YB new stock pitches (Thu, Aug 6)

Dolby Laboratories (DLB) is a new position whose Q3 2026 results confirm the 'tollbooth' thesis, with management guiding for up to $1.44 billion in revenue and 34% non-GAAP operating margins. The architects of the open-source rebellion are capitulating, as Meta becomes the latest to join Dolby's Video Distribution Program, with Alibaba also signing on, proving the indispensability of Dolby's IP. Management is deploying free cash flow to authorize a massive new $350 million share repurchase program to rapidly shrink the float. This report exorcises prior concerns, cementing Dolby as a cash-gushing, high-margin software monopoly trading at an incredibly cheap valuation—viewed as a gift.

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Terranor Group AB (TERNOR.ST), a Nordic road O&M company that traces back to NCC's 2018 carve-out and was taken public by PE fund Mutares (which fully exited in May via private placement), has risen 60%+ off its April bottom on a strong Q1 print, new contracts, and the Mutares exit, and now trades at sub-5x FY28e unlevered FCF versus peers Green Landscaping (GREEN) and NRC Group (NRC) at 10-15x LTM EV/FCFF. Pushing SEK 4b LTM revenue split across Sweden (64%, its largest and most profitable market with 23 state contracts, record backlog, and disciplined risk-adjusted cluster tendering at 100% participation/31% near-miss rate), Denmark (20%, entering a better-priced new state contract cycle with 80% of state summer contracts secured), and Finland (17%, deliberately pulling back via 'selective profitability,' with FY25 adjusted EBITA margins of just 0.2% versus 4.1% in FY22, pending legacy contract claims, and a recovery contingent on contract-mix shift/indexation rather than revenue growth), the company is transitioning from a growth phase to a harvest phase focused on profitability. The thesis centers on margin recovery toward 5% EBITA (already 4.5% group-level in FY22, with y/y expansion in 1Q26), operating leverage, and higher-margin/indexed contracts, supported by government infrastructure spend set through 2035-2037 (Sweden SEK 1,171b including a 48% road O&M funding increase, Denmark SEK 232b, Finland SEK 217b) and durable government counterparties; the author sees FY28 unlevered FCF north of SEK 160m, EBIT of SEK 240m, net income ~SEK 183m, and DPS of SEK 4-5 (versus SEK 1.5 declared this year, given a 50%+ payout target), with a rerate toward 10x FCF yielding a SEK 80 price target (SEK 100+ on full peer rerate) by year-end 2028 and a fair value range of SEK 57-125, implying a 21-64% IRR from SEK 36 today (before dividends/interim cash flows). Catalysts include a Finland inflection (claims settling/indexed pricing), sustained Sweden tender outperformance, accretive bolt-on M&A (upside since the >8% organic revenue growth target excludes M&A), and dividend-policy follow-through re-rating the discount. Risks include Finland/Denmark execution on clearing low-margin books, Sweden re-tender concentration (losing high-margin state contracts to Svevia or Destia), and governance overhang from weak insider alignment (2.6% ownership), a low-hurdle synthetic option plan (SEK 25/sh hurdle, SEK 90 VWAP cap, ~SEK 46m max payout, vesting June 2028), and CEO Michael Berglin's overhang from his prior tenure at Serneke, whose contracting arm went bankrupt six weeks after being sold to Mutares, owing SEK 2b+ and found insolvent since late 2023 under his watch (now in active Mutares-Serneke litigation). Note TERNOR's chairman Anders Gustafsson is also NRC's CEO.

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Rheinmetall (RHM.DE) issued an ad hoc pre-release ahead of its formal H1 results on August 6, with preliminary Q2 revenue of €3.3bn (+c.69% YoY, ahead of prior guidance of >60% growth) and operating profit of €562m, nearly 20% above the €470m consensus. The order backlog swelled above €80bn in Q2, providing huge visibility into the future, though a significantly negative operating free cash flow is expected in Q2 due to the lag between orders and payments—an unsurprising outcome. RHM is viewed as a prime beneficiary of Western security investment and is seen as only in the early innings ('foothills') of meeting its potential, with this upside not reflected in its undemanding rating of 15.2x consensus 2028 earnings and a 2.6% yield.

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