NEW YORK, NY, USA – SeeThruEquity, a leading independent equity research and corporate access firm focused on small-cap and micro-cap public companies, today announced it has initiated coverage on DTS8 Coffee Company, Ltd. (OTCBB: BKCT) with a price target of $0.67.
DTS8 is engaged in the roasting, marketing and sale of gourmet roasted coffee to customers in Shanghai and other parts of China. The company sells gourmet roasted coffee under the “DTS8 Coffee” and private label brands through distribution channels that reach consumers at restaurants, multi-location coffee shops and offices.
Ajay Tandon, CEO of SeeThruEquity commented, “We believe DTS8 presents a compelling growth story as a purveyor of premium coffees to the fast growing market in China. The company is on a trajectory of moving beyond just wholesale and has entered retail distribution channels as well as the retail coffee market in China in the past few months which presents attractive potential for the company. We are initiating coverage with a target price of $0.67 per share.”
Additional investment highlights are as follows:
Offering premium quality, differentiated coffee brands
DTS8 sells only premium differentiated coffee brands that provide flavor and characteristics suited for Chinese consumers. The company procures its raw coffee beans rich in aroma and flavor from coffee producers in Colombia, Brazil, Indonesia, Kenya, Guatemala, Papua New Guinea and Ethiopia. Apart from marketing coffees in two main categories -gourmet whole bean and private label whole bean, DTS8 also roasts and markets specific blends of roasted coffees on a private label basis based on individual arrangements with each customer. DTS8 offers three signature, house-branded coffees under its Premium Selection – DTS8 Shanghai Blue, DTS8 Shanghai Red, and DTS8 Espresso Classic. Each of these coffee brands offers distinct flavors and taste, and Espresso Classic has received high ratings in reviews by various magazines.
Tremendous market potential
China is an underdeveloped coffee market as Chinese prefer tea over other beverages. Consequently, per capita consumption of coffee is quite low at only 4 cups annually compared to average per capital consumption of ~300+ cups annually in the U.S. and Europe. However, a rising young urban population, changing lifestyle choices, and consumer spending are driving coffee demand and growth in China. Future projections estimate Chinese consumption increasing to ~100 cups annually from 2020 onwards. According to data from the Beijing Coffee Industry Association, coffee consumption in China is growing at the world’s fastest growth rate of 15%, and may continue to expand at a pace of 15%-20% annually, making China the most attractive coffee market by 2020. We believe the rapid growth of the overall Coffee market and the increasing shift towards high-quality gourmet coffees presents a tremendous growth opportunity for DTS8.
Aggressive expansion underway
DTS8 continues to pursue efforts for expanding the DTS8 gourmet coffee brands to penetrate and capture new market segments. Historically, the company’s core business revenue has been derived from selling coffee wholesale in China. Hence, new growth will come largely from marketing to retail distribution channels, specialty gourmet coffee shops, and online, as well as to hotel, office and restaurant accounts. In May 2014, DTS8 announced that DTS8 Coffee is served at the prestigious Morton’s of Chicago Steakhouse in Shanghai, and in Feb 2014, the company entered the online coffee market by introducing its artisan roasted coffees for sale on numerous Chinese e-commerce websites. On October 22, 2014, DTS8 and their JV partner entered into the retail coffee market with the opening of the first ‘Café De La Don Manuel’ branded coffee shop. Additional ‘Café De La Don Manuel’ shops will be opening in Shanghai in the near future and other markets in China as time progresses.
The report by SeeThruEquity is available here: SeeThruEquity is an approved equity research contributor on Thomson First Call, Capital IQ, FactSet, and Zack’s.
