YB new stock pitches (Thu, Sep 11)

Knife River Corporation (KNF), a vertically integrated building materials company trading at 9.2x EV/EBITDA versus peers at 16x, has a price target of $115 representing over 40% upside from the current ~$80 share price. The stock has underperformed significantly with a 20% decline year-to-date while peers like ROAD gained 20%, primarily due to management guidance concerns about Q2 weather and project delays, plus Oregon's failure to pass a road bill. Despite these headwinds, KNF demonstrates strong fundamentals with 9%+ organic EBITDA growth, 5.5% FCF yield, and 70bps annual margin expansion even amid volume declines, operating in consolidated local markets with high barriers to entry and oligopolistic pricing power. The company has completed accretive bolt-on acquisitions like the Strata deal and benefits from board member Tom Hill's strategic expertise. Key catalysts include the upcoming Q2 earnings (where bad news appears priced in), potential takeout optionality in a consolidating industry, expected Trump infrastructure bill in 1H26, continued margin expansion through the PIT crews and EDGE initiative targeting 20% margins, and potential upside to conservative 2026 estimates. The investment thesis centers on multiple re-rating from current compressed levels back to normalized ranges, offering 20%+ IRR potential with attractive 3:1 risk-reward ratio, downside protection at ~$68 (8.5x EBITDA floor), and M&A downside protection given frequent industry consolidation where players like CRH, AMRZ, HEI, ROAD, or PE sponsors could bid if the multiple falls below 9x EV/EBITDA.

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Visco Vision Inc. (6782.TW) is Asia's number one and the world's fifth-largest manufacturer of silicone hydrogel contact lenses, specializing in spherical, multifocal, toric, and cosmetic varieties with particular strength in colored lenses where Japan represents the largest global market. After a significant revenue decline in 2022 due to economic slowdown, supply chain disruptions, and increased competition, the company rebounded strongly in 2024 with 53% year-over-year revenue growth to NT$3.67 billion, driven by resumed orders from a major Chinese client, expansion into colored contact lenses, and enhanced production capabilities. The November 2024 acquisition of Crystalvue Medical Corp. aims to strengthen technological capabilities and expand product offerings, while the company maintains competitive advantages through specialized silicone hydrogel focus, strong Asian market presence, efficient automated manufacturing in Malaysia, premium cosmetic lens diversification, targeted R&D for regional customization, and operational agility compared to larger competitors like Johnson & Johnson Vision, Alcon, CooperVision, and Bausch + Lomb. With record revenue and free cash flow levels, strong profit margins, ROE and ROIC, plus low debt, the company trades at compressed valuation metrics that could re-rate 30% or more as fundamentals normalize, though the investment could potentially go to zero.

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Mayne Pharma Group Limited (MYX.AX) is trading at a 60% spread to the Cosette takeover price, which the analyst views as excessive despite risks around the upcoming September 22 trial and potential FIRB intervention. The South Australian government's request for FIRB to block the deal over concerns about shuttering the Salisbury facility is characterized as unusual posturing, similar to their stance on the Santos takeover, with the analyst believing FIRB will see through Cosette's alleged attempt to escape a bad bargain by deliberately agitating SA. The analyst argues that if discovery had revealed damaging information, Cosette would have withdrawn rather than proceed to an expensive trial that could result in career-ruining humiliation and personal liability for Mayne's management, suggesting the company has properly prepared its case. Management is viewed as incentivized for deal closure despite their relatively small stakes, and the analyst questions whether the 60% spread adequately reflects the combined risks of an adverse trial judgment and FIRB intervention, believing the risk/reward justifies re-entering at current discount levels after trimming positions post-earnings.

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