ratiman Posted December 17, 2020 Share Posted December 17, 2020 Sales are closer to US$100mm. Tea is a perfect internet product because it's easy to ship, no returns, huge markups, brand loyalty, repeat purchases, long tail. Personally I view tea as a commodity product. Sure there are blends but you eventually figure out that it's green tea with some flavor an just get some green tea in bulk. I have doubts. You're right that premium tea has always been a niche market, unlike premium coffee, and it probably will remain a niche market. But it's a fast growing, high margin niche, and the more cheap additives like sugar included in a premium tea, the better the margins. Link to comment Share on other sites More sharing options...
Jurgis Posted December 21, 2020 Share Posted December 21, 2020 Impressions on the teas in my latest order: - Kenyan Tinderet - I like it. Not sure it's better than cheaper black tea that I can buy online - Tie Kwan Yin - it's pretty good Oolong tea. I'm not that much of a fan of oolong though, so probably won't reorder - Gyokuro Yamashiro - Japanese green tea. I liked it. It's expensive though. - Yuzu Matcha - I think I like it. - Strawberry Moringa - they put one bag for free into my order. It's not that bad, but has somewhat artificial taste. I've had way better strawberry flavored teas from UK and Lithuania. Link to comment Share on other sites More sharing options...
Jurgis Posted January 29, 2021 Share Posted January 29, 2021 Impressions on the teas in my latest order: - Jasmine Black Pearls - I liked it a lot. Very expensive though. I got it for free for points. - Orange Pekoe - blah. Nothing special. Generic black tea. Won't buy more. - Gaba Guava - OK, but nothing special. Won't buy more. - Buddha's Blend - pretty good though expensive. Link to comment Share on other sites More sharing options...
ratiman Posted January 29, 2021 Share Posted January 29, 2021 Good article on DT. He also puts the value around $7.60 and estimates the ultimate payment in the CCAA process at below C$40mm. https://seekingalpha.com/article/4401213-davidstea-dont-to-read-tea-leaves-anymore Link to comment Share on other sites More sharing options...
rainman Posted February 4, 2021 Share Posted February 4, 2021 what happen today? I can't find any news. Link to comment Share on other sites More sharing options...
ratiman Posted February 5, 2021 Share Posted February 5, 2021 It's still below fair value. Apply the Tazo multiple to this (3.4x) and it's worth $12.50. Link to comment Share on other sites More sharing options...
ratiman Posted May 5, 2021 Share Posted May 5, 2021 CCAA payment is CAD$18mm, cash on balance sheet is C$30mm, so DT should be able to run the business with ~C$15mm of cash flow and ~C$15mm cash on the balance sheet (right now inventory is very high, probably because supply chain is slow). Capex is very low, this business just churns out cash. Here's an interesting fact: 2/3 of DT drinks are not tea! It's all just artificial flavors that are called tea. I heard an interview with David and he said that anything that isn't coffee or soda is just dumped in the tea category. Link to comment Share on other sites More sharing options...
Jurgis Posted May 5, 2021 Share Posted May 5, 2021 8 hours ago, ratiman said: Here's an interesting fact: 2/3 of DT drinks are not tea! It's all just artificial flavors that are called tea. The flavors are not necessarily artificial. They are usually herbal although DTEA has some (crappy IMO) artificial tasting flavors too. Non-tea drinks are called infusions or tisane, but neither of these terms are used much. Like you said, it's all dumped into DTEA category. Link to comment Share on other sites More sharing options...
keerthiprasad Posted May 6, 2021 Share Posted May 6, 2021 Great deal for DTEA or much lower than I expected. Looks like they have accumulated a bunch of prepaid inventory during this process and that should convert nicely to more cash on the balance sheet. Link to comment Share on other sites More sharing options...
ratiman Posted May 6, 2021 Share Posted May 6, 2021 10 hours ago, keerthiprasad said: Great deal for DTEA or much lower than I expected. Looks like they have accumulated a bunch of prepaid inventory during this process and that should convert nicely to more cash on the balance sheet. It would be surprising if they just shafted their suppliers like that. It makes more sense if the $18mm applies to the leases and the suppliers get fully paid off one way or another. We might find out Friday. Link to comment Share on other sites More sharing options...
