YB new stock pitches (Fri, Apr 3)

IRIX is undergoing a transition from in-house to contract manufacturing, resulting in lower-than-expected Q1 gross margins, though management expects gross profit margin improvement as manufacturing overhead decreases from reduced lease costs embedded in cost of revenues. Despite tariff uncertainties and management's unclear margin guidance, the company has cut operating expenses to $19M-$19.5M in SG&A costs, creating a potential path to $3M adjusted EBITDA in 2026 on a run-rate basis, aligning with guidance for positive cash flow and likely adjusted net income if targets are met. Q1 revenue is expected to be weak, which likely prompted management's unusual guidance issuance. The company, which has never achieved true profitability or positive cash flow, is improving fundamentally through OpEx cuts and higher year-over-year probe sales with approximately 80% gross margins, offering potential for sustainable financials even without revenue growth and possibly more upside than former sector high-flyer LNSR, which is suffering from a terminated merger. The investor increased their position despite near-term headwinds.

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IEH Corporation (IEHC:OTCQX), an 85-year-old family-run manufacturer of hyperboloid connectors and custom interconnects for defense and aerospace, operates in a duopoly with Molex (previously Smiths Interconnect), holding approximately 30% market share versus Molex's 70%. The company's backlog has reached an all-time high of over $28 million, more than doubling over the last twelve months and increasing 50% year-to-date, driven by the U.S. missile inventory buildout including PAC-3 (+230% ramp) and THAAD (+317% ramp), creating an expected 3-6+ year growth cycle exacerbated by the war in Iran depleting U.S. and Israeli munitions. While rising gold input costs have compressed margins over the past two years, IEHC is implementing price increases and management targets 10% EBITDA margins by FY28 (ending March 31), with the company having demonstrated strong profitability historically. The stock trades at 18.9x/10.5x FY27E/FY28E EBITDA compared to public defense peers at 21.1x/16.7x and the October 2025 takeout valuation of Smiths Interconnect at 15.1x EBITDA. The Offerman family has owned and operated the company for four generations, maintaining 37% ownership, and the company benefits from exposure to defense, commercial aerospace (15,461-jet Boeing/Airbus backlog), and the growing LEO satellite market, with global defense spending on missiles expected to increase 2-3x by 2030. The firm initiates coverage with a BUY rating and $26 price target representing 37% upside, with ongoing catalysts including quarterly financial results, backlog announcements, and potential acquisitions and strategic partnerships.

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Bonterra Energy (BNE.TO) is an Alberta light oil producer transitioning from its legacy 312 gross sections (284 net) Pembina Cardium play, which has 21% decline rates and 70%+ IRRs at mid-cycle WTI with approximately 284 booked locations, to higher-return Charlie Lake and Montney assets acquired and de-risked in 2024. The Charlie Lake asset, consisting of 116 net sections purchased for CAD $24.1 million with only 8.2 locations currently booked, delivers IP365 rates of roughly 387 BOE/d with IRRs exceeding 100% and approximately CAD $3.5 million NPV10 per well, expected to produce 6,000 BOE/d within five years through 5-10 wells annually and generate CAD $35 million total NPV from 10 wells by 2025. The Montney asset comprises 52 contiguous sections with 10 booked locations and 95+ identified potential locations, delivering 668 BOE/d IP365 rates with under one-year payouts and 880 Mboe per booked location. Conservative reserve additions assume 10,136 Mboe from Charlie Lake (40% of identified locations at 220 Mboe per well) and 16,720 Mboe from Montney (20% of identified locations), bringing total 2P reserves from 106,070 Mboe to approximately 132,926 Mboe, effectively adding 2-3 years to the Reserve Life Index. At WTI $75 (CAD $46/bbl realized), NAV is CAD $28.53 per share using 0.25x P/2PNAV, representing over 100% upside from current prices, while the high case at WTI $90-95 (CAD $65/bbl) yields NAV of CAD $64.20 per share. The company generates approximately CAD $30 million annual free cash flow (24% of market capitalization) and has approved a 10% NCIB, with management considering accretive acquisitions that could further de-risk Charlie Lake and Montney assets, though execution remains critical to realizing this value.

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