YB new stock pitches (Mon, Apr 27)

Howard Hughes (HHH) is a long position at $63.50 with a market cap of approximately $3.8 billion, where the market is pricing the legacy Master Planned Community (MPC) business at less than $2.4 billion after accounting for the $1.2 billion Vantage Group acquisition that sell-side analysts completely disregard. The South Street Seaport capital sink is now gone, and the MPC business, which owns approximately 34,000 acres representing over 50 years of supply despite selling 500 acres annually, should produce $440 million in adjusted operating cash flow in 2026, translating to over $325 million of allocable cash annually (a ~14% yield expected to expand by 50%) after adjusting for tax, CAPEX, and the $15 million Pershing Square Holdings (PSH) management fee. The company acquired Vantage Group, a specialty insurance platform with $1.6 billion in gross written premiums split 60% specialty insurance and 40% specialty reinsurance with less than 1% catastrophe exposure, at an effective price of 1.4x book value, which currently delivers a 13% pre-tax ROE that management expects to expand to high-teens or better as the expense ratio drops from 36% to under 30% (generating 600 basis points of margin expansion) alongside PSH's management of Vantage's $2.8 billion investment portfolio at no charge. PSH, which paid approximately $300 million for management rights earning 150 basis points after inflation on stock price with a $66 hurdle and recently purchased $10 million in warrants for new board member Marc Grandisson, has strong alignment as their investment needs significantly higher stock prices to exit the red. Management argues that pure-play specialty insurers with similar ROEs trade above 2x book value, and achieving target ROE could reset the multiple from sub-1.4x to over 2x, layered on mid-to-high-teens book value growth, resulting in a multi-year 25% IRR.

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WM Technology (MAPS), better known as Weedmaps, is a cannabis marketplace and software company that connects consumers to dispensaries while providing software tools for menu management, orders, compliance, and point of sale integrations, trading at approximately $64 million market cap ($0.37/share) with $57 million in cash and no debt, effectively valuing the business at less than 1x cash-adjusted P/E despite generating $43 million in Q1 2026 revenue and $5-7 million in adjusted EBITDA. The company, which started in 2008 and went public via SPAC merger with Silver Spike Acquisition Corp. in 2021 at a $1.5 billion implied equity value before collapsing, voluntarily delisted from Nasdaq on April 7, 2026, to transition to OTCQX and eventually file Form 15 to reduce SEC reporting obligations, causing the stock to drop over 50% from $0.70+ despite flat revenue and positive EBITDA guidance in preliminary Q1 results released April 17. The major catalyst is President Trump's Executive Order 14370 from December 2025 directing Schedule III rescheduling of marijuana, which would remove Section 280E tax treatment that currently forces state-legal cannabis operators to pay 60-70% effective tax rates on gross revenue rather than net profit, dramatically improving dispensary cash flows and their ability to spend on Weedmaps' services, though the company itself is not subject to 280E as a tech provider. The bull case centers on the stock trading at roughly cash value with potential for the business to double if re-rating occurs as rescheduling improves customer economics, while bear case risks include OTC illiquidity as institutional buyers exit, potential management take-private at a controlled price following a withdrawn 2025 proposal, reduced minority shareholder protections once Form 15 is filed, and the company's history of not producing significant net income despite revenue generation. The investor is taking a new position based on the attractive entry price relative to cash and potential rescheduling tailwinds, accepting the governance and liquidity risks inherent in the OTC transition.

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Harbin Electric (1133.HK) reported FY25 revenue of $46B (+19% YoY) with gross margins of 14% (up 2 percentage points), driven by coal revenue of $18B (+16%) at 18% margins (up 6ppt), hydropower $4B (-8%) at 18% margins (up 4ppt), nuclear $4B (+4%) at 17% margins (down 14ppt), and EPC/trading $8B (+101%) at -0.2% margins. New orders reached $65B (+14% YoY), with coal orders at $24B (+39%) and nuclear orders at $9B (+82%), while contract liabilities grew to $34B (+28%), signaling strong order momentum. Operating cash flow improved to $5B from -$240M, and earnings increased 54% to $2.6B due to margin expansion and a large fixed-cost base. China added 550GW of new power capacity in 2025, including 78GW of coal (highest in a decade) and 1.65GW of nuclear, with 2026 expected to see coal additions of 75GW. In 2M26, thermal capacity additions were 20GW versus 6.6GW in 2M25 (coal estimated +178% YoY at 15GW) and nuclear added 1.2GW versus zero in the prior year. Key catalysts include the Yarlung Tsangpo Hydropower Project (60GW, the world's largest hydropower project with turbine procurement beginning in 2027-2028), pumped storage buildout (30GW new construction and 30GW new capacity forecasted over five years), and strong nuclear order growth expected to improve profitability after weak 2025 additions. SASAC injected $5B capital in April, increasing registered capital from $2B to $7B, likely for financing major future projects, and Harbin formed a joint venture with China Yajiang Group (owning 2%) for the Yarlung Tsangpo project, signaling advancement. The investor sold at the war's start and bought back after a research report, with risks including EPC growth being unprofitable, weak hydropower orders near-term, and nuclear margin pressure from minimal 2025 newbuilds.

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