Seeing Machines currently has some are definite possibles. ā€œOr, it could be someone who sells image processors and wants to start packaging it with software already on it on a smart camera or smart sensor,ā€ teased Kroeger.

Despite being a world leader in DMS tech, a key plank in the forthcoming generation of semi-autonomous cars and increasingly being considered in trains, planes, trams and buses, itā€™s current share price languishes at approximately 5.5p. This valuation anomaly cannot last much longer, especially as with the recent fundraise it has been largely de-risked as an investment provided sales continues.

Ironically, such a deeply discounted valuation could well be the catalyst for an opportunistic bid from a cash-rich global player before the year end.

The writer holds stock in Seeing Machines.