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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| Litigation Capital Management Limited | LIT | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
|
|
|---|---|---|---|---|
| 4.50 | 3.98% | 117.50 | 16:35:25 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 112.00 | 112.00 | 117.50 | 117.50 | 113.00 |
| Industry Sector |
|---|
| GENERAL FINANCIAL |
| Top Posts |
|---|
Posted at 03/4/2024 09:03 by mtioc Over the last few days, I reviewed the latest LIT release and materials. In particular, the appendices of the last investor presentation provide an excellent summary of the firm’s current position. Parts have been presented before, but, as far as I am aware, not with summaries and durations. This is a tricky business to understand, but the team cannot be accused of being opaque.This led me to reflect on my valuation. While inexact, I would discount my conservatively estimated future value to a present (net asset) value. I had a go, but this was nothing better than an electronic “back of an envelope,” which will inevitably have omissions and errors. My guestimate (lots of assumptions on assumptions etc.. so DYOR), after opex deductions, was broadly as follows: • Deployed capital (own and 3rd party fee): £1.20/share (currently c. £0.9/share) • Committed but not deployed (as above): £1.60/share (I included the whole of Fund II, which should be committed this year) • “Expected̶ • Asset manager/LP: £0.3/share (Cost of hiring/retaining team in 3 jurisdictions, track record/reputation, proven “blue chip” fund raising ability. Others are struggling to replicate. This could be a material undervaluation) The “Committed but not deployed” is possibly aggressive, but even if that was discounted/“ch I would be interested in others’ views on valuation approaches, particularly re Burford. I think LCM differs, positively and negatively, due to scale, matter diversity, lack of US presence and narrower range of activities (e.g. no enforcement). Sometimes analysts have referred to multiples of NAV, which I do not understand. Litigation funders should all now have FV models, with cash flow for each investment, which could be adapted to provide projections, using pro-formas for future investments. With apologies for repetition, but I do not think we should be guessing about how the management view their business’s intrinsic value. They are using shareholders’ funds to buy back shares, so they should articulate how they are valuing those purchases. This would include the prices at which they believe the shares are cheap and those that are too expensive, together with the basis of valuation. It is not enough to simply say the shares are "obviously cheap". Simon Wolfson (CEO of Next) is the best UK example of a clearly expressed buyback policy. They should also get their financial adviser to review and to publish their own valuation. Valuation clarity and guidance would do more to drive the share price than some other initiatives. |
Posted at 21/3/2024 15:12 by johnwig I've had a good look at the LIT results and the attendant LITerature (good that eh?)and analysis and have come to this conclusion. The company is like a small chick, plump and thriving, with every chance of growing over time into, wait for it, an EMU! For the non-antipodeans amongst us, me too, appropriately the Emu is Australia's largest bird and probably the fastest. It eats and drinks intermittently when the opportunity arises taking on large quantities of water when it finds it in the arid Oz outback, just like in today's UK financial desert created by Boris,Truss, et al.For the woman-hating posters on ADVFN, of which there are many, I also have good news. The male Emu's testicles swell to double their size during the two-month mating season, so there are hopes for you yet..... |
Posted at 04/12/2023 13:21 by maddox Hi Makinbuks,They are reducing the Debt Facility as well as paying a dividend and share buy-back. So, LIT appear to have sufficient cash in-hand, or in-view with forthcoming case conclusions, to fund new cases, pay-down debt, buy back shares and pay a dividend! The significance of this appears to be lost in an argument about should they put their cash here or there - when they can do the lot (to various degrees). Having suffered the withholding tax - I'm now much preferring buy-backs over dividends as a means of returning value to shareholders. IMHO LIT is transforming into the cash machine that an IRR of c.75% suggests it should be. It'll take a while for Mr Market to appreciate this as the share price fall back signifies - investors seeking share price confirmation - will be holding off buying in. Once Mr Market realises that a p/e of 6.4 is ridiculous this will re-rate. |
