Burford Capital Share Discussion Threads

[kirkie001] 07/5/2021 20:49

Hi Maddox - I'm not sure that they have yet, unless you can direct me to something I've missed?
Cheers
K

[tnt99] 07/5/2021 20:16

You know what they say let the trend be your friend!!!

[tnt99] 07/5/2021 20:14

Still cheap buy some more!!

[scubadiverr] 07/5/2021 20:00

Possibly my best buy ever. I just regret not getting more but I was genuinely concerned at that time. 'Be greedy when others are fearful' is harder than it sounds!

[maddox] 07/5/2021 19:52

Hi Kirkie,

All your criteria have already been met.

[gettingrichslow] 07/5/2021 19:09

Up another 7% in the US. I think something is slowly leaking out on Petersen but that’s just a hunch obviously. This has more than tripled now since the low last year.

[dekle] 07/5/2021 19:03

Looks like the price has continued to go up in the US

[tnt99] 07/5/2021 18:21

Yes all great news directors bought in capital raise oversubscribed profits up future bright true value over 15 pounds jump onboard before your left behind

[george stobbart] 07/5/2021 17:24

whys this ponzi scheme going up? any news?

[tnt99] 07/5/2021 13:26

The only way is up baby! For u and me now!!!

[lazg] 07/5/2021 13:09

I have set myself two alarms: for in one year and in 2 years.

In the alarm I have copied a few of my last posts. Regardsless what happens, I think it will be a learning experience for my future self to see what I thought today. Hope my future self is happy with me :)

[williamcooper104] 07/5/2021 12:50

Yep - that's makes sense Peterson = £5 at least (of course there's still risk there) A Peterson win, particularly with another big sovereign case on the books - would cause a re-rate above trend FV - just as a Peterson loss would push the share price below FV So £15-20 in next 18 months isn't unreasonable (IMO)

[lomax99] 07/5/2021 12:09

£15 will be a breeze with the right Petersen outcome......

[loglorry1] 07/5/2021 12:00

I think that's fair Kirkie

[kirkie001] 07/5/2021 11:49

The last 20 odd posts on valuation methodology have been interesting and thought provoking.

Personally, I think that we're probably above current "fair value" on the investment book at a price of £9 per share. I don't think that this trades on much of a multiple over fair value unless you've got a track record to other evidence of one or more of the following:

- consistent record of realised gains NOT being reversed in future years;
- "annuity' style streams of future income (ie management fees from the funds);
- a demonstrable record of winning cases more than they're losing on a portfolio basis;
- cash conversion of settlement amounts to cash on a "timely" basis (and yes, I know that their business model is partly to try and go for these illiquid type situations), and no significant history of bad debts
- sustained delivery of their IRR targets demonstrating no weakening of their underwriting criteria

Of these 5 points; I'd say that the third is demonstrable from their record; the first is in the process of being demonstrated; the fifth is "Work in progress' but remains to be seen for more recent vintages - and 4 is one of the hardest to demonstrate (but with every year becomes better), and 2 is for this year and the future to show.

Delivery on these 5 points would be my catalysts for rerating onto a multiple of fair value, rather than just a "fair value plus Petersen" (which is basically what it currently is). But I don't think you get to anywhere like 2-3x FV - I'd be thinking that 1.5-2x would be more realistic.

I am, however, not really basing that on much other than my wet finger in the wind...

Or - another way of looking at it - if I think FV is around £7.50 per share; then I'm thinking current price is maybe reasonably full, but I have a year-18 months' price target of £11.25-£15 per share?

[tnt99] 07/5/2021 11:47

Growing mountain certainly join the climb to true value of at least 15 pounds just ask the boss

[loglorry1] 07/5/2021 11:36

Maddox show me an advfn thread where the posts aren't predominantly uber bullish?

Cash conversion of cases will be king here. The rest is largely noise. I don't know if we are at fair value here or £10 higher but I know the market will sit up and listen if they convert a lot of the book to cash at higher than booked values.

