The update from Seeing Machines Ltd (AIM:SEE, OTC:SEEMF) showed revenue well ahead of expectations and the latest KPIs “reinforce the continuing healthy trends and high rates of growth for the company”, said broker Stifel, reiterating its ‘buy’ rating.
With revenue now expected to be 7% better than consensus, this equates to 49% growth for the year and with recurring revenues up 27%, this altogether “is an impressive achievement and shows the progress the company is making”, said analysts Annabel Hewson and Peter McNally as they took over coverage of the stock.
Although we will have to wait for the full-year results to get profitability figures, the analysts noted that there was a “healthy” cash balance of US$36.8 million.
Stifel’s full-year revenue forecast was raised to the reported amount and the forecast EBITDA loss was cut to US$11.5 million from US$12.4 million “with confidence gained by the revenue beat”.
Estimates for the new financial year were left unchanged until the full-year results.
“We note that working capital stands to benefit as the company moves to a capital light model with its 3rd generation product which is scheduled before the end of FY24 which is likely to result in much lower inventory levels in the future,” Hewson and McNally said.
With 15 programmes across 10 OEM customers, the cumulative total initial lifetime revenue now stands at US$321 million.
“Most of this growing amount is expected to be recognised in roughly the next five years (through 2028) and the company maintains its expectation to capture 40% of volume in Automotive.
“Ongoing commercial development should be bolstered by Magna in Automotive and Collins Aerospace in the Aviation business.”
Stifel maintained its target price of 15p, derived using discounted cash flow analysis, with the analyst saying they plan a review at the time of the results.
At current levels it was noted that the shares trade at 5.1 times full year EV/sales, which the analysts said, “we think is attractive for a market leader in a large industry with current year revenue growth of c.50%”.