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Sugarmade, Inc. (SGMD)
Alert Price: $0.011
Chart Analysis
Website | Recent News
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Members,
We've just identified the steal of the year trading on the OTCQB.
Our latest trade idea has witnessed consistent revenue growth, has zero long-term debt, and plans to uplist to either the NASDAQ or the NYSE by mid-year 2020.
Please turn your immediate attention to SGMD (Sugarmade Inc.).
SGMD is one of the largest publicly traded hydroponics supply companies moving into the industrial hemp space, is a product and brand marketing company investing in products and brands with disruptive potential. Sugarmade’s brands include: ZenHydro.com and CarryOutSupplies.com. Headquartered in Monrovia, California, a city within Los Angeles county, Sugarmade has various business operations in diverse marketplaces including packaging and paper goods for various industries, agricultural supplies.
SGMD maybe one of the most undervalued companies we've seen in quite some time.
Priced at just $0.011 per share, SGMD is trading well below its Book Value Per Share of $0.02.
SGMD recently closed on its acquisition of BZRTH Inc., a marketer and manufacturer of hydroponic growth supplies, on Oct. 30, 2019, for roughly 1x revenue, integrating an annualized $33 million in revenues and an EBITDA margin of 5%, with revenues anticipated to continue to grow over coming quarters.
Management has also teased the potential acquisition of six hydroponic and agricultural supply targets in the U.S. and central Europe.
In addition to this , the Company intends to revive its October 2018 Letter of Intent (“LOI”) to pursue the acquisition of Sky Unlimited (dba Athena United), a supplier of cannabis cultivation materials in the near term. Sugarmade plans to close the deal in Q1 2020. Sky Unlimited has annualized revenues of $33 million to $35 million and EBITDA margin of 11%.
Chan continued, “When we close the Sky Unlimited acquisition, we expect to have around $70 million in annualized revenues.”
Management notes that this strategy is also predicated on a planned uplisting to either the New York Stock Exchange or the Nasdaq before mid-year 2020.
Based on what you just read, do you really think that SGMD will be trading for a penny per share for much longer?
We are extremely bullish on SGMD, and urge all of our members to start their research now, and add it to the top of their watchlist immediately.
About Sugarmade, Inc.
Sugarmade, Inc. (SGMD) is a product and branding marketing company investing in operations and technologies with disruptive potential. The Company is becoming a leading supplier to the growing hemp industry and is benefitting from the growth of the hydroponic marketplace. The Company is in the process of acquiring several leading hydroponic and agricultural supply companies that are currently producing in excess of $70 million in annual revenues. Sugarmade is also an investor in fast growing Hempistry, Inc., a Kentucky-based cultivator, operates Carryoutsupplies.com a leader provider to the quick service restaurant industry and Zenhydro.com a leading supplier in the online hydroponic industry.
SGMD has plans to uplist to a major US exchange by mid-year 2020 while moving toward another targeted acquisition. Based on the strategy the Company has laid out, management believes Sugarmade will be on track to reach excess of $65 million annualized revenues.
“We have an ambitious plan to create a viable path toward another major acquisition while extending our stepwise climb onto a major US exchange listing as we continue to expand operations in a rapidly growing market,” stated Jimmy Chan, CEO of Sugarmade. “The key steps that will facilitate this evolutionary process are a 14C filing and leveraging our superior market positioning in current and forthcoming negotiations, both of which are readily accessible and attainable ideas.”
Company Highlights
Strategic investment in Hempistry, allowing Sugarmade shareholders to possibly benefit from relationship with industrial-hemp cultivation company
Industrial hemp market in the U.S. projected to reach over $1 billion in revenues in 2018 with an expected 14% CAGR through 2022
Sugarmade is one of the largest, publicly traded hydroponic supply companies investing in the legal cultivation sector
Expansion into European hydroponics supply market to provide additional revenue growth opportunities
Led by experienced team of executives instrumental in successfully growing multiple business operations
Key Acquisition To Add Estimated $37M In Revenue Annually
SGMD closed on its acquisition of BZRTH Inc., a marketer and manufacturer of hydroponic growth supplies, on Oct. 30, 2019, for roughly 1x revenue, integrating an annualized $33 million in revenues and an EBITDA margin of 5%, with revenues anticipated to continue to grow over coming quarters.
The acquisition will position Sugarmade to book all revenues from both entities, creating a combined entity that, based on most-recent financial estimates, stands to produce $37 million in annual sales and positive cash flow and EBITDA, resulting in Sugarmade becoming one of the largest publicly traded companies in this fast growing sector.
