YB new stock pitches (Mon, Nov 10)

Nomad Foods Limited (NOMD), a European frozen food market leader trading at $11.20 per share, represents a potential 2.5x return opportunity by 2028 with a $28 price target, offering a 41% IRR when combined with its 6% dividend yield. The company trades at 5.8x free cash flow, the lowest valuation in its history, despite management's strong track record of acquisitions requiring 25 million Euros of annual synergies at under 9x EBITDA multiples, generating 4% organic revenue growth annually until recent stagnation. Management guided for 15% free cash flow growth over three years despite 2024 revenue being flat due to Europe's hottest summer in 500 years and inadequate barbecue-friendly product offerings. The bull case centers on Europe's frozen food market growing 5% annually through 2032, Nomad gaining market share, management's excellent execution over nine of the last ten years, $2.4 billion in long-term debt with favorable terms (nearest maturity 2028, one-third at 2.5% fixed rate), and potential for continued acquisitions and share buybacks that could shrink the float 8% by 2028. Bear cases include potential management stumbles after their first misstep in a decade, risks from bad acquisitions, and the stock showing no signs of price stabilization after reaching historic low multiples. With 292 million Euros in 2024 free cash flow across 152 million shares and projections of 350 million Euros by 2028 across 137 million shares ($2.94 per share), the company historically traded over 10x free cash flow compared to today's 5.8x multiple.

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Wise plc (WISE.L) is a UK-based fintech company disrupting cross-border payments by bypassing the traditional SWIFT correspondent banking system through local payment matching across its platform network. The company generates approximately 70% of revenue from transfer fees with declining take rates due to its 'scale economics shared' strategy (similar to Costco/Amazon), 20% from card revenues, and 10% from interest income on its £21bn deposit base, growing 15-20% annually while achieving 30% ROE. Founded and still led by 45-year-old Kristo Käärmann (who owns 18.2% equity with majority voting control through dual-class shares), Wise operates as a capital-light platform business with network effects, holding licenses across multiple countries and direct access to 6 national payment systems. The company trades at 4.6x sales versus 8x for peer platforms, has been profitable since 2017, and targets 15-20% earnings growth while planning a US listing in mid-2026. Key risks include stablecoin competition potentially disrupting the business model, regulatory and money laundering concerns, competition from companies like Airwallex and Stripe, key-man dependency on the founder (who was previously fined for tax issues), and interest rate sensitivity affecting the significant interest income component, while the dual-class structure and 'over-earning' on interest (with adjusted profits lower than actual profits) present additional considerations for investors.

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Supreme Plc (SUP.L), a 50-year-old UK distributor of fast-moving consumer goods, is trading at 6x EV/EBITDA despite growing sales from £122M to £231M (FY21-25) and EPS from £0.09 to £0.19. The CEO owns 56% of the company and has a proven M&A track record of buying businesses at 5-6x pre-tax profits and reducing multiples to 3-4x through synergies like closing manufacturing facilities, reducing employees, and leveraging existing distribution infrastructure. The company faces significant vaping headwinds including a UK disposables ban effective June 1, 2025, and an upcoming £2.20 per 10ml vaping tax in October 2026, though management points to Germany's similar tax experience where sales returned to pre-tax levels after an initial drop-off, and a survey shows 85% of UK vapers switched to reusables with 8% treating devices as single-use. The company's largest customer is the UK government prison services generating £20M annually, providing stable recurring revenue with potential for European expansion. Using a DCF analysis with 9.5% WACC and 3% perpetuity, the intrinsic value is £2.32 versus the current price of £1.70, representing 35% upside, while even a conservative scenario assuming significant vaping revenue declines yields a fair value of £1.85. Key risks include the impact of vaping regulations, illegal vape competition, and uncertainty around consumer behavior changes post-disposables ban, though the company's diversified product portfolio across health & wellness, soft drinks, and household products provides some protection.

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