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CUI Global - Preparing to step on the gas

CUI Global - Preparing to step on the gas

CUI Global (NASDAQ:CUI) has reported strong results for the full year (FY) 2018, with revenues of US$96.8mln versus our forecast of US$92.8mln. The FY order backlog stood at US$37.5mln versus US$32.8mln at the end of 2017.

The company reported an underlying loss (statutory LBITDA) of USS$14.0mln versus our forecast of a loss of US$8.1mln; however, this figure is after booking non-cash impairment charges of US$7.4mln, relating to delays in existing customer contracts in the Energy division, and other issues. On an adjusted EBITDA basis, the outcome of a loss of US$8.0mln was ahead of our forecast.

Also in the release, CUI announced that it has agreed to acquire a 20% stake in VPS, the key partner on the ICE programme for data-centre energy management, gaining representation on the board of VPS. We see this as a positive route to capitalise on the software-defined opportunity of ICE.

Full report is available via Capital Network website
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CUI Global Inc Timeline

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November 09 2018

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.

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March 06 2019

Gfinity PLC (LON:GFIN) reported results for the first-half period to December 2018, on March 4, demonstrating very strong progress. Revenues grew 143% year-on-year, with 104% growth for the Managed Services business and 387% for the Owned Content business. Managed Services increased its revenues by 189% on a like-for-like basis (based on existing partners) and achieved 4.3x increase in viewership. Going forward we expect continued growth in both divisions, with Managed Services becoming the major driver.

Gross profit was +ve £0.5mln (H1 2018: £3.2mln loss), with the improvement driven by improved profitability in Managed Services and reduced investment in the Elite Series contributing to a £2.8mln improvement in gross profit for the Owned Content business. The company reported a net cash position of £6.4mln, representing a good level of resource to support further growth. Overall, we have increased confidence in our FY June 2019 forecast of 80% revenue growth and positive gross margin.

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Fri

CUI Global (NASDAQ:CUI) has announced a proposed deal to combine with four other businesses, currently privately held, that provide industrial services to the energy industry and other sectors. The combined business, referred to in the release as Pro-Forma CUI, will be an entirely transformed entity, with more than 3x the revenues (estimated) of the existing CUI. Current CUI shareholders will own about 15% of the enlarged group, while shareholders of the four target businesses will own 85%.

The four target businesses provide services to industries including oil & gas, utilities, and wireless communications. The combined group will become a strong player in midstream/downstream energy infrastructure, and a platform for acquisitive growth going forward.

The chief executive officer (CEO) of the combined group will be Jim O'Neil, formerly of Quanta Services. Quanta is an infrastructure services company that enjoyed very strong acquisitive growth during O'Neil's tenure in top management roles.

The CUI news release includes an outline of the proposed deal structure:

  • Issue of 160mln new CUI shares
  • Issue of US$75mln of debt instruments, and absorption of US$15mln of debts from the four businesses being acquired
  • A US$200mln earn-out payable subject to performance targets

We believe that the terms of the deal imply that the acquired companies are valuing CUI at a premium to its last closing share price of US$1.20.

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