YB new stock pitches (Mon, Jun 29)

Cedergrenska (CEDER.ST) is a Swedish free-school roll-up (new long) that buys independent schools cheaply at 3-4x EBITA from retiring or regulation-burdened family owners, generating ~30% ROCE (twice Academedia's) with heavy insider ownership—co-founder Niklas Pålsson (17%), Rector Söderström (14%), and CEO Lotta Smith (2%, ~10 MSEK). The business model is straightforward: each student carries a school voucher (a function of student count and voucher value, increased annually with inflation), making student occupancy the key value driver. The market is ideal for consolidation, with ~90% of 2,800 operators running only 1-2 schools and many founders now retiring; regulatory tightening makes small operators unprofitable while favoring scale, and only the largest players are opening new schools. Cedergrenska stands out as one of few decentralized consolidators versus brand-focused players (Jensen, Internationella Engelska Skolan) and Academedia (the ~25% market leader, 17x larger, focused on diversifying abroad), while PE is largely absent due to political risk—the cause of the depressed valuation. Free-school enrollment has grown ~17% over the decade to 420,000 students (1/4 of total, 40% in Stockholm), reducing the risk of radical change. CEDER trades at 4x EV/EBITDA (R12M ~12M EBITDA) at the bottom of its historical 3-8x range as political risk peaks ahead of a likely weak red-green election victory this autumn; key risks include a possible 6% voucher deduction (de facto profit ban), tougher permitting, and most seriously a proposed prohibition on group contributions/value transfers (the 2025 inquiry would require schools to cover their own costs for 5 years), which the Council on Legislation did not object to on 6/12—though most regulations hit smaller players harder and could accelerate the consolidation CEDER drives, and any expropriation would legally occur at market value. In the base case, expect ~12% growth (~10% from acquisitions), 7% EBITA margin, and ~4% average EBITA growth, implying 3x EV/EBITA by 2027-2028 and 2x by 2029—a potential doubling in ~3 years even at today's multiple, with a re-rating to ~6x possible as uncertainty clears. The bear case (harsh red-green attack) keeps 12% acquired revenue growth but turns organic growth -4%, squeezing EBITA margin to 5% and -8% average annual growth, yet the multiple holds at 4x with limited downside—a Mohnish Pabrai 'heads I win, tails I don't lose much' setup. The author has bought shares.

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Rheinmetall (RHM.DE), a German defense company, saw shares sink following a Financial Times report that the German government is cancelling plans to build six F126 class frigates—which would have been the Deutsche Marine's biggest commission since 1945, with Rheinmetall expected to be lead contractor. While this is a clear setback, the near-term impact is minor given the ships were due for delivery in the 2030s, and Germany plans to replace the F126 frigates with eight new but smaller Meko A-200 frigates. A wider concern is around the German government's appetite for security investment more generally, though time will tell if this is well founded. Western security stocks have had a poor 2026 YTD, with sentiment soured by contract concerns and easing geopolitical tensions, but the author sees Rheinmetall as a long-term structural winner given recent conflicts have shown the urgent need for greater investment in inventories (e.g. shells) and new technologies (drones and counter-drones). Consequently, the author thinks its current rating of 17.4x consensus 2027 earnings, with a 2.4% yield, is too low.

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Rex Concepts ($REXA.WA), a ~PLN 1.2B market cap Central European Quick Service Restaurant operator holding exclusive rights to Popeyes and Burger King in Poland, Czech Republic, and Romania, follows an owner-operator model retaining full value-chain control (171 owned and 69 sub-franchised restaurants as of Q1 2026), and IPOed this year on the Warsaw Stock Exchange raising PLN 560M for deleveraging and expansion; the thesis is essentially 'sidecar investing' behind Chairman Henry McGovern, founder of AmRest Holdings (EAT.WA), whose shares appreciated 1,500% during his 2005-2019 tenure, with his family-controlled REX Invest CEE (Luxembourg) owning 62% of shares. Revenues grew from PLN 135M (57 restaurants) in 2023 to PLN 594.5M in 2025 at a 7.3% EBITDA margin (PLN 43.4M, up from a PLN -36.9M loss in 2023), with revenue per owned restaurant rising 30% CAGR to PLN 3.6M versus AmRest's ~PLN 5M; management targets 70 new owned stores by end-2026, 700+ equity stores by 2032 (vs. 171 now), tripling revenue in two years, long-term EBITDA margins in the low-to-mid twenties (9.8% in Q1 2026 vs. 1.9% Q1 2025), leases at 6.0-9.5% of revenue, G&A declining 2-3pp over 2-3 years, mid-to-long-term leverage below 3x EBITDA (currently net cash), plus growth accelerators including M&A (EUR 20M earmarked), new geographies, and new brands/product categories like Pizza. The base case assumes PLN 351.4M 2032E adjusted EBITDA (after PLN 249.2M lease payments), a 10x EV/adj.EBITDA exit multiple, PLN 1.5B net debt (2.5x), and ~95.2M shares, yielding a PT of PLN 21.1 vs. the current PLN 13; the bear case (PLN 300.7M EBITDA, 8x) implies PLN 9.5, and the bull case (PLN 400.7M EBITDA, 12x) implies PLN 34.7. Key risks include heavy growth CAPEX of PLN 3-3.8M per new restaurant (~PLN 245M/year, ~PLN 1.7B total through 2032, more than double IPO proceeds), meaning no positive free cash flow after all CAPEX before 2032 (though FCF turns positive by 2027 on maintenance-only CAPEX of 3% of revenue), reliance on financial debt, and sector multiples at historical lows (AmRest now ~5x EV/EBITDA vs. 10-15x historically, Domino's Pizza Group at 10x vs. 15-20x pre-2022) with uncertain timing of any rebound; this is a long-term growth story dependent on McGovern's team continuing to deliver.

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