Monday, August 31, 2009

IMF a year on

Since I last wrote, IMF has moved to a high of $1.98. This was met by heavy a director, as it later turned out... and the reason given was that the shares were sold to fund a take up of a similar number of options. The sale pushed the price back to about $1.38, and at time of writing, the shares are at $1.57.

At 120 m shares, the market cap is $188 m. The company is in a stronger position, with funded claims of about $1 b. On 30 June 2009, it has 61 m of cash with no debt. It has since announced settlements which will boost cash by at least 20 m. Accounting for dividend payment in July, the company should have about 75 to 80 m in cash. It has since announced a buy-back.

My view is that IMF continues to be undervalued. The claim "book" I have estimated a probable value of about $150-200m. Add back cash, and we get $225m to $280 m, which equates to $1.88 to $2.30 per share, with the enterprise value as a free option. I would ascribe fair value to be about $2.00 to $2.50.

There has been no significant judgments or developments affecting the claims book. With an expected fully franked yield approaching 9%, I am only too happy to hold.