6 reasons why SEE gets bought in 2024

I’m convinced that next year is set to be the year that Seeing Machines finally gets bought.

Here’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-£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 can’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: “Great businesses get bought NOT sold”. 

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 don’t know when exactly this will happen nor who will win but a bid is coming, of that I’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. (I’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.

Magna-ificent performance from Seeing Machines

Following recent announcements relating to Magna, reinforced by analysis from CEO Paul McGlone at an investor event in London, I’m confident that Seeing Machines’ 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. That’s presumably why it won the huge A$125m VW contract in December 2021. 

By 2026, it’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. 

It’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) aren’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 “will probably be in future BMWs”. I wish him luck but I don’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, it’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. I’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 latter’s dominance. Not all of Smart Eye’s 94 ‘wins’ made it into production, in contrast, every Seeing Machines design win has hit the road. 

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

Following the Seeing Machines investor presentation Friday, (when the video is posted I will provide a link) I’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, I’m still confident that a lucrative license deal will soon be struck to deliver See’s pilot monitoring technology into the cockpits of aircraft. Being early is the same as being wrong but I hope by Christmas I’m proven right.

Bids coming

As readers know, I’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 doesn’t need a takeover to prosper, unlike some of its rivals who hope to be saved by one. I’d certainly agree with the assessment that Seeing Machines could perfectly well prosper as an independent.

However, even if Seeing Machines isn’t ‘up for sale’, it doesn’t mean that it cannot be bought. A wise man recently told me: ‘Great companies get bought NOT sold’. 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 wouldn’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 wouldn’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.

There’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, he’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.

Will Seeing Machines’ likely Nasdaq listing elicit a bid?

Rumours that Seeing Machines is planning a dual listing on Nasdaq gained further credibility with the attendance of CEO Paul McGlone at a recent shindig organised by house broker Stifel to promote that very idea to clients. The question is, might a dual listing be the catalyst for a bid?

It’s long been known that a dual listing on Nasdaq has been under consideration at the Aim-listed tech company for a number of years. At a previous investor meeting held online on 24th November 2021 Paul McGlone stated (in answer to the question: ‘Are there any plans to move to a US market?’): “It is in our plan, it’s only sensible that we talk about it. I do imagine that we will end up there but I want to see some additional momentum before we flick the switch on that particular transaction.”

With Seeing Machines coming to dominate interior monitoring with its class-leading DMS/OMS system, it appears that time is drawing close. Indeed, some argue that such a listing would be guaranteed to increase its US profile and enable it to secure more backing from US tech funds.

Stifel served as joint bookrunner on an $85 million dual-listing Nasdaq IPO for Renalytix AI back in July 2020. The price tripled shortly thereafter but has since come right back down. More successful was GW Pharma’s dual listing back in 2013, before it was eventually acquired.

Mobileye IPO

A more appropriate comparison is the Nasdaq IPO of Mobileye, floated for US$5.3bn in 2014, bought by Intel in 2017 for $15.3bn and now in the running for a potential $50bn spin-off IPO, backed by Morgan Stanley. 

Examining the prospectus for the original Mobileye IPO in 2014, indicates that Seeing Machines is set to be a superior business. Not only is it dominant in auto but also in fleet and aviation. Moreover, its robust technology has applications well beyond the transport sector. 

Expected date of dual listing

While it appears that no firm decision has been made by Seeing Machines regarding a precise date for a dual listing, I believe that the much-mooted plan is moving inexorably forward.

My sources indicate that (barring a market meltdown) it is most likely to happen around Spring 2023, by which time Seeing Machines is expected to have achieved several milestones that will have more US tech funds eager to jump in. These milestones include:

  • An order pipeline of $A1bn in auto;
  • A fleet operation that has proven it can scale, boosted by the third generation of its Guardian product, which will be easily incorporated into telematics products for trucks and buses;
  • The launch of a dedicated aftermarket division to sell its Guardian product to niche manufacturers of buses and trucks, with monitoring services sold to their customers; and
  • A licensing deal in the aviation sector.

I also believe that there is an outside possibility that increased momentum in auto and fleet, with Seeing Machines pretty much set to win every contract it contests, could bring forward the date.

