YB new stock pitches (Thu, Sep 3)

Following its spin-off from Aptiv, Versigent is an entrenched global oligopolist in high-complexity automotive wire harnesses, supplying nine of the ten largest automakers and placing content in one of every six vehicles worldwide. Its roughly 33% share of EV/hybrid platforms matters because hybrids and battery-electric vehicles carry about 1.5x and 1.7x the wiring content of internal-combustion vehicles, respectively. Versigent co-designs more than 75% of its harnesses, focuses on complex and high-voltage architectures, and earns nearly twice the profit margins of legacy peers. A record program-launch schedule and the strongest forward design-in pipeline in company history support the outlook, although launch-related capacity absorption is a near-term margin drag. Additional upside could come from proactively pursuing Commercial Vehicle business as a standalone company and supplying Chinese OEMs as they expand globally. The shares trade at roughly 5x EV/EBITDA and 6x forward earnings; an $83 base-case target at 7x EBITDA and 9.9x earnings implies about 78% upside. Projected 2026-2028 cumulative free cash flow exceeds $1 billion, alongside a new dividend and $250 million buyback authorization.

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Zoomd remains a three-star holding and the position was increased. Q2 showed modest sequential improvement, while the outlook appeared brighter than at any point in the past six months. Results were still weak: revenue fell 61% year over year to $7.7M, operating profit declined 91% to $450k, and net income dropped to $1.23M, including $780k of net finance income. Quarterly operating cash burn was $500k, although cash flow before working-capital changes was positive $1.2M; higher receivables and foreign exchange caused the reported burn. The balance sheet remains strong, with $22.6M of cash, no debt and a 4.3 current ratio. One historically large customer now appears gone permanently, while management suggested the other could return materially, though that must still be demonstrated. Q3 is expected to remain painful, making quarter-over-quarter progress and Q4 the more relevant indicators. At roughly a C$50M market capitalization and C$31M of cash, the shares nevertheless look expensive based on the last three quarters under P/E, cash flow and EV/EBITDA measures.

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HeartSciences’ announced merger with Fortitude turns the former money-losing medical-device company into a speculative play on a large, vertically integrated Zcash miner; existing shareholders are expected to own roughly 5% of the combined company, and the legacy business is viewed as minimally valuable. The shares trade at an estimated 4x 2027 cash EPS using a $750 Zcash price, below the current roughly $860, although that EPS is derived from Fortitude’s EBITDA guidance using assumptions of 120 million shares, $3.6 million of interest expense and minimal cash taxes. The stated reasons for the discount are, in order, HeartSciences’ tiny $13 million market capitalization and limited institutional accessibility, poor merger communication, closing uncertainty, volatile Zcash pricing and suspected ATM issuance. Fortitude has spent millions on legal work and bought 9% of HeartSciences for $1 million at $2.43 per share, supporting confidence in completion. The central downside is severe if the merger fails; Zcash volatility and continued ATM selling add further risk.

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