April Special Situations Research Forum (Members Only, Limited Space) (Ended)
Topic: CPI Aerostructures Inc. (CVU)
Special situations are corporate actions which could reveal an undervalued security and hence an investment opportunity. Some examples of Special Situations are spinoffs, liquidations, tender offers, restructurings, bankruptcy exits etc. In the Special Situations Research Forum we will discuss an investment situation decided 3 weeks in advance. Every participant in the Forum is expected to research the topic before attending the meeting.
CPI Aerostructures Inc. (CVU) is a contract producer of structural aircraft parts for fixed wing aircraft and helicopters. The company acts as a subcontractor for defense prime contractors and commercial contractors. In June 2008 the company announced they had won a contract to subcontract for Boeing on the wing replacement program (WRP) for the US Airforce A-10 attack jet. The original contract covered 242 aircraft out of the total fleet of ~350 aircraft, and was expected to be a multi-year ongoing contract. Unfortunately, in early 2014, well prior to completion of the program, the US government scheduled to retire the A-10 from service. CVU was forced to take a large (mostly non-cash) charge in Q2 2014 to reflect the program would be truncated. Prior to the charge, the stock had been trading in the $12-14 range. On the day of the announcement the stock dropped to ~$8.00. In each subsequent quarter since that time, the reported financial results have been depressed due to CVU booking remaining A-10 WRP work (orders received prior to retirement announcement) at 0% gross margin. These optically poor results have continuously pressured the stock to its current ~$7.00. CVU’s non-WRP business has been strong, just unfortunately masked by the accounting treatment necessary for the WRP issues. In a stunning reversal, the Airforce requested in its February 2016 budget to delay the A-10 retirement indefinitely and continue the A-10 WRP. The A-10 is seen as invaluable in the fight against ISIS, and the Middle East Theater generally. CVU is now negotiating relief payments from Boeing for work completed, and is the obvious candidate to win additional A-10 work as the incumbent on the WRP. The company has earnings power in excess of $1.00 per share, placing it at a steep discount to its peers, with a near term positive catalyst.
This meeting is a collaborative effort so please be sure to research the topic before the meeting and be prepared to contribute to the discussion.
Attendance will be limited to 15 members - first-come, first-served.
Vishal Mishra; Mishra Capital Partners LLC
Nick Redmond; Oculus Asset Management
Members - Free
Attire: Business Casual
Registration: Limited to 15 members
A dial-in option will be available. Phone number and passcode will be distributed the day prior to discussion.
5:30pm - 7:00pm - Discussion
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