The Ugly Duckling
FY2026 federal budget sets the stage for a small-cap turnaround.
Let me tell you about an Ugly Duckling.
This company operates in a capital intensive and dangerous business. The common shares sit behind mountain of high-cost senior capital. It’s public share price plunged 90% since its debut via SPAC merger in 2023. Its 2023 annual filing came stamped with the scarlet letter — a “going concern” warning.
The company is not clean. An investment is not “safe”. But if you can look through the risks, a compelling narrative emerges.
The company saves lives and property from intensifying risks. Its revenues have grown at a 97% CAGR over the past seven years, and its earnings are benefiting from operating leverage. The wave of capital investment has created rare assets that generate strong cash flow. Last year, the company flipped cash flow positive and shed its going concern precaution.
Over the past year, the company crossed a critical point of inflection, boosting hopes for its shareholders. But that future just got much brighter. New legislation, new budgets, and new executive orders all announced in the past eight weeks stand to accelerate this industry and unlock a new phase of growth.
What happens when a company teetering on the edge of bankruptcy tips in the right direction? When new legislation brings a windfall? When a capex leads to cash flow? When leverage becomes a springboard?
When the ugly duckling sheds its feathers will the flock begin to notice?