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Food Co.'s New Subsidiary Yields US$151M in Just Two Months
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Thanks to the newly added agribusiness segment, the parent corporation is "recording substantial revenue and net income results," noted a Goldman Small Cap Research report.

Muscle Maker Inc. (GRIL:NASDAQ) is a currently undervalued company "experiencing record growth," reported Goldman Small Cap Research founder and analyst Rob Goldman in a May 5 research note.

Goldman's research firm has a US$4.50 per share six-to-nine-month price target on Muscle Maker, which is equivalent to 15 times US$0.30, the amount Goldman forecasts as 2023 adjusted earnings per share (EPS) for the diversified, food-focused company.

Muscle Maker is currently trading significantly below Goldman's target price at about US$1.35 per share. The difference between the two prices implies a potential 233% gain for investors.

In his report, the analyst highlighted additional key points about Texas-headquartered Muscle Maker as an investment.

Subsidiary is a Game Changer

Since Muscle Maker formed Sadot in November 2022, this U.S.-based global agribusiness subsidiary has generated between US$50 million ($50M) and US$93M each month. Revenue in the two months it existed in 2022 was US$150.6M (Goldman pointed out this figure is correct, not a typo.) This amount compares to the US$11.1M that Muscle Maker's restaurant and franchising segment yielded in all of 2022.

Consequently, noted Goldman, thanks to Sadot, Muscle Maker is "recording substantial revenue and net income results, on an adjusted basis."

Creative Pay for Performance

Muscle Maker is also benefitting from the service agreement it has with the firm, AGGIA, to run Sadot. It is, according to Goldman, a "creative pay-for-performance plan that, in our view, is a major win for Muscle Maker and also a positive for AGGIA."

In part, for instance, the agreement calls for AGGIA to earn by generating net income for Sadot, Muscle Maker common stock, and the right to nominate new board members.

Other Revenue Generators

Muscle Maker has other business segments, including its initial focus, grill restaurants offering and selling fast casual food; along with SuperFit Foods, offering direct-to-consumer premade meal prep; and Pokemoto, a Hawaiian poke restaurant brand.

Going forward, Muscle Maker management intends to concentrate on franchising Pokemoto with initial franchise fees of up to US$25,000 per location and 6% of the gross revenue. It also aims to develop a series of hybrid Muscle Maker-Pokemoto spots.

"With a focus on franchising and strength in a key category, Muscle Maker could emerge as the leading U.S. brand for the popular Hawaiian poke offering," Goldman purported.

Profitability Forecasted for 2024

Looking forward, Goldman Small-Cap Research expects Muscle Maker will first generate a profit in 2024 of an estimated US$14.6M. Goldman forecasts full-year 2024 (FY24) revenue to be US$1.05 billion, with US$13.9M of it coming from the restaurant-related business.

This year, Goldman's firm expects Muscle Maker to generate US$913M in revenue, representing a 463% year-over-year (YOY) gain, the analyst highlighted. Of this total, the restaurant business will contribute an estimated US$12.2M, reflecting a 10% year-over-year increase. Ultimately, though, Goldman Small Cap Research expects Muscle Maker to post a loss of about US$6.1M for FY23.

Goldman explained that Muscle Maker has decided to continue its legacy of fast casual restaurants for two years. However, if losses continue and growth is minimal to none, the company may consider spinning off or divesting this business segment. Muscle Maker would generate "many millions" from such an event, added Goldman, and EPS would potentially jump to US$0.38 from US$0.28.

"Upside to future forecasts and our target exists via the potential sale of the fast-casual segment, among other events," noted Goldman.

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Important Disclosures:

  1. 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., a company mentioned in this article.
  2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  3. The following companies mentioned in this article are billboard sponsors of Streetwise Reports:Muscle Maker Inc. Click here for important disclosures about sponsor fees.
  4. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
  5. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures for Goldman Small Cap Research, Muscle Maker Inc., May 5, 2023

ANALYST CERTIFICATION I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.

DISCLAIMER This Opportunity Research report was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select format reflects the Firm’s internally generated stock ideas along with economic and stock market outlooks. Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored micro-cap research ideas that typically carry greater risks than those stocks covered in the Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Research reports on profiled stocks in the Opportunity Research format typically have a higher risk profile and may offer greater upside. Goldman Small Cap Research was compensated by the Company in the amount of $4000 for a research report production and distribution, including a press release. All information contained in this report was provided by the Company via filings, press releases or its website, or through our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co. Separate from the factual content of our articles about the Company, we may from time to time include our own opinions about the Company, its business, markets and opportunities. Any opinions we may offer about the Company are solely our own and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.

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