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new CUI agreement, eMagin 2Q18 results, previews & follow-ups +3

09:20 09-Aug-18


This note is long, and as per the rank, there is nothing here that it overwhelmingly important.  Feel free to read just the first few paragraphs, or skip it if you are pressed for time.

What's of most interest to me is that both of the candidates backed by Trump appear to have eked out victories in Kansas, and especially Ohio. This downgrades my expectations for a market moving sea change in the mid-terms.  I still can't see how catastrophe is averted beyond 2025, at the latest, though.

In the meantime, the status quo should serve CenturyLink well; another day, another data breach at the competition.  On the other hand, though the latest Consumer Reports survey echoes my sentiment that they still have work to do, I view it as largely trailing data, at least for CenturyLink, which is already eliminating the haggling and TV subs that the report to refers to. 

On the heels of yesterday's OMIB, CUI Global has announced a Framework Agreement with Cadent Gas in England.  Financial and timing details are lacking and almost certainly undecided at this point, but this enables CUI's Orbital subsidiary as a supplier to Cadent, which operates 4 of the 8 distribution regions nationwide, services roughly 11M customers.  I'll also document a second open market insider buy of 2,750 shares at $2.23 by the CFO yesterday.  It's an incremental positive, but successive OMIBs like this tend to have rapidly declining impact.  Progress on deployment is what really matters and this morning's announcement looks like a solid first step, as I think the pace of progress in the U.K. outpace Italy's.

eMagin has reported second quarter results:

There's continued improvement from last quarter in yields here and management also cites increased customer activity.  Still no time frames or anything positively dramatic, though.  So, don't expect anything further from me after the call.  On the negative side, the company discontinued the consumer night vision business and wrote off the inventory.  That combined with marking warrants to market resulted in an unadjusted 11 cent EPS loss.  It looks to me like management has a few more quarters to work something out, if it can avoid more exceptional charges.  However, new technological competition is emerging all the time and I'm not particularly inclined to take chances.  While we're at it, Himax also reported inline earnings with the weak guidance I anticipated, resulting in no change to my outlook.

I will take suggestions, though, on how much writing time to devote to the Universal Display call tonight.  OLED have been been recovering, though maybe a bit more slowly than anticipated.  Although there is a lot going on in the industry, most of it is manufacturing developments from BOE, Sharp, and Samsung, particularly in the area of flexible displays, that I've anticipated.  With Sharp, what's particularly interesting is whether or not they will use their advanced IGZO backplane technology with AMOLEDs and the cited conversion ratio of LTPS to AMOLED production capacity 30 -> 22K.  This compares favorably to production conversion done by LG Display in the past, which was closer to 2-1.  In any case, we won't learn about things like this in the UDC call and long-time readers should already know that I'm completely content to miss out on any gains there.  The things to focus on will be geographic revenue split, which has been shifting but not as much as one might expect;  Intellectual property issues remain a concern, along with payment and both long-term and current competition.  Without feedback, my inclination is to focus more on Resonant's call. 

While we're on the topic of stocks running higher than they should, AES is approaching that territory.  The difference between it an OLED is the competitive situation, and to a lesser extent, the dividend.  Even so, an argument for taking profits is likely to apply to some portfolios.