YB new stock pitches (Tue, Dec 9)

Tasmea Limited (ASX: TEA), an Australian industrial services roll-up operating 25 specialist maintenance businesses across electrical, mechanical, civil, and water services, trades at approximately A$4.49 with a market cap of ~A$1.06 billion and offers compelling value at 14-15x forward FY26 earnings for a business compounding EPS at ~25% annually despite dilution from acquisitions. The company generates 90% recurring revenue through long-term Master Service Agreements with blue-chip mining, energy, utilities, and government customers, with EBIT margins expanding from 8.9% in FY22 to guided 15%+ by FY26, while maintaining ROIC above 20% through disciplined acquisitions at 2.5-5x EBIT multiples. Key catalysts include the recently announced WorkPac acquisition at 2.8x EBIT (A$60.7m total consideration) expected to contribute A$18m maintainable EBIT with 18%+ margins and be 10% EPS accretive, delivery on upgraded FY26 guidance of A$128m EBIT and A$78m NPAT, continued programmatic M&A, potential ASX300 inclusion by March 2026, and further margin expansion as higher-margin electrical and civil segments grow faster. The bull case centers on structural tailwinds from electrification, aging infrastructure requiring more maintenance, renewable energy buildout, and the company's ability to cross-sell multiple disciplines while benefiting from scale, with insiders owning ~60% and participating in dividend reinvestment plans keeping capital internal. Primary risks include macro/commodity exposure (38% revenue tied to iron ore), Australia-only geographic concentration, labor constraints in remote regions, integration challenges as the group grows, and potential value destruction from high-multiple acquisitions, though these are mitigated by sector diversification, long-term contracts, conservative 0.5x net debt to EBITDA post-WorkPac, and heavy management ownership. The price target of A$9 represents approximately a double over 18-24 months, with a more conservative A$6 target (20x FY26 EPS) offering ~30% upside if the company simply executes on current guidance.

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Propel Holdings Inc. (PRL.TO) is an AI-powered fintech providing small dollar loans to underserved 'invisible prime' consumers in the US, Canada, and UK, currently trading at $24.75 CAD with a $100 price target representing 340% upside. The stock has declined due to spillover from a short seller attack on competitor goeasy (despite having different business models and geographic exposure) and a misunderstood guidance adjustment where management prudently tightened underwriting standards, reducing growth guidance for Ending Combined Loan and Advance Balances to 18-22% to preserve unit economics amid macro uncertainty. The company demonstrates strong fundamentals with 30% revenue growth, 43% net income growth, and operates through a capital-efficient Lending-as-a-Service model that partners with FDIC-insured banks, providing regulatory protection and scalability. Key catalysts include the accretive $71 million QuidMarket acquisition in the UK (generating $27.7 million revenue and $9.6 million net income) with expected 50%+ growth in 2025, expansion of the LaaS model to additional states with 100% projected growth in 2026, and structural tailwinds from bank retrenchment due to Basel III capital requirements creating opportunities in the underserved lending market. The company maintains a fortress balance sheet with $125 million in undrawn credit capacity, a decreasing debt-to-equity ratio of 1.2x, and management confidence evidenced by the ninth consecutive dividend increase (8% to $0.84 CAD annually) and a share buyback program for up to 10% of the float. Guardian Research projects 25% EPS CAGR through 2029, with the stock trading at a distressed 9.9x PE multiple expected to rerate to 18x as the market recognizes the distinction from traditional lenders, though risks include regulatory changes from the CFPB, credit cycle deterioration if unemployment spikes above 8%, and potential funding market freezes, while the high 52% provision rate under IFRS 9 accounting artificially depresses earnings during growth periods despite stable 12% net charge-off rates validating the AI underwriting model.

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Zegona Communications (ZEG.L) has executed exceptionally on its turnaround strategy, delivering strong H1 results, completing the €1.8 billion fiberco sale to AXA, and announcing preference share redemption that will cut the share count by 69%. Trading at 4.5x EV/EBITDA versus Spanish peer Masorange's 7.5x acquisition multiple by Orange, the company offers a 13-16% free cash flow yield on an estimated €500-600 million annual free cash flow that management expects to improve further. Key catalysts include potential monetization of €300-500 million worth of data centers, a possible RANco joint venture, and a potential Telefónica takeover, alongside a £200 million buyback program representing approximately 5% of market cap. While upside has decreased materially from the original investment case, management estimates roughly 25% downside risk assuming no profitability progression and a 20% discount to peer multiples, making the risk/reward profile still attractive as the company transitions from an illiquid special situation to a blue-chip telco with excellent management alignment. - link

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