Mitsubishi’s strategic stake in Seeing Machines

A few thoughts on the strategic investment in Seeing Machines taken by Mitsubishi Electric Mobility Corporation, part of the huge Mitsubishi conglomerate.

  • It secures the cash for Seeing Machines to hit breakeven regardless of the vagaries of the economy, automotive sector or machinations of any single industry player or partner. 
  • It ensures that when a bid is made for Seeing Machine it will be at a very competitive price. The company cannot possibly go on the cheap. 
  • It provides a local partner in the Japanese market, which should make it much easier to gain a strategic stranglehold in the Japanese automotive sector, while also ensuring further diversification in its Tier 1 relationships.
  • Via Mitusubishi’s network we should see Gen 3 Guardian sales in trucks rocket from here on in. It also produces and sells buses and trucks via the FUSO brand – a collaboration with Daimler Trucks. 
  • It potentially opens up new markets to Seeing Machines technology. Mitsubishi manufacturers road construction, agricultural equipment and even forklifts, which could use Seeing Machines’ driver monitoring technology to reduce accidents caused by driver fatigue.
  • The fact that Mitsubishi was determined to take the maximum percentage of shares it could take without triggering a bid (19.9 per cent) tells me how highly it values this investment. It plans to develop more personalised robots in the future for a rapidly ageing society in Japan and combining Seeing Machines’s human fatigue/cognitive state detection with heartbeat detection would be useful features for a domestic ‘carer’ robot to have. 

Consumer Electronics Show

With the Consumer Electronics Show (Jan 7-9) expected to bring news of further license deals, the list of possible buyers of Seeing Machines grows ever longer. 

Moreover, in calendar 2025 I expect its market leadership to become both undeniable and unassailable in the medium term, as:

  • It surpasses 5m cars on the road with its DMS/OMS technology
  • It becomes profitable on a monthly basis by June.
  • Guardian goes past 100k units.
  • The Aviation product is readied for use. 

VW Tayron on sale now

The Volkswagen Tayron, which includes Seeing Machines DMS in its rear view mirror, is due to go on sale in the UK this week. 

The first UK reviews of the vehicle should take place in the spring, possibly mid-to-late March; there may well be some reviews from overseas drives before that, in late February or early March.

This should rapidly boost the profile of its life-saving technology, not to mention public interest in buying shares in a tangible AI product.

The writer holds stock in Seeing Machines

Stifel flash note: SEYE KO’d by Seeing Machines?

In a flash note published yesterday, Stifel confirmed that Smart Eye’s Q3 results clearly show it is taking at beating at the hands of the global leader Seeing Machines.

Stifel analyst Peter McNally confirmed what well researched investors already know; that the auto industry is in a tough place, particularly for Smart Eye. Regarding Smart Eye, he commented: “Automotive revenue shows a slight dip (-1.5% q/q) to SEK 32.4m and is therefore similar to last quarter, which was flattish also. Part of the reason for being flattish is a transition away from services (NRE) to licences, which grew 100% y/y to an undisclosed amount.”

For those who still think Smart Eye is a contender for the automotive crown, McNally’s killer punch is that: “On a like-for-like basis, Seeing Machines Automotive revenue (excluding Aerospace) in FY24 was well over $60m versus Smart Eye’s $11.4m (Q323- Q224), so it still looks like Seeing Machines is well ahead.”

According to McNally, two more take-aways from the results were, firstly: “Commentary on growth in Automotive licences is positive saying the growth rate should increase in Q4 and ‘even higher growth in 2025.’ Clearly this suggests that they see adoption is increasing, which is good news for the industry, but we still think they are playing catch up at this stage as their revenues are significantly lower.”

Secondly, “Smart Eye is also suggesting that volumes will pick up in Q4 in Aftermarket, which somewhat agrees with Seeing Machines’ expectation of a ramp in volumes in its fiscal H225 (Jan-Jun 2025).”

