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I currently hold shares in Seeing Machines (LON: SEE).
It’s quite rare that a company whose share price has been down in the doldrums (for the best part of two decades!) could potentially prove an attractive investment. Today, though, I see the stars aligning for a little-known player listed on the London Stock Exchange’s Alternative Investment Market: Seeing Machines (SEE). Amidst a backdrop of searing hot stock prices maligned for their disconnect with the reality on the ground, SEE represents a welcome departure from this well-known paradigm. To me, it is undoubtedly one of the most exciting growth prospects I’ve seen in my fledgling years as an investor.
SEE operates in the driver monitoring systems (DMS) market. Essentially, the technology serves to identify when a driver is tired or incapacitated, after which they can be warned and the car’s speed, among other things, can be altered. It does this through monitoring eye and head movement such as facial expressions or drooping eyelids. The applicability is obvious and exciting all at once. According to statistics presented by the European Commission, 90% of road crashes are linked to human error. And in 2017, 25,300 people were killed on EU roads, while 135,000 people were seriously injured. In a world where there are 1.2 billion cars on the road, thousands and thousands of lives could be saved with this pioneering technology. With time, it’s not completely out of order to suggest that DMS could become as ubiquitous as fixtures such as seat belts and air bags. Given this information, DMS is likely to become a multi billion dollar market this decade.
The fact that the Canberra company is poised to become the leading player in this market makes this doubly intriguing. By 2022, Seeing Machines is poised to reach 40-45% market share. Mitsubishi Electric, its apparent closest rival, would struggle to reach half of this at 15-20%. The Swedish pretender to their throne, Smart Eye, lags even farther behind at a forecasted 5-7% share. While revenue growth over the past few years has been lackluster at best, a swathe of recent deals including with a Tier 1 partner give confidence to the watchful investor. It may also be why Lombard Odier Asset Management’s stake in the firm has risen to nearly 20% of its ordinary shares on issue. For a company with a market capitalisation shy of £100m, the potential is astronomical.
I don’t mean to say, however, that investing in SEE is without its risks. The company has over 3 billion shares in issue, and this number is likely to increase should the company see themselves in need of cash. They seem to dislike debt, with negligible borrowings. Hence, especially with a global pandemic spreading across the world, equity holders may have to brace themselves for further dilution. The aviation sector of SEE’s operations will probably also take a hit, however this is a relatively small part of the company’s overall business, with the focus very much being on land vehicles.
Having acquired shares at 1.82p and 2.28p more recently, I see the benefits as far outweighing the risks. A star-studded array of customers including BMW and Mercedes underline the scale of the Australian minnow’s ambition and expertise within the field. Having been founded in 2000, they have had years and years to gain on their rivals in perfecting their craft. With driver monitoring systems set to become recommended if not compulsory in the developed world, I’m greatly convinced of the technology’s potential. Let’s hope, then, that I can read the future for SEE (or, indeed, get lucky) as clearly as DMS tracking can see me and you!