YB new stock pitches (Thu, May 8)

Arvinas, Inc. (ARVN), a clinical-stage biotech company developing targeted protein degraders, has fallen over 90% from its 2021 highs due to disappointing trial results, with its market capitalization dropping to $500 million in March 2025 following a disappointing readout for ARV-471 (vepdegestrant). Despite these setbacks, ARVN holds over $1 billion in cash and has two valuable license/collaboration agreements: a deal with Pfizer potentially worth up to $1.4 billion in milestone payments upon ARV-471 approval plus a 50/50 profit-sharing arrangement, and a Novartis agreement potentially worth up to $1 billion upon ARV-766 approval plus ongoing tiered royalties. The current valuation implies both cash burn and pipeline failure, which the author considers unlikely. Additionally, EcoR1, a concentrated biotech specialist holding a 15% stake as ARVN's largest shareholder, has sufficient incentive to prevent further value destruction.

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Leon's Furniture Limited (LNF.TO), Canada's largest furniture retailer with 15% market share, operates 202 corporate-owned and 101 franchised stores across multiple brands including Leon's and The Brick. The company boasts a 'Fort Knox' balance sheet with C$110M net cash, a 20% ROIC, and trades at attractive multiples of <5x EBITDA and 10x P/E. LNF's product mix includes furniture (50%), appliances (30%), mattresses (15-20%), and electronics (5%). Since 2013, the company has delivered consistent growth with 3.7% sales CAGR, 7.4% adjusted EBITDA growth, and 8.8% EPS growth, while generating C$1.5B+ in free cash flow and offering a double-digit FCF yield. Key catalysts include a planned REIT spinoff that could unlock C$0.5-0.9B in real estate value, continued growth driven by high Canadian immigration rates, omnichannel capabilities, and management's renewed focus on shareholder value through buybacks. With 70% family ownership and expansion potential of 15-20 new stores annually, management projects adjusted EBITDA growth from C$300M to C$350-400M, supporting a price target of C$36-41+. Primary risks include housing market slowdowns, economic recession, competitive pressures, and potential U.S. tariff impacts.

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CVS Group plc (CVSG.L), a UK veterinary chain, saw shares rise 10-15% after the Competition and Markets Authority (CMA) proposed milder-than-expected remedies in its market investigation, including pricing transparency and potential medicine price caps, but no forced practice sales. Medicine caps could impact 30-35% of EBITDA, as pharmaceuticals represent 25% of revenue. The company recently sold its crematoria business for £42.4 million (10x EBITDA), eliminating exposure to another area of CMA scrutiny. CVSG currently trades at just 6-7x EBITDA compared to private equity-backed peers at over 10x, offering potential for rerating. The company's Australian expansion provides growth opportunities with lower regulatory risk. While the CMA will issue a provisional report in summer 2025 with the final decision due November 2025, the worst-case scenario of forced divestments has been avoided, and the company's scale positions it well to adapt to regulatory changes.

Read the full article here. Read time: 8 min