Having listened to the Smart Eye presentation, I found the reluctance of the company to state the number of cars on the road with its technology a telling indication that it has been bested in autos by Seeing Machines. Smart Eye once used to boast of having 1m cars on the road but, as Seeing Machines approaches 3m by the end of this calendar year, the Swedish company has yet to announce hitting 2m, preferring to use the opaque terms ‘design wins’ and ‘models’.

Of course, do your own research.

The writer holds stock in Seeing Machines.

Euro NCAP pushes for quality DMS, as provided by Seeing Machines

Following the publication of the 2026 Euro NCAP safety protocols, Seeing Machines is on the cusp of a significant re-rate as OEMs and Tier 1s race to meet higher performance requirements for driver/occupant monitoring.

The two documents can be viewed here, courtesy of Colin Barnden, Principal Analyst at Semicast Research: 

The significance of these documents appear to have passed many investors by. However, no less a figure than Richard Schram, Technical Director at Euro NCAP, has confirmed to me that from January 1st, 2026 a new passenger car will not achieve a 5 star Euro NCAP safety rating in Europe unless it has a driver/occupant monitoring system that meets the criteria specified in these 2026 protocols.

The implications of this news are huge for any OEM wishing to sell new passenger cars models in Europe. This is because, even though driver monitoring is mandatory in Europe from July 2026, Euro NCAP is effectively “pushing for higher performance than the regulation does”, according to Schram.

This is great news for Seeing Machines as, being the most technically proficient provider of DMS/OMS with a fast to implement rearview mirror system, it offers the most realistic solution for many OEMs in that timeframe whose premium models will certainly require 5 star safety. [Elon Musk are you listening?]

I’m therefore anticipating a raft of extensions to existing contracts as well as new contracts to secure its services via Magna, but also via its other partners over the next 6 months.

I think that in the short term there will be such demand for its technology that its average selling price (ASP) will not drop significantly even as volumes expand. Moreover, that ASP is, I believe, already at a significant premium to its competitors. 

The upshot is that within the next 6 months, as SEE speeds towards 4m cars on the road with its technology, SEYE will be left in the dust, alongside Tobii and Cipia – which must be feeling the pain from the economic collapse of Israel.

Seeing Machines itself has previously stated that it expects to take around 40 per cent of the global passenger car market for DMS by volume, 50 per cent by value. I’ve long held the view that 75 per cent by value is possible and I think this news from Euro NCAP confirms that there was a sound reason for my holding onto this stock, despite experiencing a roller-coaster ride.

As OEMs, Tier 1s and fund managers realise the implications of this news I expect increased buying of SEE stock as it brushes off misplaced investor concerns. This should push the price up significantly. 

Call me paranoid but over the next 6-8 months I believe private investors should beware market makers shaking the tree in order to acquire their shares cheaply for institutional buyers.

Of course, do your own research as this is only my opinion. Maybe my prediction of a 75 per cent market share of the global DMS market 8 years ago was a fluke.

The writer holds stock in Seeing Machines.

Auto industry woes affect Seeing Machines

While Seeing Machines’ FY24 results illustrated a year of significant progress, auto industry headwinds and a slower than expected ramp in Guardian Gen 3 sales have led to Stifel reducing its revenue estimates for FY25-26. This in turn has led to it reducing its DCF-based target price to 11.4p from 13p.

It’s certainly disappointing news for shareholders but Peter McNally, analyst at Stifel, commented in a detailed note issued on October 31st: “Despite delays we maintain our positive stance on the shares moderating our target price to 11.4p (13.0p) and see the company extending its leadership with proven implementation and deployment into an increasingly regulated market.”

Revenues for 2025 are now predicted to be US$73.1m with a pre-tax loss of $13.3m, while in 2026 revenues of $97.5m produced a pre-tax profit of $5m.

Material uncertainty

In the full Annual Report (on page 46), the auditor PWC also made a comment about ‘material uncertainty’, reflecting the cash outflow of $11.9m in the FY24 results. Personally, I believe they are only fulfilling their obligations to warn investors about potential risks (while also covering themselves), yet it is unsettling for green investors unused to the conservative ways of auditors.

