Foresight Autonomous Holdings’s (NASDAQ: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.
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 (NASDAQ: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).
To read the entire report Please click on the pdf File Below: