YB new stock pitches (Mon, Aug 17)

Unusual Machines (UMAC) is a supplier of NDAA-compliant motors, components, and related hardware for small and FPV drones, positioning itself as a pure-play on the U.S. parts shortage bottleneck and an enabler across multiple OEMs at the materials/components layer of the domestic industrial base rebuild. The company is a direct beneficiary of the Executive Order push for American content, Drone Dominance procurement rules requiring compliant supply chains, OSC-style financing aimed at unlocking volume production, and DoD Group 1–2 system procurement. Revenue is growing hundreds of percent year-over-year off a small base, with expanding production capacity and increasing visibility, while the market cap sits around $1.3 billion (volatile). The 10x+ thesis rests on meaningful content per drone: if U.S. annual attritable production scales into the hundreds of thousands, a leading domestic components supplier captures high-margin, recurring volume with limited foreign competition under current policy, driving operating leverage and multiple expansion. Key risks include customer/OEM concentration, execution on capacity and quality at volume, competition or vertical integration by larger players, and the early-stage nature of the pure components model.

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Harbour Energy (HBR.L), one of the world's largest geographically diverse independent oil & gas companies operating across Europe, Latin America, North Africa and SE Asia, trades at 243p with a ~£3.8bn ($5.1bn) market cap and an adjusted PE of ~6x, despite generating $2.86bn of post-tax operating cash flow in 1H26, $2.76bn operating profit, $562m/£436m net profit, and $1.76bn FCF (35% yield) on production of 509 kboepd (a beat, with FY guidance nudged higher). The core thesis is a mix story, not a volume one: HBR faces an eye-watering ~81% effective tax rate (above the 78% UK EPL/Norway statutory rate because low-tax-region losses muddy the water), but as low-tax production from Argentina (Vaca Muerta), the US (Gulf of America, 40%+ IRR) and Mexico grows from 35% to ~50% of output over two years, the author estimates blended statutory tax falls to ~54% and ETR drops to ~69%, lifting post-tax FCF from $1.8bn to $2.52bn and FCF yield to ~49.4%. A key hidden value is the North Sea decommissioning tax carry-back: up to 78% relief on the ~$7.42bn decommissioning liability (~$7bn nominal refund over field life), not recognized on the balance sheet under IAS 12, meaning true NAV far exceeds the $6.64bn accounting equity—implying an economic discount of up to 50% (vs. an official 23% discount). Deleveraging is faster than it appears: despite the $3.2bn LLOG acquisition (completed Feb 2026), gross debt rose only to $6.81bn with $1.64bn cash leaving net debt of $5.17bn, and inherited Wintershall Dea bonds (some as low as 1.332%) give a ~4.3% blended interest cost; of the $509m finance expense, only ~20% is actual interest ($79m unrealized IFRS9 losses, $42m one-off fees, $147m decommissioning unwind). On reserves, 2.96bn boe of 2P/2C resources equate to $0.58 per barrel in the ground (sold at ~$85/boe, extracted at ~$14.5/boe), and HBR is valued at ~$9 per proven barrel versus ~$18 for Ithaca and ~$21 for Aker BP. Catalysts include a $250m buyback announced (plus a likely further $250m), an upgraded $1.8bn FCF forecast, a $300m dividend (5.9% yield), affirmed production/opex/capex with lifted price assumptions, the clearing EIG overhang (which dumped its entire remaining stake at 205p on 3 July, ~halfway done and being partly absorbed by buybacks), potential 2030 UK windfall levy expiry (priced at zero), and winter European gas tightness (storage barely above 50%) that challenges brokers' bearish, historically inaccurate forecasts (which missed 1H26 revenue by +20%, EBITDAX +15%, FCF by 300%). Bear case/risks: a genuine ~7–8 year 2P reserve life (a structural weakness requiring capex for extensions), a 2027 FCF drop (-53%) driven by a Norway tax-lag timing effect rather than deterioration, the permanent 78% Norway tax, and continued near-term selling pressure making it unappealing to short-term traders.

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Kusurinomadoguchi (5592.T), operator of Japan's largest online pharmacy reservation platform (EPARK Medicine Counter, covering ~40% of dispensing pharmacies, ~25,000 stores), is a new smaller-sized long position trading at ¥2,350 (market cap ¥26.5bn, EV ¥20.5bn) at 8.3x EV/EBIT and 11.6x EV/NOPAT, having grown revenue at a 17% CAGR and EBIT at a 34% CAGR over four years via organic growth and accretive bolt-on acquisitions. The company operates three segments—Media (two-sided prescription reservation marketplace with high switching costs and network effects, processing ~2 million prescriptions at <2% penetration, competing with Medley's melmo, pharmacy-chain apps like Ain, and Medical System Network's LINE app), Minna no Oyakubako (pharmacy procurement group, e-ordering software, and dead-stock marketplace, where ~30% of small pharmacies use price agents leaving ~26,000 addressable facilities, competing with larger MSN whose ~¥750bn GMV and historical 1.3-1.4% take rate versus Kusuri's ~1% ceiling implies take-rate expansion room), and Core Systems (lower-margin, buy-and-build EMR/pharmacy software following the Hikari Tsushin playbook). It benefits from structural tailwinds including Japan's aging population, healthcare labor shortages, and government-driven digitalization (though this created pull-forward demand that hurt comps like EM Systems, down 80% in net income). The key catalyst/inefficiency is forced selling: the NBSE fund (formerly 28% holder) distributed 3.14 million shares to LPs mid-2025 near end of its term, decoupling price from fundamentals and creating a ~40% discount to peers; notably, controlling shareholder Hikari Tsushin (via EPARK) absorbed shares, raising its combined stake from 29.56% to 38.99% at ~¥4,000 versus the current ~¥2,350. Underlying recurring revenue grew 14% YoY in FY26 (with recurring gross profit up ~34% organically), though headline underlying revenue growth was only 6.3% after adjusting for the Medi-Web acquisition (bought for effective net EV of ¥383m against ~¥1bn revenue and ~¥100m operating profit). Management (CEO Koji Tsutsumi and Chairman Nobuaki Tanaka) has a strong Hikari Tsushin-linked track record, scaling revenue from ¥2.5bn (2019) to ¥12bn with EBIT over ¥3bn, cutting SG&A, executing disciplined acquisitions (Moinet at ~5.5x P/E, Hi-Bridge at ~10x EBIT), navigating the Global H procurement JV disruption (following I&H's absorption into Sugi Holdings, transitioning to Weeds) while keeping recurring revenue rising, and initiating buybacks. Comps trade at roughly a 40% premium (with private-market deals for CE Holdings at 18.3x EV/EBIT and CareNet bought by EQT at 17.5x TTM EV/EBIT), and the author argues the market prices in zero growth; a rerate could yield ~90% upside, with each segment potentially adding ¥1bn in EBIT over 2-3 years. The bull case is media growth plus procurement reacceleration driving a rerate; the bear case/primary risk is high operating leverage (fixed cost base means earnings fall disproportionately if growth stalls, comparable to EM Systems and POPER both down over 50% from highs), a potential ~40% drawdown, and the absence of a deep structural moat, which is the main reason for the smaller position size.

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