Tel-Instrument Electronics Lands Big Army Contract

Tel-Instrument Electronics (Amex:TIK), a tiny manufacturer of avionics testing equipment, just landed a large U.S. Army contract. According to the company, the contract with the U.S. Army Aviation and Missile Command has a maximum dollar value of $44,046,886, depending on the number of units purchased.

The release indicates the contract is for Mode 5 test sets and IFF conversion sets, terms which mean absolutely nothing to me. Here’s what I do understand: the contract is fixed price indefinite-delivery / indefinite-quantity [IDIQ], which means it could result in any size up to the maximum dollar amount. Because the purchaser is the U.S. Army, it will more likely scrape the ceiling than the floor. But let's be conservative and assume a 40% of maximum purchase. That would be over $17.5M, or more than 150% of Tel-Instrument’s trailing twelve month revenues.

The news was enough to boost TIK higher in a decidedly ugly post-Geithner market. While shares face hefty technical resistance around $4-$4.20, my guess is that TIK clears resistance and climbs higher. I have not bought shares yet, but may do so in the next few days.


DISCLOSURE: No position.