YB new stock pitches (Thu, Mar 26)

Sezzle Inc (SEZL), a Buy Now Pay Later company trading at 14.7x forward P/E (0.59 PEG ratio) with 30% net margins, has been GAAP profitable since Q2 2022 while growing revenue at a 53.5% CAGR, with management guiding for 25-30% revenue growth in 2026 despite beating prior guidance (2024: 70% actual vs 20% guided, 2025: 66% actual vs 60-65% guided). The company charges merchants 6.1% per transaction (double credit card rates but justified by 57% larger average transactions) and On Demand users $7.49 per transaction (equivalent to ~17.6% APR) for zero-interest 42-day loans, with proprietary models that beat FICO scores for predicting charge-offs. Sezzle converts merchant-acquired customers into repeat users through subscription and On Demand models allowing Sezzle use anywhere Visa is accepted, with 81% of customers being Gen Z/Millennial, positioning the company to expand into debit cards, secured credit cards, and longer-term lending. BNPL penetration is currently 1/3rd of Germany's level and 1/20th the size of the credit card market, with about half of credit card transactions paid off in the first month representing addressable market potential. The company has initiated a $100 million buyback program (4% of float) and is guiding for $170 million net income in 2026, with price targets of $98 by mid-2027 and $127 by mid-2028 (assuming 15x forward P/E, 25% higher 2027 net income, and 4% share count reduction), representing approximately 24% IRR. Key risks include being untested in a 2008-type crisis, competition from Klarna, Affirm, Block's Afterpay, PayPal's Pay Later, and potential AI disruption, though AI may benefit financials through cost-cutting and efficiency gains while the BNPL market appears capable of supporting multiple players growing around 30% annually.

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OKP Holdings (5CF.SI) delivered strong 2025 results with revenue up 33% and net income up 21%, trading at 8x earnings or 4x ex-cash, though the stock is up ~200% since last year's writeup and is no longer in the portfolio. The company faces limited exposure to oil price shocks with only ~3 million SGD per year in higher fuel costs due to low consumption of 200,000 liters per month (versus KTC's 5 million liters monthly), and has fluctuation clauses protecting against concrete and steel price increases. OKP's strategy of focusing on shorter 1-2 year projects rather than 7-9 year major contracts enables faster capital recycling and higher margins during the current construction boom, which management expects to provide a strong environment through 2028-2029 based on approximately 50 billion SGD in annual government construction awards. The company has a 1.3 billion SGD tender pipeline (600 million SGD submitted, 600-700 million SGD in preparation) and recently won an 87 million SGD contract for commuter infrastructure around the Jurong Region Line, which will likely exceed 100 million SGD with options. The main challenge is human resources, with widespread poaching of engineers in the tight labor market, though OKP has grown its management team by 12-15% and recruited two senior engineers for large-scale tenders of 300-400 million SGD. Management prefers retaining the large cash balance to bid for larger projects rather than increasing dividends, as some jobs require heavy upfront cash for sheet piles and temporary structures, and clients scrutinize financial statements more carefully since the pandemic. Other construction companies like KTC and Huationg, which have higher fuel consumption and multi-year backlogs with lower margins, face greater risk from oil price inflation, while companies like Soilbuild and Lincotrade (which does no earthworks in its outfitting work) should similarly see limited impact.

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Energous Corporation (WATT), a wireless charging and RF transmitter developer, is an uninvestable dilution-dependent company that generated $2.6 million in revenue during the nine months ended September 30, 2025, while posting an $8.3 million net loss (-319% net margin), burning approximately $1.1 million monthly versus $290,000 in monthly revenue. The company has accumulated a $408 million deficit over a decade, raised capital through equity actions 21 times since 2019, executed a 1-for-30 reverse split in August 2025, and subsequently increased split-adjusted shares by 458% from 452,533 to 1,824,844 shares. WATT maintains a $64 million ATM registration (exceeding its ~$40 million market cap) that provides ongoing dilution capacity, with $21.6 million raised through ATM sales, warrant exercises, and equity issuances during the first nine months of 2025 being the sole source of liquidity rather than operations. Revenue concentration is extreme with 81% coming from two customers and 99% of accounts receivable from three customers, while the company faces product credibility issues against better-funded competitors like Powercast, which has shipped 30 million units versus WATT's 25,000+ units generating only ~$5.6 million in preliminary 2025 revenue. Governance concerns include CEO Mallorie Burak also serving as CFO (eliminating financial oversight separation), her history as CFO at Knightscope where shares fell 99% and at ThinFilm Electronics where she was terminated amid litigation involving forecasting errors and internal control deficiencies (Santa Clara County Case No. 20CV367979), and a four-member board including Burak. Executive compensation totaled $2.2 million in 2024 ($849,551 for Burak, $1,343,485 for former CEO Johnston) versus $800,000 in annual revenue and $12,000 in gross profit, with Q1 2024 severance expense of $1.563 million representing 2,442% of quarterly revenue. The company's 10-K acknowledges no history of meaningful product revenue, potential inability to demonstrate commercial viability, and risk of failing Nasdaq listing requirements, while management indicated the $21.6 million raised extends the runway by only 12 months with some estimates suggesting cash could be below $6 million. With 200 million authorized shares, 1.03 million shares issuable upon warrant exercise, toxic March 2023 warrants with reset features (strike falling from $8.00 to $0.28), $18 million in annual operating expenses versus minimal revenue, and deployment as a low-value bridge-power layer in a Wiliot/Walmart/Avery Dennison ecosystem rather than a high-margin platform, the stock is expected to revisit single-digit pricing as dilution continues to be the operating model rather than a risk.

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