SMX PLC (NASDAQ: SMX) made an announcement in October that appears to be traveling under investor's radar. For those looking for undervalued investment opportunities, it should be bright on their screens. Why? Because SMX is making deals and acquiring assets that make it a much larger and more valuable company, with tangible assets value alone able to support a significantly higher share price. And that assessment is hardly overly speculative. In fact, the bullish thesis is justified, especially after factoring its now 51% stake in trueGold Consortium Pty Ltd, which, according to a 2021 appraisal, can add over $40 million to SMX's balance sheet, a measure over 10X higher than SMX's entire market cap of $3.43 million on Tuesday.
Keep in mind that the assessment was completed in 2021. Like everything else, trueGOLD's value is likely worth considerably more in 2023. If so, its estimated value between $78.5 million and $90 million (USD) may already be portraying a conservative estimate of value, which, of course, would benefit SMX and its investors once that worth gets added to the company's balance sheet. But even before that report, SMX shares at $1.46 present a bargain basement investment opportunity, especially when factoring in the company completing significant groundwork to make sure that value earned is value kept.
That includes growing revenue streams, working partnerships validating SMX technology, and strengthening its balance sheet by turning substantial debt into equity.
SMX Deals Strengthen The Value Proposition
On the latter, SMX said it amended and/or satisfied three loan agreements, turning debt into equity at what was then above market prices. Those investors should be satisfied. They converted notes at $1.34 a share, which at SMX's current $1.46 stock price provides them a paper gain of nearly 10%. The better news for them, and, frankly, for all its investors, is that SMX continues to provide plenty to keep the bullish trend going.
Doing so has led to a growing interest in the broader SMX story, with the theme being SMX's contribution to changing the rules of engagement for how a circular economy gets managed. The good news there is that SMX technology is not something easily poached. On the contrary, SMX technology is protected by a robust IP portfolio that should keep its revenue-generating potential protected from competition. That matters when targeting business from multiple billion-dollar markets.
Frankly, those already following SMX don't underappreciate targeted potential. They even support bullish arguments by pointing to how barcoding helped change global commerce. It has. But here's the deal- SMX technology may be more valuable, with some suggesting its invisible marking technology is like barcodes on steroids. That comparison makes sense. Why? Because SMX technology is not only more robust in use applications, its invisible marking technology can be uniquely and permanently applied to metals, rubber, liquids, plastics, and other materials, adding a specific signature that becomes a part of that material's "DNA" forever.
It's beyond revolutionary; it can change manufacturing globally by providing the most potent identification means for virtually any industry material, ensuring transparency and accountability from an invisible marking technology that can be used pre-, mid, and post-production to keep a record of origin, the number of times a product has been used, how many times and where it's been recycled.
That's only part of what it can do or provide.
Facilitating A Circular Economy
SMX technology is also a sustainability initiatives game changer from its use to track raw materials from virgin use through pre-, pro, and post-production life cycles. More simply, it's a one-and-done, cradle-to-grave application, which, for the manufacturing and mining sectors, can be the most significant inclusion to prove they're staying true to their commitment to sustainable practices. And that proof can last through multiple product lifecycles.
In fact, once added to the material, it can't be altered. Rigorous testing shows it survives melting, grinding, burning, water immersion, and other potentially disintegrating processes. That inherent strength makes its applications virtually limitless, which, as it should, is helping pave the path toward mainstream use. For excellent reasons.
Foremost is that SMX has already proved its viability to mark plastics, rubber, precious metals, oil, and other liquids. The technology is more than innovative and unique to SMX; it also goes beyond what people generally call 21st-century advancements, providing its users an unparalleled and verifiable means to act as authenticators, validators, and facilitators of an entire supply chain process. Additionally, with its integration into blockchain technology, the legacy of materials mined, used, or wasted maintains a historical record. For the first time ever, miners, producers, suppliers, and recyclers can have the ability to track commitments made and kept.
As one should expect, industries are taking notice. Lots of them. With its use applications extending to timber, rubber, palm oil, cocoa, steel, gold, luxury goods, leather, plastics, and non-ferrous metals, its use by companies to prove reducing their carbon footprints and waste is almost limitless. That's not SMX's ambition; they are already providing that means. So far, SMX announced working with The Perth Mint, Continental Rubber, and a major steel manufacturer, utilizing SMX marking technology as its product life cycle transparency and supply chain validation source. And more are expected to follow, especially as use cases supporting its value accrue.
Validations By Leading Global Companies
SMX published a compelling update working with Continental. Earlier this year, SMX announced success in verifying a marker substance for natural rubber in a tire for the first time, with the marking surviving throughout the entire production process. The dedicated marker technology, which both companies optimized for use in natural rubber, is designed to create greater transparency along the value chain of tires and technical rubber products from Continental. Embedding special security features, using the marker substances enables the invisible marking of natural rubber with information on its geographical origin. The value to Continental isn't going unappreciated.
