Business Overview
AIM-listed SEEING Machines Ltd is a technology hardware & equipment company. It enables the machine to see, understand and assist people through Artificial Intelligence. The outstanding market capitalisation of the company stood at £110.15 mn, which ranks it among the small companies listed on the Alternative Investment Market of the London Stock Exchange. Its shares are the constituents of the FTSE AIM All-share and FTSE AIM All-Share- Technology. The group is headquartered in Canberra, Australia. On December 2005, its shares got admitted to the AIM for trading.

Major Institutional Shareholders
Lombard Odier Asset Management (Europe) Ltd., The Independent Investment Trust Plc (Investment Management), Legal & General Investment Management Ltd. and Miton Asset Management Ltd. are the major institutional shareholders in the company. (Source: Thomson Reuters)

Recent Development
On June 10, 2019, the group has secured a contract with a leading North America’s self-driving company to supply its Guardian Back-up-driver Monitoring Systems. The deal was signed at initial purchase of AD 2.2mn, and the monitoring system is expected to be fit into a crucial portion of the self-driving car.

Financial Performance – H1 FY19 (A$)
On March 20, 2019, the technology company reported its half-yearly results for the period ended December 31, 2018.

Revenue
During the period under review, revenue declined to A$14.0mn against the revenue of A$ 14.6mn recorded in the year-ago period. However, revenue from the sale of goods and license fee surged by 2.98% to A$ 6.9mn from A$6.7 mn received in first-half of 2018. Revenue from the rendering services segment dipped by 10.5% to A$ 6.64 mn against A$7.42 mn recorded in the year-ago period, and research revenue surged by 2.1% to A$ 0.49mn, during the year under review.

Gross profit during the first half of FY19 surged by 34.4%to A$ 8.86mn, primarily on account of a 35% reduction in the cost of sales. Net gain from forex activities stood at A$0.67 mn against the loss of A$ 0.60 mn. However, pre-tax loss during the period under review surged to A$24.63 mn against the loss of A$16.68 mn recorded in H1 FY18. The pre-tax loss swelled on account of steep surge in the Research and development expenses. However, the rest of all expenses were broadly in line with the expectation.

Although, out of total research and development expenditure, A$ 7.4 mn was a non-cash expenditure, resulting from one-off performance award.

Profit/(loss) attributable to the shareholders
Post operating expenses and tax-related adjustment made, the pre-tax loss of the technology solution provider swelled to A$ 24.6 mn against the loss of A$ 16.68 mn in the corresponding period of the previous financial year. Basic loss per share stood at A$0.015 against A$0.013 recorded in the year-ago period.

Stock Performance – 1 Yr

Daily Price Chart (as on June 11, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 03:18 PM GMT), shares of the SEE were quoting at GBX 3.2/share and slumped by 1.84% against the yesterday’s close. In the past 52wks, the stock has registered a high of GBX 14.25 and a low of GBX 2.85.

From the volume standpoint, the 5-days average daily volume traded on the LSE was 80.29% above the 30-days average daily volume traded on the LSE.

Valuation Methodology


Conclusion
Increasing global regulatory drivers that are increasing the installation of driver monitoring system across the auto industry is going to benefit SEEING Machine as well. Recently, the group secured a contract from a North America based self-driving car manufacturer. The group has also negotiated deals with leading global OEMs.

The group is well placed to meet future demand for their technology from the worldwide automotive sector, as Driver Monitoring System (DMS) has now acknowledged as a crucial element in the transport safety.

Therefore, on the basis of above rational and valuation done using the above methodology, we have given a "Speculative Buy" recommendation at the closing price of GBX 3.26 (June-10-2019), with lower double-digit upside potential, based on NTM Peers Median Price-to-Cash Flow-based valuation (approx.) on the FY19E Cash Flow Per Share (approx.)
 
*The “Speculative Buy” recommendation is also valid for the current market price as on June-11-2019.

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