logo

CUI Global Inc - Growth opportunities taking shape

Writen by Ed Stacey

Q3 RESULTS – AHEAD OF CONSENSUS

CUI Global Inc (NASDAQ: CUI) reported third-quarter (Q3) results on November 7th, showing revenue of US$24.7mln (Q3 2017: US$21.8mln) and a reduced earnings per share (EPS) loss of US$0.05 (Q3 2017: -US$0.09). These compare with the consensus forecasts of US$23.5mln revenue, an EPS loss of US$0.07 (from market sources). The performance reflects strong execution in the Power & Electromechanical segment and a sharp rebound in the Energy division.

The biggest strategic driver for CUI remains the potential for the GasPT product to deliver dramatic revenue growth in the Energy segment in 2019 and beyond; however, these results show that the company remains focussed on achieving performance across the portfolio.

THE BIG GROWTH DRIVERS – GASPT, ICE

GasPT is a product with transformational potential for CUI Global Inc and for the natural gas industry, providing cost-effective near-real-time analysis of natural gas along transmission pipes.
An important opportunity for GasPT is an existing contract with Snam Rete of Italy, which has been paused pending regulatory clearances not related directly to GasPT. We understand that the Italian government has now appointed an energy authority, and we believe that the project could be cleared to advance in the next few months.

Aside from the Snam Rete programme, in the UK CUI has announced three purchase orders for BioMethane-to-grid terminals, as well as six wins out of eight competed tenders, with 27 more outstanding. BioMethane projects could become a substantial revenue driver in the 2019/2020 time-frame, in our view.

CUI has also made further progress with its ICE (Intelligent Control of Energy) product in the Power and electromechanical (EM) segment, with the selection of ICE by SAP for collaborative trials as a power management solution for SAP data centres. This programme could deliver significant revenues in 2019, in our view.

FINANCIAL METRICS AND VALUATION

The following table shows our financial forecasts for CUI Global Inc. These include growing contributions from GasPT and ICE in 2019 and 2020. Based on current market valuation multiples, for 2020e in particular, we argue that the market is attributing a low probability of the various projects advancing. We see significant upside potential for the stock price when progress is announced on these programmes.

Important – Please read this information: This report has been commissioned by CUI Global Inc and prepared and issued by Capital Network for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however, we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Capital Network at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. Capital Network does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Capital Network’s solicitation to effect, or attempt to effect, any transaction in a security. This document is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Capital Network has a restrictive policy relating to personal dealing. Capital Network does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Capital Network may have a position in any or related securities mentioned in this report. Capital Network or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Capital Network within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Capital Network, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication.

Latest Research

Safety Pays

In pence-per-share terms, the NAV increased by 0.8p during the quarter. This...