YB new stock pitches (Tue, Apr 15)

Capri Holdings Limited (CPRI) recently sold Versace to Prada for $1.375 billion, creating a net-cash position for the company. Despite this positive development, Trump's tariffs on Chinese and Southeast Asian goods have suppressed the stock price, which is believed to be temporary. Two scenarios presented show upside potential for CPRI, with a $20 price target and over 25% upside potential. The bull case for CPRI includes the likelihood of tariff reduction due to economic pressure and bond market forces, as well as the company's options for utilizing its newfound cash position, such as business investments, debt reduction, and share repurchases. The remaining business, consisting primarily of Michael Kors and Jimmy Choo, still faces challenges from tariffs, but the company's net-cash position and potential for repricing once market sentiment improves make it an attractive investment opportunity.

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Alsea Group (ALSEA.MX), a franchise operator of Domino's Pizza and Starbucks in Mexico, Europe, and South America, is poised to benefit from Mexico's growing middle class and rising wages. With a 10.4% revenue CAGR since 2015 and 8.5% same-store sales growth in 2024, the company has shown strong performance despite pandemic-related challenges. Trading at an EV/EBIT of 7x based on 8.3 billion MXN EBIT, Alsea appears undervalued for a company with double-digit earnings growth potential. The company has manageable debt, consistently generates free cash flow, and returns cash to shareholders through dividends and share buybacks. With fewer than 5,000 units across its brands, Alsea has significant room for expansion in its markets, serving a population of 130 million in Mexico and hundreds of millions more in South America and Europe.

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Rayonier Inc. (RYN), a timberland REIT, is trading at a 27.8% discount to its net asset value of $33.77 per share. The company owns 1.75 million acres in the U.S. South and 308,000 acres in the Pacific Northwest, recently selling its New Zealand joint venture for $710 million as part of a $1.45 billion asset disposition plan. RYN has authorized a $300 million share buyback program, representing 7.9% of its market cap. The company is diversifying beyond timber harvesting, focusing on higher-value land uses such as solar development (39,000 acres under option), carbon capture and storage (154,000 acres under lease), and real estate development projects like Wildlight and Heartwood. Rural higher-and-better-use (HBU) land sales have increased 62% since 2015, with average prices rising from $2,763 to $4,468 per acre. Management sees potential for significant value creation if even a small percentage of land is converted to these alternative uses, potentially transforming the company's value over time.

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