Burford Capital Share Discussion Threads

[lomax99] 14/5/2019 17:23

bgo - I suppose it depends on the end allocations. The current investment portfolio on page 25 of the AR suggests that $320.9m (12.8% of the $2.5bn) will relate. to Recourse/complex strategies. (14.5% of BS investments). Hopefully future commitment allocations to complex strategies will seek to significantly redress the intended balance.

[cockerhoop] 14/5/2019 17:06

BigGreenOak,Surely it IRR's that are important rather than ROIC which as a metric takes no account of time. I'd expect partially realised investments for any given year to have a higher ROIC as they will tend to have been running for a longer period of time than the concluded cases.

[biggreenoak] 14/5/2019 16:36

1. Mad Foetus, Burford is not mixing post-settlement and complex strategies on p. 29.

2. Arregius, complex strategies are not portfolios. I assume that you by "portfolios" you mean investmetns where Burford finances portfolios of claims as opposed to single cases.

3. Jonwig, you are 100% correct. Burford has been vocal about Complex Strategies having lower ROIC, shorter duration and lower risk of a commplete loss (becuase if a litigation claim is lost, Burford still own the underlying assets).

This is where my opinion differs from yours.

(a) 6% of profit is the wrong metric to look at. You are looking at the rearview mirror.

(b) We need to be looking where Burford's commitment and deployments go. ~30% go into complex strategies (see p. 5 of 2018 AR). We do not know how much of that will come from the Funds and how much will come from the B/S. But 30% of committments going to Complex Strategies will bring ROIC down.

(c) P. 25 shows that ~10% of current B/S investmet portfolio is Complex Strategies.

[minerve 2] 14/5/2019 14:58

Burford Special Brew

[lomax99] 14/5/2019 14:50

Standard AGM statement out.

[arregius] 14/5/2019 10:10

Thats the goal of portfolio finance. Mixing different investments with different durations and roics to de risk the entire portfolio and in sum get nice roics and Irr

[mad foetus] 14/5/2019 06:48

I will look at AR later, I wonder if they are mixing post-resolution strategies with complex ones but will check. Thanks

[jonwig] 14/5/2019 06:42

biggreen - doesn't Burford admit (p29) that Complex Strategies are "... lower return, lower risk and shorter duration investments", and that it wants to have that mix? A ROIC of 12% - 15% isn't a cause for concern if that's the figure they're expecting. And a small segment: 6% of profits.

[biggreenoak] 14/5/2019 05:10

Mad Foetus, your expectation has not been proven right so far. Just look at p. 29 of 2018 Annual Report. The math is laid out clearly so you do not need to work anything out.

There is a possibility that five cases are not representative of the rest. We will find out (most likely later).

[mad foetus] 14/5/2019 04:58

I will read the AR later to see if I can work that out but I would expect ROIC for complex strategies to be higher for the following reasons. The (in my named misnamed) complex strategies approach is to buy cases outright rather than provide funding for them. This immediately has profound changes, the main one being that there is no "commitment". We don't agree to fund a case up to £xm, we just buy it and then fund it to completion. So we want it to finish as quickly as possible, at as little extra legal cost as possible, but we get back all the proceeds, and are motivated to commit as little subsequent capital to it as possible. Whereas in a standard case we have committed the capital and do not have control over how much is drawn down. Though in any settlement our fees, interest on our fees and our share of the profit will come back to us first. But the whole rationale for complex strategies is the extra control it gives us, so it would be perverse if the ROIC was worse.

[biggreenoak] 14/5/2019 00:09

1. I think Bogart's response at 18.00 has next to zero of information that has not been communicated in the past.

2. What is more interesting and important is why ROIC on concluded investments is ~51% vs. ROIC on concluded + partial realizations is ~85%. That's the most important question.

3. CG is correct about Burford is reporting ROIC on Complex Strategies in a way that is not apples-to-apples because BUR includes management and incentive fees. Now, Burford has obviously disclosed it extremely clearly in 2018 AR and when I read it, I thought "this is not the best way to do it". So CG is not making a breakthrough discovery here. What's more important, however, is what ROIC on complex strategies would be going forward. If it is 12% - 15% ROIC (disregarding management fees and incentive fees), then it is a cause for concern.

