IMF Bentham Limited (ASX: IMF)
Company Profile: As a litigation funding company, IMF Bentham Limited (ASX: IMF) is focused on investigation, management and funding of litigation claims. The company serves its clients in Australia, New Zealand, Canada, Singapore, Hong Kong and the United States. IMF practices in the areas of commercial litigation, arbitration, funding for insolvency and class actions. Currently, its portfolio includes a total of 80 investments, covering 43 US investments and 37 non-US investments. It has served claimants, including individuals, small businesses and large investment funds. The company, which doesn’t offer legal advice, was incorporated in 2017 and is based in Sydney, Australia.
Recent Updates: Fund 5 Launch: IMF, on 20 June 2019, announced the launch of Fund 5, which has a US$500 million fund size and is focused on non-US dispute finance investments through wholly owned subsidiary entities. The company’s wholly owned subsidiary IMF Bentham Cayman Advisory Services (IMF Advisory) is the appointed investment advisor of Fund 5, which is the second non-US Fund. In November 2018, the company launched Fund 4, which also has a fund size of US$500 million.
Fund 5 has secured US$400 million in binding external subscriptions for aggregate capital commitments and IMF has committed US$100 million to investments made by the fund. Fund 5 has terms similar to Fund 4, according to which investors have the option to roll over into a successor fund. If the investors decide to exercise this option, the total new capital commitments will reach US$1 billion. The two funds enable IMF Bentham Limited to finance all global investments for the medium term. External investors in Fund 5 are largely the same as Fund 4. Funds managed by and investors represented by Partners Capital Investment Group and funds managed by Harvard Management Company (Harvard), Amitell Capital and Balmoral Wood are the Fund 5’s external investors.
Meanwhile, combined funds under management of the company grew to nearly A$2 billion (at exchange rates on 20 June 2019).
The Fund 5 is covered under the After-the-Event (ATE) insurance policy. The policy contains a cap on individual claims and also an aggregate indemnity cap. The initial premium will be paid by Fund 5, of around US$17 million, which is subject to the hurdle return to the investors. The next round of premium payments will be made when the capital commitments to investments by Fund 5 exceed US$300 million.
IMF is of the view that the adjusted risk return structure of Funds 4 and 5 to be the preferred model for the group going forward.
Settlement Update: In another release on 14 June 2019, IMF Bentham Limited gave an update regarding the settlement of the securities class action against Ashley Services Group Limited. As per the company, the Federal Court of Australia has approved the settlement. The company is likely to generate nearly A$7.6 million in revenue, yielding a profit before tax and overheads of $4.8 million, and an IRR of 106%, though the period during which the revenue will be recognised is yet to be determined. The investment was part of IMF’s on-balance sheet portfolio.
Stock Information: IMF has a market cap of A$585.18 million and 204.61 million outstanding shares. Its stock was trading at A$2.830 on 20 June 2019 (AEST 02:34 PM). The company at current stock price has an annual dividend yield of 1.05%, while its EPS stands at negative A$0.096.
Villa World Limited (ASX: VLW)
Company Profile: With more than 30-year experience, Villa World Limited (ASX: VLW) is one of the largest housing providers in Australia. The company is engaged in the development and resale of residential land as well as buildings. The company, specialising in contemporary homes and land in Australia, was founded in 1986 and is headquartered at Broadbeach, Queensland.
Recent Updates: Extension of AVID Due Diligence: In an ASX announcement on 20 June 2019, VLW informed that its board of directors have decided to extend the exclusive due diligence granted to AVID Property Group Australia Pty Ltd (AVID) to a limited period. Earlier, AVID had secured a limited-period exclusive due diligence from the company to move ahead with the updated offer and facilitate a binding proposal. AVID Property Group Australia Pty Ltd (AVID) has proposed to buy all of VLW’s shares for a price of A$2.3451 per share in an all cash-deal.
The development follows a company announcement on 2 May 2019 that its board of directors plans to make a unanimous recommendation related to the acquisition proposal by AVID Property Group Australia Pty Ltd (AVID). As per the recommendation, shareholders should vote in favour of the revised indicative, conditional, incomplete and non-binding proposal for the acquisition of 100% equity in VLW by AVID through a scheme of arrangement.
VLW anticipates keeping the market updated regarding the status of the revised proposal by the end of June 2019. As the revised proposal is subject to various conditions, there is no security that the changed offer will lead to a transaction. Thus, the company has asked its shareholders not to take any action in relation to the offer at this moment.
Operational Update for 3Q19: Villa World Limited recorded 783 sales for FY19 to the end of April 2019, according to an operational update announced on 15 May 2019. Of the total sales, 266 sales were recorded during the first four months of CY19. In CY18, customer sentiments and residential housing market conditions declined across the country. Moreover, customers experienced delays in obtaining approvals for finance. Owing to the aforementioned factors, the company expects nearly 80 to 115 settlements in FY20, though these settlements were earlier expected to be reported in 2H19.
In Victoria, the company focused on the delivery of the first stages at its Lilium project during the third quarter of FY19. The company produced first and second stages in May 2019, while the third and fourth stages are likely to get delivered and settled in June 2019. Additionally, it expects to start the delivery and settlements under the first stage at the Sienna Rise and Sienna North projects in 1H20. The company also reported some improvement in sale conditions at its flagship projects, The Meadows in Strathpine, Killara and Chambers Ridge in Logan City and Arundel Springs in Gold Coast.
Meanwhile, the company has decided not to give any outlook for FY19, due to factors like uncertainty related to continued sales and settlement and uncertain outlook for the sector. Its gross margin for FY19 is expected to be within the target range of 23% to 25%. The business cost structure is expected to be managed on back of the current trading conditions, with the likely impact in FY20. On the dividend front for 2H19, the company stated that the board would consider 2H19 dividend once there is clarity regarding the company’s FY19 results.
Stock Information: VLW stock was trading at A$2.230 on 20 June 2019 (AEST 02:58 PM), down 3.463% from its last close. With a market cap of A$289.12 million and 125.16 million outstanding shares, its annual dividend yield stands at 8.01%. VLW’s EPS is A$0.347, while P/E stands at 6.660x.
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