Posted at 31/10/2023 16:32 by brileyloucan I have been in touch with HL regarding my LCM holdings which are in an ordinary share account, an ISA and a SIPP. Had the following response:Thanks for getting in touch. Looking over the recent dividend from your holding in Litigation Capital Management Limited, I can confirm the dividend was subject to 30% Australian Withholding Tax which is deducted from the dividend at source. For us to apply reduced rates of withholding tax to dividend from the countries mentioned, we would need to verify that all holders within our pooled nominee accounts were eligible for the reduced rates. As we're unable to do this, dividends will be Taxed at the full rate of withholding Tax. Whether it's possible to reclaim any of this amount depends upon your personal taxation situation. If possible, an application would need to be made to the relevant foreign tax office. We don't offer a service to reclaim any foreign withholding tax on behalf of clients due to the complexities of the tax regimes in other countries. However, we can produce ad-hoc dividend tax vouchers that you can use with your claim. Should you want one of these, please send us a secure message with confirmation of the specific stock and dividend payment date you’d like the voucher for. Finally in regards to your SIPP account, I'm afraid that under HMRC rules and regulations it states you are unable to gain a benefit outside of the SIPP wrapper on a holding held within the SIPP. Only the beneficial owner of the shares would be eligible to submit a reclaim, within the SIPP this would Hargreaves Lansdown but within other accounts this would be client. Hargreaves Lansdown is unable to confirm each individual clients tax status and is unable to action a bulk reclaim. Therefore following these rules you are unable to submit a withholding tax reclaim for holdings held within the SIPP wrapper. So in summary can apply directly to the Aussie tax authorities myself for the 15% refund on the ISA and shares account but in the SIPP it is lost. I have found the relevant info here hxxps://www.ato.gov. Will also be contacting LCM to ask them to pay the dividends in future in a more tax efficient way for UK investors holding shares in nominee accounts. BL |
Posted at 01/10/2023 08:41 by mtioc LCM’s capital allocation decisions should be viewed in the context of its unusual ability to potentially compound incremental capital at a 70% IRR.Debt I am sure LCM did their best at the time. Credit providers probably deem litigation finance higher risk on the criteria that drive credit models: probability of default and loss given default. In the UK, a few litigation funders did not survive Covid (especially those with a more retail focused model). The underlying assets are esoteric and illiquid, with a limited secondary market. I am not surprised that in the difficult days of February 2021, LCM had to pay top of the market range. It appears to be SOFR (a US dollar overnight rate, currently 5.3% vs US$ LIBOR of 5.8%). LCM were smart enough to cap the total return to 13%. It appears LCM can redeem the loan (i.e. any call protection has expired). LCM are looking at a retail bond that may reduce the cost of debt, but may be a lot of hassle compared to private credit providers like Northleaf. The key point is that if you can compound at 70%, within reason, your debt interest rate is pretty irrelevant and, if LCM has investment opportunities, it should be increasing not reducing debt. Dividend I think the management acknowledge that the proposed dividend is not a logical allocation of capital. Their rationale appears to be that it is small (a few million AUS$), potentially encourages some institutional investors (for unexplained reasons) and is a “reward” for shareholders. The reward is not clear to me. If a higher rate tax payer, a UK shareholder receiving AUS$100 of dividend (paid out of LCM’s post tax earnings) may receive AUS$55. AUS$100 compounded at 70% over five years produces $1,420 (14x). For obvious reasons, I wish they would stop “rewardingR Share Buyback I support this. For reasons discussed above, LCM appears far below any reasonable estimate of intrinsic value. That said, if a company introduces a buyback programme, it should state how it is valuing its purchase (of its own shares) with shareholders' capital. In other words: when would it buy its shares, and more importantly, when wouldn’t it? Particularly given LCM's ability to invest incremental capital at such high rates. Very few companies do this. Simon Wolfson, CEO at Next plc, does so very well. This leads to my major issue with LCM is its market, rather than shareholder, communication. There are no forecasts and I appreciate it is very difficult business to forecast (realisations in particular). I have not seen any broker reports that attempt to explain or value the business by alternative methods (NAVx,DCF etc..). There is a “read across” to Burford but there are scale, size and return differences. When I looked at LCM, the best resource was this BB (again, many thanks to the remarkably well-informed other posters). The company needs to get better institutional quality market communications (e.g. kick its brokers to produce a proper note) if it wants to attract institutional shareholders and drive the share price. |
