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IMF: A Step-Change

IMF: A Step-Change

Regular followers of the blog should be well aware of our favourable view of Bentham IMF (ASX: IMF) – see here. We are pleased with the company’s recent 2015 half-year results.

For the first six months to December 2014, Bentham IMF settled $460 million of claims, which resulted in Net Profit After Tax of $23 million. This compares with the full-year 2014 profit of $9.8 million.

We have explained in previous posts how Bentham IMF’s earnings have historically been volatile due to the uncertain nature of case settlement. Yet when analysed over the longer term, the return metrics have been relatively stable, which allows for meaningful forecasts to estimate intrinsic value.

We are becoming increasingly confident that earnings are stabilising as a result of management’s efforts to expand the scope and scale of Bentham IMF’s operations. In particular, we consider that the first half of 2015 marked a step-change in earnings potential from the United States, which IMF entered in 2011.

However, in order to achieve smoother earnings, Bentham IMF will need to maintain a claims book above $2 billion. While the company began the 2015 financial year with a claims book of $2.1 billion, it ended the first half with a claims book of $1.8 billion, as $460 million cases settled but only $221 million of new claims were funded. This has resulted in a sizeable cash balance of $135 million. It was pleasing to hear management explain that the large cash balance will be prioritised to fund new cases, rather than fund special dividends.

We have met with company executives to discuss IMF’s prospects – stay tuned for an update next week.

The Montgomery funds have been comfortable holders of Bentham IMF for quite some time, and we are pleased to see the market is now becoming aware of its prospects.

Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery, find out more.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.


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  1. As a long time investor in IMF and a long time reader of this blog I eagerly await the results of your meeting!

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