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Summary

  • The global leader in the design and development of software and related technologies for camera-based Advanced Driver Assistance Systems (“ADAS”).
  • 200%+ Q1 increase in rev & gross profits.
  • Excluding share-based comp, annualizing Q1 '14, and applying Israel's tax rate, the P/E is 103.
  • Seems to have a near-monopoly position in a market MBLY created.

Based in Jerusalem, Israel, Mobileye N.V. (Pending:MBLY) scheduled a $500 million IPO on the NYSE with a market capitalization of $3.8 billion at a price range midpoint of $18 for Friday, August 1, 2014. Price range increased to $21-23.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Goldman Sachs, Morgan Stanley, Deutsche Bank, Barclays, Citi.

Joint Managers: Wells Fargo Securities, Baird, William Blair, Raymond James.

End of lockup (180 days): Wednesday, January 28, 2015.

End of 25-day quiet period: Tuesday, August 26, 2014.

Summary

MBLY is the global leader in the design and development of software and related technologies for camera-based Advanced Driver Assistance Systems ("ADAS").

Valuation

Glossary

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Annualizing Q1 qtr

Mobileye N.V.

$3,821

26.8

-47.8

13.0

12.9

13%

Excluding share-based comp

102.7

Conclusion

The rating is buy.

  • 200%+ Q1 increase in rev & gross profits
  • Excluding share-based comp, annualizing Q1 '14, and applying Israel's tax rate, the P/E is 103
  • 27x annualized sales
  • Seems to have a near-monopoly position in a market MBLY created.
  • MBLY is generating about $26 million per year in free cash flow.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

MBLY is the global leader in the design and development of software and related technologies for camera-based Advanced Driver Assistance Systems ("ADAS").

MBLY's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving.

Proprietary software algorithms

MBLY's proprietary software algorithms and EyeQ​® chips perform detailed interpretations of the visual field in order to anticipate possible collisions with other vehicles, pedestrians, cyclists, animals, debris and other obstacles.

MBLY's products are also able to detect roadway markings such as lanes, road boundaries, barriers and similar items, as well as to identify and read traffic signs and traffic lights.

MBLY's products combine high performance, low energy consumption and low cost, with automotive-grade standards. MBLY's technology was first included in serial models in 2007.

Installed in 3.3 million vehicles

MBLY estimates that its products were installed in approximately 3.3 million vehicles worldwide through March 31, 2014.

OEM market penetration

By the end of 2014, MBLY's technology will be available in 160 car models from 18 original equipment manufacturers ("OEMs") worldwide.

Further, MBLY's products have been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

Mobileye's more than 15 years of research and development and data collected from millions of miles of driving experience give it a significant technological lead.

80% quotation win rate

For the past six years, MBLY has won more than 80% of the serial productions for which it has been requested to provide a quotation.

Dividend Policy

No dividends are planned.

Intellectual Property

MBLY currently holds 18 U.S. patents, seven European patents, 29 U.S. patent applications, 24 European and other non-US patent applications, and 16 provisional patent filings.

MBLY is a party to a re-examination proceeding involving one of its U.S. patents and two post-grant opposition proceedings involving one of its European patents.

Competition

Although MBLY believes that it is the only provider of ADAS that offers all major safety and convenience-related functions in one cost-effective and well-packaged system and that has the amount and type of validation data necessary to compete effectively in the ADAS industry and there are significant other barriers to developing a competing sensory modality.

MBLY faces potential competition primarily from Tier 1 companies and potentially other technology companies.

MBLY does not work with Tier 1 companies who buy from competitors

However, MBLY believes that some of its Tier 1 competitors have considerably reduced their internal efforts to offer an alternative camera technology in part because of its stated policy that MBLY does not work with Tier 1 companies that sell products that compete with its products.

More importantly, developing effective ADAS technology is technologically complex, requires the development of large validation datasets in order to train the software algorithms effectively, requires a long-term commitment to validation and qualification with an OEM before serial production can even begin and requires significant financial resources.

High barriers to entry

MBLY further believes that, due to the high barriers to entry described above, the market will not easily open to new start-up participants.

While large technology companies could possibly enter the market, MBLY believes that they would experience the same five-to-seven year development timeline with an OEM as any other competitor, thus creating a significant barrier to entry for even the most resource-rich companies.

5% stockholders

Goldman Sachs Investment Partners​ 14.9%

​Dr. Shmuel Harlap​ 9.5%

Fidelity​ 7.7%

Enterprise Holdings, Inc.​ 7%

BlackRock, Inc.​ 5.6%

Prof. Amnon Shashua 9.2%

Ziv Aviram​ 9.2%

Use of proceeds

MBLY intends to use the $138 million in proceeds from its IPO as follows:

$30 million of the net proceeds of this offering to purchase EyeQ​® chips and Mobileye 5-Series aftermarket inventory and the balance for general corporate purposes, which may include working capital and capital expenditures.

MBLY may also use a portion of the net proceeds to acquire assets, technologies or companies complementary to its business strategy and to capitalize on business opportunities.

Disclaimer: This MBLY IPO report is based on a reading and analysis of MBLY's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Mobileye N.V.