Seeing Machines Ltd (LON:SEE) is going it alone commercialising its driver monitoring technology for the automotive industry, rather than spinning out the business. And it is raising up to £17mln to pursues these plans.
An option previously being considered by the AIM-listed group was to demerge its FOVIO automotive business as a separate entity.
This would allow it to fully capitalise on opportunities to develop and sell its technology as the first generation of semi-automated vehicles roll off the production lines.
It had cornerstone investors; however the venture capital backers wanted the intellectual property behind its chip-based system transferred to FOVIO.
“The original intention had been for FOVIO to receive a perpetual licence for use of the technology in automotive applications and developers to be temporarily seconded,” explained Lorne Daniel, analyst at City broker finnCap.
“The changed terms would leave Seeing Machines investors significantly disadvantaged – unnecessary given the relatively small funding requirement.”
Potentially huge car market
The car market is a potentially huge one as it moves towards automating the role played by the driver.
Road tracking expertise has been perfected by specialists such as Mobileye. But as important is being able to gauge the alertness (or otherwise) of the person at the wheel.
That’s where Seeing Machines comes in. And in fact 14 major car makers have been trialling the company’s unique eye and facial recognition tracking system.
According to analysts, the semi-autonomous CT6 Cadillac, with SuperCruise, will likely be among the first to benefit from the driver monitoring system (DMS).
WATCH: finnCap analyst gives us his view
The market is potentially huge with 100mln vehicles produced annually. With FOVIO chips priced at US$40 each, that’s a market worth up to US$4bn a year, according to finnCap.
The first commercial deployment of the company’s DMS system is an in-cab system used by the mining industry in large dump trucks used to transport ore.
However, there are wider applications for the platform – it could be used in HGVs, buses, trains and even planes. And it is these commercial avenues the go-it-alone strategy protects.
“Recent incidents highlight the urgent need for this technology, including the conviction of a trucker who killed a family on the A34 while distracted by his mobile phone and the crash of a Croydon tram whose driver appears to have lost concentration or consciousness,” said finnCap’s Daniel.
The new infusion of cash is being garnered via a £15mln share placing at 4p, and an open offer to existing investors that could bring in a further £2mln.
Seeing strong demand from global car makers and tier-one suppliers
“We are seeing strong demand for our advanced driver monitoring systems from global car makers and from their tier-one suppliers,” said chairman Terry Winters.
“We previously considered spinning out our FOVIO automotive business however the directors have resolved it is in the best interests of shareholders to retain full ownership.
“All our intellectual property including data, our SiP driver monitoring system chip and all our key staff will remain available to all Seeing Machines' target industries.”
In the announcement the company also updated on trading, saying 2016 had been a record year thanks to sales of its first commercial product, Fleet Guardian, which is used by the mining industry.
Seeing Machines has a licensing deal with Caterpillar and it said the agreement provided a one-off boost that won’t be repeated in 2017.
The digger and dump truck maker is expected to appoint a representative to the Seeing Machines board.
Shares worth 12p?
At 11.30am, Seeing Machines were changing hands at the placing price of 4p a share (down 11%). finnCap thinks the stock is worth 12p.
It pointed out that rival Smart Eye, which is trying to develop a similar solution for the automotive industry, recently joined the Swedish market valued at £45mln.
The IPO valued the company at more than 10 times' revenues.
Using that metric, Seeing Machines, which generated sales of £33.6mln, would be worth £330mln. Its market capitalisation is currently £43m.
“Smart Eye and some tier-one automotive suppliers are seeking to develop solutions but have no real world experience,” said finnCap’s Daniel.
“In comparison, Seeing Machines has a ready-to-go system backed by years of experience and data gathered in the mining industry in some of the harshest environments on the planet.”