YB new stock pitches (Thu, Apr 24)

Hallador Energy (HNRG), traditionally a coal mining company, is transitioning into an Integrated Power Producer with its Merom power plant. The recent Expedited Project Review approval, which the market has overlooked, was the final regulatory hurdle before finalizing a deal with an unnamed data center partner, expected to be announced in May-June. While fairly valued as a coal company at 2.5x EBITDA, an IPP transition could command an 8-10x multiple, given the 10-15 year fixed-price contract that would utilize Merom's full capacity. The Power division alone could generate $200-250 million in run-rate EBITDA versus a current market cap of $600 million with zero net debt. Key catalysts include Indiana's attractiveness for data centers, MISO's capacity shortfall, Trump's pro-coal policies, and front-of-meter energy decreasing headline risk. Risks include potential exclusivity period extensions, environmental protests, poor capital allocation following deal-related cash flows, and deal cancellation. The price target is $20-25 near-term, with longer-term potential of $50 (3.7x upside from $13.50).

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New Horizon Aircraft Ltd. (HOVR) is developing the Cavorite X7, a hybrid electric 7-seat eVTOL aircraft for the Regional Air Mobility market with speeds up to 250mph, range over 500 miles, and 1,500lb payload capacity. Priced at approximately $6 million with estimated 50% margins, the aircraft features patented HOVR Wing technology that enables vertical takeoff like a helicopter but flies like a conventional airplane for greater efficiency. The hybrid design (combining internal combustion with electric) provides advantages over pure electric competitors, including no need for external charging infrastructure and longer range. HOVR targets initial commercial applications in medical evacuation, remote supply delivery, disaster relief, and military missions. The company expects to achieve certification and commercialization within 36-48 months, though it will require approximately $206 million in additional capital. Risks include technical challenges, ongoing capital requirements, regulatory uncertainties, and competition from well-funded rivals. The analyst initiates coverage with a 12-24 month price target of $1.60.

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Close Brothers Group (CBG.L) is a UK merchant bank trading at just 28% of book value and a PE under 5 based on 5-year average profits, despite maintaining profitability for 30+ years with a strong 7-9% net interest margin versus a 1.2% bad debt ratio. The company operates across Commercial, Retail, Property, and Securities divisions, with a contra-cyclical lending strategy that builds client loyalty during downturns. Currently, CBG faces an FCA investigation into auto financing practices that could result in fines between £250-640 million, representing the market's primary concern. However, even the worst-case scenario appears manageable given the bank's 12-13% CET1 ratio, short loan duration averaging 1.5 years, and recently completed asset management division sale to Oaktree. The company's mid-teens ROE historically justifies a 1.5x book value multiple, suggesting significant upside potential once the regulatory fine is finalized, which serves as the primary catalyst for share price recovery.

Read the full article here. Read time: 7 min