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Co. Grows Agri-Foods Division Yielding Strong Income
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Recent efforts have included expanding its geographic reach, acquiring a producing farm and entering an equity purchase agreement, noted a Zacks Small-Cap Research report.

Sadot Group Inc. (SDOT:NASDAQ) has made several moves in the past few months regarding its newer, high-income-generating Agri-Foods division, reported Zacks Small-Cap Research analyst Tom Kerr in an October 11 research note.

"Since forming the Sadot Agri-Foods operations, the company has quickly established itself as a player in the global agriculture commodity trading, shipping, and logistics space," Kerr wrote.

394% Return Projected

Sadot Group is currently trading at about US$0.81 per share.

"SDOT stock is substantially undervalued at this time," Kerr commented. "We believe that as profitability improves in both the Agri-Foods segment and Restaurant segment, the stock could be worth US$4 per share."

The difference between the US$4 valuation and the US$0.81 current price implies a substantial return for investors of 394%.

Expands Geographic Reach

Kerr discussed the handful of recent developments pertaining to Sadot Group's Agri-Foods division under the auspices of the subsidiary, Sadot LLC.

One of the division's lines of business involves sourcing sustainable food and commodities, such as soybean meal, wheat, and corn, from producing locales such as the Americas, Africa, and the Black Sea region. Also, it exports the same to markets in Southeast Asia, China, and the Middle East/North Africa region.

Sadot Group recently added another geography to its Agri-Foods footprint, Latin America, and created a new subsidiary, Sadot Latam LLC, for it.

Adds Farm To Asset Portfolio

Earlier this year, Sadot LLC acquired 4,942 acres of farmland in Zambia, and the deal closed on August 18, Kerr reported. The farm on this property produces grains in high demand, such as wheat, soy, and corn, as well as mangos and avocados.

Since the closing, Sadot LLC hired several farm managers, and they have been busy harvesting and planting crops. In September, the farm yielded about 987 metric tons (987 mt) of wheat, equivalent to US$508,305 in revenue.

Earlier this month, in October, another 1,334 acres of corn and 775 acres of soybeans were planted. They are expected to yield 4,952 and 942 metric tons, respectively.

Now, at the farm, the crops being worked are 1,345 acres of corn, 775 acres of soybean, 270 acres of wheat, 180 acres of Hass avocados, and 50 acres of Tommy Atkins mangos.

Pursues Collaboration With Farmers

Also in the works, Sadot LLC is looking to develop a collaborative pilot program with local farmers in Zambia and has been having discussions about this noted Kerr. Through this program, Sadot LLC would afford the 1,200 local smaller farmers in Zambia access to seeds, fertilizers, and related services.

"This initiative, when executed, is expected to positively impact the livelihoods of the participating farmers as well as enhance the company's position in the region while presenting a potential future revenue stream," Kerr wrote.

Enters Equity Agreement

Finally, Sadot Group effected a standby equity purchase agreement with Yorkville on September 22, 2023. Yorkville is an exempt limited partnership in the Cayman Islands.

Per the agreement, Sadot Group may sell to Yorkville up to US$25 million (US$25M) worth of common stock. Also, at its discretion, Sadot may, but does not have to, direct Yorkville, via written notice, to purchase a specified number of shares of common stock.

Also, Yorkville agreed to advance US$4M to Sadot Group in the form of convertible promissory notes.

Monthly Revenues Strong

Agri-Foods is Sadot Group's largest division, and it generates the most revenue. Since coming online, it has generated strong monthly revenue, with a year-to-date (January through August) total of US$488M, Kerr reported.

Of the eight months, March had the most revenue, at US$93.8M. In August, the most recent month for which a total is available, revenue was US$67M, up from US$53M in July.

"The company does not report monthly profitability on these revenues," wrote Kerr. "However, we believe the net margins are in the 1−3% range on average."

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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. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  3. 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.

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Disclosures for Zacks Small-Cap Research, Sadot Group Inc., October 11, 2023

The following disclosures relate to relationships between Zacks Small-Cap Research (“Zacks SCR”), a division of Zacks Investment Research (“ZIR”), and the issuers covered by the Zacks SCR Analysts in the Small-Cap Universe.

ANALYST DISCLOSURES I, Tom Kerr, 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. I believe the information used for the creation of this report has been obtained from sources I considered to be reliable, but I can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.

INVESTMENT BANKING AND FEES FOR SERVICES Zacks SCR does not provide investment banking services nor has it received compensation for investment banking services from the issuers of the securities covered in this report or article. Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm engaged by the issuer for providing non-investment banking services to this issuer and expects to receive additional compensation for such noninvestment banking services provided to this issuer. The non-investment banking services provided to the issuer includes the preparation of this report, investor relations services, investment software, financial database analysis, organization of non-deal road shows, and attendance fees for conferences sponsored or co-sponsored by Zacks SCR. The fees for these services vary on a per-client basis and are subject to the number and types of services contracted. Fees typically range between ten thousand and fifty thousand dollars per annum. Details of fees paid by this issuer are available upon request.

POLICY DISCLOSURES This report provides an objective valuation of the issuer today and expected valuations of the issuer at various future dates based on applying standard investment valuation methodologies to the revenue and EPS forecasts made by the SCR Analyst of the issuer’s business. SCR Analysts are restricted from holding or trading securities in the issuers that they cover. ZIR and Zacks SCR do not make a market in any security followed by SCR nor do they act as dealers in these securities. Each Zacks SCR Analyst has full discretion over the valuation of the issuer included in this report based on his or her own due diligence. SCR Analysts are paid based on the number of companies they cover. SCR Analyst compensation is not, was not, nor will be, directly or indirectly, related to the specific valuations or views expressed in any report or article.

ADDITIONAL INFORMATION Additional information is available upon request. Zacks SCR reports and articles are based on data obtained from sources that it believes to be reliable, but are not guaranteed to be accurate nor do they purport to be complete. Because of individual financial or investment objectives and/or financial circumstances, this report or article should not be construed as advice designed to meet the particular investment needs of any investor. Investing involves risk. Any opinions expressed by Zacks SCR Analysts are subject to change without notice. Reports or articles or tweets are not to be construed as an offer or solicitation of an offer to buy or sell the securities herein mentioned.

CANADIAN COVERAGE This research report is a product of Zacks SCR and prepared by a research analyst who is employed by or is a consultant to Zacks SCR. The research analyst preparing the research report is resident outside of Canada, and is not an associated person of any Canadian registered adviser and/or dealer. Therefore, the analyst is not subject to supervision by a Canadian registered adviser and/or dealer, and is not required to satisfy the regulatory licensing requirements of any Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and is not required to otherwise comply with Canadian rules or regulations.

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