YB new stock pitches (Fri, Feb 27)

Morningstar (NasdaqGS:MORN), a Chicago-based financial data provider established in 1984, has sold off from a peak valuation of 36.6x EBITDA in early 2024 to 9.4x EBITDA in February 2025—a level last seen during the financial crisis—due to market fears that AI poses an existential threat to financial data providers. The company operates across multiple segments including Direct, PitchBook, Data & Analytics, Wealth, Advisor, and Asset Management & Rating, with structured data products through Direct and PitchBook driving the majority of revenues and profits through seat-based licenses. Since FY 2020, MORN has compounded revenues at 9.9% and EBITDA at 12.0%, with EBITDA margins ranging from 15.8% to 24.3%, LTM operating cash flow of $589.7M, modest capex requirements of ~$145M annually, 1.2x leverage with $732.4M net debt on $593.4M EBITDA, and returns of 8.9% on assets and 12.6% on capital. The investor estimates only ~16% of MORN's revenue is at high risk of LLM-driven disruption, primarily GUI-based workflows and human-generated research content, while core proprietary datasets like CRSP and PitchBook—which represent decades of historically accumulated, point-in-time structured data requiring years of institutional knowledge to replicate—are likely to benefit as AI increases demand for canonical, high-fidelity datasets since low-cost code generation and structured data are complementary goods. In the bear case, assuming 8.9% revenue growth with a 16% cumulative AI headwind through 2030, 22.3% EBITDA margins, and an 8x exit multiple, equity holders would earn a 2.3x MOIC; in the bull case, assuming 12.1% revenue growth, 30% EBITDA margins with ~570bps expansion through margin improvement toward higher-margin data infrastructure products, and a 14x exit multiple (still 8 turns below MORN's 10-year average), equity holders would earn a 4.6x MOIC through 2030, with the investor assigning a 60% probability of achieving returns in the 2.3x-4.6x range and taking a new position in the stock.

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Nam Cheong Limited (1MZ.SI), the largest offshore support vessel (OSV) owner in Malaysia, has secured significant long-term contracts totaling RM$317 million for 7 AHTS vessels over 2 years and RM$211 million for 3 OSVs over 2 years, with over 60% of its fleet now under long-term contracts. The company sold two older platform support vessels for US$41 million to repay debt and fund newer vessel construction, and announced its first newbuild contract in over a decade worth US$64.5 million to deliver four vessels to a UAE-based company between 2H2027 and 2028. AGT Partners, an investment fund with a 74% CAGR since 2019 that previously invested successfully in competitor Marco Polo Marine, acquired a 7% stake at S$1.28 per share, comprising 7% of its AUM. DBS Research initiated coverage with a buy rating and S$1.60 target price while CGS has a S$1.87 target price, representing significant upside from current levels. The company is trading at approximately 7x EV/EBITDA despite expected double-digit EBITDA growth ahead as the OSV market tightens due to an aging global fleet (16-18 year average age) with limited newbuild supply, while Petronas increased its 2026-2027 well count guidance to 70 and 80 development wells respectively. Nam Cheong owns 36 OSVs and is building 6 vessels for internal use, expanding to 42 by year-end 2026, and benefits from replacement demand as one of the few remaining shipbuilders in the field, positioning it to capitalize on the multi-year offshore oil and gas upcycle driven by increased deepwater exploration budgets.

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Axon Enterprise (AXON), trading at a $40 billion market cap with a Snowflake-like multiple, is being pitched as a short due to its attempt to re-rate from a 'hardware + gov software' company to an 'AI platform company' despite financials showing structural weaknesses. The company is guiding $590M-$620M in stock-based compensation (SBC) for 2026, with roughly $230M tied to broad-based employee plans and CEO performance awards, which management openly highlights as structurally large, making adjusted EBITDA metrics misleading as they double-count economics. The touted $750M in 'AI Era Plan' bookings are primarily packaging stories, bundle pull-forwards, and contract restructuring rather than proven high-margin AI software revenue, and may carry significant services, implementation, and support costs especially in the 911 push. The company's $14.4 billion backlog (up 43% year-over-year) is a non-GAAP operational metric that can mask margin dilution and service intensity, while the $7.4 billion in bookings (up 46%) may represent '10-year managed service obligations + hardware + integration' rather than clean contracted SaaS. Axon has been acquisition-heavy, notably the $625M Carbyne deal, behaving like a capital allocator and roll-up platform while being priced as organically scaling SaaS, with significant investing cash outflows obscuring the quality of earnings. The company guides 27-30% growth with only 25.5% adjusted EBITDA margins, creating a wide gap between GAAP economics and story economics due to SBC and acquisition spend, while exploiting the market's willingness to forgive weak owner earnings for companies that can frame themselves as 'AI platforms.' The investor previously shorted the stock earlier in the year, covered, then re-shorted after a recent pop, and after analyzing the earnings call has increased the short position significantly, betting on a new 52-week low within 3 weeks, viewing the valuation as absurd given the tape's recent intolerance for such moves at these multiples.

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