Tuesday, September 30, 2008

IMF cash bank

IMF informed the market on 30 September 2008 that it has $83m in the bank. We need to subtract $6m for the impending dividend payout. So it has $77m in the bank, and assuming 120m shares on issue, then cash backing is 64 cents per share. Current share price of 85 cents implies $102m market capitalisation.

So the market is saying that the business is worth $25m (once you back out the cash). Realistically, IMF will have at least $10m per year in revenue, and on assumption that its fixed and recurring costs is $4m to $5m per year, IMF earns at least $5m per year before tax. The current business valuation price is at 5 to 6 multiples, which is akin to early start up valuations.

The market is not wrong, just unwilling to pay higher multiples for this business. Looks like Rob Ferguson will just have to work harder on this lumpy earnings beast.

Thursday, September 4, 2008

IMF "panning" out

Further to my previous posts on IMF, things appear to be proceeding according to plan. The Aristocrat settlement has been approved by the court. Given that this is more or less already anticipated, it is still surprising to see a surge in the share price to 80 cents briefly. The price has now stabilised at about 76 cents.

Today, a further funding agreement for a case against the Federal government has been announced concerning the Pan Pharmaceuticals affair. Given the $50m settlement with Jim Selim CEO, albeit on a without admission basis, it is difficult to see how the Federal government can avoid liability.

There is also news today of possible multiple actions by councils against Lehmann in respect of investments in CDOs and losses being suffered from the subprime crisis. This has been a pet project of IMF Hugh McLernon. I believe the chances of further funding agreements on CDO losses related matters are fairly high.

Currently, IMF is sitting on cash estimated at $80 million, which is about 66 cents per share. Market cap is 91.2 m, therefore, the business is being valued at $11.2 m for a portfolio of cases with maximum value claim of over $1 billion. The market appears to be saying that IMF will only squeeze 1% out of its portfolio.

This is still within Ben Graham region, with no regard to a defensive business in a monopolistic position in a growing market.

As per previous post, watch out for court judgments.