Posted at 22/9/2023 10:34 by maddox Taking a broad brush viewpoint - LIT's prospects look compelling.The recent results confirmed LIT's long-term performance metrics: 'With respect to every investment completed during the past 12 years, inclusive of losses, LCM has generated a return on invested capital (ROIC) of 1.78x. On a three year rolling basis, LCM's investment performance, again including every completed investment inclusive of losses, has generated an IRR of 76% and a ROIC of 2.09x.' So, if LIT are able to apply this performance to the growing Assets Under Management - now A$553m [£281m]as at 31 August 2023 - there is huge potential for asset value growth. [The AUM is double the current mkt cap (£140m)]. If this is then compounded over the next few years - this is a potential multi-bagger. There appears to be plenty of headroom for growth in Lit Fin and the competitive environment appears to be benign. Mr Market may ignore LIT's attractions in the current market gloom but when it becomes apparent that this is a long-term compounder the current p/e of 7 will look ridiculously cheap. In the meantime, we now have a dividend, share buy-backs and an impending news flow of final case resolutions. |
Posted at 21/9/2023 13:55 by someuwin A robust outlook makes this legal stock a buyA cash-rich provider of litigation financing has reported record results and could deliver another year of growth September 19, 2023 By Simon Thompson * Net profit up 145 per cent to record A$21.8mn (£11.3mn) * EPS of 29.5ยข (15.4p) * NAV up 27 per cent to A$124.3mn * 2.25p a share final dividend declared Litigation Capital Management (LIT:117p), a provider of litigation financing, has reported record results buoyed by settlements from its directly held portfolio as well as bumper fees earned from third-party funds. The performance of both the group and the fund interests made for a good read. The third-party funds delivered A$70.2mn (£36.5mn) of post-tax profit and a hefty $24.6mn of performance fees for LCM, which receives 25 per cent of profit on each fund investment over a soft hurdle rate of 8 per cent. The group also earns an outperformance return fee of 35 per cent over an internal rate of return (IRR) of 20 per cent, so providing an attractive income stream to complement realisations from its own directly held portfolio. Over the past three years, LCM has delivered a cumulative return on invested capital (RoIC) of 208 per cent and internal rate of return (IRR) of 76 per cent, a key reason why outside investors want a slice of the action. Earlier this year, the group’s second Global Alternative Returns Fund (GARF) raised A$291mn of commitments. The outlook for deployment of the capital is increasingly positive. Strong trading outlook Chief executive Patrick Maloney predicts a significant rise in the number of appointments of external administrators and liquidators in insolvency, which will translate into increased litigation funding applications in the future. That is of particular benefit to LCM given its long history of funding disputes arising from insolvency and restructuring. Maloney also highlights a tightening and contraction of the competitive landscape in the litigation finance industry across several markets, including the UK, US and Canada. Having built LCM's expertise and capacity in the London market, as well as having access to capital through its funds management business, the well-funded group is well-placed to capitalise on tighter industry conditions. In addition, Maloney pointed out that LCM is “seeing more opportunities in the market and expects to materially achieve commitments in the second fund”. This will position LCM well for launching its third fund, aiming to exploit the high-quality investment opportunities that underpin generations of value and cash to both fund investors and LCM’s shareholders. Furthermore, as the group continues to grow, the operational leverage of the business means that it should deliver even greater profitability and cash generation given that higher activity levels will not need to be matched with proportionate increases in overall costs. It’s a positive narrative and one well-supported by a raft of successful case settlements in the past year that led to bumper profit for both third-party fund investors and LCM shareholders. It also explains why the board has announced a A$10mn share buyback programme alongside a 2.25p-a-share final dividend, and is planning a fixed-income investor roadshow to attract investors for a London-listed sterling retail bond to take advantage of investment opportunities. Re-rating set to continue The news has been well-received with LCM’s share price hitting a 12-month high around 121p post results, up from 87p when I last suggested buying over the summer (‘Litigation funders LCM and RBG digest court ruling, 27 July 2023). House broker Investec is working on new forecasts to take into account the group’s transition to IFRS-9 fair-value accounting, but analysts had previously forecast a 66 per cent rise in adjusted pre-tax profit of A$47.7mn. Trading on a 12-month trailing price/earnings (PE) ratio of 7.5, offering a 2 per cent dividend yield and an delivering eye-catching return on invested capital, the shares remain a buy." |
