Shares trading for under a pound grab investors’ attention and it’s not hard to see why. Pick right and the returns could be life-changing. I’m increasingly confident this could be the case with AIM-listed Seeing Machines (LSE: SEE). In fact, I think it could be one of the best penny stocks for me to buy for 2022.
Life-saving tech
SEE may not be familiar to a lot of readers so let’s have a quick recap. The Canberra-based, London-listed company is a specialist in eye-tracking. It creates tech for monitoring drivers’ level of alertness with the aim of reducing traffic-related accidents. The business has been around for over 20 years but it’s only now, thanks to new legislation and higher-spec vehicles, that the true opportunity is becoming apparent. This is, to some extent, borne out by today’s full-year numbers.
Revenues rise
This morning, Seeing Machines revealed an 18% rise in revenue to A$47.2m in the year to the end of June. The vast majority of this came from the company’s Aftermarket division where its Guardian tech is retrospectively fitted to fleets. The A$35.1m generated here was up 30% from last year.
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All told, almost 32,000 vehicles had been fitted with Guardian by the end of June. And if the recent agreement with Royal Dutch Shell is anything to go by, I can see this number rising substantially in the years ahead.
Arguably the most important development over the last year, however, has been the start of OEM royalty licence revenue as cars begin to be fitted with its driver monitoring system (DMS) software. As things stand, nine models (roughly 120,000 cars) have this installed, including the new Mercedes Benz S-Class. It’s this part of the business that I think will eventually drive the share price a lot higher.
Can anything hold this penny stock back?
Absolutely. Even if it manages to avoid all general obstacles in its path (Covid-19, supply chain issues), progress won’t come cheap. Only yesterday, the company announced that it had raised US$41m to help it capture as big a share of the “rapidly expanding” driver monitoring system (DMS) market as possible. Such a move dilutes existing shareholders. It might not be the last time either.
Potential buyers like me also need to be comfortable with a volatile share price. A rise of almost 190% over the last five years masks the roller-coaster journey in the interim. The shares rose from below 3p in 2017 to 13p+ back in 2018. They then sank below 2p in March 2020 before recovering to just shy of 12p today. To be clear, an investment here is not for the faint of heart.
Happy to hold
I’ve taken reasonable steps to avoid getting too dependent on Seeing Machines for growing my wealth. This includes being invested in more established businesses in a variety of industries and owning a number of quality-focused funds. To be clear, I’m not betting the farm on it. I never will.
Notwithstanding this, the prospect of it revealing the full identities of its latest OEM customers in the months ahead could easily move its shares into a higher gear. And should the company succeed in capturing even a modest proportion of the opportunities in other sectors such as aviation, I think this could be one of the best penny stocks for me to buy more of for 2022.
