4C Report - December Half Year 1/4 ly, page-3

Greg

It's a peculiar share, as it adopts a strange accounting policy to the core turning operating asset the Litigation Contracts in Progress, which by dint of their wisdom, they choose to treat as a Capitalised Long Term Intangible Asset!

This is NOT the accounting approach adopted by their international competitors.

I doubt the drafters of accounting standards had lawyers building up a long term case, as anything different to a shipyard building a ship, except, of course that you can kick a tangible ship. So it's by way of a semantic quirk that we see the production of these magnificent accounts.

Litigation Contracts in Progress are "Investments", and not "Long term Operation Contracts" like you'd see say on an oil platform producer.

Sadly this means these accounts are NOT as prudent as their competitors, if there is a NET NAUNCE.

Something I hold against any operation that has pursued a certain reporting avenue.

Prudence ranks #1 for me.

However you can take these accounts at face value. They are not bad accounts, they are just not good acoounts, but to my mind, IMF Bentham discloses too much, if at fault.

Good accountants don't hand you the General Ledger at year end, rather they prepare a decent, well thought out presentation of the undertaking.

In IMF's Bentham's case the General Ledger is all but there.

You must rake back your sleeves, don a peek, light up some oil, to find what you want.

But if you do wan't to understand these accounts, you will need to take a big breath, as operating expenses transfer to the income statement from the balance sheet, where they have been capitalised as an asset for some years, when a judgement arises, via a rather pebbled pathway through the cash flow statement, and with fresh expenses capitalised anew.

In this regard go to the Litigation Contracts in Progress, "Proceeds" & "Proceeds", and the "Net Impact of the Reclassification of Litigation Intangibles" need some understandind.

I do a very in depth assessment of IMF Bentham, going 'the whole nine yards'

That meaning I strip out all the accounting adjustments, to derive the NOPAT. I then correct the interest tax shields, and that can be a joy, as IMF Betham has capitalised BOTH Interest & Salary expenses to the balance sheet, and I never seem to keep my notes on these period to period. Grrr... So what the gearing is, or was is always somewhat moot.

I apply a WACC assessment, and them do a pitch (guesstimate) at expected growth by discounted EVA & DCF. Giving a price 'technically' at about the same figure.

It never is ¿?

But I believe I get a very good estimate of IMF-Benthams worth.

I hold.

Patiently.

So that says it most...

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It is a slow(!) growth play.
It vacuums up vast amounts of your (the shareholders) cash.
It sits on a huge pile of cash, until it has all dried up, and then comes knocking for more.
It adds to your portfolio volatility, as for years it has a case pond that produces small fry only, before it will land a few decent fish. ( And some times, for some years when a decent catch is made, the courts will subsequently tell IMF Bentham to toss the catch back.)