YB new stock pitches (Thu, Apr 17)

Skyline Bankshares (SLBK), a community bank in rural Virginia and Tennessee with a $70 million market cap at $12.50 per share, is currently trading at just 5x adjusted earnings despite solid fundamentals. While 2024 EPS declined to $1.34 from $1.74 in 2023, this drop was primarily due to $2.5 million in merger-related expenses and increased core deposit intangibles from a Tennessee bank acquisition. The first full post-merger quarter (Q4 2024) showed adjusted earnings of $0.61 per share, which annualizes to $2.45 per share, suggesting the core business remains strong. The bank offers a 4% dividend yield, and there's potential for additional cost savings beyond what was visible in the initial post-merger quarter. Based on a reasonable valuation of 10x earnings, a fair value of approximately $25 per share is projected, representing significant upside from current levels.

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UNTC (Unit Corporation) presents an opportunity with its current ~$200m enterprise value versus an estimated $400m liquidation value. Management has demonstrated discipline by locking in gas sales above $4 near March's peak pricing, while the company's drilling rigs continue to generate strong cash flow. As a cash-rich Oklahoma operator with secured income streams, UNTC is well-positioned to weather oil price volatility stemming from tariffs and recession fears. The stock was reentered as its price dropped to targeted levels, coinciding with a strong increase in natural gas prices, with the futures curve now fluctuating around $4.

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Tigers Polymer Corporation (4231.T), a Japanese polymer manufacturer trading at 0.5x NCAV+securities, 7.5x LTM P/E, 8.4x forward P/E, and offering a 5% dividend yield, primarily serves automotive, electronics, and industrial markets. The company's most profitable operation is its U.S. factory in Ohio (established 1987), positioning it to benefit from potential tariffs. Tigers Polymer has demonstrated remarkable consistency, reporting only one small loss in 2009 while being profitable since 1985. Despite its attractive valuation and 5% dividend yield (with management targeting a minimum 30% payout ratio), investors should note several risks: management's FY2025 profit guidance was revised downward by 27% from ¥2.2 billion to ¥1.6 billion, high customer concentration with 41.5% of revenue from Hondo Motor Co. and 14.7% from Kuriyama of America, and a poison pill in place since June 2022 that limits activism, with a shareholder register dominated by management-friendly entities making an MBO the ideal exit strategy.

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