YB new stock pitches (Mon, May 12)

BGSF, Inc. reported promising Q1 2025 results, driving an 8% stock jump. Despite overall revenue declining 8% year-over-year to $63.2M, the professional segment showed 5.6% quarter-over-quarter growth (though still down 4.2% YoY), while property management remained challenged at -14.9% YoY. The company secured 60 new client logos (up 60% YoY), improved adjusted EBITDA to $2.4M from $1.4M in Q4, and generated positive operating cash flow of $1.1M despite gross margin compression to 33.1% from 34.1% YoY. G&A expenses decreased to $18.9M from $21M YoY as the strategic restructuring reached 65-70% completion, with remaining cost savings expected in Q2. Management has indicated the property management division is bottoming out, showing early signs of turnaround. The key risk is a potential recession, which could result in a total loss on the position; however, if the U.S. avoids an economic downturn, BGSF could experience a substantial re-rating before year-end.

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Cineplex Inc. (CGX.TO), Canada's dominant movie theater operator with 75% market share, trades at an attractive 5-6x EV/EBITDAaL multiple and offers 100% upside potential. The company's recovery thesis hinges on box office attendance returning to 75-80% of 2019 levels, which would yield approximately $220M in EBITDAaL and $100M+ in free cash flow, supporting a valuation of $20/share at 10x EBITDAaL or an 8% FCF yield. Beyond its theater operations, Cineplex has hidden value in its high-margin Media segment (49% margins), growing Location-Based Entertainment business (23% store-level margins), and valuable Scene loyalty program with 15 million members (40% of Canada's population). The company benefits from significant pricing power (BPP has increased from $7.99 in 2006 to $13.26 in Q4 2024), premium format growth (42% of box office revenue), and operating leverage through its fixed cost structure. With management targeting 30 LBE locations (versus 16 today), reduced interest expense through deleveraging, and the potential reinstatement of dividends, Cineplex represents an attractive acquisition target given its monopolistic position in Canadian exhibition.

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Consensus Cloud Solutions (CCSI) is an undervalued SaaS spinoff trading at 5.7x EV/EBITDA and a 17% FCF yield, with a market cap of $440M and $526M in net debt. The company has two segments: Corporate (62% of revenue, growing 6.5% with 101% retention) and SoHo (38%, declining 9.5%), with overall revenue stabilizing at $350M. CCSI maintains impressive 53% EBITDA margins and 80% gross margins while operating with minimal working capital needs and a negative cash conversion cycle. Management has successfully delevered from 5.3x to 3.1x EBITDA, enabling a planned $100M stock buyback once the 3.0x target is reached. The midpoint valuation estimate of $1.3-1.4B ($38-44/share) suggests 70-100% upside from the current $22 share price. Key risks include potential poor M&A decisions, slowing corporate segment growth, and disruption from larger competitors, though mitigated by CCSI's healthcare focus and high customer retention.

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