YB new stock pitches (Thu, Oct 2)

Tetragon Financial Group Limited (TGONF), trading at $17/share, represents a >50% discount to stated NAV and approximately 1/3 of true NAV, primarily due to a dual share class structure where management (Reade Griffith with $10 million annual salary and 20% ownership, Paddy Dear with $2 million salary and 6.6% ownership) controls all voting shares and has historically extracted value from minorities through hefty management fees. The key catalyst is a likely Ripple Labs IPO within the next 2 years, driven by favorable crypto regulation under the Trump administration and management signals following the March 2025 SEC settlement, with CEO Garlinghouse stating 'I think that's available and I think the company's at a stage where we could consider that.' TFG's Ripple stake, currently marked at $3/share on the balance sheet, is estimated to be worth $19.9/share after applying a 50% haircut to XRP holdings and 3x revenue multiple to the operating business, supported by Ripple's recent tender offers at $125/share in January and $700 million at $175/share in June. Management owns 27% collectively and has been consistently buying stock, with the most likely outcome being a tender offer at a premium to current prices so management can capture the majority of the windfall from an IPO, though alternatively a Ripple IPO would lead to NAV expansion that shareholders would benefit from as the company has delivered 10.8% annualized NAV growth since IPO despite substantial management fees.

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Flotek Industries (FTK), a frac services company with 130+ patents, operates two business segments: chemical solutions featuring Complex nano Fluids (CnF) that increase oil yields by 22-32% while cutting water and frac sand use by 50%, and data analytics that grew 189% year-over-year to 26% of revenue with 63% EBITDA margins. The data analytics business, which provides sensors, software, and AI-driven reports to optimize frac fleet performance and monitor equipment from drilling rigs to refineries, qualifies as a Rule of 40 SaaS company that would typically fetch 6x-8x price-to-sales ratios, suggesting the segment alone could be worth $100-130 million compared to FTK's current $430 million market cap at 2.01x price-to-sales. ProFrac Holdings (ACDC) holds an equity stake and board representation in FTK, providing approximately 50% of revenue but creating single-customer concentration risk. Management guides for $200-220 million full-year revenue and $34-39 million adjusted EBITDA, with data analytics projected to reach 60% of EBITDA by 2026, though the CEO has beaten guidance for eight consecutive quarters, suggesting potential sandbagging. The company serves less than 25% of the frac market and competes with industry giants like Schlumberger and Baker Hughes, while the data analytics addressable market for natural gas power generation monitoring approaches $5 billion. A DCF model yields a price target of $20.47 versus the current $14.43 share price, offering a 12.36% annualized return, though recent frac fleet count growth from 162 to 179 fleets suggests a potential cycle turn that could drive growth beyond current guidance.

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Rumbu Holdings Ltd. (RMB.V) is a fast-growing funeral home rollup trading at CAD $1.3/share with H1 revenue growth exceeding 500%, gross margins around 70%, and Q2 adjusted EBITDA margins of approximately 15%, targeting net margins above 20%. The company uniquely funds acquisitions at 4-6x FCF multiples using 85% debt financing through 3% promissory notes and mortgage-based debt, enabling theoretical FCF growth rates exceeding 99% annually for five years without additional equity raises. Management, with 60% insider ownership and decades of experience, targets 4-6 acquisitions per year to create monopoly positions in small communities within Canada's funeral home market expected to grow 6-7% annually to 2030. The company operates with significant overhead operating leverage upside as it scales, has achieved positive H1 free cash flow, and trades at 14x adjusted EBITDA (8x forward run-rate). Key risks include potential dilution (currently 5% annually), lumpy organic growth (Q1 showed -30% YoY organic decline), integration issues, expensive acquisitions, high debt-to-equity ratio, seasonality, filing delays, MD&A restatements, and challenges retaining funeral home management staff, though the company's stable and growing TAM, experienced management team, and compelling valuation are expected to offset these uncertainties.

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