[mad foetus] 13/5/2019 18:51

Yes, very good and helpful to see that he met 30/40 institutions that day as well. A pity we couldn't have finished above £15 but in a bad day on the markets a very good performance that bodes well. The business is doing fine, it's just sentiment is very volatile

[arregius] 13/5/2019 18:20

You are very welcome. Lets see if bur goes back where it belongs. Time will tell

[biggreenoak] 13/5/2019 16:13

Jockthescot, thank you for answering my question and posting a link to the website.
Arregius, thank you for a direct link to the video.

[jonwig] 13/5/2019 16:01

Arregius - great, thanks. So that's the Shares Mag presentation.

The rebuff to Cannacord starts at 18:00. There's also why we don't move from AIM, and why IFRS accounting is a poor way to represent the business.

[arregius] 13/5/2019 14:57

https://youtu.be/9KvmdZK8VNgBogart also answers a questions about the cannacord note

[rar100] 13/5/2019 11:15

Good write up in Investors Chronicle of BUR but no mention of Cannacord

[bigbigdave] 13/5/2019 09:42

Has no history of a trading update with the AGM statement so unlikely to deviate from that...............that is unless they wish to stamp on Cannacord comments

[lomax99] 13/5/2019 09:42

No not normally, other than confirmation of any voting.

[ali47fish] 13/5/2019 09:33

does bur issue a statement on its agm- there is one tomorrow-please confirm anyone!

[jonwig] 12/5/2019 16:09

I agree he should have provided a link. But as a paying subscriber to IC, I rather resent it being made free-to-view in entirety.

It's the AIM 100 annual list (BUR is No 1) by the Companies Team:

[ali47fish] 12/5/2019 16:05

compnews- who is the above article by and can you provide a link/date ofpublication!

[keyno] 12/5/2019 11:18

Please post sources, compnews. Always helps.

I believe source for above is IC.

[compnews] 12/5/2019 08:19

After enjoying a spectacular run in the prior two years, shares in BurfordCapital (BUR) endured a rockier rideafter last year’s equity market downturn. However, that comes with the territory given the stock’s high-growth status and belies the litigation finance specialist’s track record of impressive returns. Last year the return on its core portfolio jumped 85 per cent, with realisations from 26 different investments helping boost total income by a quarter.

Since 2018, Burford Capital has been joined by litigation finance providers Manolete Partners (MANO) and Litigation Capital Management (LIT) on London’s junior market. However, those groups are minnows in comparison to Burford, which had net assets of $1.36bn at the end of December.

The funding firepower backing Burford also puts it head and shoulders above peers, after it secured an additional $1.6bn (£1.3bn) in funding during 2018 for litigation finance investments, including $667m from entering a strategic relationship with a sovereign wealth fund. Under the agreement, a $1bn pool of capital will be invested on a 2:1 basis, with Burford providing the remaining $333m in exchange for 60 per cent of profits generated once the initial investment has been recovered.

Encouragingly, for a group deploying such a high level of capital, Burford only tapped investors for further funds in October last year, raising nearly £200m via an oversubscribed share placing. That cash was raised to finance geographical expansion, including moves into Australia and Germany. Up until 2016, the group had financed new investments using cash receipts from existing business.

Investing in litigation finance providers like Burford carries a natural level of high risk and assessing the value locked up in the portfolio is more difficult than traditional financial services groups. However, Burford only alters the fair value of ongoing cases in the event of a secondary market transaction, where it sells part of an interest in a matter to third parties, or if there is a significant development in the legal process of a case.

Despite the rate of share price growth slowing since the final quarter of last year, we remain encouraged by the large amount of capital ready for deployment and the group’s track record of doing so profitably, with the portfolio generating a 31 per cent internal rate of return since its inception a decade ago. We remain buyers.