4 AIMs shares that are potential bid targets3 May 2024 19:52
Https://www.ii.co.uk/analysis-commentary/four-aim-shares-are-potential-bid-targets-ii531587
Seeing Machines (SEE)
Share price: 4.585p
Market cap: £190.6 million
Driving safety technology developer Seeing Machines Ltd
SEE
3.71%
has spent decades perfecting its technology and it has been winning contracts to supply it to automotive manufacturers. Revenues from those contracts have started to build up and the company is moving towards profitability.
Seeing Machines says the number of vehicles on the road using the company’s technology has more than doubled to more than 1.5 million units. The cumulative initial lifetime value of 17 programmes with 11 customers is $366 million, and most of these revenues will be booked by 2028.
The share price is well off its high in 2021, let alone the all-time high in 2018, and the share price trend line is still heading downwards. Yet, the company should reach cash breakeven during the next financial year.
However, loss-making technology companies are not in favour, currently. That is why it has been difficult for the share price to make a consistent recovery despite the contract wins. The forecast loss for the year to June 2024 is nearly A$25 million. Next year the loss could be little more than A$1 million before a move to a pre-tax profit of more than A$17 million in 2025-26. Profit should grow as more contract programmes mature.
Chief executive Paul McGlone has been exercising options, some of which were priced at 5.4p/share and 5.09p/share, which is well above the current share price suggesting he is confident about prospects. The finance director has also been buying shares at an average price of 4.42p each.
An automotive components supplier could find Seeing Machines an attractive purchase now that much of the risk has been taken away due to the contract wins. There is already a collaboration deal with Magna International Inc
MGA
3.20%
to develop occupant monitoring via the rear-view mirror. Canada-based Magna also has a $47.5 million convertible note, which is convertible at 11p a share. Magna is certainly big enough to make the acquisition of Seeing Machines a realistic possibility as results improve.