YB new stock pitches (Fri, Nov 29)

Paysafe Limited (NAS:PSFE), with a market cap of $1.1B and trading at an EV/EBITDA of 7.9x, is a payment processing company split evenly between B2B payment processing and B2C digital wallets. Approximately 30-35% of its revenue comes from online gambling, with over 50% attributed to the U.S. market. The company is well-positioned to benefit from the projected doubling of the U.S. online gambling market by 2029, driven by increasing legalization (now 30 states) and technological advancements. Paysafe's multi-decade experience in processing high-risk payments for online gaming provides a significant competitive advantage. Despite a recent 30% sell-off due to a slight EPS miss attributed to sales team expansion investments, the company appears undervalued, leading to the initiation of a starter position.

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DCC plc (DCC.L) presents a compelling break-up play with 95% upside potential and -12% downside risk. The company plans to divest its Healthcare and Technology divisions for an estimated £2.2bn, representing 41% of its market cap. The remaining Energy business, accounting for 75% of operating profits, is currently valued at 6.8x EBITDA, significantly below its historical average of 11.8x. This core business boasts impressive metrics, including a 19% ROIC, 10% earnings growth, and a 7.5% FCF yield. Management intends to return surplus cash from the divestments to shareholders, positioning the simplified energy-focused RemainCo for a potential market re-rating. The Energy division is poised to benefit from energy security and transition tailwinds, making DCC an attractive investment opportunity in the evolving energy landscape.

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* I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

Kinaxis Inc. (KXS.TO) is a supply chain planning software company operating in a market with a 16% CAGR. The company's growth has decelerated, but a new sales-oriented CEO is expected to boost performance. Kinaxis recently launched its next-gen Maestro platform, positioning it well in the industry. Profitability is anticipated to improve through operating leverage, higher gross margins, and cost-cutting measures, including a 6% workforce reduction in 2024. With $8.02/share in net cash and positive free cash flow, Kinaxis trades at a discounted 6x sales compared to peers at 10x and its historical average of 9x. However, risks include a prolonged growth slump, increased spending on sales and marketing, and rising competition. The stock has recently rallied on takeout rumors, which may disappoint investors if not realized.

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