I fully accept this share will be considered a ‘flash in the pan’ – but is it really?

Sure, undergarments aren’t the sexiest item in the shop but, like toilet paper, who isn’t using these products?

True, one can consider it a generic and they are available at Big W et al for under $10 for a pack of 5 or singularly at STP for $25.

Without giving away too many secrets, I opt for the $25 STP variety and feel very comfortable at the price v comfort ratio. I’ve been a tight ass in the past, but no more. The ‘boys’ enjoy the comfort and style…and many, many athletes can attest to what I mean here.

So, with STP we are talking about a product which has a massive price disincentive when compared to competitors and yet it is selling, selling, selling.

Also, the method of marketing is very different and direct – but that gives rise to two massive intangible assets, which I think are not appreciated by the market – the growing database of customers AND the huge repeat order customers. Remember, underpants do have a short life (or should) and need constant replacement. That said, they do last much longer than the ‘Big W pack of 5’.  

Think about the value of that database where one can go direct to the customer – at the right time with the right incentive to replace said underpants.

What’s more, think about the different products which can be peddled to the expanding global database with existing product varieties to different customer segments (male, female, juveniles, kids). I won’t go into the gender extension of LBGTIQX because, for mine, you either fill out this product offering with your ‘junk’ or you don’t!

Right now, STP is experiencing success moving into the female and kid sectors.

Then, think about serializing the same product – surely there’s a specialty product for shy kilt wearers, specialty advertising – BHP’s ‘Think Big’ comes to mind. Maybe funny slogans for the soon to be married ‘Warning slow swimmers ahead’. If the women can have slinky sexy undies and g bangers a la Honey Burdett, why not the guys. White Y fronts are passe.      

Then there are the ‘add on’ products to that valuable database – colognes, lotions, indeed all manner of beautification for both male and female. Hint: look at how The Shaver Shop (SSG) has branched out into ‘beauty’, as opposed to just trimmers.

No, I do think there is more substance to STP than meets the ‘eye’…are you with me here?

Certainly, the financials are pretty encouraging & the dividend paid is brilliant – but then again, I love the franking credits.  

I bought a few today at 77c for which I expect the ff dividend over the next year to be around 8c – that’s a grossed-up return of 14.8%. Not bad.

Of course, the negative nellies will bring out their counter arguments – dividend sustainability (yep, I expect it might fall off a tad as they allocate more money to developing new regions like Germany). Some question the differential between cash ops and NPAT + non-cash items (bull, that may have applied in FY23 but look at the half yearly figures subsequent - they are generating over 100%, as they should.

Some will refer to the big sale by the founder at $1.70 in September last year. Fortuitous, yes, but he hasn’t sold a share since. And hey, everyone is entitled to a big draw to buy the big boy toys.

Others will raise the possibility of margin compression and yes, a definite possibility. But you cannot look at this in isolation without considering the global expansion of sales – Aus/NZ and UK are travelling nicely, and Germany is now a target. The company has wisely left the USA alone and so Donald’s tariff ‘fiasco’ has no impact on STP.

Yes there is risk, as there is for most things, but I think the risk is worth it. If not, I will eat my shorts!