Will QC gatecrash the party?

The question is, will the host of chip companies who want SEE’s IP wait until its value has been boosted by a Nasdaq dual-listing IPO before swooping? Moreover, will Qualcomm’s Christiano Amon risk another chip company, or one of the three Amigos (Amazon, Alphabet and Apple) eating his lunch? It doesn’t seem likely. The Arriver acquisition proved Qualcomm fights for want it wants. 

Given the crucial importance of Seeing Machines vision technology to Qualcomm’s Snapdragon Drive automotive stack it seems logical that he will act quickly, to forestall any rival acquiring this important strategic partner. 

Sector ripe for consolidation

The sector is certainly ripe for M&A deals. Even peripheral DMS players are starting to be bought. In fact, one took place late in 2021, with Lattice Semiconductor acquiring computer vision company Mirametrix. The latter has a rudimentary DMS and, according to unnamed sources, went for a ‘huge multiple’ in a private deal. You can see its offering here: https://ir.latticesemi.com/investor-overview/presentations

Note the slide detailing some of the consumer uses for its technology entitled ‘Consumer Challenges’ — it may ring a (door)bell for some investors. The wide range of markets in which SEE’s technology can be used, aside from its transport applications, is one reason it is an attractive target.

Smart Eye would probably love to be taken over as would Cipia. However, SEE is the demonstrable market leader and will be the one that all the major players covet. 

As ever, if you’ve found any value in this article please consider making a donation to a charity of your choice.

The writer holds shares in Seeing Machines.

A$23m Stellantis win for Seeing Machines

It seems likely that the OEM win announced today by Seeing Machines is for Stellantis, using Magna’s driver monitoring system (DMS) in a mirror.

In any case, given the minimum lifetime value is A$23m, it is a pretty safe assumption that it will actually end up being at least three times that figure.

Cenkos close to upgrading

Broker Cenkos has maintained its 20p price target but admits it really could be lowering its discount rate and bumpting up that target price, given Seeing Machines’ accelerating win rate that is leaving competitors far behind.

Here’s the concluding comment from Marc Bunce, the Cenkos analyst covering Seeing Machines: “This new automotive DMS award comes less than two weeks since the last which further supports our view that Seeing Machines win rate and market share in automotive Driver Monitoring Systems are increasing. It is also reassuring to hear that this view is now also publicly supported by Nick DiFiore with his expectation for 40% market share by volume now marginally ahead of our expectations which represent around 38.5% by volume to 2030. We iterate our Buy recommendation and 20p valuation and note there remains significant upside in this from reductions in our discount rate, small increases in our Automotive market share expectations, increases in our cautious aftermarket expectations and the addition of aviation (we will incorporate aviation when we get visibility into meaningful contributions).”

Certainly, when Seeing Machines announces the wins I referred to yesterday I expect Cenkos to upgrade.

The writer holds stock in Seeing Machines.

Desperate stuff from Redeye

This week’s note on Smart Eye (SEYE) from a Redeye analyst was disappointing and, quite frankly, unfair to investors who mistakenly believe it’s the leader in driver monitoring (or, as it might now term it, ‘interior sensing’). It isn’t. 

Perhaps desperation at the fall in Smart Eye’s share price following the Volkswagen (VW) win by Seeing Machines has prompted this latest attempt to maintain the myth that Smart Eye is the market leader. However, any sober analysis leads one to question this.

Smart Eye’s recent moves on the acquisition front are evidence for me of its late realisation that it can’t compete on the DMS/OMS front with Seeing Machines, proven by its recent failure to win VW.

Furthermore, I think SEYE has overstated the value of its wins to date, while Seeing Machines has understated its own 8 OEM wins. For example, One of Smart Eye’s early wins was with BMW, but it has since been supplanted by Seeing Machines. VW and Mercedes have also gone with Seeing Machines. Do you see a pattern?

In the US, General Motors, Ford and FCA (now part of Stellantis) chose Seeing Machines. Similarly, Fisker and Byton chose Seeing Machines. 

