Mogul Energy International, Inc. (OTC: MGUY) shares surged over 122% on over 20X average volume since Monday. And that gain could be just the precursor to a more substantial move higher. Indeed, that's bullish speculation. However, it's warranted considering that MGUY is in its best-ever position to capitalize on and maximize opportunities in the multi-billion dollar logistics and transportation sectors. (* share price on 10/17/23 of $0.05, Yahoo! Finance, 10:24 AM EST)
Frankly, for Mogul Energy investors, the bullish sentiment is more than warranted; it's justified, with MGUY providing plenty to support investor optimism. Its most significant value driver was added in Q4/2022. That's when MGUY completed its acquisition of the "Flora" group of companies, an accretive addition to MGUY's portfolio that is expected to contribute substantially to reaching targeted revenues of $185 million by 2025, an over 164% increase from its roughly $70 million expected by its current fiscal year-end. But more than revenue growth is attracting investors. The company expects more than doubling its EBITDA, forecasting an increase from $3.6 million to $8.1 million over the same period. That's an over 125% increase. Aggressive cost-cutting measures announced Tuesday could help post an even higher increase.
If so, and even staying on track to meet that target through 2024, the investor optimism that has sent shares over 122% higher so far this week could get further rewarded. Considering revenue growth can be coupled with minimal dilution, an expectation supported by its completed capital raise, that's a more likely proposition than not. And that's not all attracting investor interest.
Metrics Support Higher Valuations
A key metric supporting higher highs is that according to Yahoo! Finance on 10/17/23, MGUY has only about 11.1 million shares outstanding. With a considerable portion of that in solid hands, the bullish case is made stronger as laws of supply and demand for shares generally favor the bulls, with patient investors often supporting the bid to limit the downside. However, while the capital structure in MGUY supports the bullish thesis, so does its operational position. In that respect, MGUY's mission-in-progress is to do more than capitalize on targeted sector opportunities; they want to help revolutionize it.
That may sound like a tall order for a nanocap-sized company. It's not. As an agile and adaptable company, MGUY may be better positioned than many to capitalize on and maximize niche revenue-generating opportunities. In fact, MGUY is already taking advantage of its position, building a client list through established industry relationships that understand its value from delivering "gold standard" services in a sector mired with mediocrity.
That distinction is a decisive competitive advantage, especially with clients entrusting MGUY to deliver up to millions of dollars worth of perishable and time or temperature-sensitive cargo, including floral, produce, plants, dairy, poultry, meats, and even dry high-value commodities. For MGUY, that's one part of its services offered. They also provide last-mile delivery, logistics, warehouse consolidation, and distribution services. That comprehensive list of services has led to MGUY enjoying an appreciable growth spurt. In fact, as noted, despite its penny stock price, MGUY expects to score revenues of $185 million within the next two years. If they do, the recent surge in MGUY's share price may pale in comparison to the impact revenues in that range can have on shareholder value.
Keep in mind that MGUY shares are no stranger to higher prices. Its stock has traded as high as $0.42 during the past 52 weeks, 740% higher than its current price. And with its small trading float, news-based traction could keep its in-progress rally going and strengthen its trajectory toward re-claiming that high. That's possible, considering that MGUY has assembled the right pieces at the right time to fuel a revenue breakout in 2024 growth. Those believing in that potential are, therefore, presented with what could be more than a ground-floor investment opportunity; it's a bargain basement one.
Acquisitions Are Fueling MGUY's Growth
And like other windows of opportunity, this one could close quickly. That likelihood is supported by an asset portfolio that justifies MGUY stock being priced significantly higher. In fact, despite its run to $0.05, there is still a considerable valuation disconnect between assets, potential, and share price. At current prices, its acquisition of the "Flora" group of companies appears to be entirely absent from its current appraisal. Factoring just parts of that asset's contribution supports a higher share price, noting it establishes MGUY as a contributing and valuable player in the specialized transportation space, providing refrigerated trucking and logistics services for companies in floral, plant, food, and other industries needing time-sensitive, temperature-controlled segments through the supply chain.