keerthiprasad Posted May 7, 2021 Share Posted May 7, 2021 15 hours ago, ratiman said: It would be surprising if they just shafted their suppliers like that. It makes more sense if the $18mm applies to the leases and the suppliers get fully paid off one way or another. We might find out Friday. The 18m is definitely lease related. Inventories are up yoy despite store closures and accounts payable are down significantly (vendors up front payment during this process). We can expect more normal payment terms after resolution of the ccaa. They also have 7M in deposits with vendors. This will be unwound as well. Link to comment Share on other sites More sharing options...
TBW Posted May 12, 2021 Share Posted May 12, 2021 Can someone help me see the value here? I want to like this idea as I have followed the company for years, like the product, and my view was that they always had a good Cad business but they ruined it by their US expansion and bad management. So a Canadian focused biz, with a cleaned up balance sheet is interesting. However, say they do $150mil in revs in a 'normal' 2022. With 40% margins, and say $50mil in G&A (I would expect G&A to be higher than last q annualised, that would only be $10mil in EBIT. And considering those are $cad, and $cad mkt cap is roughly $120mil that doesn't strike me as cheap. Especially as they don't have that much cash on hand if sales start off slow, management is unproven, you are a minority holder to Segal family, etc... Over time, there could be good growth in a rebuild out of Canadian stores, but that business is somewhat cannibalised by the new focus on grocery store and online sales. They just emailed me yesterday with an offer of free shipping no matter the order size, which may be an indication that lockdowns are hurting their business at the moment. I think it looks ok, but I don't think cheap enough for the risks. Would love to hear if I am missing something, which I easily could be. Link to comment Share on other sites More sharing options...
ratiman Posted May 12, 2021 Share Posted May 12, 2021 (edited) Look at the comps. Tazo went for 3.4x sales. Unilever's declining black tea business is estimated to go for 2.5x. Teavana went for 4x. JDE Peets coffee and tea business goes for 3.5x. An acquirer looking to hop onto the fast-growing botanicals trend with access to online platform would have to pay over the Tazo multiple (3.4). IN my opinion of course. I've been wrong before about DT so I wouldn't listen to me about DT or in general. Edited May 12, 2021 by ratiman Link to comment Share on other sites More sharing options...
Jurgis Posted May 12, 2021 Share Posted May 12, 2021 5 hours ago, TBW said: They just emailed me yesterday with an offer of free shipping no matter the order size, which may be an indication that lockdowns are hurting their business at the moment. They cycle the offers. "Free shipping no matter the order size" just means that there are very few good prices or sales. There have been way better sales/offers in the past - although mostly around Thanksgiving/Christmas. Link to comment Share on other sites More sharing options...
keerthiprasad Posted June 11, 2021 Share Posted June 11, 2021 https://www.globenewswire.com/news-release/2021/06/11/2246023/0/en/DAVIDsTEA-Creditors-Approve-CCAA-Plan-of-Arrangement.html Link to comment Share on other sites More sharing options...
ratiman Posted June 12, 2021 Share Posted June 12, 2021 @ricksalin on Twitter says earnings power is 50c and he does his homework so I'll take it although I'm a little more conservative. There is probably $1 of cash and tax assets so this is trading at 8x earnings for a stock that should be able to generate 100% returns on tangible capital. The economics of this business are Sees Candy-like. They are actually similar businesses - both are mall retailers that sell comestibles and enjoy high margins and regional moat and well-liked brand although I'm not sure if Sees Candy is sold wholesale. When I see people say this is worth 10x ebitda I ask myself, have we learned nothing from Buffett? The economics of this business are much better than any 10x ebitda business. There is also the possibility that a Tilray will make a stupid expensive bid and the Tilray CEO has mentioned that he's interested in the tea business in a recent interview. There's also a chance that DT makes some sort of announcement during earnings (Tuesday) about expanding into US wholesale. Link to comment Share on other sites More sharing options...