Stifel’s McNally certainly didn’t appear unduly concerned, stating: “We note the auditor’s “material uncertainty” comment but see a path to breakeven given strong (although reduced) operational drivers and cash costs containment”.

He went on to explain his estimate changes and assumptions in detail: “We reduce FY25/26E revenue by 11%/17% assuming a slightly higher GM% of 64% (62%), driven by a slightly higher software mix resulting in a cash EBITDA loss of $14.9m ($10.8m) for FY25E but profit of $8.6m ($19.5m) in FY26E. This is based on stable cash opex of $65m, resulting in $9.8m cash at FY25E year-end and cash generation thereafter as royalties continue to ramp and Guardian Gen 3 volumes increase.”

In his presentation today on Investor Meet, Paul McGlone reiterated that the company still expects to hit breakeven on a monthly basis in Q4 of this financial year.

He went to explain that if additional working capital is required due to the lumpy nature of automotive revenues: “We have a reasonably simple solution in the form of receivables funding and that process is underway. We expect it to deliver additional working capital in the range of $5-10m.”

Furthermore, he added: “To the extent that we need additional cash, we have a whole range of opportunities before us, some of which are well progressed and are consistent with the types of programmes or results that we’ve delivered in the last 2-3 years.”

I assume here that he is referring to license deals which, as Stifel points out have had a dramatic effect on profitability and cash given its similar 100% gross margin nature to royalties. McNally teased in his note: “Licensing is very difficult to predict but the company has benefitted from licensing deals over the past few years from Magna for $5.4m in October 2022, Collins Aerospace for $10.0m in May 2023, and most recently Caterpillar for $16.5m in June 2024.”

I’m therefore fairly confident Paul McGlone and his team will pull another rabbit out of the bag this year. Happily, it seems smarter people that me are thinking the same.

Speaking directly about the cash concerns McNally wrote: “With $23.4m of cash on the balance sheet we feel that the company has sufficient cash for the year with the goal of reaching run-rate cash flow break even by the end of FY25E (June). The company also has a history of sourcing strategic funding and software license agreements that have benefited cash. We believe these options still exist and can provide additional cash if required.”

Peel Hunt

In a short note issued today Peel Hunt reiterated its ‘BUY’ rating but reduced its target price to 7p from 9p. Analyst Oliver Tipping stated:

“Management has re-affirmed its commitment to reach a cash break-even run rate in FY25. However, we believe this could be challenging. 

“Ultimately,  OEMs  across  the  industry  have  been  struggling  and  they dictate the speed of production. We fear timelines could shift to the right. 

“Seeing Machines’ ability to reach its break-even  run  rate  goal  is  likely  to hinge on its ability to control costs. Competitors, like Tobii, have already begun severe  spending  cuts  and we  believe  Seeing  Machines  will  require similar measures given  its  current  cash  burn  rate of $2m a month. To account for wider industry weakness, we reduce our TP from 9p to 7p.”

Reasons to be cheerful

While the share price tanked on Thursday, as nervous private investors do what they usually do when real life intervenes; panic and sell low, there are reasons to be cheerful.

In the Investor Meet presentation today Seeing Machines did confirm that for this financial year it expects: 

  1. 1.9 – 2.1 million annual production units for Automotive, contributing to high-margin royalty revenue. 
  2. A 20% increase in connected Guardian units generating monthly services revenue. 
  3. 13,000 – 15,000 Guardian Gen 3 units to be sold, predominantly in Q2 at a much higher margin (50%) than previously with Gen 2 units (10%). 
  4. Aviation to achieve Blue Label (functioning prototype) product delivery, adaptable for certain fields of use (simulator, air traffic control). 
  5. Cash flow break-even run rate target at end of FY2025.

