YB new stock pitches (Fri, April 25)

WPP is trading at sector-low multiples (lowest valuation on all metrics) despite undergoing significant transformation under CEO Mark Read, who has eliminated 300 brands, 1400 legal entities, and 840 offices while implementing the proprietary 'WPP Open' platform that integrates all marketing functions. The company is heavily investing in AI technology (2-3% of sales versus competitors' <1%), including proprietary Brand/Audience/Performance/Channel 'Brains' to enhance marketing capabilities. The Coca-Cola success story, where WPP's OpenX solution drove KO's outperformance versus peers, validates this strategy. Medium-term targets include 3%+ organic growth (though management hints they'd like to do better), 16-17% margins, and potential M&A adding 1% annual growth. The base case projects 5.5% EBIT growth with re-rating to 13x (Publicis-like multiple), producing attractive returns as margin improvements and client wins materialize in 2025, described by management as 'the year of execution.'

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Hunting PLC (HTG.L) is a precision engineering company that manufactures tools for the upstream oil and gas industry, currently trading at just 0.7x tangible book value with a compelling 22.1% free cash flow yield. In FY2024, HTG generated $1,048.9m in revenue (+13% YoY), $188.5m in operating cash flow, and $124.2m in free cash flow, despite posting an operating loss of $21.1m and net loss of $25.5m primarily due to a significant $109.1m goodwill impairment. The company maintains a strong balance sheet with total equity of $902.3m, tangible equity of $817.8m, and $70.7m in net cash including lease liabilities. HTG returned value to shareholders through $16.7m in dividends and $14.2m in share repurchases, offering a 3.0% dividend yield and 5.5% shareholder yield. The investment thesis centers on attractive valuation metrics providing upside potential if oil and gas markets rebound, with downside protection from the robust balance sheet, though risks include further goodwill impairments, falling oil/gas prices, and negative political climate in key markets like the UK.

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BigCommerce (BIGC), an eCommerce platform trading at 1.5x sales (95% below IPO price), has transformed into a FCF-positive business (7% margins) under new CEO Travis Hess. The company offers product strength in B2B/mid-market segments with approximately 6x Shopify's ARPU and 78% gross margin subscription revenue. Despite slowing from 36% growth in 2020 to just 3% in Q4 2024, BIGC has dramatically improved profitability with FCFE margins improving from -34% in 2022 to +7% in 2024. Management expects to reaccelerate growth to market-level mid-teens by 2H25 while continuing to expand margins, which should reach 20%+ at maturity. The bull case sees BIGC achieving 10% growth by 2027 with 15% EBIT margins, potentially trading at 4-5x sales ($20-25, >200% upside). The base case projects 5-6% growth with continued margin expansion, valuing BIGC at 2.5-3x CY26 sales ($11-13). The bear case includes either disappointing 2% growth leading to acquisition at 2x sales ($8.40), or zero growth with declining margins resulting in a 1x multiple ($4). BIGC has received repeated acquisition interest historically, suggesting a floor valuation of at least 2x sales if growth initiatives fail.

Read the full article here. Read time: 8 min