YB new stock pitches (Fri, Jan 24)

NCS Multistage Holdings (NCSM), an oil and gas well construction company with 65% revenue from fracking, trades at 11x TTM FCF and 40% ROE. With a $77M market cap versus $91M net tangible assets, NCSM reported Q4 net income of $4.1M ($1.63/share). Potential catalysts include Trump's $500B AI infrastructure plan and an energy emergency order, which could boost domestic energy production. The company faced challenges in 2023, including a $40M lawsuit settlement and operational issues, but has shown strong momentum in 2024. NCSM's revenue mix has diversified since 2016, with current operations in North America and select international markets. The stock is viewed as a cigar-butt play on energy sector recovery, with the potential to trade up to a fuller valuation. NCSM's stock price has recently decoupled from crude oil prices but shows strong momentum and is poised to break out to new monthly highs.

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Shelly Group SE (SLYG.F), a smart home IoT leader, has shown 40%+ YoY growth and recently uplisted to the Frankfurt XTRA exchange. The company held its first Capital Markets Day, outlining a new strategy focused on an integrated platform and software development. Growth drivers include geographic expansion, particularly in the US, and new product launches in cameras and smart locks. Shelly is shifting from DIY customers to professional installers and expanding into industrial IoT. The company aims to develop software offerings for recurring revenue streams, including Shelly X Software, cloud management, and energy management solutions. With 92 hardware SKUs and plans for expansion, Shelly targets a 5x growth potential by 2030. Currently trading at 16x NTM EBITDA, the stock is valued 25% below its previous level, despite continued strong performance and strategic developments.

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Reading International (RDI/RDIB) is an undervalued real estate and cinema company trading at $1.45 per share with a $42m market cap and $240m enterprise value. The company owns high-quality real estate assets worth more than its entire EV, giving investors the cinema business for free. RDI is selling non-core assets to reduce debt, including the recent $21.5m sale of Courtney Central in New Zealand and a pending sale of Cannon Park in Australia. These sales will reduce debt by ~20% and eliminate half of 2025 maturities. The cinema business, which previously generated $40m+ in EBITDA, is at an inflection point with record box office results in Australia/NZ and improving US operations. Management is upgrading offerings and closing unprofitable locations. Despite poor capital allocation history and a controlling family, the stock offers 300%+ upside as deleveraging and improved operations drive a re-rating. Risks include potential poor future capital allocation, punitive financing, asset sales falling through, and continued cinema industry challenges.

Read the full article here. Read time: 26 min