“After months of negotiations, we now have robust terms set into place that represent enormous value for Sugarmade shareholders,” commented Jimmy Chan, CEO of Sugarmade. “This acquisition, in itself, will dramatically augment the Company’s top and bottom line numbers and massively expand our overall presence in the booming hydroponics and hemp ecommerce space. Further, it also represents the central piece of our overarching roll-up strategy to position Sugarmade as the dominant pick-and-shovel entity on the hydroponics side catering to producers in the explosive market for hemp and hemp-related crops in North America.”
Management notes the investment boom in the production of raw hemp and hemp-related crops has tightened margins for growers through a massive expansion in the sheer number of producers. This process is driving an associated boom in the market for goods and services that improve efficiency in producing these crops as producers compete for market share and return on invested capital. Sugarmade and other companies in the hydroponic supplies markets are perhaps the most natural beneficiaries of this dynamic due to the ability to maximize output relative to inputs – invested capital, time, energy, and resources.
According to multiple sources, the global market for hydroponic and hemp cultivation supplies will remain robust for many years. For example, Maximize Market Research, PVT. LTD. recently forecasted the worldwide market during 2017 at US$26.6 billion and forecasts the market to reach US$37.7 Billion by 2026. Sugarmade has dedicated itself to becoming the dominant supplier in North America for products that address this need.
To effect this strategy, the Company places paramount importance on dominating the ecommerce side of the hydroponics market. The BZRTH acquisition will accompany its existing Master Marketing Agreement with BizRight, LLC, the sister company to BZRTH, whereby the Company will be able to vertically integrate ecommerce through ZenHydro.com (and several additional hydroponics ecommerce sales portals) with a 55,000 sq. ft. fulfillment center and a market leading logistics platform, resulting in an entity operating in a leadership position as a hydroponics equipment provider to the soaring North American hemp and hemp-related cultivation marketplace.
Mr. Chan continued, “With this acquisition, we believe Sugarmade has entered into a “best of all worlds” situation. It is clear that the hydroponics market is growing fast, as is the hemp marketplace. Additionally, the ecommerce sector is booming. Sugarmade and BZRTH capture growth from all of these market sectors and combine these with what is already stellar growth coming from BZRTH. We are pleased to announce today that since inception, the operations we are acquiring have grown astonishingly over 40% compound annual growth rate. Of course, this compares very favorably to the ecommerce sector, which grew at 15% last year and the overall retail market, which grew at only 3.9%. We cannot think of a better market in which to continue our expansion.”
SGMD Unveils Plans To Uplist To The NASDAQ Or NYSE Before Mid-Year 2020
Late last month, SGMD provided an update as the Company moves toward an uplisting of shares onto a major US exchange following news that Sugarmade’s direct competitor, GrowGeneration Corp. (GRWG) (“GrowGen”), announced on Monday, Nov. 25, that its shares have been approved for listing on the Nasdaq Capital Market ("NASDAQ").
Following its acquisition of BZRTH, Inc. (“BZRTH”), and another acquisition to be announced in the near future, management believes that Sugarmade is very similar to GrowGen in terms of market segment, scale of operations, and financial performance metrics (on an overall, consolidated basis). As a result, the Company believes GrowGen’s move onto the Nasdaq is a very promising signal for Sugarmade as the Company prepares to uplist its own shares.
“The approval of GrowGen shares for the move up onto the Nasdaq market is a great sign for Sugarmade as we prepare to make a similar move,” commented Jimmy Chan, CEO of Sugarmade. “It’s a positive signal about the hydroponics market and about our overall strategy. It’s time for institutional investors to get heavily involved in the pick-and-shovel ancillary markets surrounding the hemp and hemp-related boom. GrowGen has done a great job, and we are hot on their tail right now, and plan to surpass them in the race to number one in the hydroponics space.”
The Company recently completed its acquisition of BZRTH. Including sales brought in by the acquisition, the Company has already booked over $26 million in revenues on a year-to-date basis. The Company anticipates this number to swell to $32 million on sequential strengthening in gross margins and sales into year end. The Company is also in the process of another major M&A transaction that will significantly further boost overall forward financial projections for 2020. Further details will follow soon.
Mr. Chan continued, “Let’s not forget why GrowGen and Sugarmade are both seeing such a strong wave of growth. The market for cultivation of hemp and hemp-related crops is growing at an astounding pace. But supply has caught up with demand, and margins are tightening fast for producers. Hydroponics is a core part of the solution for those producers. Growth is moving from cultivators to ancillary products and services catering to those cultivators. And we are committed to a leadership position as this dynamic continues to unfold.”
