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CUI Global wins $1.5M services contract and more +4

09:21 13-Aug-18


CUI Global has announced a new maintenance contract with a "major UK natural gas transmission company" valued at £1,15M ($1.5M) over two years.  The press release touts the exclusivity of the contract as being atypical for the industry, and the contract begins on September 1st.

I suspect that this is a follow-on announcement to the supply contract with Cadent from last week, which didn't do much to amend the understandable post-earnings slump.  As such, it gives some clues about the scope of the opportunity and its ongoing value beyond the actual parts.  In particular, the revenue should help avert any need for dilution.

My sense is that the combined news merits about a 5% immediate gain for CUI shares, but more importantly, it serves as a proof point for the business.  As such, I think shares are buyable up to almost the $3 mark.  If the Samson agreement gets the definition that is expected in September, that could help extend the stock's potential above that level.  Developments in North America are likely to be just as important, though, and I think the current trend remains uncertain.  CUI may not have as much appreciation potential as WPRT, but unlike that stock, it has applicability beyond vehicles, which may be a blessing.  In both cases timing remains key.