Global Food Co. Sees Spike in Revenue

Sadot Group Inc. (SDOT:NASDAQ), an emerging player in the global food supply chain sector, announced its fourth quarter and full year 2023 financial results, noting that its consolidated revenue increased from US$161.7 million in 2022 to US$726.7 million.

The company said non-GAAP adjusted EBITDA from operations was US$0.1 million in 2023, compared to a US$2 million loss the year before.

"It has been a truly transformative first 16 months since Sadot Group refocused and retooled the organization to become an emerging player in the global food supply chain," said Chief Executive Officer Michael Roper. "Beginning with our initial focus on agri-commodity origination and trading, we have embarked on a journey of diversification and growth."

Roper continued, "Our strategic decision to hire Lisiten Associates to explore alternatives in our restaurant holdings underscores our commitment to focusing on our core operations and driving long-term value for our shareholders."

Last July, the company announced that it had pivoted and changed the company name from Muscle Maker Inc. to the Sadot Group Inc. It trades under the symbol SDOT on Nasdaq. With the move to the agri-foods supply chain sector, Sadot Group sees significant growth potential in providing sustainable solutions to address the world's food security issues.

Last fall, it announced it was expanding its reach with a wholly owned subsidiary in Brazil, Sadot Brasil Ltda., which will source and export soybeans, soybean meal, wheat, and corn from the South American country.

Sadot also closed last year on its purchase of grain and tree crop-producing farmland in Zambia. The farm produced a strong wheat harvest of about 987 metric tons of wheat in September, generating more than US$500,000 in revenue, and corn and soybeans have been planted.

"Sadot Group sees growing demand for its services as the demand for food and feed is projected to grow significantly through the end of the century. This demand will likely place stress on the global food supply chain," wrote analyst Tom Kerr of Zacks Small-Cap Research in a note on March 11, who said the company's stock was "substantially undervalued" at that time.

The Catalyst: Increased Assets, Cash Balance

Sadot said its assets increased from US$178.1 million in 2023 from US$27.2 million the year before.

As of December 31, 2023, Sadot said it had a cash balance of $1.4 million compared to a cash balance of $9.9 million in 2022, as some of it was deployed to facilitate trades. In 2023, Sadot Group's working capital increased to US$8.3 million from US$4 million in 2022.

Kerr predicted the net income for the company to expand by 3% by 2026 and to 4% in the following years. 

"We believe US$3.50 to be a conservative valuation target because if net margins in the Sadot business increase at a faster rate than expected, valuations could exceed US$5.00 per share," the analyst wrote.

Focus on Growth in Agri-Foods

In the coming year, Sadot will remain focused on capitalizing on growth initiatives within its agri-foods segment, Gray noted.

"The company aims to utilize trade financing to engage in larger commodity trades, noting it has already secured (US)$15-20M of financing and will increase this amount moving forward," Gray wrote. "Additionally, the carbon credits (purchased in 3Q23) could allow for higher transaction prices by making them carbon neutral. In terms of diversifying commodity revenues, the company announced it expanded trading operating into Brazil … and will look to enter additional markets in the future."

Analyst Rob Goldman predicted that "Sadot Group will first generate a profit in 2024 of an estimated US$14.6 million." 

Goldman forecasts full-year 2024 (FY24) revenue to be US$1.05 billion with US$13.9 million of it coming from the restaurant-related business."

Technical Analyst Clive Maund rated the stock a Buy in September 2023, saying it was "below a still strongly rising 200-day moving average and the rapidly improving momentum (MACD), which is now trending higher . . .  To that, we can add that the price has pushed its nose out above the second downtrend line, with volume having become light in recent weeks and downside volume having eased off with the Accumulation line having held up well on the drop from late July." 

Ownership and Share Structure

Insiders own 8.37% of the company. Joey Giamichael owns 3.14%, Kevin James Mohan owns .91%, and Michael John Roper owns 0.89%, according to Reuters.

Institutions own 41.6% of the company. AGGIA LLC FZ owns 24.14%, Thoroughbred Diagnostics LLC owns 1.89%, The Vanguard Group Inc. owns 1.64%, and Geode Capital Management LLC owns 0.76%, Reuters reported.

There are 46.76 million shares outstanding, with 34.29 million free-float traded shares. The company has a market cap of US$15.55 million. It trades in the 52-week period between US$0.30 and US$1.60.

Important Disclosures:

1. Sadot Group 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.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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