Centro settlement good news for IMF

IMF (Australia) Limited (ASX: IMF) announced on 10 May 2012 that it expects revenue of $60 million and profit before tax of $42 million from settlement of the Centro case.  The Centro settlement is the largest class action settlement in history, after the Aristocrat class action. Shareholders will recall that IMF was also the litigation funder in the Aristocrat class action.

The central premise of IMF’s business model is to gain $3 for every $1 spent.  This is reaffirmed in the Centro settlement, with IMF spending $18m and getting a return of $60m.

Meeting expectations

In our previous articles, we set expectations for IMF to achieve an average net profit per year of at least $24m.  If the Centro settlement is approved and the results recognised in this financial year, then IMF will easily achieve our net profit expectations.  Even if Centro is not recognised this financial year, the actual results are expected to come close to our expectations.

I have also estimated that after the Centro payback, IMF’s cash will exceed $100m.  This is more than sufficient to pay a dividend of at least 10 to 15 cents per share.  If this happens, then our dividend expectations on IMF are fulfilled.

Case Portfolio

On 3 May 2012, IMF published its investment update with $1.535b case investment portfolio, of which $325m was expected to complete by June 2012.  If we make a conservative assumption that the whole of $325m relates to Centro, this means that the current case investment portfolio stands at $1.21b.

We know await the results of further cases.  The significant ones include Collyer Bristow, the Bank Fees case and Wyvenhoe.

Foolish takeaway

The current market capitalisation of IMF at $1.45 is $180m.  The downside is more than sufficiently covered by expected cash on hand and its remaining cash portfolio.  The upside is an average of 30% per year for the next 5 years.

If your looking for dividend stocks to add to your portfolio, look no further than “Secure Your Future with 3 Rock-Solid Dividend Stocks”. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

Fool contributor Peter Phan owns shares in IMF (Australia) Limited. The Motley Fool‘s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s  free  investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request  your free subscription , whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!