Swiss Water Decaf Coffee

SWP-T

SWP is one of the few companies in the world to decaf coffee using a chemical process. A few competitors have shut down. Volumes are growing nicely and they are improving their margins. They are completing a Vancouver plant this year, which will ramp up volumes in coming quarters. Pays a good dividend as you wait.

It is a chemical free process for decaf. People are trending towards decaf. They are building a big plant expansion with 6 months to go so you have to wait to see that things go as planned. They many not fill up capacity quickly.

They are the only company in the world that decaffeinates coffee in a chemical free manor. They basically have the market to themselves. Sales have really accelerated in the last two years. He thinks the stock is significantly undervalued at 10 times earnings. 4.4% dividend. No analysts are covering it right now.

They have been building a new plant in BC. Looking at about a year before the plant is up and running. This is a long time to ask investors to wait. There is a lot of risk to owning it now. Look at it in 12 months time. There are better opportunities now and look at this name later.

Only company in the world that decaffeinates coffee without using chemicals. More businesses are getting away from using coffee processed with chemicals. Double digit growth in volume, sales, and profitability. Building a new plant. Big customers like Tim Horton's and McDonald's Canada. Dirt cheap, under 11x earnings. Lots of cash flow. Undervalued. Growing at double digits. Yield is 4.5%.

He is neutral to them right now. Their organic decaffeinated process for coffee is interesting. However, they have not converted sales as aggressively as hoped. He does not think you need to own it here now.

The symbol changed last year. He has a big position (about 7% of the company). They are signing up a lot of new business. The volumes are rising nicely and they are in the process of building a new facility. This is the year for the company to really shine. It pays a nice dividend. Some countries are banning the chemical process.

He pressured the company to change their name back. He was happy with the last quarterly results. Volumes continue to grow. Margins are improving. There is a new plant coming on in Q3 next year.

Issued equity and then went out and did a major plant expansion. Customers didn't come. They cut distributions and the price dropped. At that point they were 5 X EBITDA. As of today they have no leverage and trade at 7.5 X EBITDA. The US coffee roasters have much higher EBITDA and someone could look at this as a possible takeover.

Expanded their facilities to meet increased demand but has had increased competition recently from Mexico. Last a key customer. We'll be looking at this because it has fallen quite hard.

A small cap name and somewhat illiquid which may account for its sell off. Likes it because they are expanding into a new line and increasing capacity. Seeing some growth in this trust. You will see a better '06 then '05.