YB new stock pitches (Tue, Nov 12)

Danaos Corporation (DAC), a containership lessor trading at $82 with a $115 target, offers a compelling investment opportunity despite bearish industry outlook. Strong charters through 2026 insulate the company from potential market weakness, with a DCF valuation range of $95-$138. The thesis is not dependent on NAV or a resilient containership market, but on the locked-in revenue backlog from post-COVID boom contracts. Upside potential exists from new contracts and a possible 2025 market boom due to Trump's tariffs and potential port strikes. Risks include weak shareholder returns and a large industry orderbook, which could lead to a market downturn. However, Danaos' smaller vessel sizes compared to the orderbook and potential for increased scrapping of older ships may provide some support. Management's conservative approach, focusing on debt reduction and diversification, has frustrated investors hoping for buybacks but may prove beneficial in weathering potential market weakness. The long-term thesis remains intact, though it may require patience as shareholder returns are expected to increase significantly once the company navigates through the potential downturn.

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European Residential Real Estate Investment Trust (ERE-UN.TO) is liquidating its Dutch portfolio to focus on Canada, with CEO Mark Kenney confirming plans to sell all properties above NAV. The company recently sold half its portfolio above IFRS NAV, and management has scheduled a special meeting to seek unitholder permission for complete liquidation and REIT closure. The current NAV is $4.50, with an expected transaction value of $4.20-$4.50. Netherlands real estate values are rising, supported by falling European bond yields and a political shift towards conservative parties. The housing shortage in the Netherlands is comparable to or worse than Canada's, suggesting strong demand for ERES's remaining assets. Nugget Capital Partners sees ERES as a low-risk opportunity below $4 per share, with a target of $4.20-$4.50 upon liquidation, likely in 2025.

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Sky Harbour Group Corporation (SKYH) is a private jet hangar developer with 14 existing campuses and plans to expand to 50. The company operates in a market with high demand and limited supply, securing 40-50 year airport leases with high barriers to entry. SKYH offers dedicated hangars for high-net-worth clients, differentiating itself from traditional Fixed-Base Operators (FBOs). The company's current valuation is justified by existing projects alone, with potential to double or triple if the 50-airport plan is executed. SKYH generates over $50 per square foot in annual net operating income, ensuring unlevered returns of over 15%. Risks include limited operating history, construction delays, potential funding challenges for expansion, and lease renewal competition. The stock is currently trading at $11.60 per share, with a price target of $37.57 and a given upside of 3.0x.

Read the full article here. Read time: 13 min