YB new stock pitches (Thu, Jun 19)

Lenovo (LNVGY) trades at 4x FY28 EV/EBIT, with potential to double in 3 years if re-rated to its historical 8x multiple. The market overly focuses on its PC business, where anticipated demand surge from Windows 10 EOL and AI PCs failed to materialize, but overlooks key growth drivers. While IDG (PC segment, 70% of revenue) grows high single-digits with minimal margin expansion from AI PC ASP increases, the transformation lies elsewhere. SSG (services, 10% of revenue) delivers 21% margins versus IDG's 7%, growing at low-teens rates. Meanwhile, ISG (server business, 20% of revenue) has reached profitability inflection after strategic vertical integration, growing 63% in FY24/25 with 85% of growth from hyperscaler demand. By FY27/28, the three segments could generate $7.7 billion in segment EBIT, translating to $3.3 billion consolidated EBIT after eliminations and HQ costs. This business mix shift toward higher-margin segments supports the investment thesis, though intense competition and commoditized markets make this more suitable as a trade than a long-term opportunity.

Read the full article here. Read time: 6 min

GTT.PA, a French company dominating the LNG technology sector with 95% market share in carriers, has delivered a 16.2% annual return over 10 years. The company generates €591 million in royalties (92% of revenue) with margins exceeding 50%, operating on a unique business model of licensing technologies to shipyards rather than building infrastructure. GTT's record orderbook of 292 LNG carriers, 3 FSRUs, 2 FLNGs, and 21 VLECs secures revenue until 2030, supported by global LNG demand growing at 4% annually. The company has strategically restructured its underperforming Elogen hydrogen subsidiary by cutting 110 of 160 jobs, and acquired Danelec, a provider of mandatory 'black boxes' for ships that generates recurring high-margin revenue, though its 17% operating margin will temporarily dilute GTT's profitability. Despite this dilution, GTT targets a 62% operating margin within two years as it focuses on its core LNG business while expanding services for ship performance optimization, monitoring, and decarbonization solutions to meet increasing environmental regulations.

Read the full article here. Read time: 10 min

Tullow Oil (TLW.L) faces critical financial challenges as production rapidly declines, with Jubilee down 28% YoY to 70,000 bpd and TEN struggling with $60/bbl production costs. Net debt has increased to $1.6bn from $1.45bn at year-end, while the company generates negative $30m FCF at $65 oil. Crucial asset sales in Gabon ($300m) and Kenya ($80m) are pending but remain uncertain, with proceeds needed to address the company's escalating debt burden. Working capital has deteriorated to a negative $280m position, potentially reaching -$380m when accounting for payment risks, creating a severe liquidity crisis. With all credit facilities drawn down, cash likely below $200m, and the 2026 bonds yielding nearly 30%, Tullow urgently needs the Gabon sale proceeds to avoid potential insolvency. Even if secured, the persistent high debt combined with minimal liquidity suggests any debt restructuring would likely result in massive equity dilution or a complete wipeout for shareholders.

Read the full article here. Read time: 5 min