7 ms·

Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth. Why

Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth. Why is it so cheap though in terms of absolute value, is the percentage of revenues claimed by this asset very low? The offer lacks detail. Where's an appropriate SEC form when you need one :)

Scoundreller 4y ago
It’s an auction, so it’ll go up, but there have been auctions before, so it seems like different heirs/successors are selling their stakes sliver by sliver. My fear is that this is a branded product and as the royalty stream gets further and further away from the manufacturer/marketer, they’ll just kill off the product and push royalty-free alternatives.
- thucydides 4y ago
  To put the wisdom of buying the royalty stream aside for a moment, why would a manufacturer abandon an iconic and profitable brand like Listerine after more than a century just to avoid paying royalties they've been paying during that entire time?
phkahler 4y ago
>> Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth P/E is just an indicator (E/P) of what dividends could be. In this case the return is real and is over 5 percent. But it's not quite the same. As others have pointed out there is no physical asset behind the investment. OTOH it appears there is also no way to "cut the dividend" ever, so it's as solid as the brand.
bombcar 4y ago
It's not very tradable on the open market, so you really are buying a revenue stream. However, pensions and endowments are probably quite interested.
hodder 4y ago
I stated it was attractive if the bid gets hit, which as posted was 1.5m. Listerine revenue royalties likely keep pace with inflation while facing no bottom line risk. A 6-7.6% to yield is certainly attractive in my opinion for this asset.
Beltalowda 4y ago
> Why is it so cheap though in terms of absolute value, is the percentage of revenues claimed by this asset very low? It's not a percentage but a fixed dollar amount; the court case from the 50s says the agreement is to pay "six dollars on each & every gross of Listerine & Lithiated Hydrangea manufactured or sold". There was also an agreement for something called "Dugongol & Menthated Camphor", which was 10%, but that hasn't existed in a long time it seems (can't find anything in a quick search). I assume that with a "gross of Listerine" they mean 144 bottles, but this bid isn't the complete contract since they sold other parts before; this 30k/year one sold for $561k in 2020.[1] I'm not an expert on these things at all, but overall seems like a bit of a so-so investment because inflation. [1]: https://auctions.royaltyexchange.com/auctions/sales-royalties-listerine-mouthwash/ https://auctions.royaltyexchange.com/auctions/sales-royaltie...

Scoundreller 4y ago

It’s an auction, so it’ll go up, but there have been auctions before, so it seems like different heirs/successors are selling their stakes sliver by sliver. My fear is that this is a branded product and as the royalty stream gets further and further away from the manufacturer/marketer, they’ll just kill off the product and push royalty-free alternatives.

thucydides 4y ago
To put the wisdom of buying the royalty stream aside for a moment, why would a manufacturer abandon an iconic and profitable brand like Listerine after more than a century just to avoid paying royalties they've been paying during that entire time?

phkahler 4y ago

>> Not sure if a P/E of 18.38 is so so attractive, it looks neither cheap nor expensive for something that will at best keep up with the (nominal) GDP growth P/E is just an indicator (E/P) of what dividends could be. In this case the return is real and is over 5 percent. But it's not quite the same. As others have pointed out there is no physical asset behind the investment. OTOH it appears there is also no way to "cut the dividend" ever, so it's as solid as the brand.

bombcar 4y ago

It's not very tradable on the open market, so you really are buying a revenue stream. However, pensions and endowments are probably quite interested.

hodder 4y ago

I stated it was attractive if the bid gets hit, which as posted was 1.5m. Listerine revenue royalties likely keep pace with inflation while facing no bottom line risk. A 6-7.6% to yield is certainly attractive in my opinion for this asset.

Beltalowda 4y ago

> Why is it so cheap though in terms of absolute value, is the percentage of revenues claimed by this asset very low? It's not a percentage but a fixed dollar amount; the court case from the 50s says the agreement is to pay "six dollars on each & every gross of Listerine & Lithiated Hydrangea manufactured or sold". There was also an agreement for something called "Dugongol & Menthated Camphor", which was 10%, but that hasn't existed in a long time it seems (can't find anything in a quick search). I assume that with a "gross of Listerine" they mean 144 bottles, but this bid isn't the complete contract since they sold other parts before; this 30k/year one sold for $561k in 2020.[1] I'm not an expert on these things at all, but overall seems like a bit of a so-so investment because inflation. [1]: https://auctions.royaltyexchange.com/auctions/sales-royalties-listerine-mouthwash/ https://auctions.royaltyexchange.com/auctions/sales-royaltie...