YB new stock pitches (Wed, Mar 26)

Tutor Perini Corporation (TPC) is undergoing a significant transformation with a record $14bn backlog (+35% QoQ), improved contract terms, and resolution of legacy disputes. The company expects strong cash flow of $425-575mm in 2024, with Civil segment margins of 10-12% and Building/Specialty margins of 3-4%. TPC is pursuing $32bn in near-term opportunities through 2025, benefiting from the Infrastructure Investment and Jobs Act. The company has made progress in resolving disputes, with seven major settlements in Q3 2024 and expectations of collecting $180mm in Q4 2024. TPC is trading at 1x book value and 5.5x FY25 EBITDA, with a target price range of $34-58 in two years, assuming $300-400mm in annual EBITDA. The company's balance sheet has improved, with net debt at $409mm (1.4x EBITDA) and an undrawn $170mm revolving credit facility. Key risks include project execution and capital allocation decisions as cash builds on the balance sheet.

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New England Realty Associates Limited Partnership (NEN) is a Boston-focused Master Limited Partnership owning 31 properties with 3,015 apartment units and 131,000 square feet of commercial space. Currently trading at a 7.7% cap rate, $195K per unit, and a 10% FCF yield, NEN appears undervalued compared to market cap rates of 5% and comparable sales of $300-375K per unit. The company has a strong balance sheet with over $100M in cash and a 6% dividend yield. NEN benefits from Boston's supply-constrained market, showing consistent rent growth and low occupancy rates. The Brown family maintains control through a complex ownership structure. Management has refinanced debt at low rates, and the company has a conservative leverage profile. Assuming a 5.25% cap rate, the estimated price per depositary receipt is $163.80, suggesting over 100% upside potential from the current price of $78.41. While the MLP structure and multi-class shares may warrant some discount, the current valuation gap appears excessive given the company's strong fundamentals and market positioning.

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Doximity (DOCS) is recommended as a strong sell and short due to its predatory business model and aggressive revenue recognition practices. The company's auditor, Deloitte, has failed to properly sample customer accounts, focusing only on larger contracts. Doximity has changed its key metrics, shifting from $100K+ to $500K+ revenue customers, and altered its Net Revenue Retention calculation, potentially masking customer churn. The company's pre-populated profiles force healthcare professionals to engage with the platform, artificially boosting user numbers. Doximity faces increased competition from LinkedIn and Formedics, while political uncertainty threatens pharmaceutical ad spending. The company's AI product has shown low usage, and CFO Anna Bryson lacks necessary financial experience. With aggressive revenue accounting, conservative pharma spending, and potential regulatory risks, Doximity is expected to face significant challenges through 2025. - link

Read the full article here. Read time: 13 min