YB new stock pitches (Fri, Feb 20)

Honeywell International Inc. ($HON), which spun off its advanced materials division in October 2025, is planning to separate its automation and aerospace segments in approximately Q3'26 following pressure from Elliott Management's November 2024 letter to the board. The company has historically traded at a conglomerate discount due to its multiple distinct industrial businesses where consolidated reporting obscures true economic value and performance. The key value driver is the aerospace segment, which, while different from GE Aerospace, is high quality and positioned to rerate to publicly listed aerospace peers' high multiples once spun off, unlocking significant value. Elliott Management's base case price target is approximately $330 per consolidated Honeywell share and their upside case is approximately $383 (including the already spun-off Solstice Advanced Materials, though most value comes from aerospace). Despite the stock's run-up, the June 17, 2027 $250 strike calls at a last premium of $26.60 appear attractive with an 11% relative premium, 14.6% breakeven over 485 days (1.3 years), and 5.17x leverage factor, offering potential profits of approximately $5,340/200% at the $330 target and $10,620/400% at the $383 target. An additional tailwind is the contract's low 25.9% implied volatility, which could provide a 'vega kicker' boosting profits if volatility rises (potentially when the aerospace registration statement is released, giving investors their first detailed look at disaggregated financial metrics), even if the stock price remains flat, though spinoff dates can be delayed.

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6K Additive Inc (6KA.AX), a U.S.-based advanced materials company producing high-performance metal powders for additive manufacturing, offers exposure to U.S. re-industrialization and critical materials supply chains amid geopolitical tensions and defense readiness priorities. The company's strategic moat is its proprietary UniMelt microwave-plasma production platform, which enables manufacturing of highly spherical, high-purity powders from recycled scrap rather than primary ore, providing a process-driven IP advantage with flexibility across multiple metals versus peers whose differentiation is alloy-specific. 6K produces C103 niobium alloy powder for hypersonic missile systems with a meaningful cost advantage through scrap-based feedstock, along with titanium and nickel-based powders from recycled aerospace and industrial scrap. The company has received Defence Production Act Title III support with US$14 million still available, deep DoD relationships, and recently added defense procurement expert Jeff Green to its board. Q4 revenue reached US$5.6 million, up approximately 25% quarter-over-quarter, with the business exiting at a US$22 million+ annualized run-rate and over 30% of Q4 revenue from new customers. Current capacity sits at approximately 200 tonnes per annum running at roughly 65% utilization, with fully-funded expansion to approximately 1,000 tonnes per annum by end-2026 beginning commissioning in Q3. The balance sheet includes US$29.5 million cash, no debt, remaining DPA funding, and an approved US$27.4 million ExIm Bank loan, with a US$250 million+ order book and pipeline including US$60-70 million of qualified opportunities annually and triple-digit quarter-over-quarter growth in nickel and titanium powders. Trading at AUD$250 million market capitalization with US$29.5 million cash and no debt implying approximately AU$210 million enterprise value, 6K expects to generate approximately US$27.4 million revenue this year (roughly A$40 million) compared to closest peer Amaero 3DA at A$315 million market cap with approximately A$15 million cash implying near A$300 million enterprise value while targeting similar A$40 million revenue in FY27, though 6K's superior process-level IP moat suggests re-rating potential. Key catalysts include new contract wins and customer logos, successful commissioning and ramp-up of expanded capacity, and continued conversion of the US$250 million+ pipeline into recurring revenue as the business transitions from proof-of-capability to scaled execution following a challenging late-2025 IPO period.

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RS Technologies (3445.T), the global leader in reclaimed wafers with over 30% market share in 12-inch wafers serving TSMC (~25% of sales), is a long at ¥3,450 with a market capitalization of approximately ¥92 billion ($600 million). The company's core reclaimed wafer business, which uses proprietary film-stripping technology allowing 10-20x reclaims versus competitors' less than 10x, generates 65% of operating profit at 35%+ margins with 26% ROIC and has grown operating income at a 20% CAGR over the past decade in an oligopolistic market where the top 6 firms control over 90%. The business benefits from secular tailwinds as advanced nodes demand 20% more test wafers with higher ASPs and tighter specifications, with TSMC's 2025 advanced node revenue expected up over 50% year-over-year. RS is expanding capacity from 630,000 wafers per month in FY24 to 1.19 million by FY28 (+73%), pulling forward the restart of its Sanbongi Plant 7 acquired at ¥400 million versus ¥20 billion replacement cost. The company guides for ¥115 billion in revenue (17% CAGR from FY24) and ¥19 billion in operating profit by FY28, with a history of beating out-year estimates. RS holds a 40% stake in GRITEK joint venture with state-owned GRINM (China's core semiconductor materials program), worth approximately $1 billion or 1.7x RS's current market cap, with GRITEK trading at a ¥17.1 billion (~$2.48 billion) market capitalization. The company maintains a fortress balance sheet with net cash of ¥76 billion (~$496 million, or 23% of market cap), including ¥54 billion of consolidated GRITEK cash and ¥21 billion at the holdco level, resulting in an enterprise value of only ¥71 billion (~$465 million) against ¥53 billion in operating cash inflow expected over the next three years. Trading at 6x EV/EBIT, 9x EPS, and 15% ROE with 20% operating profit growth over the past five years, RS offers a price target of ¥7,000 (2x current price) with a 20%+ IRR from both growth (doubling intrinsic value every 3-5 years) and multiple expansion, representing a significant discount to peers despite superior ROE, growth profile, and balance sheet strength.

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