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