YB new stock pitches (Thu, Apr 30)

RADCOM (RDCM), a 5G service assurance software pure-play, trades at 14-15x trailing GAAP EPS of $0.71, but stripping out $109.9 million in net cash (42% of the $260 million market cap) values the operating business at just 9.5x earnings. The company delivered its sixth consecutive year of growth in FY2025 with revenue of $71.5 million (up 17.2% year-over-year), record non-GAAP operating margins of 20.6%, and GAAP EPS growth of 65% driven by operating leverage on its cloud-native RADCOM ACE platform and newer AI modules including the recently launched Neura agentic AI suite (demoed at MWC Barcelona in March 2026) which is embedded in Rakuten Symphony rollouts to global operators. An activist group combining the founder's children (Michael and Klil Zisapel) with Value Base (~19.27% combined stake) and separately Lynrock Lake (~19% pushing for strategic alternatives) collectively represent roughly 38-39% of votes heading into a May 20, 2026 extraordinary general meeting that will vote on board overhaul, capital allocation changes, and removal of five incumbent directors. Key catalysts include the EGM outcome, potential capital return (special dividend or buyback), possible M&A exit given strategic interest and founder family involvement, new Tier 1 customer wins beyond the current three customers representing 86% of revenue, and adoption of Neura AI agents across telecom operators. Management guided 2026 revenue growth of 8-12% (implying $78.6 million at midpoint), with gross margins around 76-77% and zero debt supporting a clean balance sheet that generated $15.2 million in operating cash flow in 2025. Risks include high customer concentration (three customers at 86% of revenue, with AT&T as anchor), lumpy sales cycles, governance issues that activists cite as causing capital allocation inefficiency (stock-based comp exceeding $6 million annually versus modest GAAP earnings), competitive pressure from larger players like Cisco and NetScout, and geopolitical exposure from Tel Aviv headquarters. Applying a fair P/E of 22x to projected 2028 EPS of $1.50 yields a price target of $33 (versus current ~$16), implying approximately 27% IRR over three years, with potential for faster realization if the activist situation forces capital return or a sale to strategic buyers like NetScout or Spirent who could value the high-margin, AI-native telecom assurance platform above standalone valuation.

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Alluvial Fund initiated a new position in Gulf Marine Services PLC (GMS.L), a London-listed owner of 15 self-elevating, self-propelled support vessels (SESVs) that service offshore oil, gas, and renewable energy operations, primarily for blue-chip national oil companies in the Middle East. The company previously struggled with excessive debt from a poorly timed acquisition spree, reaching $406 million in net debt on $50 million EBITDA by 2020, but new management aggressively deleveraged by $250 million through 2025, bringing net debt to $156 million while EBITDA grew to $113 million and 2025 day-rates increased 11% over 2024. The stock trades at 4x EBITDA and a 20% forward free cash flow yield with a revenue backlog of $396 million, and the company was positioned to resume capital distributions and modest growth investments before Iran-related hostilities forced evacuation of four vessels from Qatari waters, causing shares to fall 35% from February peaks. At the current price below 18 GBp per share, the enterprise value of $430 million is essentially equal to the existing revenue backlog of $396 million, meaning the market assigns nearly zero value to the company's assets and operations beyond current contracts despite evacuated crews and client personnel gradually returning to vessels. The fund believes shares could double as leverage normalization and visible cash flows play out, viewing the Iran-driven selloff as a temporary headwind creating an opportunity to buy at a significant discount to the value of the young, quality fleet.

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Hamilton Lane (HLNE), a $4 billion market cap private equity firm managing $1 trillion in assets, is facing scrutiny as Hunterbrook Capital takes a short position amid concerns over accounting practices and potential redemption pressures. The firm's $6 billion Private Assets Fund (PAF) has increasingly relied on buying secondary stakes in private equity portfolios at discounts and immediately marking them up to previous valuations through 'day-one markups,' which Hunterbrook analysis shows account for approximately 33% of PAF's total gains rather than actual appreciation of underlying companies. In early 2025, Hamilton Lane changed its fee structure to collect $58 million in incentive fees based on unrealized gains and marks rather than only upon actual asset sales, while simultaneously excluding stock-based compensation from its fee-related earnings calculation—changes that inflated the reported fee-related earnings margin from 32% to 59% and explain more than 100% of recent earnings growth (without these adjustments, fee-related earnings would have declined 16% year-over-year instead of growing 37%). The firm's evergreen fund model, which manages $17 billion and derives 34% of fees from retail investors (higher than peers like Blackstone at 24%), faces risks as PAF holds approximately 30% exposure to software companies amid the 'SaaSpocalypse' of AI disruption, while the Global Private Assets Fund experienced record outflows of $172 million in March 2025, its largest on record and nine times larger than any previous monthly outflow. Industry veterans call the combination of evergreen fee structures collecting performance fees on unrealized gains from day-one markups 'very dangerous' and 'unheard of,' as the model requires continuous inflows to buy new discounted secondary assets and generate new markups—creating potential for a feedback loop where redemptions force asset sales, triggering markdowns that pressure reported returns and stall fundraising, potentially unraveling the $17 billion evergreen business built on what critics characterize as accounting magic, with the stock already down 50% from its peak.

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