IMF: Full steam ahead

IMF’s business is strong, and our investment thesis remains intact

a woman

IMF (Australia) Limited (ASX: IMF) was featured in our previous articles of 3 December 2012 and 28 February 2012. In both articles, we outlined and reiterated our expectations for IMF to achieve an average net profit per year of at least $24m, and to grow its investment in its case portfolio.

In the months since, IMF’s share price has traded in a tight range, with the bottom range of prices flirting with yearly lows.  For daily watchers of share prices, this will be an unnecessarily nervous experience.

The central thesis underpinning this investment is the premise that IMF will continue to gain $3 for every $1 spent.  This was affirmed in the recent Centrex settlement.  Happily enough, on 10 April 2012, IMF once again reaffirmed our investment case with the announcement of a conditional settlement for the claim it funded against Transpacific Industries Group Ltd (TPI). This settlement will result in revenue of $13.1m and a profit of $10.5m.

From our investing experience, and contrary to popular investment advice disclaimers, whilst past performance is no guarantee of future performance, it is more often than not a reasonably reliable indicator, especially in the absence of evidence to the contrary.

Foolish take-away

Once again, our positive view of IMF remains unchanged. The lumpy and uncertain nature of earnings from its operation will create difficulties and uncertainties for analysts and investors. This will create volatility in the share price, which is where patient investors get the opportunities to make money.

If you are looking for ASX investing ideas, look no further than “The Motley Fool’s Top Stock for 2012.” In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

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Fool contributor Peter Phan owns shares in IMF (Australia) Limited. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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