Ten Peaks Coffee Co (TPK.TO)

It has become a big holding. He took a big position in the summer. He is very happy because it was a great performer. They have the Swiss water decaffeinated coffee process. They have all the big fast food restaurants. Countries like Japan are going toward chemical free decaffeinated coffee. They have one big plant in Vancouver. They are bursting at the seams. They want to build a whole new plant. They decaffeinate coffee coming on the boat and then put it back on the boat. If they can ever separate the caffeine and sell it to Red Bull it will be a big bonus.

They decaffeinate coffee in an organic process, so no chemicals are involved. That trend is very big these days and is showing up in their bottom and top line. Very solid growth. A trend that is not going to go away anytime soon. He doesn’t cover this company just yet, but is starting to watch it. He really likes small companies that are growing fast and that not that many people have heard of. Their earnings, cash flow and revenue are really starting to pick up. He likes what is going on.

In a strong growth position now. Their decaf, which is chemical free and organic, is the only one that can use the words Swiss Water in it. They supply big chains like Tim Hortons and McDonald’s in Canada. They are just starting with McDonald’s USA. There is a whole 3^rd wave of specialty coffee retailers developing in the US. They have perfected their technology so that you cannot tell the difference between decaf and caffeinated anymore. They are not able to retain the caffeine and resell it, but if they were ever able to do that, it would be icing on the cake. Thinks they can easily do $10 million EBITDA. A very unique, high margin, high barrier to entry, pre-cash flow generating company, that is going to be building a new plant and doubling its capacity. Dividend yield of 3.29%.

Good company. Last year was one of those years where everything that could go right went right. Wait and see a couple of quarters to see what happens. There are 2 things. The use of proceeds from their financing, and wait and see a couple of normal quarters when not everything in terms of coffee prices, etc. is going their way. There is a good chance that down the road he will be owning this.

A pretty good company. In terms of ROE, he is looking for 20% and this is around 16%-17%. You have to be a little careful as their financial results for the last 5 or 6 quarters is where everything that could have gone right has gone right. Whether they can maintain this level of profitability is questionable. He would guess that there is a financing coming, so wait to see what they use the proceeds for. If they buy some kind of an interesting kind of tack-on coffee business, it could be a nice up and coming consumer name.