In addition, during the Investor Meet presentation CEO Paul McGlone revealed that there has been a resurgence in the inflow of RFIs and RFQs for the auto industry. “We are currently processing RFQs for OEMS based in Japan, Korea, Europe, China and North America. The vehicles associated with those RFQs are largely for Europe, Japan and North America and would have start of production timing between 2027 and 2029. And we expect the sourcing of these programmes to begin in 2025 calendar year.”

Thus, I think Peel Hunt’s fears of auto timelines shifting to the right are unfounded. Indeed, Seeing Machines has already suffered from that and the market is now hot for DMS/OMS once more.

Amazing news?

Regarding Gen 3 sales, I’m also hearing a whisper that Seeing Machines has begun trials with a global US online retailer, which is A household name. If they are successful and a deal is announced a few months from now I’m pretty confident the share price will soar on that news alone. Can you guess the name?

I’ve been in this stock a long time, too long in truth. However, I’ve no intention of selling out when the company is so close to achieving breakeven. That’s because I believe it will trigger a bidding war. Do your own research of course.

The writer holds stock in Seeing Machines.

P.S. If anyone does make any money from this information do please consider making a small donation to a charity for the people in Gaza. As we worry about money they are being murdered en masse and ethnically cleansed, which according to international law constitutes genocide. Thanks.

Seeing Machines takes gold with new world record

Seeing Machines has proved to the world that it is the leading company in DMS, with its latest set of KPIs taking it past the 2.2m level for cars on the road an increase of 104% year-on-year. It seems set to pass the 3m level, as predicted here a few months ago.

Guardian sales for Aftermarket were also solid: monitored connections rose 19% over the past 12 months to 62k despite the Gen 2 box approaching end of production.

Peter McNally, analyst at house broker Stifel commented: “Seeing Machines seems strategically well positioned for continued market leadership with Tier 1 automotive suppliers Valeo and Magna as partners, rising adoption, a recently homologated Gen 3 aftermarket product and a healthy balance sheet as it heads toward a monthly cash break even run-rate in FY25E.” 

Paul McGlone, CEO of Seeing Machines, said: “We have maintained growth of over 100% in the number of cars on road featuring our technology from 12 months ago, despite the quarter-on-quarter volatility experienced during the year. Regulations are now in place so we are confident that these figures will continue to grow for existing Automotive programs and as new programs start production.

“Similarly in Aftermarket, the new regulation in Europe will require more commercial vehicle OEMs to seek After Manufacture fitment for our Guardian technology, underpinned by successful homologation (regulatory approval) with our Northern Ireland customer, Wrightbus, as announced on 30 July 2024. With Guardian Generation 2 stock sold we are now focused on Guardian Generation 3, initially with European commercial vehicle OEMs, then all customers across existing markets in Europe, The Americas and Asia Pacific.”

Unassailable lead

Seeing Machines has now surpassed Smart Eye and there appears to be no way its Swedish rival can catch up in the short term.

Peter McNally, gave a useful summary of where we stand now:

“Cars on the road is proof of engineering execution: Although its competitor Smart Eye was the first to break the 1 million cars on the road threshold in June 2022, it was still “not quite 2 million” in May 2024 (Smart Eye report Q224 on Aug 21st). Seeing Machines reached 1 million in June 2023 and has been the first to announce 2 million. Seeing Machines has 7 Automotive programs currently in production and we believe most of these are still ramping given it takes roughly 18 months to reach full production. The company has a total of 17 programmes signed worth $392m with many more likely to be added in the future given increasing regulatory drivers and evidence of execution.”

Were there a DMS Olympics Seeing Machines would take gold, with Smart Eye in second place. As for Bronze, I’d hoped to award it to Cipia. However, I wonder if Cipia may be hampered by the likely fallout from Israel’s escalating Israel war in the Middle East.

The writer holds stock in Seeing Machines

Seeing Machines Gen 3 Guardian fitted into first commercial vehicle manufacturer

Seeing Machines has confirmed that its recently launched Guardian Gen 3 AI-powered Driver Monitoring System (DMS) has been successfully fitted into Wrightbus and achieved ‘homologation’, the formal process of being approved and certified for use.

