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CUI Global 1Q19 results and more ?5

18:22 15-May-19


I've just finished reviewing the 8-K, which does provide more detail the new "Nikola" transaction.  The four other companies being combined are

  1. Signature Associates, LLC
  2. Fusion Industries, LLC
  3. Land Coast Insulation, Inc.
  4. Castille Telecom, LLC

We should expect more details from a definitive agreement by the start of next month, and closing in the third quarter.  Earn-outs in the deal structure do make it seem quite promising, though somewhat more moderated than the figures given in the press release:

 

EBITDA Hurdles¹

2H 2019

$15.0

2020

$35.0

2021

$35.0

2022

$35.0

2023

$35.0

1H 2024

$17.5

¹ Plus EBITDA Hurdle Adjustments.

Based on these figures, we might reasonably expect the resultant company to be worth between $2.50 and $3 per share, even without future growth.  Don't expect CUI shares to get there overnight, though, as most of the immediate benefits go to private stakeholders.  Even so, this looks like a very positive development and a good long-term opportunity.  That's probably all from me for tonight.

On 5/15/19 5:44 PM, Esekla wrote:

The CUI conference call has just concluded.  In some ways, it was similar to others in recent memory, where management cited delays and talked up opportunity, including:

  • North American gas turbine integration, where testing is complete and deployment is supposedly a near-term opportunity
  • gas analyzers being a uniquely good for LNG-powered shipping
  • an invitation to set standards for bio-methane with a global energy company

The risk here remains the same as ever, where time is money.  If that was all the news this evening, I do not think shares would be up after hours, now more than 35%. 

The call did NOT include any direct discussion of the new CUI Pro Forma transaction, but the list of clients is impressive: ExxonMobil, BP, Noble Energy, plus more intriguingly, AT&T, Verizon, and Nokia.  Although, I do not yet have any means for quantifying the opportunity, the likelihood of owning the resuling 15% of natural gas services pure play at this stage in the evolution of the gas market seems compelling.  As I result I expect CUI shares to continue rising, just as WPRT has, despite the risks.

On 5/15/19 5:15 PM, Esekla wrote:

CUI Global has reported results for its first quarter:

  • a loss of 11 cents per share misses by 4 cents
  • on $23M in revenue, which beats by $1.2M

Delays continue in both the U.K. and Italy, but both affirm eventual use of CUI Global products for their infrastructure.  In particular, Italy mandates a standard starting next year that can only be filled by GasPT.

The bigger news, though, is the pending formation of a new diversfied energy services company through the acquisition of four privately held companies.  Revenue is projected to more than triple, to $350M, and EBITDA of $43M this year is expected to almost quintuple within 18 months of closing.  However, share outstanding will more than quintuple also with the issuance of ~160M shares.  I am listening to the call now, and shares are up about 15% after hours.  While I can see clear potential here, it's too early put any clear metrics on this.