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Re: IMF - Bentham IMF

Without knowing the company well: IMF is a lumpy cash flow business. They win a big case, they get a large cash inflow. Look at 2013 and see the first line of investing cash flows. $87m proceeds covers the $44m in costs for employees (lawyers) as well as the other operating costs which are shown in the operating cash flow section (interest on debt, income tax, suppliers and employees (probably admin employees here?). So I would class 2013 as a positive cash flow year.

IMF is an interesting one from a cash flow perspective as OCF will likely always be negative, and the heavy lifting will be done by investing cash flows - if and when they win cases.
 
Re: IMF - Bentham IMF

VSntchr said:
Without knowing the company well: IMF is a lumpy cash flow business. They win a big case, they get a large cash inflow.
Click to expand...

Yeah, it's not the best to work off the cash flow statement. They do estimate the portfolio claim value and you can guesstimate what their share of settlements will be (it's been around 18%-20% over the last few years) and then what their case expenses are. That relationship might start to breakdown in the future because, at least in the US, their income is based on % of how much they invested whereas in Australia it has historically been a cut of the payout.

If you use last year's numbers (and exclude the BOQ loss) you'd get case proceeds of ~$70m for this year.
 
Re: IMF - Bentham IMF

McLovin said:
That relationship might start to breakdown in the future because, at least in the US, their income is based on % of how much they invested whereas in Australia it has historically been a cut of the payout.
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How do you know this?

I know if lawyers are fronting the fees themselves (in Australia), it's the opposite - they can add a 25% premium to their fees if they win, but they can't take a % of the payout, whereas in the US you can have purely contingency-based fees (% of payout). That said, it is likely different/less restricted for funders, but I'm not sure.
 
Re: IMF - Bentham IMF

McLovin said:
Yeah, it's not the best to work off the cash flow statement. They do estimate the portfolio claim value and you can guesstimate what their share of settlements will be (it's been around 18%-20% over the last few years) and then what their case expenses are. That relationship might start to breakdown in the future because, at least in the US, their income is based on % of how much they invested whereas in Australia it has historically been a cut of the payout.

If you use last year's numbers (and exclude the BOQ loss) you'd get case proceeds of ~$70m for this year.
Click to expand...


If I may, I suggest an alternative method to guesstimate the value of their portfolio. You can use the Intangible Assets figure on their balance sheet, apply a multiple to that number to estimate how much future income they can derive for their portfolio. You may want to look back historically to guess how much of their costs will be written off, for cases they lose. Happy to be corrected on this though, if there is anything wrong with this.

Agree with McLovin and Valuesnatcher. The cashflow isn't the best way to look at it. Also I think the loads of cash on the balance sheet is deceptive. This is a cash intensive business. In 2013 they spent 40 million on cases, so they have roughly enough cash to fund cases for 2 years or so.

MY 2 cents' worth
 
Re: IMF - Bentham IMF

herzy]How do you know this? [/QUOTE] They told us pretty much since they went into the US that the payment arrangement would be different:). Here's from this month. [url]http://www.asx.com.au/asxpdf/20141009/pdf/42ss3clzs7xyg4.pdf[/url] Third slide said:
If I may, I suggest an alternative method to guesstimate the value of their portfolio. You can use the Intangible Assets figure on their balance sheet, apply a multiple to that number to estimate how much future income they can derive for their portfolio. You may want to look back historically to guess how much of their costs will be written off, for cases they lose. Happy to be corrected on this though, if there is anything wrong with this.
Click to expand...

The only problem with that method is that costs are capitalised as they are incurred. They don't estimate total costs at initial recognition. For a long court case the amount contributed may be many multiples of what is initially capitalised.

AUSG said:
Agree with McLovin and Valuesnatcher. The cashflow isn't the best way to look at it. Also I think the loads of cash on the balance sheet is deceptive. This is a cash intensive business. In 2013 they spent 40 million on cases, so they have roughly enough cash to fund cases for 2 years or so.
Click to expand...

Carrying the cash also serves as a deterrent.
 
Re: IMF - Bentham IMF

McLovin said:
The only problem with that method is that costs are capitalised as they are incurred. They don't estimate total costs at initial recognition. For a long court case the amount contributed may be many multiples of what is initially capitalised.



