YB new stock pitches (Wed, Aug 12)

H&R REIT (HR-UN.TO), a significant and accumulated position for the author, is a Canadian REIT reporting earnings August 12th with a conference call August 13th, and the thesis centers on the company's aggressive disposition of harder-to-sell office and retail assets over the past year at strong prices, reducing office exposure to just 11% as of March 31 (likely lower after a BGO purchase of 26 Wellington Street in May, yet to be confirmed). Blackstone confirmed in June it is back in talks for 'some' assets, and the author believes H&R has been strategically selling assets Blackstone didn't want to eventually fetch close to NAV, potentially via a take-private (previously eyed by Blackstone, Crestpoint, PSP, and TPG Angelo Gordon), a US residential spin-out (leaving a Canadian industrial REIT), special distributions, increased dividends, an NCIB, or an SIB. Key near-term catalysts include ~$500 million in guided asset sales (mostly land contributing no FFO, thus bullish as they reduce debt), particularly the Gowanus, Brooklyn 459 Smith Street parcel (3 acres, up to 732,000 sq ft of residential development rights, bought for $76M in 2024, possibly worth ~$200M, with a comparable JLL sale at 55 Smith Street a mile away) and the Caledon industrial land (153.5 acres, likely worth $300M+ using a ~$2M/acre comp from an adjacent $252M Avison Young listing at 12506 Heart Lake Road, with the Ontario Government seeking land for Highway 413 and quality tenants like Amazon and Prologis); management hopes to firm up both this quarter. Leverage has already fallen 2.3x turns year-over-year and would decline further with land sales, and several large investors and an activist have moved in supportively. Remaining major offices include TC Energy Center (Calgary), Two Gotham (NYC), 310-330 Front Street (Toronto trophy asset), Halifax government-leased offices, and a Dorval office slated for demolition into townhomes. H&R trades at a mid-7 cap versus a watered-down Q1 2026 NAV of $15.96, with a personal target of $13.50-$15.00, though bears remain wary that CEO Tom Hofstedter will 'fumble' it again; the author remains optimistic into earnings with a final gameplan likely released before year-end.

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Water Oasis Group (1161.HK), a Hong Kong-based beauty and aesthetic-medical service provider, is down ~45% from its 2021 peak on an industry-wide downturn driven by weak HK consumption (total retail sales fell 7.3% in 2024) and the 'northbound effect,' where consumers travel to lower-cost Shenzhen and South Korea (with tourist outflows from HK to Shenzhen running 3x the reverse). Despite headwinds, the company has continued gaining market share from struggling competitors (EC Healthcare, Perfect Medical), with group revenue growing at a 4% CAGR (services ~10%), implied same-store sales accelerating to ~4.6% in H1 FY2026, and margins improving through footprint optimization (14 underperforming stores closed 2023–2024, co-location strategy, renegotiated rents) and lower capex (10% of revenue in FY22 to 1.5% in FY25). Services are ~90% of FY2025 revenue, almost entirely prepaid, generating a ~HK$752mm contract-liability float that produces a deeply negative cash conversion cycle; against HK$917mm cash and no debt versus an ~HK$850mm market cap, float-adjusted 'owner accessible cash' is ~HK$309mm. The stock trades at ~5.5x NTM P/E. Three catalysts are identified: a potential take-private/MBO (suggested by aging founders 70–75, an installed next-gen CEO age 48, zero buybacks, a suppressed payout, and ongoing family share accumulation—though HK Takeovers Code Rule 2.10 requires ≥75% disinterested-share approval with ≤10% opposed from the ~30% float, likely necessitating a hefty premium), M&A execution (assuming disciplined ~6x LTM P/E purchases of distressed players deploying ~HK$300mm to add ~HK$50mm net income at ~14% net margin, with 50% cash deployed by FY2027), and industry recovery (tracked via an improving financial conditions index driven by rising property prices, weakening HKD, and expanding bank credit). Scenarios: base case (50%) sees ~5% organic growth, flat margins, and a re-rating to 8x (comps Perfect Medical and Beauty Farm at ~10x) for ~70% upside; bull (10%) assumes 7% growth, margin expansion, and 12x; bear (20%) assumes no recovery/M&A, -5% annual revenue, and a depressed 5.5x; MBO (20%) implies 30–50% upside (40% midpoint). Probability-adjusted upside is ~50%. Key risks include continued northbound tourism erosion, dependence on macro recovery, and unproven M&A execution.

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Kion Group (KGX.DE/KIGRY) is the world's second largest forklift manufacturer (after Toyota) and also operates an IAS (intelligent automation solutions) segment for automating warehouses and fulfillment centers, including robots that pick items for fulfillment. The stock surged when Amazon aggressively built out fulfillment centers post-COVID, then tanked when Amazon pulled back on capex; although other customers filled much of the gap, broader weakness in the forklift market has driven a further stock pullback. The opportunity is that IAS could be re-accelerating on the back of a recent Amazon order, and at 9x forward earnings consensus in the hot robotics field, the risk/reward is solid. The biggest risks are Amazon failing to make sufficient follow-on orders and general competition from China. The investor currently holds a small position.

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