The much-vaunted early Audi design wins back in 2017 by SmartEye have also failed to go fully into production, as has the Jaguar Land Rover win a few years back. Redeye naively assumes that they have been temporarily postponed. As the analyst states on page 5 of this note published on 9th May, 2021: “Smart Eye says it has still not lost any design wins, but some are postponed for external reasons.” Let me suggest that those wins have been lost, as the auto companies concerned realise Seeing Machines’ technology is more advanced.

Importantly, the VW and Fisker wins indicate that Seeing Machines is not only the leader in DMS but is also winning as car manufacturers seek to build in occupant monitoring systems and move to interior sensing. Yes, Smart Eye can talk the talk re. Occupant Monitoring but the only cars currently going into production with OMS have a Seeing Machines system.

A further indication of SEE’s leadership position is evident from the fact that Qualcomm chose to partner only with Seeing Machines. Similarly, Magna has chosen to use Seeing Machines technology. 

My research indicates that Smart Eye’s “pure software” model effectively means that it is treated like a commodity and doesn’t really gain the respect of the Tier 1s whereas, in sharp contrast, Seeing Machines is acknowledged as the expert in DMS/OMS. After all, OMS is effectively only DMS with more occupants. And Seeing Machines leads the way in DMS.

What that means is that OEMs are far less likely to take a chance on Smart Eye for big programmes delivered to short timescales, especially when high-level DMS will be make or break in achieving 5 star NCAP ratings from 2024. It is simply too important for them in a fiercely competitive market to take a chance. For example, imagine the pain that Renault recently experienced at the hands of Euro NCAP, receiving 0 stars for shoddy safety in its Zoe. Such an event must be concentrating minds at car manufacturers around the world. 

That’s why I think Seeing Machines is going to clean up in the DMS/OMS market. Okay, Smart Eye will win a few Chinese models and low volume models elsewhere but for premium and large volume RFQs I don’t expect it to win any of note. 

A further problem for Smart Eye may also be that QC is set to take away its Chinese lunch in due course, supplying Seeing Machines technology as part of its system.

Of course, I may be wrong or, perhaps, my investing in Seeing Machines has affected my judgement.

Well, here’s a little test. Back on 22nd October, 2021 the Redeye analyst wrote: “Three of the largest DMS procurements to date will be completed within next few quarters – where ‘Smart Eye is a force to be reckoned with in all three’. Though we don’t know what this means, we believe Smart Eye is confident of getting at least one or two of these”.

Well, one of them has been completed and it wasn’t Smart Eye that won it. I’m confident that Seeing Machines will win those other two in this financial year, as well as a host of others this year and next. 

Fleet

I’m expecting great things from Seeing Machines’ Max Verberne and his team in fleet, similar to what Nick DiFiore and his team have achieved in auto.

I’m therefore confident that 2022 is set to be a transformational year in fleet for Seeing Machines. Despite the fact it already has approximately 32,000 fleet installations, the pipeline is rapidly expanding, 40% annual growth in revenues is expected. The Shell deal is huge and offers the potential for many thousands of installations each year, National Express is also in the process of rolling out Guardian tech to its enlarged fleet following the acquisition of Stagecoach. That target market represents approximately 40,000 badged as National Express, with approximately 10,000 more belonging to  contractors.

Moreover, such is the potential for driver monitoring as part of an overall control system that it is clear this is only the beginning of a global ramp up in sales. Seeing Machines is only scratching the surface of the potential within telematics with its current partnerships. Europe and the US will be screaming out for this technology as regulations tighten and companies seek to improve both safety and reduce emissions. This will all become apparent as we hear more about the introduction of its 3rd Generation fleet product.

In contrast, SmartEye is ‘pre-revenue’ with a fleet operation that only launched in March 2021, with 20 staff. It had a ‘pilot projects’ operational in July and I look forward to hearing about some meaningful revenues one day soon.

Aviation

Smart Eye is even further behind in aviation. To the extent that even Redeye doesn’t want to talk about it. Suffice to say that it has yet to fly in Aviation.

By comparison, Seeing Machines’ Pat Nolan is airborne, and charting a course for a smooth landing on profit central. Take, for example, the recent agreement with Collins Aerospace, which is the world’s largest Tier 1 avionics company.

