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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
|
|
|---|---|---|---|---|
| -2.00 | -2.00% | 98.00 | 16:35:15 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 99.60 | 97.80 | 101.00 | 98.00 | 100.00 |
| Industry Sector |
|---|
| GENERAL FINANCIAL |
| Top Posts |
|---|
Posted at 18/12/2024 12:10 by mtioc Canaccord (Portia Patel and Justin Bates) produced a note on 17 December, which I think is available on Research Tree.For me, it is the first analyst note produce a clear and sensible valuation framework, which should hopefully encourage institutional investors. Canaccord focus on price to book. To look at this they build a 10-year high level model based on cash returns and ignore fair value adjustments. Cost versus “fair” value has been discussed on this and other boards. Both have merits, but cost and cash is cleaner and simpler. The key assumptions, which must have been sense checked with management are as follows. • Annual commitments: A$250m split A$187m fund and A$63m balance sheet • Deployment: 75% of commitment vintage evenly over 4 years (25% pa) • Realisation: After 48 months at MOIC of 2.5x • Fees: 25% on 3rd party profits with no management fees • Expenses: FY25E A$19.8m to A$70m in FY34E Overall, the analysts appear to have been quite conservative. LCM is currently deploying at about the assumed rate before any additional US deployment. The MOIC is less than historical, which did not have the fund performance fee boost. I doubt Patrick would allow costs to go up 3.5x to deploy same level of capital. The analysts calculate a realised PBT (excluding FV) and based on equity (excluding FV) they estimate an ROE of 17% through the cycle. They use this to imply a 1.7x P/BV, which they discount by 25% to 1.3x, which they apply to the mean FY25E to FY34E NAV to arrive at a per share value of 182p up from 146p in Sep(prior to more detailed analysis). While there are several "steps" or assumptions in the valuation, which is based on a 10-year forecast, the analysis does focus quite simply and clearly on four or five key value drivers. Hopefully, this, together with Cavendish’s notes re LCM's development and market context, will enable institutional investors to engage. Earlier in the year, I was quite critical about the company's and advisors' attempts to explain a complicated story to the market. They have certainly addressed that over the last 6 months. In passing, the analysts comment on concentration risk and note a similar concentration re one more Australian class action with cost overruns at A$25m and a few more at $A10m to 13m (NB LCM B/S exposure). Happy Xmas to everyone. |
Posted at 05/12/2024 01:07 by bigbaggy 20% of invested cash blown up on one case. And that is just their own costs. What about the LCM liability for the winner's costs? They probably have some level of ATE insurance cover but (1) insurance for, say, A$15m adverse costs is hard to come by and very expensive to maintain. (2) even if they have it on paper - will it pay out ? As others have stated above, the case deteriorated badly, so were the insurers properly informed. Did LCM step into their shoes ? No idea. Pure conjecture but the RNS on this is very thin. Who knows.This is horribly tough territory now. The other side's lawyers and the insurers lawyers will be ravenous. Very sad to see. I think Patrick the LCM CEO has fought very gamely. Wonder whether the CFO leaving a few months ago, just before results were issued, was possibly connected to this ? Again, who knows. Pure conjecture. Much more fundamentally: the investment thesis on this stock seemed to be that it was a nailed on constantly growing cash multiplier. Hindsight, yes, but that was always complete nonsense peddled by a buffoon in a wig and sunglasses. He ramped the shares and legged it. This is litigation. Of course they were always going to get a bloody nose at some stage. This case is a massacre though. And so soon after the Katy Perry loss. No RNS on that one. So valuing this by moronically assuming perfect win record and perfect execution is and always was pure garbage. LCM is and always was very, very high risk because they have and always have had a very small size portfolio of very large bets. And this is one of their very largest cases and furthermore held at a 20% Fair Value premium to cash cost. TomT is of course 100% correct in picking Maddox up (Maddox used to be a high quality poster) when Maddox stated the judgment was "perverse". Pure nonsense Maddox. You need to take your loss like an adult as well. I thought you seemed better than that. No one is going to appeal this. It is completely disingenuous of the company to suggest otherwise. It turned into a complete