Interactive Investor

Insider: these company bosses still buying as shares keep rising

5th July 2021 09:12

Graeme Evans from interactive investor

This AIM share sprang to life a year ago, and now directors are buying more, even at higher prices. They’re doing the same at another small-cap. 

A flurry of buying by directors at Seeing Machines (LSE:SEE) has followed confirmation that General Motors (NYSE:GM) is using the AIM-quoted company's driver safety technology on more models.

The AI-powered systems that can track head pose, gaze direction and eyelid behaviour to ensure drivers are alert at the wheel, will feature in GM's Cadillac CT4, CT5 and Chevrolet Bolt, as well as the Mercedes Benz S-Class and Mercedes Benz EQS sedans. 

Canberra-based Seeing Machines said its Driver Monitoring System is now in production across nine individual vehicle models globally and set to be in more than 30 by early 2023. Seeing Machines previously announced that its software is in GM's Cadillac Escalade.

June's encouraging production update has set the scene for significant boardroom purchases of Seeing Machines shares, led by chief executive Paul McGlone whose acquisition last week of 250,000 shares at a price of 9p was worth £22,500. People associated with chair Kate Hill (£18,000) and non-executive director John Murray (£21,500) also bought at around 9p a share.

The stock, which joined AIM in 2005, surged to 13p in 2018 before falling back to 1.3p in the early days of the pandemic. Analysts at house broker Cenkos, however, have a price valuation of 16p and concluded from the recent General Motors announcement that the automotive business now being won by Seeing Machines is more extensive than originally thought.

The company dates back to 2000 when it was set up to commercialise research that had been jointly undertaken since 1997 by Volvo Technology in Sweden and researchers at the Australian National University into vision-based human-machine interfaces.

The technology has multiple automotive-related uses, most significantly for helping transport and logistics fleets to detect fatigue and distraction-related driver events. It also enhances safe innovation in automated vehicle technology by ensuring that the back-up driver is sufficiently alert to take the controls should it be necessary.

Other fields include aviation, where its eye-tracking system for flight crew training was recently the subject of a deal worth $1 million over five years in the Australian defence industry.

Figures at the end of March showed operational revenues of 18.1 million Australian dollars (£9.8 million) for the second half of 2020, a rise of 15% as losses narrowed to 16.8 million (£9.1 million). Cash at the end of December was slightly higher at $52.3 million (£28.4 million). 

As more car models get to the start of production, the company expects to transition from non-recurring revenues towards significantly higher margin-based royalty revenue.

Interactive Investor's Andrew Hore recently named Seeing Machines as one of his five AIM stocks with potential for longer-term returns, with the others being eEnergy (LSE:EAAS), DX Group (LSE:DX.), Angle (LSE:AGL) and PCF Group (LSE:PCF).

Hore expects the company to lose money for the next three years at least, making another cash call possible. However, he notes there should be plenty of additional contract announcements before that happens.

Hore wrote in March: “The market capitalisation is high based on the short-term outlook, but if Seeing Machines can garner a market share of more than 30%, as has been suggested, then the valuation could be much higher.”

Carclo chair splashes out

This year's 240% rebound for shares in technical plastics specialist Carclo hasn't stopped new executive chairman Nick Sanders from topping up his stake in the business.

His purchase was made at just under 52p and followed robust full-year results showing revenues from continuing operations only slightly lower at £102.5 million, despite the severe impact of Covid-19 on its aerospace components division. Underlying profits fell 34% to £4.8 million.

Sanders, who started in his current role in October, is confident that a three-year agreement with the group's lending bank and pension trustees has given the business a much more stable platform from which to grow. The opportunities appear particularly strong in the medical diagnostics market.

He's also been encouraged by a strong trading performance in the first quarter of the new financial year.

The purchase of shares amounted to a value of just under £50,000, while chief financial officer Phil White spent about £10,000. The shares fell to 7.6p in August but were trading as high as 462p in 2013.

Carclo was established in 1924 as a manufacturer of card clothing – a consumable wire product used in the combing of textile fibres prior to spinning. In 1997 the group undertook a series of acquisitions and disposals to focus on higher growth technical plastics businesses.

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