In addition, via CAE and L3 Harris, Seeing tech is already in simulators used by Quantas and the Royal Australian Air Force. It is also working with Airservices Australia to use its technology within Air Traffic Control (ATC).

Summary

In summary, not only does Seeing Machines lead in auto, it is far ahead of any competitor in fleet and the only player in aviation. Too little, too late, sums up Smart Eye’s offering in both fleet and aviation. 

I expect the next second half of this financial year to confirm the pre-eminence of Seeing Machines in all three transport sectors. Seeing Machines’ ever-growing pipeline will make this very clear, very soon.

Yes, Smart Eye does have significant value and potential. However, in my humble opinion, it could be an expensive mistake for an investor to presume it is in the same league as Seeing Machines. Of course, any investor should do their own research.

Full-year results for both companies should bear out what I have stated here. In the end, the acid test for both is the visibility of increasing revenues and profitability. If I am correct, Seeing Machines should impress on the upside and Smart Eye will fail to match that.

The writer holds stock in Seeing Machines.

SmartEye vs Seeing Machines

In view of the stellar PR coming out of SmartEye today, I felt it worthwhile to mention that while I applaud its chutzpah, I still don’t think its technology matches that of Seeing Machines. That said, I believe both will progress further and eventually be taken over.

Questions for SmartEye

Let me explain some questions that arose in my mind as I read the announcement from SmartEye today.

  1. SmartEye is saying that it has half a million cars carrying its DMS but, if so, they must be selling it very cheaply given the revenues announced.
  2. Given Seeing Machines has already stated that A$900m of RFQs are being decided right now, it seems odd that SmartEye should contradict this with the statement that “several smaller procurements are soon to be decided in the near term”. Is it possible that this is marketing speak for: “We’ve not won VW or Toyota”?
  3. As if to dispel this notion we’re promised: “Three of the largest procurements of DMS to date are due for sourcing in the coming quarters”. Really? Well, don’t hold your breath if you think SmartEye is going to win them against the combined might of Qualcomm and Seeing Machines.

Of course, I am biased purely because I’ve conducted one helluva lot of research. I believe Qualcomm is set to unveil a host of auto RFQ wins before Christmas, with Seeing Machines DMS/OMS in them. And yes, I’m convinced SEE has won Toyota and VW — I just can’t prove it. Certainly, I don’t hear SmartEye mentioning either company.

Regarding fleet, I believe the global Shell deal is set to be huge. I’ve heard whispers that it could be a caterpillar-style deal, with upfront revenues that will bring forward break-even. Though, with Shell in a quiet period, I can’t confirm.

Moreover, See’s fleet arm is making money, while SmartEye’s nascent fleet offering is still pre-revenue! 

As for aviation, we patiently await the imminent takeoff off of Seeing Machines’ licensing deal with L3. It appears to have been delayed by a year. Regardless, given the progress made, the idea that Seeing Machines aviation arm has no value is plainly ludicrous (not in an Elon Musk way).

Bidders circling Seeing Machines?

By the way, I’m still of the opinion that Seeing Machines is very likely to receive a bid from Qualcomm very, very soon. Indeed, one fund manager recently rang me to ask about a rumour he’d heard coming out of the US, regarding a possible takeover of Seeing Machines. He didn’t mention who it was or his source but, if I was Qualcomm, I’d get the ring on Seeing Machines finger fast.

CES might be the perfect opportunity to announce the betrothal to the world. (I also believe SmartEye will also get bought in due course).

My logic? I just can’t imagine that Qualcomm can risk SEE’s tech falling to anyone else, given its importance to its auto stack offering. Look at how it outmaneuvered Magna to get its hands on Arriver. Certainly, Apple or Alphabet have the potential to outmuscle Qualcomm, as they must also know its potential worth. Therefore, I believe a lot of wooing is going on behind closed doors. 

By the way, has anyone dared tell Elon Musk that buying Seeing Machines might get Missy Cummings off his back?

My advice to Seeing Machines: “Don’t sign any pre-nup until you’ve seen the size of their respective wallets. You’re worth at least £10 billion!”

(Do your own research, as the writer may have been high on life while writing this – Ed).

The writer holds stock in Seeing Machines