YB new stock pitches (Mon, Nov 18)

Red Cat Holdings (RCAT) is expected to win the Army's Short Range Reconnaissance (SRR) T2 contract on Tuesday, with several clues supporting this prediction. These include insider intel suggesting Skydio didn't win, Skydio's flat valuation and supply chain issues, hints from an Army official, and the timing of RCAT's 'Town Hall' announcement. The estimated NPV of the contract is $300-400M, with a price target of $7-9. Risks include uncertainty about the program's size, the possibility of multiple winners, and Skydio's larger production capacity. RCAT may need to raise $10-20M before SRR revenue starts. The contract could lead to larger NATO deals, potentially increasing the stock's value. However, the recent $100M shelf offering and tight runway before SRR money arrives are concerns.

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Kamigumi Co., Ltd. (9364.T), a leading Japanese port operator, has announced a 5.4 million share buyback (5.08% of shares), continuing its trend of reducing shares by 19% over 8 years. The company trades at 9.11x EV/EBIT, significantly lower than peers at 11-22x, and offers a projected 9% shareholder yield by 2025. With a strong balance sheet including 44% of market cap in net cash and securities, Kamigumi generates robust free cash flow, with operating cash flow reaching 42.47B yen in the latest fiscal year. The company's diverse port portfolio mitigates risk, and it benefits from a wide moat as a toll gate keeper. Kamigumi is adapting to new Japanese stock market reforms by increasing cash returns to shareholders and reducing cross-shareholdings. Despite potential challenges from protectionism and tariffs, the company's low risk profile, solid balance sheet, and attractive valuation make it a compelling investment opportunity in the port infrastructure sector.

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* More stock pitches from Greenhaven Road Capital in “The Rest of the Pitches” section.

Lifecore Biomedical (LFCR) is a CDMO specializing in sterile injectables, recently spun off from a conglomerate. With new leadership, doubled capacity (35% utilization), and a strengthened balance sheet post-PIPE investment, LFCR targets 12%+ annual revenue growth and margin improvement from 15% to 25-30%. The company faces near-term headwinds due to destocking by its largest customer, Alcon, but has long-term contracts with increasing minimums. While not currently manufacturing GLP-1 drugs, LFCR is equipped to do so, potentially benefiting from industry capacity constraints. Trading at <15x EV/EBITDA compared to recent acquisitions at >25x, LFCR presents a potential 2-5x return opportunity in the medium term. Risks include execution challenges and flat near-term growth, with a two-year lag for new business onboarding due to regulatory requirements. - link

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