There seem to be two companies currently trading on ASX and they are IMF Bentham and Just Kapital.
In terms of available assets for litigation, IMF is about 15 times bigger than Just Kapital and five times bigger than the proposed IJF.
Unless IMF Bentham significantly improves returns over time then I would classify it as a very average business at an equally expensive price. However, it has a track record of making profits. All be it small relative to the cash they have available for litigation.
Just Kapital has not shown any revenue yet and of course the same applies to IJF.
To buy into the IMF business you are effectively paying goodwill of around 45 percent of the total buy price.
To buy into the Just Kapital business you are effectively paying goodwill of around 35 percent of the total buy price.
At an IPO price of $1 for IJF you are effectively paying goodwill of around 24 percent.
In summary, IJF is cheaper than the current two listed businesses and so it should be. On listing it will also be the second biggest player behind Bentham.
So, should the market pay an even bigger goodwill premium than 24 percent for IJF ?
If you think it should be priced similar to Just Kapital in terms of goodwill premium then IJF should trade around $1.15 on listing.
If you think it is as good as Bentham then IJF should trade around $1.23 on listing.
My summary based on trading results of Bentham is an average business trading at an expensive price.
In theory, based on above , IJF should trade at a small premium of $1 to $1.15 but not convinced on this one due to my reasoning and analysis above.
Are there any other listed litigation funders in Australia that I have missed ?
Any other views please
