Burford Capital Share Discussion Threads

[loglorry1] 03/11/2021 10:04

Agree with most of this and I too think it is cheap but not ridiculously so. It isn't a company that can double it's book value every 2.5 years becuase of G&A, bonuses, tax and interest. It can grow its value quickly though and so its cheap.

[maddox] 03/11/2021 09:41

Yesterday's CMD was clearly aimed at US analysts and institutions - if they liked what they heard - that's where the demand will come from.

It'll take them a few days to crank through their investment process, and then filter through to the market. The very obvious value anomaly will then start to disappear.

[donald pond] 03/11/2021 09:19

As far as Terry is concerned, SSON does take positions in things like Spirax Sarco and Fundsmith itself has always held Kone, which aren't direct to consumers. What he wants is an essential/non-discretionary product that has big barriers to entry and high rates of return. And I think BUR ticks those boxes.

[maddox] 03/11/2021 09:18

Hi Donald,

Just a point of clarification on your Tweet. This Case Outcome Model valuation is at a point-in-time, rather like a B/S valuation - how that translates into P&L profits is the unpredictable element. So, yes the realisation of that value will occur over, on previous average timeframe of 2.3 years or 5 reporting periods. But how you spread that $2.3bn across those periods is going to be lumpy.

Also, case investment and Case Outcome Modelling will continue and generate further potential value over that period. We have a firm with the potential to double in value every c. 2.5 years on a continual basis, with plenty of runway.

Regards Maddox

[williamcooper104] 03/11/2021 09:03

Yep c2 years is the average but after a few years if it's demonstrated that BUR is well on it's way to realising $3.8bn cash then the share price is likely to re-rate in anticipation

[tradertrev] 03/11/2021 08:59

DP - read your tweet - £45 + YPF on top - very punchy! I hope you are right.
I think your timeline for realisation of the profits is a bit optimistic, although admittedly there will be something to add for new business added in the next couple of years. Don't forget, the average duration is the time for half the portfolio to get a result and the early results include most of the losses. I don't think we know the average duration of a win - damn, should have asked that question yesterday!
Regarding Terry Smith, I don't think it passes the small ticket, non-people business aspects of his model.
It's my biggest position by far and I'm very happy to hold for a few more years yet.

[donald pond] 03/11/2021 08:43

New board, new Chairman, new CFO, Bogart now a director, US listing, 2 more years of evidence that the accusation that all the growth was through unrealised write ups was inaccurate. Muddy waters are quite good at identifying frauds but historically they are either correct, and the company folds quickly as soon as the fraud is exposed, or they are wrong, and the company shrugs it off. They were wrong on BUR but the price hasn't recovered yet (though it has tripled in 18 months). And therein lies the opportunity

[this tea tastes of chicken] 03/11/2021 08:34

How would you summarise, What do you believe they have cleared up now that they hadn't pre summer 2019, that is, where are the improvements in governance for investors, insti and private?

[donald pond] 03/11/2021 08:28

There was a time when any bit of news would provoke 4 or 5 analysts reports. BUR is now well under the radar. I think that is going to change btw. If I was Bogart I'd be calling Terry Smith. This is one for SSON IMO. A global leader in a growing area with great ROCE and big barriers to entry. Ticks all the boxes

[donald pond] 02/11/2021 21:13

Can't be bothered to retype this but someone tell me what I'm missing https://twitter.com/donaldpond6/status/1455643845685878785?s=21

[scubadiverr] 02/11/2021 20:46

Patience I think you'll find, unless I've invested in the wrong sector

[syoun2] 02/11/2021 20:30

I agree, great to watch today. I’m sure all of us know that it is about patients here.
Still small volume so price change means little however when you heard who was there, analysts & big fund guys. If one of them take Burford into their funds then things will start to happen.
The rating will only happen with this & positive results in March/April however I’m feeling things are coming together.
I listened in to every result call and investors day now & the Tone today was a good sign for investors.

