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Diversified Global Food Co. Gains Analyst Coverage
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This U.S.-based, multi-segment entity has significant growth opportunities and related strategies in place along with a savvy management team to lead the way, noted a Zacks Small-Cap Research report.

Muscle Maker Inc. (GRIL:NASDAQ), a global food company, garnered additional analyst coverage, from Zacks Small-Cap Research, which initiated on it with a $5 per share target price, reported analyst Tom Kerr in a May 22 research note.

"We believe GRIL stock is substantially undervalued at this time," Kerr wrote.

What It Does

U.S.-based Muscle Maker has two primary lines of business, noted Kerr. One is its international agri-foods segment involved in shipping and trading key food products, such as soybean meal, corn, wheat, and edible oils, through its subsidiary, Sadot, created in November 2022 and run by Aggia.

The other is its restaurants, of which it has more than 50, including Pokémoto Hawaiian Poké and Muscle Maker Grill, and its subscription-based fresh-prep meal service SuperFit Foods.

To better reflect its diverse operations, Muscle Maker is undergoing a renaming and a rebranding.

Attractive Possible Return

Because this U.S.-based food service firm is currently trading at about US$1.11 per share, 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," Kerr explained. "The majority of the value within our target price is derived from the Sadot subsidiary."

Pursuit of Growth

Kerr highlighted that the food entity could significantly expand both of its business segments over time.

The primary growth driver, however, is Sadot, a high-revenue business. Management seeks to add other related services, such as logistics and supply chain management, transportation in the form of owning dry bulk ships, and owning or managing farming processing facilities, to increase its net transaction margins, currently at about 2–3%.

"We expect the Sadot subsidiary to generate approximately US$19.8 million ($19.8M) in net income in 2023 (exclusive of stock-based compensation)," wrote Kerr.

As for its restaurant operations, Muscle Maker will concentrate on expanding the Pokémoto franchising program, as it has the most growth potential.

"Pokémoto franchise growth could be substantial over the next three to five years due to low initial franchise costs and an underpenetrated food concept," Kerr commented.

If Muscle Maker can execute its growth strategies, it could grow revenue and earnings at "very robust, double-digit growth rates for the foreseeable future," purported Kerr. "The company's current stock price does not likely reflect that potential level of profitable growth going forward."

Well-Seasoned Leadership

Muscle Maker's management team and board members directors, Kerr pointed out, have the resumes to effect such positive change, given their extensive experience with and involvement in high-growth companies, including in the areas of strategic planning, restaurant development, mergers, and acquisitions.

Highlighting a few members of the executive suite, leading the team as the chief executive officer is Michael Roper, who has owned and operated several franchise locations, including Taco Bueno, IMS Barter, and Quiznos.

Chief Financial Officer Jennifer Black is an experienced CFO with a track record of working with public and private equity-backed organizations.

Chief Operating Officer Kenneth Miller spent a large part of his career in the restaurant industry, including as senior vice president of operations for Dickey's BBQ Pit and in various positions at Taco Bueno.

Sadot's management team has significant experience as well, with the global agricultural supply chain.

Insider Ownership

Currently, Muscle Maker executives and directors own about 3.37% of the company's shares, reported Kerr.

Additionally, it is expected that Aggia and its affiliates will own 19.99% of it at the end of the fiscal year 2023, given the terms of the agreement between Aggia and Sadot.  

Solid Q1/23 Financials

Kerr presented key numbers from Muscle Maker's Q1/23. Revenue was US$213M, materially higher than in Q1/22 when it was US$3M.

Of the recent total, Sadot generated US$210.4M, and the restaurant operations generated US$2.6M.

Reflecting a similar trend, adjusted EBITDA for Q1/23 was up year over year, at US$2.4M versus ($1.5M).

At quarter's end, March 31, 2023, Muscle Maker had about US$6.4M in cash and US$947,000 in debt. The following month, the company announced a new share repurchase program, in which it may purchase shares of its common stock with a value of up to US$2M in open market transactions.

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Important Disclosures:

  1.  Muscle Maker Inc. is an affiliate of and has a consulting relationship with Streetwise Reports and has paid a consulting fee between US$8,000 and US$20,000. 
  2. 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.
  3. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  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.

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Disclosures for Zacks Small-Cap Research, Muscle Maker Inc., May 22, 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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