YB new stock pitches (Fri, Dec 5)

Shin-Etsu Chemical Co., Ltd. (4063.T) is a global leader in three key businesses—PVC, silicones, and polysilicon wafers—each operating in consolidated markets with high barriers to entry. In PVC, most of Shin-Etsu's US-based assets benefit from low-cost power and natural gas, positioning the company at the bottom of the global cash cost curve, with potential recovery supported by signs of rates peaking and resilient household balance sheets despite current weak demand from sluggish US housing. In silicones, used across construction, autos, electronics, and healthcare, demand typically grows at twice GDP in a highly consolidated market outside China, where recent overcapacity pushed prices to breakeven levels but conditions are improving through closures and cancelled expansions. In polysilicon wafers, Shin-Etsu leads in 300mm diameter wafers for advanced nodes with demand spanning autos, gaming, smartphones, PCs, and data centers, benefiting from AI as a structural driver since AI servers require three times more silicon than traditional servers. The company trades at 16x forward earnings with high single digit growth, holds 20% of its market capitalization in cash, and offers potential upside from corporate action.

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U.S. Physical Therapy (USPH) operates outpatient physical and occupational therapy clinics across the U.S. and an industrial injury prevention division, presenting a low-risk, low-leverage platform with predictable volumes and easier staffing post-COVID. The company is deploying two key efficiency drivers: an AI-based documentation system expected to add 1-2 incremental visits per day to the current 32.7 visits per clinic, and WelcomeWare front desk optimization allowing one remote staffer to cover three clinics versus the old one-per-clinic model, saving 0.5-1 FTE per clinic with potential for 100-200 FTE savings at scale across their goal of 200 clinics by year-end. After five years of Medicare rate reductions that compressed clinic margins from 22% to 19%, USPH received its first Medicare rate increase in years at 1.5%, while the labor market has normalized with improved therapist supply after post-COVID constraints when 65% female workforce stepped back for family reasons and salary inflation ran 4-5% annually. The company acquires 70-80% of clinics at 6.5-12x EBITDA depending on size and geography in a fragmented market where top 5-7 players control only 10-15% of the market, while their industrial segment provides 3:1 ROI on worker comp savings through 3-5 year contracts with high renewal rates, positioning USPH as a steady compounder with clean operating leverage drivers.

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Jet2 plc (JET2.L), the UK's largest packaged holiday provider and third-largest airline, trades at 6.3x TTM earnings with 20% of its market cap in net cash and has been aggressively repurchasing 0.05%-0.2% of shares daily through a £250M buyback program. The company expects ~10% annual revenue growth and 20%+ EPS growth driven by 5% annual capacity expansion from fleet growth (2-3% annually) and aircraft mix shift (30% of 2025 fleet upgrading from 189-seat Boeing 737-800NGs to 244-seat A321neos), plus potential price inflation and economies of scale from new fuel-efficient aircraft negotiated during COVID. With F2025 revenue of £7.2B growing to an estimated £9.6B by F2028, assuming 6.5% operating margins (below the historical 7% average), the company projects £558M net income, translating to £2.79-£3.34 EPS depending on share count reduction from buybacks, targeting a fair value of £27.9-£40.1 per share (100%-186% total return, 32%-52% IRR) at 10-12x PE multiples. Key risks include airline industry volatility (wars, pandemics, natural disasters), younger travelers preferring independent travel over packaged holidays, increased competition with EZJet (route overlap rising from 21% in 2016 to 54% in 2025), UK consumer weakness, reported seat overcapacity, and transition from founder leadership, while the primary catalyst is earnings growth making the current PE multiple increasingly attractive.

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