In a note issued today by house broker Stifel, its analyst Peter McNally explained that the actual contract with the Northern Irish bus manufacturer is likely to be worth ÂŁ0.8m-1.5m per year to Seeing Machines at full production.

While that’s not huge, the real significance of this news is that it paves the way for further approvals from bus and truck manufacturers. For example, Seeing Machines revealed that 3 other OEMs are currently going through the approval process, which McNally noted: “indicates that the company has won another customer since the last update”.

OEMs Future Proofing

McNally also reiterated a point that has been ignored/misunderstood by many investors; some manufacturers will increasingly seek to future-proof their commercial vehicles by installing advanced DMS, to be ready for the introduction of more stringent regulations in Europe that come into effect in 2026. 

Here’s how he explained it in his note: 

“On 7 July, two key regulatory changes to Europe’s GSR came into effect:
(1) Driver Drowsiness and Attention Warning (DDAW): DDAW, which requires driver monitoring systems for signs of drowsiness, is as of 7 July mandatory for all new road vehicles sold. While the regulation does not appear to require advanced DMS, allowing a wider scope of solutions, we would expect the change to increase demand for DMS, with Seeing Machines’ products a market- leading option for OEMs now necessitated to at least provide monitoring for drowsiness. However, this can also be provided by steering wheel torsion.

(2) Advanced Driver Distraction Warning (ADDW): A more stringent standard requiring direct or camera-based DMS to detect driver distraction, ADDW points more directly towards Seeing Machines’ offerings. As of 7 July, this is mandatory for all new ‘types’ of registered vehicles, but we shall have to wait two years before it is mandatory for all new vehicles sold. However, for customers installing DMS in the short term to meet the DDAW regulation, there is now an incentive to future- proof vehicles for when ADDW fully comes into effect in 2026, with the Guardian 3 a market-leading option.”

It’s therefore a no brainer that the more proactive, safety-conscious, OEMs are going to accelerate the process of installing advanced, camera-based DMS. With its technological lead further buttressed by leadership in gaining regulatory approval and certification for use by commercial vehicle manufacturers Seeing Machines should take a very healthy chunk of the market in Europe.

Massive market in Europe

The scale of this regulation-driven opportunity is huge as McNally conveyed with some stats: “The European Automobile Manufacturers’ Association (ACEA), which ‘unites’ Europe’s 15 major car, truck, van and bus makers, stated that European bus production rose 19% to 33k vehicles in 2023. In addition, commercial truck production rose 16% to 347k. For comparison, Seeing Machines reported a total of 14.8k hardware units sold in FY23 which produced $14.5m in revenue from hardware and installations.”

McNally reiterated his investment case for Seeing Machines with ‘BUY’ recommendation and a 13p price target. “We continue to think that Seeing Machines is leading the DMS market. At current levels, the shares trade at 4.0x FY24E EV/sales or 3.3x FY25E, which we think is attractive for a market leader in a large industry with a three-year forecast revenue CAGR of 27% or 42% for gross profit through FY26E.”

Personally, I’m expecting upgrades this financial year as Seeing Machines market leadership in Aftermarket and Auto (never mind Aviation) becomes glaringly obvious and profitability is achieved.

The writer holds stock in Seeing Machines

Seeing Machines’ canny acquisition outweighed by Peel Hunt’s reduced price target

Investors were left scratching their heads as a bargain acquisition by Seeing Machines that enhances its automotive DMS/OMS offering, cements its presence in Europe and secures it more automotive contracts, was outweighed by news that Peel Hunt has reduced its price target from 12p to 9p.

The acquisition was of Asaphus Vision, a Berlin-based company that was owned by Valeo and which has strong IP in AI and machine learning relating to facial recognition and DMS. According to the RNS issued today, it supports a strategic collaboration with Valeo to grow market share in automotive. Moreover, the  acquisition for US$6m (only $2m in the first two years) is “expected to be cash neutral on an operating basis.”