Posted at 19/9/2023 16:05 by maddox Investors Chronicle's Simon Thompson re-tips LIT as a BUY with the re-rating set to continue. 'Trading on a 12-month trailing price/earnings (PE) ratio of 7.5, offering a 2 per cent dividend yield and an delivering eye-catching return on invested capital, the shares remain a buy.'A couple of points he highlights are: aa) A predicted significant rise in the number of insolvencies requiring litigation funding [a particular speciality of LIT]. bb) A slackening in competitive pressures [due to unquoted Lit Fin funders struggling to raise cash]. cc) LIT being very well funded and looking to raise another fund (III). [my additions] |
Posted at 18/7/2023 07:03 by someuwin RNS Number : 2935GLitigation Capital Management Ltd 18 July 2023 Litigation Capital Management Limited ("LCM" or the "Company") Transition to Fair Value Accounting and Dividend Payment Litigation Capital Management Limited (AIM:LIT), a leading alternative asset manager of disputes financing solutions, provides a market update for the twelve month period to 30 June 2023 ("FY2023"). Following a number of recent resolutions in the second half of FY23, the result for the full year will deliver LCM's strongest performance to date by a significant margin. The Company is well positioned for the year ahead with in excess of A$80m in cash held at period end. We will provide further details with the release of our year end results. The Company wishes to update the market on two important developments. Reporting update - Transition to Fair Value Accounting The evolution of the Company's business over the past two years, transitioning away from the legacy direct investments business model and towards positioning LCM as an Alternative Asset Manager, necessitated the need to review the Company's accounting policies. In consultation with our advisers, the Board has taken the important decision to transition to Fair Value accounting. This will put LCM in line with industry peers in both accounting policy and fair value framework. In doing so, we expect to announce our audited results for FY2023 under both the existing accounting policies as well as the newly adopted Fair Value accounting. This will provide our investors with better transparency on the impact of the transition. Dividend Following the strong financial performance of the business during FY2023, the Board has decided to pay a dividend of 2.25p per ordinary share payable to Shareholders. The dividend timetable for this distribution will be contained within the FY2023 results announcement. Patrick Moloney, Chief Executive Officer, commented: "We are pleased with the performance of the business over the past 12 months, particularly as we begin to see the benefits of moving to a fund management business model. Our strong financial performance is the best in LCM's history and reflected in the Board's decision to pay a dividend." Jonathan Moulds, Chair, commented: "The transition to Fair Value accounting is a significant milestone for LCM. We believe this decision just taken by the Board should be welcomed by investors. Given the strong performance, the underlying pipeline and cash reserves LCM has built up, it is an appropriate time to pay this dividend. The Board will continue to keep under review the optimal way to return value to shareholders, balancing our future investment opportunities with the importance of rewarding our shareholders." |
Posted at 04/7/2023 10:01 by 74tom The final thoughts I had when comparing the two were around fund structure & fund timing. Having looked at Omni's funds, I'd argue LIT have negotiated the best structure I've seen. There is little doubt in my mind that Patrick has studied Omni in detail & fine tuned the terms so that the balance fairly rewards LIT's expertise whilst also being very attractive to investors. On a big win the split is near 50/50 and that is the way it should be in my view.On timing, Omni raised a huge amount of fund AUM in a very short space of time from ~2016-2019. This meant that they had a huge amount of cases to source / fund & then a lengthy gap before any 'harvesting' could take place, accentuated of course by Covid. LIT have so far taken a more restrained approach, and already cash from their first 3 cases in Fund 1 (A$53.1m) has nearly satisfied the A$56.25m of Fund 1 deployment that is required. Further Fund 1 settlements can go towards Fund 2, overheads & balance sheet strength. Then once Fund 2 is substantially deployed, they can start on Fund 3 (Patrick said in March that Fund 3 would potentially be $500m in size & they would start the round in 12-18 months, so mid 2024). So overall, I think the excellent overhead management, superior fund structure, relatively simple balance sheet & disciplined fund scale up sets LIT apart from Omni. Omni were a £650m market cap last autumn, given the above I see little reason that LIT can't move towards this level of valuation over the coming years. |
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