The total market capitalization of the Nasdaq Exchange currently stands at $10 trillion U.S. dollars, representing the second largest exchange in the world in terms of market capitalization for shares traded.
Recent Developments
Sugarmade Targets Additional Acquisitions in Hydroponics Roll-Up Strategy
Two weeks ago, SGMD announced that they will continue to pursue an aggressive M&A roll-up strategy as it positions Sugarmade as the dominant entity in the hydroponics marketplace. Specifically, the Company is currently in preliminary talks with six hydroponic and agricultural supply targets in the U.S. and central Europe.
Management notes that ideal targets should have an EBITDA margin of at least 8%. The Company prefers to pay a reasonable multiple to revenue, with 10% in cash and 90% in stock for potential acquisitions, with precise terms dependent on market conditions. Sugarmade closed on its acquisition of BZRTH Inc., a marketer and manufacturer of hydroponic growth supplies, on Oct. 30, 2019, for roughly 1x revenue, integrating an annualized $33 million in revenues and an EBITDA margin of 5%, with revenues anticipated to continue to grow over coming quarters.
Sugarmade CEO, Jimmy Chan, noted, “We continue to position Sugarmade as a dominant entity in a market that promises aggressive growth as margins tighten for larger producers in the hemp and hemp-related space. The return on investment in this space is extremely appealing right now, and we believe that will continue to be the case as we pursue this strategy.”
In addition, the Company intends to revive its October 2018 Letter of Intent (“LOI”) to pursue the acquisition of Sky Unlimited (dba Athena United), a supplier of cannabis cultivation materials in the near term. Sugarmade plans to close the deal in Q1 2020. Sky Unlimited has annualized revenues of $33 million to $35 million and EBITDA margin of 11%.
Chan continued, “When we close the Sky Unlimited acquisition, we expect to have around $70 million in annualized revenues.”
Management notes that this strategy is also predicated on a planned uplisting to either the New York Stock Exchange or the Nasdaq before mid-year 2020.
Chan concluded, “The capital market is valuing publicly-traded hemp ancillary companies at 3x-5x revenue, while most of these companies are in the red. GrowGeneration just started trading on Nasdaq a few days ago with a market cap of $172 million. Our financial performance is tracking in a very similar profile at a discount of $160 million. We are targeting shareholder value and believe we have a strategy in place that offers a tremendous path forward.”
Market Outlook
According to recent research from Mordor Intelligence, the Global Hydroponics Market was valued at $24 billion in 2018 and is expected to register strong growth over coming years. Maximize Market Research also forecasts a coming boom in this market space, driving total annual sales from $26.6 billion in 2017 to $37.7 billion by 2026.
According to the U.S. Department of Agriculture, farm production within the United States is expected to fall an additional 6.7% this year on top of already weak market over the past few years. These reductions will likely result in the overall U.S. agricultural production for 2019 being the lowest since 2006. Prices for the commodities that are being produced are also at near record levels. One of the few bright spots in the agricultural sector is industrial hemp, which became legal via the December passage of the U.S. Farm bill. Estimates for hemp production for the 2019 season continue to be revised upward, with major hemp producing states, such as Colorado, Kentucky, Oregon, North Dakota, and others, reporting sharp increases in both cultivation applications and expected acreages. Arcview Market Research, is now predicting the market for Cannabidiol (CBD), which is mainly derived from hemp, will surpass $20 billion by year 2020. Hemp and its by products are growing fast and are one of the few bright spots in the agricultural sector.
Technical Analysis
We've done our very own chart analysis on SGMD, and see the potential for a double-digit move from today's alert price.
Just like many of our past winners, SGMD is sitting on a bottom'd out chart, and appears to have nowhere to go but up.
SGMD has yet to close under $0.01 all year, and we don't see that happening any time soon.
We believe that SGMD's upside potential far outweighs any downside risk at this entry point.
A run back to its 52-week high of $0.13 would show traders a +1,081% ROI!
The Bottom Line
SGMD appears to be a steal at this price.
The Company has consistent revenue growth, is trading under book value, and has uplisting aspirations.
This looks likes a clear cut winner from all angles.
We are extremely bullish on SGMD, and urge all of our members to start their research now, and add it to the top of their watchlist immediately.
(*Remember to use a Stop-Loss Order to protect your gains, as well as limit possible losses.)
Best Regards,
Past performance is not an indicator of future returns. The publishers of this report are not investment advisors and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. The publishers of this report has received ten thousand dollars compensation to complete investors relations marketing campaign for SGMD .. Never make investment decisions based on anything the publisher of this report says. This message is meant for informational and educational purposes only and does not provide investment advice.