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another CUI gas win and report preview +3

07:38 13-Mar-18


CUI Global has issued yet another press release.  This one documents orders worth $4.58M with a "tier 1 Engineering, Procurement, and Construction firm" in the U.K.  Unfortunately, the timing of the orders is unspecified.  

All news has pushed CUI shares up to $3.24 from levels around $2.50 where I first mentioned it.  That leads to the possibility that there could be disappointment associated with backward looking results versus forward-looking anticipation that has been built up.  Strong clear guidance would be most helpful in avoiding such a reaction.  The trading situation should also be helped by a rebate rate being just above 4%, slightly lower than the historical average, but nowhere near the spike we saw a year ago, when CUI shares were still around there historical range between $6-7.  However, low shorted float, below 2%, means that a real squeeze is probably not much of a possibility. 

As always, I prefer to focus cautiously on the long term.  I've been consistent in saying that I view the gas side of the business as more interesting and potentially valuable in the long term than the data center side.  Most signs, such as the progress in Puerto Rico, indicate that natural gas will play a major role for many years to come.  That said, news has been good on both sides, and I'll be looking for some quantification from management on both cash flow and timing.  The business has been burning about $1M per quarter for the past two, and has less than that in cash.  So, I'd particularly like to hear that they won't need to raise funds.  There is substantial risk with any stock of this sort, but so far this has been a good GRoDT pick.