[maddox] 07/5/2021 11:27

Hi loglorry,

It really depends upon your investment style. If you are a fundamentalist investor as I am understanding of a stock's value is key to making an investment decision. On the other hand the current price is driven by the balance of sentiment between buyers and sellers. But I'd suggest that a large proportion of both buyers and sellers will have a view on whether the shares are under or over-valued.

When the disparity between share price and value is as wide as it appears from our recent BB discussion - it makes for a pretty compelling investment case - even if you factor in a healthy degree of discounting.

Regards Maddox

[lomax99] 07/5/2021 07:59

Yes, and there’s a growing mountain heading for conversion.

[loglorry1] 07/5/2021 07:56

We can all make up new ways to value BUR but it's largely pointless if the market doesn't agree.

Converting cases to cash is key. That's what will cause a rerate. That's going to take time.

[lazg] 07/5/2021 01:23

Maddox, this is exactly what I was thinking as well.

While I really like how conservative Burford is with its estimates the unusually long time between investment and return is hard to capture on a YoY basis.

Accounting principles are meant for normal companies. What BUR needs is a five year accounting period.

Most companies buy input products and sell them within a reasonable amount of time, so YoY is fine for them.

Can we maybe look at how pharmaceutical companies are valued for inspiration? They too make long term investments (in R&D) with uncertain lumpy returns (when and if a cure is found). Happy for people to explain to me how to value pharmaceutical assets.

Burford should be valued like a pharmaceutical company with genius researchers that find a cure 80%+ of the time they try.

One final comparison: If a car company could buy aluminum and steel for $ 200 and sell a car made from those materials 5 years later for $ 10.000, and they were buying more steel and aluminum every year, it would be easier to understand that what is intersting is the multiple, 50x in the example.

If the car company bought steel and aluminum for $ 500 in year 2, you would think they will make 25k in year 6. And so on.

Surely, you would value such a company not on what sales it made in year 2, but you would want to estimate the discounted future cash flow. I am still unsure how to estimate the multiple correctly though.

Thanks Maddox for sharing your thoughts, very helpful indeed. I think we need to take into account interest and opportunity costs for the money sitting there for a long time, but still.

Alsp, I think I need to learn more about company valuation methods, if only to put my thoughts into more coherent words.

[maddox] 06/5/2021 23:56

Ok just thought of one adjustment. We are still carrying YPF in the portfolio at a mark-to-market valuation of $773m. So, lets take that out and it brings it down to c. $16bn.

[maddox] 06/5/2021 17:19

Hi LazG,

Like your thought process. Yep, the Investment Asset portfolio cases undergo a re-valuation process as they mature.

As Burford are very conservative, and the portfolio of cases has been rapidly expanding (52% CAGR) - most will be young and mostly valued at near cash cost invested. Where there is an objective event, a court judgement, step towards settlement - this will cause a revaluation.

In the b/s at the year-end there were 41 cases amounting to $183m in unrealised gains (excl. YPF) that were 'widely distributed' a large increase on the previous year of $38m (excl. YPF) - this as a result of the FY20 year-end revaluation process.

However, we also know the realised gain on case conclusion is substantially more than the value held at the previous year-end prior to its conclusion. If the concluded realised gain value is taken to be 100% then the prior year-end valuation is typically 19% on average, and between 2% and 4% for 5 years to 2 years prior to conclusion (p14 FY Results pressy).

This suggests, based on some rough averaging you could see the potential realised future value of the current Investment Capital being 8x its current book value. Taking BUR's ~ $3bn invested capital would generate an eye watering $24bn!

Surely, there's a fault in my logic?

[loglorry1] 06/5/2021 14:24

I think that's basically done for us in the latest presentation which shows cash in vs cash out returns. It's about 90% total at around 30% IRR. Peterson skews it a bit but no so much now the whole book has grown a lot.

I agree though that we should be trading at a multiple of book if cases really do throw off this much cash.