Quite the opposite. Established precedent shows that responsibly sourced natural rubber and its origin can be verified at every stage of the supply chain all the way through to the customer. In doing so, Continental further strengthens its pioneering role in its commitment to greater transparency along its supply chain. SMX noted in its release that by 2050 at the latest, Continental expects that all materials it uses in its tire production will originate from responsible sources. How will they do that? Well, SMX provides a great start by providing them the DNA of the material right up front. And the better news for SMX and its investors is Continental likely has no reason to look elsewhere to ensure meeting its internal compliance initiative; SMX marker technology may already be the most excellent and easily used way to ensure that the natural rubber used in its tires is grown and responsibly sourced.
If integration by Continental goes as expected, SMX stock could be off to the races. In its note, SMX said that Continental intends to use the new marker technology on a larger scale while sourcing its rubber and integrating it into other rubber products. For SMX, that intent could send revenues soaring, and certainly at a pace faster than many expected. Additionally, as part of the industrialization of this technology, the value inherent to SMX technology can increase by its potential linking of the markers with blockchain technology, which is generally considered tamper-proof. Better still, from a company and investor's perspective, success with Continental potentially opens doors to Goodyear (NasdaqGS: GT) and/or Bridgestone Corp (OTC Other: BRDCY).
Contributing To Supply Chain Management
That could happen faster than many expect. And it should, considering that SMX offers a robust, innovative, and scalable solution for supply chain authentication, traceability, and transparency in the circular economy. Not only for solid goods. SMX technology also gives materials in liquid and gas forms the ability to maintain a virtual memory of origination, processing, and supply chain journey, including the ability to authenticate provenance, track recycling loop counts, and tally the percentage of certified and/or recycled materials contained. That's not all.
SMX marking technology is also easy to implement, making it an efficient, cost-effective drop-in solution within an existing supply chain. It enables substantial benefits for manufacturers, consumers, and others in the value chain – and the planet, including providing the necessary data for product recycling and reuse. Additionally, the SMX technology addresses the issue of the increase in waste globally by serving the rise in demand for verified, usable recycled materials by creating a commoditized, tradable certified asset, which is the recycled material, which can be traded and sold to other players in the value chain and ecosystem. That could open massive deal-making opportunities, including with thousands of private companies that resell millions of megatons per year of recycled plastics, resins, and other fit-for-new manufacturing materials.
Incidentally, while only recently getting its introduction to the US markets, the SMX technology has been in active operational use on a national scale by the Israeli Government for over a decade. Since then, SMX has been able to do more than build its resume; it's proven its value in contributing to environmental sustainability by meeting the highest expectations. That trend will continue. SMX announced joining the Global Platform for Sustainable Natural Rubber (GPSNR). This voluntary membership organization brings together organizations, companies, societies, institutions, and government agencies to help foster improvements that have socio-economic and environmental benefits across the natural rubber supply chain.
All told, the sum of SMX's parts compared to its current $1.46 share price exposes a valuation disconnect worth seizing. Remember, its majority stake in trueGOLD alone supports a share price appreciably higher than its current. And by continuing to make deals with some of the world's largest manufacturers, its interest and value in trueGOLD, while significant, could pale in relation to near and long-term revenues generated. Remember, SMX has demonstrated success well beyond marking rubber. They have also proven their value by marking gold bars, timber, plastics, leather, and other non-ferrous metals. That proves SMX can generate revenues from virtually any market, anywhere.
Serving A Global Need, Demand, And A Multi-Billion Dollar Opportunity
Moreover, they showed that the rewards from doing so can be more than impressive; they can be exponential. In fact, based on what this technology can do and the global mission of ensuring sustainable and accountable business practices, the inclusion of SMX technology is less of a question of when it becomes mainstream but how substantial the rewards and impact will be from creating it.
Is SMX presenting a technology that is ahead of the technology curve? Perhaps. But that's not a bad thing. Every great company started with a vision to disrupt the status quo, including Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT), which brought products to market when the thought of carrying a cellphone with mainframe capabilities and seamlessly operating desktop computers drew laughs instead of praise.
They proved that being innovators still matters. And they made billions in that process. Thus, while hindsight is 20/20, investors have an opportunity to embrace some of the most revolutionary technology ever developed at prices that fail to approach anything close to fair value. Yes, the SMX window of opportunity is open. But like most companies on the forefront of a technological shift, it won't remain that way for long.
Valuation gaps do close quickly. And once investors hear and understand a compelling story, they also close tightly. In other words, with SMX stock exposing a value disconnect that's best described as too good to ignore, seizing this opportunity is better done sooner rather than later.
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