YB new stock pitches (Tue, Oct 8)

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

Conrad Industries (CNRD), currently trading at $10.20, is an undervalued marine vessel construction company with a $34 price target in 5 years. The company has $6/share in net current asset value, $8 million in expected lawsuit proceeds, and record backlogs. CNRD is poised to benefit from a structural barge shortage in the USA and normalizing steel prices, which boost demand and create cost savings. The company's recent losses, primarily due to fixed-price contracts signed before steel price spikes, are expected to be behind them. Risks include steel price volatility, recession, and customer concentration. With strong management, high insider ownership, and a history of shareholder-friendly actions, CNRD offers potential for a 27% 5-year CAGR. The company trades at 6x normalized earnings, with additional downside protection from its balance sheet assets. Catalysts include the structural barge shortage, steel price normalization, lawsuit settlement, and potential reinstatement of dividends or share buybacks.

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Codere Online ($CDRO) is an iGaming company with operations in Spain and Mexico, trading at an enterprise value of 290 million EUR with 41 million EUR in net cash. The company's Mexican business, the second-largest in the market with a 10-15% share, is breaking even and growing over 50% year-over-year. The Spanish business generates over 30 million EUR in EBITDA. Caliplay, a competitor in Mexico, demonstrates the potential profitability of the market with a 32% EBIT margin at scale. The Mexican iGaming market is viewed as undervalued with high growth potential. Potential catalysts include a Caliplay IPO and third-party acquisitions in the market. The main risk is regulatory changes in Mexico. The market appears to be undervaluing CDRO's Mexican business, pricing it at close to zero despite its growth and potential, while the Spanish operations alone nearly justify the current valuation.

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Dave & Buster's Entertainment (PLAY) is implementing several strategies to drive growth and profitability. A shift to digital marketing and store remodels is expected to increase same-store sales by 20%. The company is transitioning to dynamic game pricing, which could add $80M-$120M in EBITDA. A simplified F&B menu aims to boost revenue by 34% from current levels. Hill Path Capital's influence is key in these transformations, drawing from their experience with SeaWorld. The company is also revitalizing its special events business to drive high-margin F&B and gaming bundles. Risks include macroeconomic sensitivity, with 76% of revenue coming from households earning less than $100,000 annually, and high leverage with $1.2 billion in debt. However, the company's position as a cheaper leisure option and active debt management could mitigate these risks. The stock presents potential upside from cheaper leisure substitution and effective debt management.

Read the full article here. Read time: 3 min