Peel Hunt had previously stated (in a note dated 26th June) that it would reduce its forecasts “to reflect the timeline for the expansion of its driver monitoring systems (DMS) shifting to the right and slower-than expected roll-out of the Gen 3 aftermarket product.”

It that note it stated:“Greater uptake in ‘basic’ DMS has diluted royalty per car, whilst Gen 3 delays mean Aftermarket sales are low-margin end-of -life Gen 2.”

Today, Peel Hunt analyst Oliver Tipping confirmed that view: “Greater demand for low-priced ‘basic’ DMS and the delay in getting its Gen 3 aftermarket product ready to ship, mean FY24 margins are lower than expected. Underlying progress remains solid, today’s acquisition further differentiates its expertise, and the EU regulations mandating more advanced DMS (at a higher ASP) in 2026 keep us bullish on the medium term prospects. We revise our numbers based on this shift to the right and lower our 12-month TP from 12p to 9p, but retain our Buy rating.”

Its forecast revenue figures for the financial year ending 30 June 2025 has been reduced to $76.8m from $91m, with its pre-tax loss forecast to rise to $11.8m from $1.2m, with cash EBITDA falling to $1m from $11.3m. 

Bargain acquisition

Far from being dismayed at these developments, I think the market is being far too pessimistic. Seeing Machines has got a bargain acquisition in Asaphus, which only a year ago was valued at $12.5m by owner Valeo, for whom it was its internal DMS/OMS product development division.  Moreover, it’s tech reached commercial deployment in 3 automotive programmes, including one in China.

According to Peter McNally at house broker Stifel: “While Seeing Machines has worked with Valeo in the past, its work has had to be carefully delineated to account for Aphasus. With the company taking ownership of this asset, it appears that Valeo has now aligned itself with Seeing Machines technology and is evidenced by a statement from a representative of Valeo in today’s release which states, ‘We are delighted with this collaboration. Combining their teams with Seeing Machines, we will benefit from the best-in-class perception software to integrate into our hardware and software architecture for driver and occupant monitoring systems. Together, we will be able to provide more competitive solutions.’

McNally believes this tie up with another Tier 1 automotive supplier, in addition to Magna, is “a sign that the market is increasingly moving toward Seeing Machines’ solution.”

Deepening partnerships

So what are the implications for the future? Well, this is McNally’s take. “We note that less than a year ago, Valeo announced its Smart Safety 360 product that was suggested within the industry to use Mobileye (MYLY.O, not covered) advanced driver assistance (ADAS), as well as Seeing Machines DMS in the same product. We also note that Seeing Machines signed a non- exclusive distribution agreement with Mobileye in February 2023. We wonder what the combination of partnerships including these companies could be in the future. It appears that Seeing Machines has made partnerships/agreements with these companies that could be deepening the involvement amongst them.”

I believe this deal makes Seeing Machines an even more attractive target for an acquisition in the near future as its global dominance grows and high quality DMS/OMS becomes the only game in town.

The writer holds stock in Seeing Machines.

$16.5m license deal for Seeing Machines with slight delay for Gen 3 ramp

Seeing Machines (AIM: SEE) surprised the market with a ‘good news-bad news’ RNS, that led to house broker Stifel reducing its price target to 13p, while still maintaining its ‘Buy’ recommendation.

The good news was that it has renewed its software license for its Guardian aftermarket product with Caterpillar. It appears that is has received a $16.5m upfront payment covering a period of 5 years.

Unfortunately, it was effectively overshadowed by the bad news; a statement that “cash EBITDA” was behind expectations, due to a slower transition to the Gen 3 product.

