YB new stock pitches (Wed, Jun 11)

The Marcus Corporation (MCS) is an undervalued theater/hotel operator trading at $17.66, with real estate covering 90% of its market cap at cost ($15.65/share net properties after debt). The stock offers 60% upside potential to $28 as the box office recovers (2025 +24% YTD, Q2 +60% YoY), with 20-30% upside to near-term estimates ($130M EBITDA possible vs $108M consensus) and $155M EBITDA potential by 2026. Management is aggressively buying back shares ($10M in 2024, $7.6M in Q1 2025) and has a history of shareholder-friendly actions, including divestitures, special dividends, and smart capital allocation. Despite being the most shareholder-friendly company in the space with the strongest balance sheet, MCS trades at a discount to peers Cinemark and Cineplex. Free cash flow is improving as the capex cycle normalizes from $80M to $50M, potentially generating $65-70M FCF by 2026 (13% yield). Key catalysts include the 2025 box office recovery and upcoming blockbusters in 2026-2027 (Avengers, Toy Story 5, Shrek 5, etc.). Risks include perception of secular box office challenges and economic sensitivity in the hotel business, though cinema has historically been resilient during downturns.

Read the full article here. Read time: 5 min

Groupon (GRPN) is up 174% YTD due to a fake turnaround heavily reliant on two unsustainable trends: compounded GLP-1 weight loss medications and Microsoft Office 2024 keys (released October 2024), both misleadingly categorized as 'Local' rather than 'Goods' revenue. The GLP-1 business consists of sketchy telehealth providers and med spas offering introductory deals that customers exploit by purchasing multiple trial offers to stockpile medications rather than converting to recurring revenue. Meanwhile, Microsoft Office sales are cyclical, with releases only every three years. Both trends are now reversing as the GLP-1 shortage has ended, FDA regulatory changes have taken effect in April/May 2025, and the Office 2024 cycle is waning. The Czech management team (installed by Pale Fire Capital) deliberately avoids mentioning these key revenue drivers on earnings calls, while evidence shows vendors are already churning off the platform. At $32.94 per share, GRPN faces significant downside as these temporary tailwinds dissipate.

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NCD Co., Ltd. (4783.T) is a Japanese system integrator with modest 6% margins compared to peers' 15%, but features a hidden gem in its market-leading bike parking operation showing strong growth. The system integration business maintains 80% recurring revenue with loyal insurance clients like MetLife and relationships spanning up to 50 years. The bike parking segment offers three contract types (self-operated being most profitable) with typical 5-6 year terms and nearly universal renewal rates. Despite delivering impressive 25% annual returns over the past decade, NCD trades at just 11x PE and 8x EV/EBIT. Governance is above average with five independent directors, though a key risk is the 68-year-old CEO with no named successor. With ¥6B in idle cash dragging down ROE, there's an opportunity for 25% IRR through buybacks, alongside potential for margin improvement in the SI business and continued growth in bike parking operations.

Read the full article here. Read time: 3 min