[williamcooper104] 02/11/2021 19:16

Unlike most other posters here I merely think that BUR is cheap/good value and not dirt/gave away cheap With today's guidance it's easier to play about with DCFs to get to a current share price "fair value"; this really helps as one of the problems has been the difficulty in valuing BUR And separating the equity story from Peterson is crucial as means we won't be just sat waiting for it to resolve

[dancerbrian] 02/11/2021 19:07

The $3.4bn cash return includes return of capital invested so isn't all profit.

Crudely, existing book gives $2bn of gains plus $360m of performance fees. Last average duration was 1.5 years, but with courts still slow the adjudicated cases are probably less than usual. Say average duration is more likely 2-2.5 years. Court cases give biggest gains so back-end loaded in that? So spread over 5 years is $472m revenue a year, if its 4 then $590m. If we allow for some of that book being part-way through you can pick shorter terms and higher figures.

Allow for expenses, carry, debt and even taxes, the former gives something in mid $300s of net profit pa, or mid 200s in GBP. Market cap £1.7bn. But that's conservative, and probably the floor - nothing for future book additions, YPF or courts clearing backlogs.

So its dirt-cheap, but most posters here know that. Does today's info make it clear enough to change that?

[loglorry1] 02/11/2021 18:58

Yep 1.7x-2x book but aren't we close to 1.5x now?

[loglorry1] 02/11/2021 18:56

Yes William I agree with that although it would pay back its EV in 2-3 years and all the cases would be gone. So the rest for free is a strange concept at that point! I'm not suggesting they will do that I'm just saying the intrinsic value of their cases is approx equal to their EV.

It's not shabby at all but I'm just pointing out a different perspective.

[williamcooper104] 02/11/2021 18:14

And even if you look at it earning it's EV - to have paid back your entire EV (ex Peterson) within 3 years then means shareholders have the entire future business for free - isn't it the same as an EV/EBITDA multiple of 3? If we say BUR can sustainably generate equity returns of 25 percent and the cost of its equity is 12-15 percent then we'd easily get to a c1.7-2x premium to book

[williamcooper104] 02/11/2021 18:04

It's $3.4 plus $380m of management/performance fees They don't need to retire debt when they win cases, there's only a (from memory) rather weak NAV based covenant of which there's loads of headroom If they get say a net $3.4bn (with the man fees covering interest and G&A) within 3 years and reinvest then it's really not too shabby The interesting point is how they are developing a case of valuing BUR ex-Peterson which will help detach the share price from Peterson and fits in with what I thought would happen if Peterson fails it'll drag on for years by which time the rest of the business could have justified the share price

[donald pond] 02/11/2021 18:00

Except it doesn't include YPF or the funds management business, which is projected to generate $360m in performance fees

[loglorry1] 02/11/2021 17:48

The 2bn profit is the value of the expected excess value of the case book over what they've invested to date if they just let the cases settle over the next 2-3 years. The total was $3.4bn.

From that profit there is tax and costs to pay and interest on debt and the bonuses to take off.

Set that against a current EV of around $3bn and it suddenly doesnt sound so amazeballs.

Its the age old problem of valuing BUR on book value or earnings multiples.

[maddox] 02/11/2021 16:59

I very much enjoyed the two Analysts' questions as they struggled to rationalise BURs valuation. Along the lines of

'.....so let me get this right - you anticipate making, excluding YPF, $2bn of profit plus $360m of performance fees over the next 2-3 years, on your current invested capital - which is still growing ....and your mkt cap is $2.3bn?!?'

You could almost see them thinking '.... that's nuts!'

Wonderful ha ha.

[jockthescot75] 02/11/2021 15:40

Thanks Trev. I didn't know that. Interesting nonetheless.

[tradertrev] 02/11/2021 15:29

Baillie Gifford were a large day 1 investor who sold out a few years ago. Not sure if they ever got back in.

[jockthescot75] 02/11/2021 15:21

Interesting to see Baillie Gifford crop up as one of the investment houses asking questions.

[lomax99] 02/11/2021 15:19

Sounds great, put it on a modest double digit PE and off we go.... lol