Seeing Machines Ltd (AIM:SEE, OTC:SEEMF) has secured a $16.5 million upfront payment from global mining equipment giant Caterpillar for its Guardian driver monitoring product.
Alongside the contract, the AIM- and OTC-listed company also provided a trading update as the end of its current financial year approaches, where it said revenue and cash are set to finish "at or ahead of market expectations".
Also today, the company had a 'buy' rating from Stifel reiterated.
Although the final revenue recognition of the Caterpillar deal and the final outcome on automotive royalties it not yet complete, it is expected that cash EBITDA will be lower than market expectations, driven by a slower-than-expected transition from Guardian Generation 2 to Generation 3 aftermarket products.
Despite this, the board said the business has funding to deliver its business plan, with a cash flow break-even run rate still expected in the new 2025 financial year.
Stifel said the transition to the next generation of aftermarket products will have an effect on its forward estimates, which resulted in it trimming its share price target to 13p from 15p, though this noted "still has plenty of upside" above the last 4.7p closing price.
"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," the Stifel analysts said.
"Seeing Machines remains one of our top picks within the sector," they added, noting that the shares trade at 4.1 times forecast sales for the current year, falling to 3.4 times for next year.