Re: IMF - IMF (Australia)
Hi guys, interesting discussion going on here. Good to have insights from nutmeg, I admit I couldn't understand IMF before without the help of a lawyer. What nutmeg said about settling was also emphasised to me by another lawyer as well. He said by going to trial and having a verdict handed down, it makes it easy for every dick and harry to line up with a lawsuit if they win because a precedent has been set, and also exposes the company to further payout risks. By settling, there is no admission of guilt either and IMF keep an advantage over any competitors in the market by not allowing them to become predators and line up for easy pay days after a winning verdict.
Profits are lumpy, true. Something I struggled to get my head around as well. But, the book value should provide some security (cash - debt + intangibles). I bought early in the year when they had a book value of ~$0.70c backing up every share. I bought at $1.35, so a book ratio of 1.9 or so and not exactly conservative I guess.
But, what helped me to buy was that the investment in cases had been accelerated, it went from $30-40 million to an all time high of $60 million at the time I bought, so I expected an increase in profits over the next 2-3 years. With the settlement of Centro, I'm sure the amount of money invested has changed, but we should see a profit of $40m+ this year, or EPS of ~30c? I am pretty sure we'll see a record profit, at least. Hope the directors don't pay themselves too much in bonuses, as they are entitled to 25% of gross profits which is ridiculous. But, given most of them have shares in the company they would only be shooting themselves in the foot long-term if they take too much away from shareholders and surely it's in their best interests to see the share price rise long-term.
My expected book value has been updated to $1, or 90c after the dividend, but I still have effectively $1 of cash in my pocket for every $1.35 invested IMO. I think IMF are cheaper now than what they were earlier in the year because they have more cash backing it up and book value is now 1.5 if you include the dividend, seeing as they are still trading CD. I consider the intangibles to be effectively cash as they could be sold $1 for ever $1 invested. IMF have historically earned ~100% net profit on the cash invested in cases.
Using 100% profit on invested money, when I bought IMF they had a book value of ~$85 million (market cap of ~$170 million) and from the money invested in cases I assumed another $60 million in net profit over the next 2-3 years, which I expected to be retained as profit or paid out in dividends to give me close to a "book value" of my purchase price through either cash retained or paid out in dividends.
For me, I bought and $1.35 and I see myself sitting on $1 cash for every share held now.. so the future income stream and dividends come for 35c/share. Even if you take their average profit over the last 3 years of $17.5 million (or ~14cps), given the odd dividend of 5 or 10c, that is great value if they were to consistently maintain that, but I expect a higher average profit over the next 2-3 years although I make no predictions beyond those 2-3 years.
I realise I may be too "forward-looking" and not conservative enough, but I come from a gambling background and I make money by looking forward to see what is likely to happen, not what has happened in the past.
My 2c anyway, good luck to everyone!