Carrying the cash also serves as a deterrent.
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Agree with you on the cost thing, it does neglect the potential costs down the road. Claims may be a better number to forecast the future earnings.

Can you elaborate on the "cash also serves as a deterrent"? Do you mean as a deterrent to the defendants in the class actions, because they know that IMF has the cash to sustain a lawsuit, and so they would be encouraged to settle rather than go to court?
 
Re: IMF - Bentham IMF

AUSG said:
Can you elaborate on the "cash also serves as a deterrent"? Do you mean as a deterrent to the defendants in the class actions, because they know that IMF has the cash to sustain a lawsuit, and so they would be encouraged to settle rather than go to court?
Click to expand...

Pretty much.
 
IMF Bentham behind legal action against Tesco for overstating profits
ANDREW CLARK THE TIMES NOVEMBER 26, 2014 1:42PM

AN Australian firm that specialises in whipping up shareholder fury has turned its guns on British supermarket chain Tesco, which is accused of overstating profits.

Investors in Tesco are being invited to sue it over its bookkeeping scandal under a legal action co-ordinated by Bentham Europe.

http://www.theaustralian.com.au/new...rstating-profits/story-fnb64oi6-1227135692337
 
I find it interesting that the market seems to value SGH's growth potential significantly more highly than it does IMF's. SGH's PEG ratio is just over 1.3. IMF's is a measley 0.17. I appreciate that the PEG ratio on its own does not say much about a company's value but the discrepancy here between IMF and SGH seems to point to a very myopic view of what IMF is doing in the UK, Europe, the US and more recently in Hong Kong. Any thoughts anyone?
 
galumay said:
I will have to go back and check, but when I was selecting companies for my SMSF late last year, SGH came out better value than IMF at the time.
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IMF is an uneven earner. That probably partly accounts for its discount to SGH. But I think that IMF's business model will ultimately prove to be superior to (that is to say, more profitable than) SGH's.
 
Rainman said:
IMF is an uneven earner. That probably partly accounts for its discount to SGH. But I think that IMF's business model will ultimately prove to be superior to (that is to say, more profitable than) SGH's.
Click to expand...

Maybe, they have some catching up to do in terms of cash flow, ROC, ROE and margins, but I also found it hard to make a straight comparison because of some of the accounting practices in IMF's Annual Report!
 
Australian Lawyers With Financial Interest In Litigation Funder Restrained From Acting In Class Action

In July 2014, in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 3) [2014] VSC 340, Ferguson JA of the Supreme Court of Victoria found there was a serious risk of a conflict of interest where a legal practitioner was a sole director and sole shareholder of the lead plaintiff in a securities class action. Consequently the legal practitioner was restrained from acting for the lead plaintiff.[1]
On 26 November 2014, in the case of Bolitho v Banksia Securities Limited (No 4) [2014] VSC 582 ("Banksia Securities") Ferguson JA found that a solicitor and senior counsel with a pecuniary interest in the outcome of the case, beyond their legal fees, should be restrained from acting for the lead plaintiff. The concern was that the substantial (direct and indirect) shareholding of the two legal practitioners in the litigation funder which was funding the class action may impinge, or have the appearance of impinging, on the integrity of the judicial process. In particular, "the practitioner may not fulfil or may not be seen as fulfilling their obligations to the Court".[2]
Banksia Securities is illustrative of the Supreme Court of Victoria's continuing willingness to restrain a legal practitioner from acting so as to safeguard the proper administration of justice, and the appearance of justice, where a legal practitioner has a financial interest in litigation over and above the legal fees that the practitioner will earn from the litigation

http://www.jonesday.com/Australian-...medium=syndication&utm_campaign=View-Original
 
Just had a glance at the interim report, there were some nice lumps of cash flow in this half. They are expecting to increase investments in the next half however.
 
I topped up at 1.76 - very close to yearly low of 1.75.

At a market cap of $300 million (and with $128 mill in cash), I think IMF is trading very cheaply at the moment. Despite recent Bank Fees loss, I think long-term prospects are very good. As AUSG points out, losing such a large-scale case could easily deter competitors from entering the market, too.

US expansion going well (lower AUD makes this even better) - in about 4 years, they've managed to get a case-load of $500 mill, new office opening etc. HK and EU prospects also good, as well as Aus.

Any other thoughts? Something I'm missing?
 

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