Burford Capital Share Discussion Threads

[lomax99] 23/9/2021 08:26

Not sure if already mentioned, BUR have a slot on the Shares investor evening webinar on 5th October.

[williamcooper104] 14/9/2021 20:29

They could easily present non-GAAP performance measures - IRR on cases is one for instance that they report on - that showed no fair value upward adjustments

[loglorry1] 14/9/2021 19:22

I don't know what the accounting rules are but I see no reason to think why a simple system where they simply show cash invested in cases, cases settled and paid, cases lost and cases still pending each year. They can then show resulting costs in running the business each year and tax paid on profits from settled cases. Seems to me that this would be very transparent. To be fair this is all there but its hard to work out.

[gettingrichslow] 14/9/2021 17:57

Loglorry, surely Burford aren’t allowed to ‘mark all the pending cases at the cash invested’ under the accounting rules!? Added to which, why on earth would that be better than estimating their value, particularly when you have a demonstrable multi-year record of conservative estimation?

[time_traveller] 14/9/2021 12:46

Again bought back my non core holding I sold in the low 900s - easy money.

[catsick] 13/9/2021 14:49

What should be good for burford is it is looking more likely now that Argentina get a new centre right government who will be much more likely to reach a reasonable settlement, YPF shares up 11% today, that should help the cause ...

[1aconic] 13/9/2021 11:53

But the effects of the carry aren't what the article implies. Yes, because of carry shareholders will get a slightly smaller share of truffles than previously expected. But for a start, the truffle isn't expected to be X, that's just a conservative representation in most cases; institutions buying a Petersen share don't simply expect to get their X back... The expect a multiple of X. Anyhow, the article isn't a discussion of whether Bur's NAV is representative of case value. To the casual reader, the article implies that BUR have looked at their portfolio and decided the cases in it aren't worth as much as they previously estimated ( in an objective sense, not it a how much if the truffle each player gets sense). They haven't done any such thing and as we all know, Bur don't do any such estimations (publically at least).

[williamcooper104] 13/9/2021 10:35

Other than Peterson where you had third party sales the majority of the mark adjustments happen in the last 12 months prior to settlement and only happen after an objective event - eg a court ruling To date there's been no to very little reversal of any mark uplifts prior to settlement

[williamcooper104] 13/9/2021 10:30

It's fundamentally correct The mark on Peterson is less because management carry inexplicably wasn't included (or disclosed) in the prior carrying value So for a given return of x Burs shareholders will receive x less the carry and not x which was what was on the balance sheet Now Bur did a bit of spin about how to get the full carry on the balance sheet lots of cash would need to be generated - and that's true but also totally misses the point and is misleading - in that if loads and loads of cash is not realised then Burs carrying values will be further impaired

[1aconic] 13/9/2021 10:22

What would really help is if the press and analysts didn't make blatently incorrect statements. That must be more confusing to people beginning to investigate the company than the accounting itself. "This is because it reassessed the "actual and expected value of its portfolio". In other words, some of the cases in the portfolio aren't going to generate as much income as previously hoped for." Errrr... To my understanding that's fundamentally incorrect on virtually every single level. Someone please correct me if I'm wrong.

[donald pond] 13/9/2021 09:47

It is confusing, but to not mark up would be misleading.Look at ANIC, which invests in unquoted assets. It did some follow on funding today at an amount 7.5 times its last investment in 2019. So what was the value of the investment last week? Has it suddenly jumped from 1 to 7.5? Is the total investment worth the amount they put in (say 8.5 - 1 + 7.5) or do you value the whole lot at the price of the latest funding (15, with the 1 now worth 7.5). I'm simplifying the numbers but you get the point.That's the issue with BUR in particular with Petersen. They bought the claim for say £30m and have sold something like 30% of it for £300m. So what should you value the rest at? £21m, being the amount paid for it? £700m, being the last market price? There's no right answer, just accounting rules.

[loglorry1] 13/9/2021 08:48

Isn't this really the problem. Why doesnt BUR just mark all the pending cases at cash invested and book the gains when they settle. They can also publish probability of sucess and age of case. At least that way investors can understand whats going on. All the rest is just confusing frankly.

[djderry] 13/9/2021 01:13

Hold on a second.Their reference to non-cash accruals is not my understanding of it.It's about matching up potential fair value gains.None of this kicks in unless and until the cases are won and cash comes in at a certain level.This was a non-cash adjustment to align with US Gap requirements.It's an accounting loss,not a real/cash loss.That reference in the article to actual cases in the portfolio being marked down is completely wrong.

