Muscle Maker Inc. (GRIL:NASDAQ) was founded in 1995 and made its IPO in February 2020. The chain's 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 chain's tagline is "Great Food with Your Health in Mind,"™ and its menu features items with grass-fed steak and all-natural chicken, as well as options that satisfy an array of dietary preferences from vegetarian to low-carb and gluten-free.
Muscle Maker Inc., the parent company, operates Muscle Maker Grill restaurants, Pokemoto Hawaiian Poke, and SuperFit Foods meal prep, its non-traditional (hybrid) segment that provides meals for locations such as universities and military bases. The SuperFit Foods Meal Prep segment 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.
The firm's most recent major success was the 2022 launch of its Sadot segment, which is focused on international Agri-food commodity shipping, farming, sourcing, and the production of key ingredients, such as soy meal, corn, wheat, and food oils.
The Catalyst: Half a Billion in Revenue
On July 24, Muscle Maker reported that its Sadot segment had passed the half-billion-dollar total revenue milestone as part of reporting top-line revenue of over US$45.7 million for June 2023.
Rob Goldman wrote that Sadot's structure is a "creative pay-for-performance plan that, in our view, is a major win for Muscle Maker and also a positive for [management firm] AGGIA."
June was the eighth consecutive month in which Sadot's top-line revenue exceeded US$45 million, illustrating what a good gamble tertiary-industry Muscle Maker made when expanding its operations in the direction of primary and secondary industry. Sadot LLC's total revenue since inception in November 2022 is now over US$515 million.
Muscle Maker CEO Michael Roper says that he is "thrilled to announce another remarkable milestone. Achieving top line revenue of over US$45.7 million for the month of June 2023 showcases our consistent growth and continued success of Sadot LLC."
"And now Sadot has crossed the US$500 million revenue since inception milestone. With our recently announced amendment to the service agreement with AGGIA, which reduces the quarterly non-cash stock-based compensation expense by 50%, our monthly revenues are expected to have a more favorable impact on our financial reporting with the intended result of improving the bottom-line results for our company."
Why This Sector? Food Contract Manufacturing Outpacing Retail
According to a recent report by We Market Research, "The Global food contract manufacturing market is presently worth US$120,960 million and is anticipated to grow to a value of more than US$272,070 million by 2033, with a growing CAGR (compound annual growth rate) of over 9.5% from 2023 to 2033."
Conversely, a report from Future Market Insights reports that the food service industry itself is only "anticipated to rise at a CAGR of 5.3% during the forecasted period."
Analyst Tom Kerr reported that "We believe GRIL stock is substantially undervalued at this time."
The upshot of this disparity is that back-end considerations like Sadot are looking at roughly twice the growth over the next decade as front-end operations like Muscle Maker's traditional restaurant chains.
The We Market Research report explains that "The industry's growth is likely to be aided by rising demand for outsourcing food manufacturing. During the forecast period, the rising frequency of coronavirus, together with increased R&D spending, are likely to have a beneficial impact on the food contract manufacturing market. Factors such as panic buying of comfort food during the duration of the pandemic and increased private equity investment in contract manufacturing are also projected to support sector growth."
"When demand for ready-to-eat food products surged in 2020, food processors couldn't keep up, so they turned to contract producers. Due to the limited manufacturing capacity of OEMs and rising food producers, outsourced manufacturing is on the rise."
Why This Company? Full Commitment to the Pivot
Today, July 26, CEO Roper announced that Muscle Maker Inc. would change its company name and NASDAQ stock symbol effective July 27 at market open. "Our new company name will be Sadot Group Inc," he said, "and our new NASDAQ trading symbol will be SDOT."
This change is aimed at highlighting Sadot's continued efforts to deepen its presence in the global agri-food supply chain. Recently, the company announced the expansion into new trade routes throughout North, Central, and South America, as well as the initiation of farming operations in Zambia.
Technical Analyst Clive Maund reported that "Muscle Maker put in a reversal candle at strong support yesterday and looks set to advance."
As Roper explains, "With the addition of Sadot, MMI has made a significant strategic pivot. 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."
"Recently," he continues, "we were added to the Russell Microcap® Index, which recognizes the Company's new strategic direction and recent performance. 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."
Why Now? Undervalued All Year in Analysts' Eyes
Various analysts have pointed out how undervalued Muscle Maker is this year. On May 24, Rob Goldman wrote that Sadot's structure is a "creative pay-for-performance plan that, in our view, is a major win for Muscle Maker and also a positive for [management firm] AGGIA."
"Upside to future forecasts and our target exists via the potential sale of the fast-casual segment, among other events," noted Goldman.
The next month analyst Tom Kerr reported that "We believe GRIL stock is substantially undervalued at this time."
"The upside to the US$5 per share target price represents a material potential gain of 202%," wrote Kerr.
"We believe this to be a conservative valuation target because if net margins in the Sadot business increase at a faster rate than expected, valuations could range between US$5 and US$10 per share," he explained. "The majority of the value within our target price is derived from the Sadot subsidiary."
Then recently, on August 13, Technical Analyst Clive Maund reported that "Muscle Maker put in a reversal candle at strong support yesterday and looks set to advance."
Ownership and Share Structure
Streetwise Ownership Overview*According to Reuters, as of May 23, 8.43% of Muscle Maker's stock is held by management and insiders. Director Paul L. Menchik has 0.37%, with 0.12 million shares. Director Jeff Carl has 0.26%, with 0.08 million. Director Stephan A. Spanos has 0.25%, with 0.08 million, and Major Malcolm Frost has 0.23%, with 0.07 million. Other insider owners include Southall Alfred BIII Southall, Phillip Balatsos, Kevin James Mohan, and Michael John Roper.
15.40% is with strategic investors. AGGIA LLC FZ has 8.85%, with 2.85 million shares.
5.69% is with institutions. Catalytic Holdings LLC has 3.51%, with 1.13 million shares. Thoroughbred Diagnostics' has 3.04%, with 0.98 million, and Joey Giamichael of Thoroughbred Diagnostics has 5.04%, with 1.62 million.
The Vangaurd Group Inc. has 1.67%, with 0.54 million. Geode Capital Management LLC has 0.99%, with 0.32 million. BNY Mellon Asset Management has 0.53%, with 0.17 million, and Citadel Advisors LLC has 0.51%, with 0.16 million.
Other institutional investors include Walleye Capital, Northern Trust, and Virtu Americas LLC.
The rest is in retail.
Muscle Maker Inc. has a market cap of US$37 million with 32.2 million shares outstanding. According to Market Watch, it trades in the 52-week range between US$0.30 and US$1.60.
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- Muscle Maker Inc. has a consulting relationship with an affiliate of Streetwise Reports and pays a monthly consulting fee between US$8,000 and US$20,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Muscle Maker Inc.
- Owen Ferguson wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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