And not just in local markets. MGUY is expanding its presence nationwide by leveraging the strengths inherent to Flora, which fortifies an already strong presence in the refrigerated transport and logistics industries. That's not all. In addition to facilitating nationwide transportation coverage, Flora can satisfy the entirety of the client's supply chain cycle. That distinction and ability should be appreciated. Not only does Flora make MGUY bigger and stronger as a company, but it also creates an enviable means to earn substantially more revenues. Incidentally, Flora and its subsidiaries are very familiar with servicing clients in the logistics sector.
The company was established in the mid-1980s and since then has grown through opportunities seized, enabling it to expand its business reach beyond its initial core focus of floral transportation. Nearly four decades later, Flora is a one-stop shop offering clients refrigerated long haul, regional and dedicated transport, and logistical services for the floral and plant industry. It's not a small operation.
Flora's 230 Trucks Contribute To MGUY's Growth Spurt
Flora manages approximately 230 trucks and 320 trailers across Florida, Tennessee, and California. The Florida location is one of the largest cold storage facilities in the Southeast, with roughly 200,000 square feet of dedicated storage for fresh-cut flowers and produce. The company also employs about 300 people, expected to double by 2025 to meet projected growth.
To manage that growth, Flora utilizes the latest and best technologies, including AI, to maximize and lower cost overhead. The company has highlighted integrating new software in its fleet that does more than provide operational and technological advantages; it facilitates revenues falling faster to its bottom line. That matters because revenues are expected to more than double in the next three years. Still, as much as Flora contributes to the bullish thesis, it's not the only value driver.
MGUY expects to continue its growth by maximizing assets and through an acquisition strategy intending to add accretive revenues to a business model designed to maximize income. Not just current but pipeline contributions too, including income expected from engaging credit facilities to expand their fleet of trucks and warehouses with newer asset-light models. In addition to replacing older vehicles and trailers, the company's information technology team will be tasked with integrating automation and technology to reduce overhead through algorithms that will modernize its operations and expedite new fleet acquisitions into service.
An Asset Portfolio That Justifies Higher Valuations
All told, the right way to appraise MGUY is to factor in its asset portfolio's value, inherent potential, and guidance presented. A more accurate and fair share price valuation can be given only after combining those contributions. In MGUY's case, that total supports a stock price significantly higher than its current. Admittedly, MGUY is a speculative play. However, having assets that can drive revenues higher and a team that knows how to get the most out of dollars earned in the sector, the risk/reward model may favor the long side of the trade.
In fact, by doing things differently and providing services many of its peers don't, MGUY can do more than exploit being in a sweet spot of opportunity; they can help strengthen supply chain weaknesses exposed during the pandemic. Doing so will bring a tremendous revenue-generating opportunity into the crosshairs.
Targeting income from just the perishable goods transportation market puts an expected $6.3 billion in play by 2026. And that market continues to grow, especially as the demand for organic, fresh foods and beverages grows. Part of that is resulting from the proliferation of home-delivery companies like Doordash (NASDAQ: DASH), GrubHub (NASDAQ: GRUB), and Blue Apron ( NASDAQ: APRN), which have seen valuations surge since their IPOs. While not a direct comparison, their growth affects MGUY since greater demand for perishable foods creates demand from wholesalers and retailers. Still, that's just the perishables side of the equation. The fresh flower business in the U.S. presents an over $35 billion market opportunity. And as companies like 1-800-Flowers (NASDAQ: FLWS) continue to expand their business reach, the same need as the food companies is shared- they all must have inventory.
That need puts MGUY in the right sector at the right time. Moreover, with the right assets to serve demand, it can capitalize on client interest and its place in a red-hot logistics sector. That combination, and having the capital to exploit their value, helps pave the likeliest path of least resistance for its shares higher. In other words, at current prices, Mogul Energy stock may present a bargain too attractive to ignore.
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