YB new stock pitches (Wed, Mar 19)

CBB Bancorp (CBBI), a Korean-American community bank trading at 5x current earnings (3-4x normalized) and 45% of book value, has demonstrated strong growth with an 11% net income CAGR and 13% book value CAGR over the past decade. The bank's $1.42B loan portfolio consists of 85% commercial real estate loans and 30% SBA loans. Despite a rise in non-performing assets to 0.66%, CBBI remains well-capitalized to absorb potential losses. The bank's loan repricing schedule suggests improved net interest margins in the future. Compared to peers, CBBI trades at a 50% discount while maintaining higher capital adequacy ratios. Key risks include rising non-performing assets, compressed margins, and potential interest rate hikes. The stock's current 3% dividend yield and historical profitability, combined with its discounted valuation, present an attractive investment opportunity, albeit with the caveat of being a highly illiquid micro-cap.

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Solaris Energy Infrastructure (SEI) acquired Mobile Energy Rentals (MER) for $200 million, overpaying at 3.19x book value for a commoditized business with one data center customer. MER was co-owned by John Tuma, a convicted felon who served prison time for environmental crimes and was involved in an $800 million gas turbine scandal. Solaris's turbines at xAI's Memphis data center are operating without air permits, facing local opposition, and increasing competition from the grid. The company fails to disclose significant overhaul costs for its turbines, estimated at 50% of unit cost every 3.5-4 years, and uses a 25-year depreciation schedule compared to competitors' 8-12 years, potentially inflating short-term profitability. Solaris projects over 70% EBITDA margins for its Power Solutions segment, but faces risks from customer concentration, environmental concerns, and potential permit issues. The company's legacy business is also embroiled in an IP lawsuit related to its 'top fill' system. With these factors in mind, Morpheus Research holds a short position in SEI. - link

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Lindex Group Oyj (LINDEX.HE), formerly Stockmann, is a leading Scandinavian lingerie retailer with over 400 stores and 20%+ online sales. The company boasts industry-leading margins in a growing business with low cyclicality and fashion risk. Despite its strong performance, Lindex is significantly undervalued compared to peers, trading at less than half their valuation. This discrepancy stems from its association with Stockmann's department store business, which nearly defaulted during COVID and is currently in Chapter 11 restructuring. A strategic review is ongoing to determine the future of the department store segment. Lindex has invested €100 million in a new distribution center, set to generate significant savings from 2026 onwards. The company maintains a net cash position when adjusting for IFRS lease debt. Catalysts for stock appreciation include the end of restructuring, resolution of the department store situation, and potential valuation normalization, which could lead to a doubling of the stock price. The current market cap is €450-501 million, with limited institutional interest due to its small size and ongoing restructuring.

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