Stifel analyst Peter McNally doesn’t appear to be overly concerned by the Gen 3 delay, reducing revenue estimates by 7.1% and 6.0% for FY25/26. He also assumes a higher level of operating costs going forward resulting in his reported EBITDA estimates dropping from $14.3m in FY25E to $7.0m and cash EBITDA loss falling to $10.8m from $3.5m. With the benefit of the cash from Caterpillar, his FY25 gross cash estimate reduces by a smaller amount to $14.2m from $17.9m.

He wrote: 

“The cash EBITDA weakness has been due to a slower transition to Gen3 Aftermarket products, and we think this will have an effect on our forward estimates, which we adjust to reflect today. However, the company reiterates its guidance for FY25 cash flow run-rate breakeven and the payment from Caterpillar helps boost the company’s already healthy balance sheet.

As the company gets closer to cash flow breakeven, we think the shares will appeal to a much broader group of investors, which should have a beneficial effect on the share price.

Seeing Machines remains one of our top picks within the sector. The shares trade at 4.1x EV/Sales for FY24E or 3.4x for FY25E. The estimate changes result in a revised target price of 13p from 15p, but leave plenty of upside to the current price.”

My personal view

I was very pleased with the license deal, particularly as it enables SEE to sell into the on-road portion of the General Construction category. As the RNS stated: “The changes open up access for Seeing Machines to sell its Guardian solution for on-highway vehicles directly and through its distribution network to select customers in many market segments of the General Construction and other core industries.” 

I wonder if it might even open up the possibility of further licence deals with other manufacturers in the near future, covering vehicles ranging from asphalt pavers, backhoe loaders, cold planers, fork lifts and so on?

What was a mistake in my view was combining an RNS detailing a positive licence deal and one attempting to explain the slower sales of Gen 3. Indeed, I would have preferred the ‘cash EBITDA” issue to have been dealt with in a separate RNS as part of the Trading Update. 

Unfortunately, the way the information was presented effectively killed what was a very good news story without giving any real insight into the issues with Gen 3 uptake. It’s not the first time great news has been upstaged by something negative and it was a clumsy way to communicate to the market.

Regarding the ‘bad’ news, the RNS that was published this week posed more questions than it answered. The reasons for the slower transition to Gen 3 weren’t properly explained, so I expect management to soon clarify exactly what has caused the delay. I’d also like to know if it correct to assume a higher level of operating costs going forward.

That said, Gen 3 is a game changer once it gets going. And that isn’t like to be far off. One source, who prefers to remain nameless but is so accurate that I refer to him as Nostradamus, told me: “I’m expecting sales to ramp up around November/December.” 

Another source has indicated that getting final sign off from the regulatory authorities for the Aftermarket Gen 3 Guardian solution in situ was the delaying factor. (I guess we should be thankful that the EU’s GSR standards are so high). However, that has apparently been achieved recently, so I’m expecting announcements regarding that. 

But why wasn’t that communicated in the original RNS, which would have made clear that the slow Gen 3 uptake really is just a temporary issue that has effectively been resolved? Somehow there appears to have been a miscommunication that cost investors dearly.

Mercifully, for the impatient, auto is doing very well. Not only am I confident that SEE will hit 3m cars on the road by the end of this financial year but Colin Barnden, the renowned analyst at Semicast Research, confirmed the likely ramp on LinkedIn. “The assumption is just the BMW and VW programs will lead to DMS deliveries exceeding 1 million units per quarter within the next twelve months. After many years of delays and frustration, 2024 will be the year DMS deliveries finally exceed ten million units.”

Apparently, the mix in terms of auto vehicles in Q2 led to a slight miss on the profit front for auto but with volumes shooting up it’s of little concern going forward. So why mention it in the RNS? 

I’m still very keen on this stock but would really like a little more care taken in the way news flow is handled and the RNSs are put together. It appears a bit too amateurish for a company that is a global leader in an increasingly hot niche market.

The writer holds stock in Seeing Machines

Seeing Machines to hit 3m cars on the road this year

Yesterday, Seeing Machines released its latest quarterly KPIs. These included very positive numbers for cars on the road with its driver monitoring tech. Indeed, I believe it is set to pass the 3m figure by the end of this calendar year, leaving Smart Eye far behind. (Literally in its rear view mirror).