pig but going back through the river of blood was never going to be an easy decision. BUT you do not put more good money from the bank and shareholders after bad. Take it on the chin. It will be bloody awful for the numbers and the equity story but you have to live to fight another day. The Fund model must be the way forward, if there is one. But how will fund investors perceive this outcome, is the obvious question...and equally obvious answer...Query also the very recently announced new bankers. Gordon Bennett, they must be spitting feathers... The other listed funders that I am aware of: BUR, OMNI and MANO all have one similar feature that LCM never had. They have LOADS of cases. Yes, of course a total YPF write down for BUR would be horrible but even then...it has LOADS of other cases. OMNI looks pretty well balanced. MANO is very, very granular and cookie cutter UK insolvency small/medium cases. Sad. But this was always an incredibly brave business model. As soon as I saw the video of Patrick Maloney the LCM CEO actually WITH the buffoon in the wig and sunnies, this looked like a total sh*t show waiting to happen. |
Posted at 08/10/2024 22:25 by gallamar Remember the big one is queensland power class action. Rumoured to be 1bn aud claim in press. 100pct funded by us. Pretty sure we get 20 to 25pct.On investor call I asked about it. Case is heard, judgment in 2 to 11 months |
Posted at 08/10/2024 15:58 by mtioc CEO said potential to be most successful LCM investment ever.It would be really interesting to know fair value of this matter at last reporting date. Although an extreme example, it should bring home the point to institutions that there is significant unrecognised value in the portfolio with real potential for NAV uplifts at matter conclusiond. Irony is that smart US endowment and pension fund investors get it and backed LCM over a multi fund cycle. UK listed small cap institutional investors don’t and bleat about dividends. |
Posted at 08/10/2024 08:38 by johnwig Welcome back, 74tom. It's good to have your expert views. I understand why you sloped off because the last few months have seen some really inexplicable manipulations here which have baffled this private investor. Don't disappear again until this hits 2 quid, OK?Thanks to the brave few who continued to try to explain the unexplainable in the meantime! |
Posted at 08/10/2024 08:03 by nchanning Fund 1 is now all but guaranteed to be considered a resounding success by investors , bodes very well for the chances of raising an even larger Fund 3 on the same very favourable terms for LIT |
Posted at 17/9/2024 10:55 by pigeonfeeder Disappointed they have declared another dividend - would much prefer they pay down debt, or do a share buyback. 30% Aussie W/H tax makes it unattractive for UK investors, especially if held in an ISA or SIPP. |
Posted at 15/8/2024 12:21 by williamcooper104 Lawsuit financing: investors smell profit in classic hold-your-nose stocks https://on.ft.com/4c |
Posted at 03/4/2024 09:26 by mtioc Makinbuks/GallamarThanks. Agree, nub is FV and associated risks. I also question LCM's ability to deploy more capital at same historical returns. My forecasts are for lower returns. In fund II LCM currently deploying at $8m/commitment. At that level will have over 40 commitments versus 20 in fund I. They will need to do something different (unit size, case type, geography etc..). That said, as an investor you need to value the business. In my case, if I believe it is conservatively valued at £2.50 per share, but due to risk of error, FV risk or uncertainty, I may choose a 40% margin of safety, which would suggest buying up to £1.50. My point is the company could be more helpful re investors reaching those conclusions. [G. not sure I follow your valuation approach.] Note win rate point, but if there are proper forecasts, that is simply a variable that could be flexed (e.g. low, med and high cases). Not sure LCM returns are as reliant on others for a few cases. See p9 of latest presentation for return distributions. CEO trying to steer investors away from case news. With 53 investments and growing, it is a better appreciation of overall portfolio that will drive value rather than news flow. On capital allocation, the amounts are small and the company is clear they are "market signals" rather than genuine capital allocation decisions. That said, if you have the internal investment opportunities that LCM does, you should be clear why you are preferring others such as buying your own shares or dividends. Again, I question the lack of explanation rather than the decision. |
Posted at 21/9/2023 12:55 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." |
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