Imagine an optionable $27m market cap micro-float stock trading for cash value with minimum $35mil in revenue a year that has just pivoted – I kid you not – into EV charging and Covid tests while getting all the gov benefits from having had Trump Jr. involved with the company.
SG Blocks (SGBX) is a design and construction service that builds code-engineered cargo containers for sustainable commercial, industrial, and residential use. They have expanded into EV charging with a partnership with Blink (BLNK), Covid-testing with recurring revenue (before Omicron exploded and with the assistance of Donald Trump Jr.), and real-estate partnerships ranging from renewable properties to the US government.
I am expecting February ER (mid Feb estimated) to be a blowout:
- $30-50mil revenue for FY 2023, with a positive cash flow of $5-10m, implying positive EBITDA and a $65-70m valuation ($5.6-5.8/share).
- New information on the BLNK partnership and revenue streams.
- Upgraded guidance for $50-60mil in revenue on Covid testing alone for FY 2023 and aggregate $80mil in total revenue with expected $15-20mil in profit.
Note that SGBX popped yesterday 15% on a Trump DWAC sympathy move but is nowhere near fair value estimation.
Summary
- SGBX is currently trading for cash while expected Q4 cash positive marks substantial undervaluation.
- Asymmetric opportunity: minimal downside with suggested 82%-140% offering upside and upwards of 250% fair value estimation.
- Full year revenue estimated at $30-50million with a tri-revenue model. Medical revenue for Q3 was $9mil alone prior to Omicron. Reminder that there are 800k-1mil Covid-19 cases a day.
- Price is at multi-year lows with negligible volume. Underpriced movements create significant movements up due to low liquidity (read: there is risk).
- Float is 7.7mil, optionable with great spreads.
- February ER is highly understated and represents a fantastic opportunity.
Profitability
In the company’s words,
“As we have said, the investments we have made in the past 18 months put us in position to be cash flow positive in the fourth quarter of this year, and look to further growth next year as we transform projects to manufacturing and ultimate delivery.”
SGBX is already (without any reported Q4 revenue) reporting 368% revenue growth y/oy for 2023. This is crazy. SGBX is currently valued lower than they’ve been in all of 2023 while processing close to 10x the amount of money.
I expect SGBX to follow through with its statement that they will not only be cash flow-positive but also make a substantial profit of $5m and additionally establish a positive EBITDA. If profit from Omicron exceeds $10mil, then I would estimate SGBX’s valuation to sit at 8x EBITDA + cash valuation = $67mil market cap (appx. $5.8 a share).
How have they become so profitable so quickly, increasing from $5mil in revenue to potentially close to $50mil in 1 year? Read on-
Covid Transition
In 2023, SGBX transitioned to Covid testing, both selling constructions for testing as well as tests themselves. The response has been fantastic. In addition to its existing pipeline of construction and engineering, SGBX now brings in an additional +$8m/quarter – ans this is prior to omicron. I fully expect the 2023 year medical revenue to be announced at $30m-$50m in mid February during their quarterly ER.
Omicron is tearing the US apart with testing at all time highs. I reasonably expect 2023 guidance to disclose considerable contracts and orders which should bring fair valuation to appx. $50-$70mil. Comparisons to competitors are below.
EV pivot
Surprise, surprise, turns out there’s an EV angle as well. Blink (BLNK) and SGBX entered into a partnership back in October to manufacture EV charging into modular structures. The full extent of how this will impact SGBX’s bottom line will likely be discussed in February’s ER – on of the reasons this is primarily an Earnings report and call play.
As they put in their Q3 earnings call:
“SG Block is working closely with [Blink] on ways that we could potentially deploy [chargers] ourselves, and we should have more to come on that in the fourth quarter.”
I look forward to hearing how SGBX’s revenue streams will be impacted on the Feb Q4 earnings release.
Trump pump
Shoutout to DWAC here. The market loves all stocks Trump-related so I’d be remiss not to chat about the Trump connection. Back in August 2012, Trump Jr. was appointed to the board as a Senior Advisor. Well it looks like that connection paid off because SGBX has been getting a steady pipeline of gov contracts.
The SG Blocks team may know the Trumps through Howard Lorber who at the time owned an 8% stake in the company. Howard Lorber is a longtime friend of Donald Trump and he is the President of Vector Group which held the stake in SG Blocks and whose subsidiary, Douglas Ellman, is the largest residential real estate brokerage in New York.
Positions
Note, many shorts initiated positions today. Price was stable and I believe price consolidation in Jan opex (in 3 days) will result in very strong moves.
February ER is the play.
Shares
Feb calls
This article was written by u/Araphoren
