Foresight Autonomous Holdings — Associate Rail Vision looking at Nasdaq listing

Foresight Autonomous Holdings — Associate Rail Vision looking at Nasdaq listing

Foresight’s (FRSX) 24.8%-owned associate, Rail Vision (RV), has announced that it is considering a Nasdaq listing. RV is one of relatively few developers of advanced driver assistance systems (ADAS) for the rail industry and it has had a number of successful trials of its 1.5km range obstacle identification systems with major European railways. We therefore see strong potential for future sales of its ADAS, as well as attractive revenue streams from big data collected from its train-mounted equipment. In our recent note on Foresight, Well placed for China’s coming ADAS revolution, published on 31 October 2017, we valued RV at $79.3m (see discussion below), equating to $19.6m or NIS0.65 per FRSX share for Foresight’s stake. With increased accounts and management transparency, we see potential for the market to derive a significantly higher DCF-based value for RV with positive impact for FRSX’s valuation.

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Foresight Autonomous Holdings

Associate Rail Vision looking at Nasdaq listing

Potential RV Nasdaq listing

Software & comp services

13 November 2017

Price per share*

NIS3.94

Price per ADR*

$5.59

Market cap

NIS424m

Market cap ADR

$120m

*Priced at 9 November 2017

NIS3.5152/US$

Net cash ($m) at 30 June 2017

18.3

Shares in issue

107.6m

Free float

66.6%

Code

FRSX

Primary exchange

TASE

Secondary exchange

Nasdaq

Share price performance

Business description

Foresight Autonomous (FRSX) is a development-stage technology company in Israel developing ADAS systems based on technology developed by its parent company Magna BSP. FRSX also has a 24.8% stake in rail ADAS specialist Rail Vision.

Analysts

Anna Bossong

+44 (0)20 3077 5737

Richard Jeans

+44 (0)20 3077 5700

Foresight’s (FRSX) 24.8%-owned associate, Rail Vision (RV), has announced that it is considering a Nasdaq listing. RV is one of relatively few developers of advanced driver assistance systems (ADAS) for the rail industry and it has had a number of successful trials of its 1.5km range obstacle identification systems with major European railways. We therefore see strong potential for future sales of its ADAS, as well as attractive revenue streams from big data collected from its train-mounted equipment. In our recent note on Foresight, Well placed for China’s coming ADAS revolution, published on 31 October 2017, we valued RV at $79.3m (see discussion below), equating to $19.6m or NIS0.65 per FRSX share for Foresight’s stake. With increased accounts and management transparency, we see potential for the market to derive a significantly higher DCF-based value for RV with positive impact for FRSX’s valuation.

Year end

Revenue ($m)

EBITDA*
($m)

PBT*
($m)

EPS*
($)

DPS
($)

EV/revenue
(x)

P/E
(x)

12/16

0.0

(3.3)

(3.4)

(0.08)

0.00

N/A

N/A

12/17e

0.0

(5.8)

(5.7)

(0.06)

0.00

N/A

N/A

12/18e

1.1

(11.5)

(11.5)

(0.11)

0.00

98.6

N/A

12/19e

14.6

(8.6)

(8.7)

(0.08)

0.00

7.9

N/A

Note: *EBITDA, PBT and EPS (diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

FRSX’s stake in RV was diluted in 2017 from 32% to 24.8% by not taking part in the last two RV capital increases. However, Foresight has warrants to increase its stake to 38.7% (fully diluted) by February 2019 for an outlay of $11.3m. Valuation note: in our outlook note of 31 October 2017 we valued unlisted RV applying EV/revenue multiples of 4.2x to 2018 and 2019 revenue forecasts, discounted to an end-2017 value at a 15% rate. With no real direct listed competitors, we derived this multiple from the average of three companies representing different facets of the RV business: Tesla (TSLA), which is involved in cutting-edge driverless auto technology (trading on an EV/revenue of 3.5x), BII Railway (HKG:1522), engaged in transportation technology, active in global railway traffic management systems (EV/revenue 4.7x) and Nvidia (NVDA), engaged globally in interactive 3D graphics with numerous applications including autonomous driving (EV/revenue 4.4x).

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China Aviation Oil — Strong volumes in tougher trading environment

Q3 results reflected the combined impact on gross margin of the core trading operation due to a return to a backwardation situation in product markets, as well as supply disruptions. More positively, SPIA and the other associates made a stronger contribution. With adverse trading conditions expected to persist for a period of time, management’s strategy to reduce volatility is being tested. The key growth drivers of increasing air traffic and an expanding geographic footprint continue to increase trading volumes and augur well for the future. Maintenance of profitability at a lower margin level while backwardation conditions persist should be offset by stronger growth from SPIA next year, but we now assume a more subdued expansion of the core business. The balance sheet remains supportive of further strategic M&A to facilitate growth. Our fair value falls to S$1.88 from S$2.11.

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