keerthiprasad Posted June 12, 2021 Share Posted June 12, 2021 My rough numbers: 25M net cash this year 100M revenue 15-20M cash flow No debt Hoping for a nice re-rating after CCAA exited. Not many online retailers trading at these valuations. Link to comment Share on other sites More sharing options...
ratiman Posted June 12, 2021 Share Posted June 12, 2021 (edited) 18 minutes ago, keerthiprasad said: My rough numbers: 25M net cash this year 100M revenue 15-20M cash flow No debt Hoping for a nice re-rating after CCAA exited. Not many online retailers trading at these valuations. That would be nice if it happened. I don't know what post-Covid revenues will be and how many who ordered during lockdown will come back. The Christmas results were disappointing on both revenues and margins so this quarter will be important. Without as many mall stores DT is less seasonal so Christmas wasn't as big as usual. The monitor report said that raw product costs (ie tea and a few teapots) are about 23% of revenues and with those kind of gross margins, DT should generate better margins than they currently. Maybe margins will improve when DT starts to adjust to the new revenue mix. Edited June 12, 2021 by ratiman Link to comment Share on other sites More sharing options...
keerthiprasad Posted June 13, 2021 Share Posted June 13, 2021 23 hours ago, ratiman said: That would be nice if it happened. I don't know what post-Covid revenues will be and how many who ordered during lockdown will come back. The Christmas results were disappointing on both revenues and margins so this quarter will be important. Without as many mall stores DT is less seasonal so Christmas wasn't as big as usual. The monitor report said that raw product costs (ie tea and a few teapots) are about 23% of revenues and with those kind of gross margins, DT should generate better margins than they currently. Maybe margins will improve when DT starts to adjust to the new revenue mix. Agreed... It only works if they can pull off online marketing. I'm giving it a couple quarters to decide. Link to comment Share on other sites More sharing options...
Simba Posted June 15, 2021 Share Posted June 15, 2021 On 6/12/2021 at 12:44 PM, keerthiprasad said: My rough numbers: 25M net cash this year 100M revenue 15-20M cash flow No debt Hoping for a nice re-rating after CCAA exited. Not many online retailers trading at these valuations. They did 10M of EBITDA in 2020, where are you getting 20M FCF from? No debt, what about leases ? Link to comment Share on other sites More sharing options...
ratiman Posted June 16, 2021 Share Posted June 16, 2021 (edited) IT expense increased from $.7mm to $2.2mm, there was no capex. If you normalize the IT expense you get an extra $1.2mm last quarter and another $.9mm this quarter. That's where the margin is going, the notorious investing through the income statement. The mysterious reference to "global" expansion is strange because they've barely made a dent in the US market. The increase in inventory to $29mm is strange. They carry more inventory today than when there were 250 stores. Edited June 16, 2021 by ratiman Link to comment Share on other sites More sharing options...
keerthiprasad Posted June 17, 2021 Share Posted June 17, 2021 On 6/15/2021 at 6:47 PM, Simba said: They did 10M of EBITDA in 2020, where are you getting 20M FCF from? No debt, what about leases ? Rough adjustment of ebitda for cost reductions + 18 stores (not consistently open) + optimism . I think 15 can still happen. Q1 was a bit light on sales, but we will see. Maybe the company expected better sales too..inventories are high. Link to comment Share on other sites More sharing options...
Simba Posted June 17, 2021 Share Posted June 17, 2021 13 hours ago, keerthiprasad said: Rough adjustment of ebitda for cost reductions + 18 stores (not consistently open) + optimism . I think 15 can still happen. Q1 was a bit light on sales, but we will see. Maybe the company expected better sales too..inventories are high. Interesting. I'm new to the name... How much do you think they can really grow in Canada? Or is this just a turnaround (improve margins, prove to street they can hit the 15M FCF you noted and the stock re-rates?) Link to comment Share on other sites More sharing options...
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