[lomax99] 12/9/2021 23:15

IC:Burford income drops because of Covid-19 disruptionsIts income was down, as 43 per cent of its funded cases were delayed, but it has deployed record amounts of new capital.Litigation funder Burford Capital (BUR) deployed more cash in the first half of the year than ever before but Covid-19 has clogged up the court system meaning its income was down. The tricky thing with litigation funders is that their income is lumpy and their accounting practices are often confusing. Burford is no exception. For Burford, the first half of this year was a perfect example of these issues. It swung from a profit before tax of $187m (£136m) in the first half of last year to a $67.5m loss this year. Income was down 68 per cent because 43 per cent of ongoing cases were delayed by Covid-19. Burford only gets its investment back when the cases they fund win, so Covid-19 clogging up court procedures is not good for its cash flow.On top of the hit to losses, it also had to include some non-cash accruals in its operating expenses. This is because it reassessed the "actual and expected value of its portfolio". In other words, some of the cases in the portfolio aren't going to generate as much income as previously hoped for. These non-cash accruals came in at $78.9m. It's tricky to account for the success or not of the cases it invests in, so these non-cash accruals are an expected hazard when looking at Burford.However, Burford can point to its 95 per cent return on invested capital (ROIC) as evidence that it is quite good at picking winning cases. Its ROIC was pushed up this year thanks to a full $103m entitlement in the Akhmedov judgment - which generated an ROIC of 233 per cent.The company will be hoping that it can continue to generate the 95 per cent ROIC on the $503m group-wide capital commitments it made in the first half of the year. This was four times higher than the first half of last year. Commitments had slowed in 2020 because clients paused expensive legal procedures during the uncertainty of the pandemic, so an uptick is expected as people return to courtrooms to deal with pandemic delayed disputes. Brokers seem confident that its growing case portfolio will translate into profits. The FactSet broker consensus is that EPS will be 43.8p for the end of the year before jumping to 93.7p for FY22.Forecasts dropped significantly since March this year, although analysts have historically missed by double digit percentages, so take them with a pinch of salt. Hold.

[djderry] 11/9/2021 13:36

I've been critical of the FT in the past for its coverage of the company which,in my view,was hostile and,at times,lacking insight and more focused on headline puns. In yesterday's edition of the paper,they focused on the Harbour link up with Mischon.I think,perhaps,they had not grasped the concept of portfolio financing. However to give credit,their editorial,whilst calling for better oversight of litigation funding ,was quite balanced.They mention some of the key features and advantages of the sector from a client's perspective,gaining access to a system that would be prohibitedly expensive,enabling clients ( with meritorious claims) to outlast the delaying tactics of the deep-pocketed,etc. The FT also seems to understand that the top tier litigation funders adhere to high standards and addresses 'less sophisticated tie-ups'. All in all,a much more nuanced and balanced outlook.Long may it continue.

[williamcooper104] 10/9/2021 17:11

BUR really hasn't helped themselves by complicating their accounts by not separating out the P&L impact of Peterson and then not including the carry payable to management on the Peterson mark, and by doing that they've created the impression that they're an Enron mark to market black hole It's a great business but they have repeatedly shot themselves in the foot

[williamcooper104] 10/9/2021 17:08

The poor profit line I'm totally relaxed about But I've long thought that PE multiple was the wrong valuation metric There's many bulls who think that BUR historically was when trading at 4-5x NAV was cheap on a PE basis now think that PE on current year earnings doesn't make sense The PE in prior years when share price =4-5 NAV was based on Peterson exceptional profits and was the wrong metric to value BUR Just as it's the wrong metric to value BUR at on current year earnings

[loglorry1] 10/9/2021 17:08

To be fair I think @WilliamCooper understands the situation far better than I do. I just find it all very hard to get to the bottom of the accounts. I accept over a multi year view the performance seems very good.

[williamcooper104] 10/9/2021 17:03

They won't be - the 30 IRRs comes from a few big home runs and a lot of small equity multiple quick pay back cases Bur get a pref return (10-15 percent) and then a split of profits above that - so the equity multiples are better on a delay but the IRRs fall considerably

[williamcooper104] 10/9/2021 16:58

I've disagreed with Loglorry - but I fully respect his right to question; and actually find it stimulating as questions my own thesis And the way to answer is with argument not childish - oh you're nasty about the company you must be an evil short I don't care if he's short and most of us are long and don't assume that what we think about Bur is wrong because we are long If you want cultish investment go buy BTC

[williamcooper104] 10/9/2021 16:54

Current carrying values is mostly at cost but for Peterson Unlikely to do 30 on the Peterson mark The 30 is the gross IRR - it doesn't include management carry/costs

[williamcooper104] 10/9/2021 16:51

The vast majority of the fair value uplifts on the balance sheet relates to Peterson And on a liquidation of Bur you'd get some uplift on cost on the rest of the balance sheet Usually the mark to market uplifts happen in last year before cash settlement Peterson, while great, does distort things

[brileyloucan] 10/9/2021 16:27

So to add to this we should have seen $845m of realisations + $905m of unrealised gains in the last 12 years from Burford only assets. Less costs.

[brileyloucan] 10/9/2021 16:23

Log, You are comparing apples and pears I think. The 30% IRR increase is only on completed cases so was impacted (positively) by the large Akhmedov realisation so this relates to the return on $893 of historic deployments. The lack of p+l has arisen because of the covid delay so there has been less realisations. Unrealised gains actually fell in the period from $913m to $905m and only $12m were added. But the question is do you believe the 30% IRR? If you do then over the next few years we should see both large p+l as cases mature of the orderof $600m p.a. pre costs and recycling of unrealised gains into cash. BL