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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.
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.
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.
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