YB new stock pitches (Thu, Jul 30)

Remitly Global (RELY, increased position) is a cross-border remittance app and a volume-based business with natural operating leverage, demonstrated by incremental operating margins north of 45% in the last two quarters while send volume continues to grow over 30%. Operating in a massive, fragmented market, Remitly is a bet on execution, gaining market share at the expense of banks (too expensive, poor customer experience), incumbents (channel conflict, not digital-native), and other subscale fintechs. Fears over stablecoins are misplaced—stablecoins are ultimately a rail and likely to enhance Remitly's business model rather than threaten it, as it will be years before they represent a critical mass of money movement and consumers are unlikely to use them for everyday purchases anytime soon. The thesis holds that Remitly can grow 15-20%+ for years to come while maturing into a 20%+ operating margin.

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Structural Monitoring Systems (SMN.AX), an ASX-listed aerospace micro-cap, is misvalued by a market still anchored to its decades-old, perpetually-delayed Comparative Vacuum Monitoring (CVM) crack-detection technology story, while the underlying business has quietly transformed into a profitable avionics and aerospace electronics operator via the 2017 acquisition of Anodyne Electronics Manufacturing (AEM, ~CA$10M/~5x EBITDA) and 2021 acquisition of Eagle Audio (~CA$4.3M/~2x EBITDA); AEM operates across avionics products (higher-margin proprietary), contract manufacturing (prioritized above 30% gross margin), and CVM. The thesis rests on a mix-shift toward higher-quality proprietary avionics (nearly two-thirds of revenue), driving margin expansion despite flattish near-term sales, evidenced by five consecutive profitable quarters, Adj. EBITDA margins rising from 8.8% (FY24) to 23% (1H26), a net cash balance sheet, and a normalized FY26 ROIC of 10-12%. New CEO Rick Freeman, focused on quarterly profitability and margin discipline, targets AU$100M sales by FY30. Currently trading at 7.5-8.5x FY26f EBITDA (10.5x rent-adjusted EV/FCF on annualized AU$5.2M FCF), the author's base case applies a 12x EBITDA multiple to AU$8M normalized EBITDA (versus peers at 14-17x for proprietary avionics and 8-10x for contract manufacturers), implying ~AU$96M EV and ~AU$100M equity value versus the current ~AU$58.4M market cap, or 70%+ upside, with CVM FAA approval (FY27) as free optionality; short-term catalysts include the FY2026 annual report, continued avionics shift, investor discovery, bolt-on M&A, and CVM FAA/deployment progress. Risks include ~37% customer concentration (mitigated by IP stickiness), limited insider ownership (Freeman holds little; major shareholder Faillace owns 15% with a board seat), historical dilution and 24M listed options at AU$0.74 strike (whose exercise would imply the stock nearly doubled), execution/M&A risk, and potential avionics cyclicality, all mitigated by a debt-free, profitable base.

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TOVIS Co., Ltd (051360.KQ) is a Korean deep value name that this month spun off its auto display business (itself hit by heavy selling), leaving a core industrial and casino gaming machine display business priced at under 3x normalized earnings and 0.36x book value. The game machine business is solid with strong customers (Aristocrat, Konami), historical gross margins of 30-33%, and operates in a relatively mature niche market with 3-5% revenue growth; TOVIS is one of two big players in the Korean market, and its large customers typically dual source. A key catalyst is capital allocation, with the post-spin company's 30% payout policy (two-thirds from buybacks) potentially adding 6-9% to normalized EPS even with low single-digit business growth; combined with dividends and a slight rerating (even to ~4x), a high-teens IRR is achievable on a 2-3 year hold. This assumes no recovery in 2025 core segment earnings, which appear to be in a cyclical trough and were hit by U.S. tariffs, and gives no credit to optionality from smaller growth segments (LED signage, casino analytics). The company has manageable leverage (KRW 19.1bn net debt vs. base EBIT of KRW 39bn) and appears oversold, caught up in post-spinoff dynamics and the recent KOSDAQ crash. The investor opened a small deep value basket position.

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