Profitable Small-Cap Start Up Grows to Half a Billion in Eight Months
Source: Streetwise Reports
August 14, 2023 (Investorideas.com Newswire) This company has pivoted and rebranded itself after its new international food supply chain segment took off with half a billion in revenue within the first eight months.
Newly christened after its hugely successful international food supply chain segment that launched last November, Sadot Group Inc. (SDOT:NASDAQ) is set to take advantage of the stresses of feeding a growing world population.
The Sadot LLC segment brought in more than half a billion in revenue for the company, formerly known as Muscle Maker Inc., including US$45.7 million in June, by trading and shipping sustainable food and commodities like soybean meal, wheat, and corn.
The global grain market is currently worth about US$1.5 trillion with a compound annual growth rate (CAGR) of 9.5%, the Business Research Company reported.
In an April 25 report, Aaron Gray from Alliance Global gave the company a US$2.40 per share target price.
"We see the risk-reward as attractive at this entry point," added Gray.
"Sadot is poised to take advantage of these needs by creating a comprehensive, global food company that stretches from sustainable farming, agricultural commodity shipping and trading, distribution, production and ultimately reaches consumers through restaurant, franchising and meal prep companies," Zacks Small-Cap Research analyst Tom Kerr wrote in a research note on July 28. "We believe SDOT stock is substantially undervalued at this time."
As part of the rebranding, which was effective last Thursday, the company's Nasdaq ticker changed from "GRIL" to "SDOT," and company officials rang the exchange's opening bell on Friday.
"With the addition of Sadot, MMI has made a significant strategic pivot," Sadot Chief Executive Officer Michael Roper said when the new name was announced. "In a short period of time, Sadot has produced significant revenues while generating noteworthy net income. The Company has expanded into multiple verticals in the global food supply chain, including farming and warehousing, origination and trading, and food services."
Some of the prime markets Sadot operates in include Brazil, Canada, China, India, Japan, Malaysia, the Philippines, Poland, Romania, Ukraine, and Vietnam. Primary commodities include wheat, rice, soybeans, coarse grains like corn and barley, oils, and oilseeds.
Kerr wrote that the company competes with larger global firms like Archer Daniels Midland Co. (ADM:NYSE) and Cargill Inc. but can "move much more nimbly and leverage the team's years of experience and their deep global relationships."
The company was recently added to the Russell Microcap Index, "which recognizes the company's new strategic direction and recent performance," Roper said. "I look forward to sharing future announcements as our journey to become a global agri-food supply chain company and a significant participant in the effort to provide food security to global communities evolves."
Spinoff Could Generate 'Many Millions'
Muscle Maker Inc. was founded in 1995 and made its IPO in 2020. Its Muscle Maker Grill restaurants provide healthier versions of mainstream-favorite dishes based on a philosophy that great taste and affordability should make it easy and enjoyable to eat healthy, even on the go.
The company also operates Pokemoto Hawaiian Poke and SuperFit Foods meal prep, which provides meals for locations such as universities and military bases. SuperFit operates as a centralized kitchen that prepares all meals for distribution to consumers. The restaurant and meal prep segments include over 19 Company-owned restaurants and a number of new franchises currently in the pipeline. However, Goldman wrote that the company could consider spinning off or divesting its food segment if it doesn't see the growth it wants from them.
Such an event would generate "many millions" for the company, he wrote. This such event is now happening as the company pivots its focus to Sadot.
The Catalyst: Undervalued With 'Record Growth'
The pivot is aimed at deepening the company's presence in the global agri-food supply chain. The company recently announced it was expanding into new trade routes throughout North, Central, and South America and initiating farming operations in Zambia.
Sadot is currently undervalued and "experiencing record growth," Goldman Small Cap Research founder and analyst Rob Goldman wrote in a May research note.
The firm gave the company a US$4.50 per share six-to-nine-month price target on its stock. Currently, it trades at US$1.10, which would mean a more than 300% gain for investors.
Goldman expects Sadot to first generate a profit in 2024 of an estimated US$14.6 million and forecasts full-year 2024 (FY24) revenue to be US$1.05 billion. However, the company had its first-ever profitable quarter earlier this month, ahead of Goldman's schedule.
On July 13, Technical Analyst Clive Maund wrote that the company "put in a reversal candle at strong support yesterday and looks set to advance."
In his July 28th research note, Tom Kerr noted the rebranding, instilling a target price of US$5.00, US$0.50 higher than what Goldman's Small Cap gave the company in May.
Sadot note that its current agri-commodity shipping and trading activities net 2% to 3% margins, but future areas of opportunity for the company feature higher margins, like logistics, transportation, farming and processing facilities, and sustainability. [OWNERSHIP_CHART-10815]
Ownership and Share Structure
Sadot has a market cap of US$34.45 million with 32.2 million shares outstanding. It trades in a 52-week range of US$1.5989 and US$0.30.
According to Reuters, about 9% of Sadot's stock is held by management and insiders. Director Paul L. Menchik has 0.39%, Director Jeff Carl has 0.27%, Director Stephan A. Spanos has 0.26%, and Major Malcolm Frost has 0.24%. Other insider owners include Alfred B. Southall III, Phillip Balatsos, Kevin James Mohan, and Michael John Roper.
Strategic investors have about 45%, including AGGIA LLC FZ with 38.80%.
Institutions have about 6%, including Catalytic Holdings LLC with 3.51%, Thoroughbred Diagnostics with 3.04%, and Joe Giamichael of Thoroughbred Diagnostics with 5.04%.
The Vangaurd Group Inc. has 1.67%, Geode Capital Management LLC has 0.99%, BNY Mellon Asset Management has 0.53%, and Citadel Advisors LLC has 0.51%.
Other institutional investors include Walleye Capital, Northern Trust, and Virtu Americas LLC.
The rest is in retail.
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