The reason I’m so confident of that is because production of the VW models with its tech have begun, and VW churns out over 3m cars in Europe every year, never mind globally. 

Production of Seeing Machines Gen 3 Aftermarket product have also started, so I’m expecting a very healthy ramp up of revenues for that. 

With auto royalties increasing, auto extensions expanding long term production figures, and Aftermarket revenues set to swell, hitting its year end forecasts seems assured. This is particularly the case as my sources confirm management are laser focused on reducing costs to ensure it hits cash flow breakeven on a monthly basis in the next financial year. 

Breakeven confirmed

Paul McGlone, Seeing Machines CEO yesterday confirmed this, stating categorically: “We have worked hard this past quarter to remove cost from our business as part of our disciplined approach and rigorous operational focus. As we see our high-margin royalty revenues increase, we reiterate we are on track to meet FY2024 expectations and achieve a cash break-even run rate during FY2025.”

Certainly, house broker Stifel seems very confident. Yesterday, its analyst Peter McNally put out a note summarising the positives:

  • “The highlight of Seeing Machines Q324 KPIs (Jan-March ’24) are Automotive production volumes which are up 51% or more than 105k to c.313k in just three months (+80% y/y). This is welcome news after a still healthy but slightly slower Q224 and is likely to affect the shares positively, in our view.
  • The news comes with further reiteration from the company that it is on track to meeting FY24 (to June) expectations and continues to expect a cash flow break- even run rate during FY25. We make no changes to estimates as we approach year end but see this as positive given its main competitor recently pushed out its breakeven potential target by up to six months.
  • The shares remain one of our top picks within the sector as we approach regulatory mandates for all new vehicle types in the EU. We think investors should take advantage of the current price given the shares trade at 4.1x EV/ Sales for FY24E or 3.1x for FY25E. Buy.”

He maintains his target price of 15p. 

I’m still confident that with news of more contracts very likely, the share price has a lot further to rise before the end of June.

The writer holds stock in Seeing Machines.

Is Seeing Machines set to be a 10-bagger?

Seeing Machines has hit a 3-year low but my research leads me to believe that it will announce contract news before the end of the current financial year that should catapult it well into double figures. Inside the next year I’m hoping it will become a ten-bagger.

Mr Market is looking in the rear view mirror instead of focusing on the direction of travel; near-term profitability and years of profitable growth ahead across Auto, Aftermarket and Aviation. 

Yes, anticipated auto contracts have been delayed but through no fault of Seeing Machines. According to my sources delays have been caused by haggling between Tier 1s and the OEMs. Nothing to do with the superlative technology of SEE. As the OEMs need a quick solution I anticipate the delay will be overcome soon.

Nevertheless, I’m still expecting auto contract wins before the end of this financial year, probably with Japanese OEMs. These should be sizeable contracts and one name that keeps on popping up is Honda, but I’m optimistic we win another too. Japanese OEMs are behind the curve on interior sensing and Seeing Machines could help improve their position.

I’m also expecting to see some decent Aftermarket contracts announced. A big name client could have a huge impact so I would be grateful if it’s not buried in an RNS on the grounds of an NDA.

As positive news comes out many PIs will be tempted to sell, some may need to. Yet, I think the momentum will continue, driven by auto KPIs, aviation products being developed with Collins Aerospace, and a growing realisation that Seeing Machines is going to be profitable on a monthly cashflow basis during the 2025 financial year. This was confirmed by Peter McNally, an analyst for house broker Stifel, in a recent interview with Safestocks.

That momentum, accelerated by broker upgrades, should enable holders to experience the joys of holding a ten-bagger within a year from now.

Of course, nothing is certain. Especially with two ongoing conflicts in Ukraine and the Middle East, not to mention some sectors of the US stock market in bubble territory. So, do your own research and  always question assumptions.

The writer holds stock in Seeing Machines.