Litigation Capital Manag... Share Discussion Threads

[stewpot3] 11/2/2019 09:13

What's going on here? 9a.m. Monday morning, down 7% and 100k more volume than Burford! Perfect timing by me last week I don't think.

[bigbadaussiebear] 07/2/2019 14:03

you know whats funny, you're nit picking about the board... but i was speaking to a fund manager in Australia when i was telling him he should buy LIT at 45p equivalent...

He said he wasnt sure about the board.. before they moved to AIM there was only 3 board members and Patrick was the only one with experience in LAW. The board has been significantly strengthened and i think it is quite strong considering the size of the company.

Well guess that fund manager missed out on an 80% return in 6 months so far.. and my guess much much more over the coming years ....

Not only has the board been strengthened, they have been expanding their team in Australia + setting up a team in singapore + the addition of the UK team.

gearing up for a years of growth ahead i would say

[upsillon] 06/2/2019 15:54

Was happy to buy £LIT recently and still happy to add more in the future subject to results and updates.

Mkt cap: PBT looks fine and balance sheet pleasing to my eye.

Website nice and clean.

People in charge seem to know what they're doing from what I can see.

Position sized at 1R with a stop just below the IPO price so lot's of space for this to breathe. Happy holder.

Only slight grumble is that all members of the board have a full set of hair...never a good sign. Never trust a CFO with a full set of hair.

My views....your money.

[bigbadaussiebear] 05/2/2019 13:20

some decent volume going through past 3 days now.. just what i wanted to see after a big move from 50p in such a short space of time... It was a bloody steal for me at 45p

Out with the old... in with the new...

I have also been buying MANO - which is doing very well too

[jockthescot] 03/2/2019 10:37

Jonwig- funnily enough I’ve just registered for that to be sent via email. Yes - I did think it was strange.

I tried to register for free but not sure you can now.

Jock.

[jockthescot] 03/2/2019 09:31

Can anyone work out how to listen to this without paying £600 to register?!

[spob] 02/2/2019 08:58

here you go Big...


LIT is one of 10 constituents of the annual Investors Chronicle Bargain Shares Portfolio. Published every February.

INL JOG RFX FUM AUGM TMT MERC DRV LIT BMY






Litigation Capital Management (LIT)

Aim: Share price: 78p

Bid-offer spread:75-78p

Market value: £84.9m

Website:lcmfinance.com

Sydney-headquartered Litigation Capital Management(LIT), a leading provider of litigation financing to enable third parties to pursue and recover funds from legal claims, listed its shares on Aim just before Christmas 2018 when equity markets were falling out of bed. However, the company had strong support from investors, who backed a £20m placing (£18.1m net of expenses) of 38m shares at 52p each. That was a bargain entry point at the market low, but there is still scope for the rerating since then to gather pace.

Importantly, all of the proceeds from the equity raise were kept by the company, and there was no selling by existing shareholders. Funds managed by asset managers Miton Group, River & Mercantile and Standard Life Investments acquired 30m of the placing shares to give them a 27.6 per cent stake in the company. Litigation Capital also raised A$10m (£5.6m) from investors in Australia in October prior to cancelling its listing on the Australian Stock Exchange (ASX) when it moved to Aim. The company had previously listed its shares on the ASX in 2016 when it raised A$15m on admission.



A growing alternative investment class

It’s easy to see why both UK and Australian investors have been willing to back a company that is a mini version of market leader Burford Capital(BUR), shares in which have risen 12-fold since I spotted the company’s potential in the summer of 2015 (‘Legal eagles’, 8 June 2015). In a nutshell, litigation financing involves the funding of third parties’ legal claims in exchange for receiving a share of any amounts recovered from those claims. It’s a growing alternative asset class with returns determined by the skill of selecting and managing profitable litigation projects. Indeed, over the past decade, there has been significant growth of the industry and expansion beyond insolvency claims to commercial claims, class actions and international arbitration in an increasing number of jurisdictions.



Company background and trading history

Founded in Australia in 1998, and led by chief executive and 6.8 per cent shareholder Patrick Maloney since 2013 – the board of directors hold 9.1 per cent of the issued share capital between them – Litigation Capital has experienced significant growth in recent years. In the seven financial years to 30 June 2018, the company generated a cumulative return on invested capital of 138 per cent, and posted an eye-catching portfolio IRR of 83 per cent.

Around 88 per cent of litigation projects the company backed were profitable in the seven-year period, with the average time from investment to settlement of a litigation case only 27 months, a relatively short holding period. Moreover, momentum is building as Litigation Capital delivered its strongest returns ever in the financial year to 30 June 2018, posting a profit before tax of A$12m (£6.7m) on 231 per cent higher revenues of A$31.2m, and reported a return on equity of 41 per cent.

The current portfolio consists of 16 unconditionally funded litigation projects and five conditionally funded projects. Litigation Capital is also targeting a further pipeline of 49 projects with estimated capital commitment of A$365m. This pipeline represents a set of qualified opportunities at various stages of due diligence. The move to Aim provides the company with access to additional capital in a larger and more mature market and complements its business expansion in the UK.



International expansion

In line with the strategy for international expansion, the board of directors recruited a highly experienced UK litigation finance team of six staff, headed by executive vice chairman Nick Rowles-Davies, who joined Litigation Capital in 2018. He has a wealth of experience in this space, having created and defined the concept of portfolio litigation finance. Mr Rowles-Davies was a director of Burford Capital until 2016, where he had led the group’s non-US operations as managing director. Other members of the UK team are Matthew Denney and Tobey Butcher, both of whom were partners at Enyo Law, one of the UK’s largest and most respected litigation-only firms.

Not that Litigation Capital’s board lacks experience, as chief executive Mr Maloney has acted in more than 200 commercial litigation cases so knows the market inside out, while finance director Stephen Conrad has 25 years' investment banking experience. Indeed, the strategic addition of the UK team has provided Litigation Capital with a major opportunity to enter the European market. The company is also adding a corporate portfolio approach to the single-case funding that has been the origin of the business in Australia.



Peer group comparisons

Importantly, the listing of the shares on London’s junior market enables investors to value the business relative to peers. There’s value on offer. The company had net assets of A$25.4m (£14.2m), including cash of $13.8m and litigation cases with a book value of A$11m at the end of June 2018, since when it has raised £25.7m of net cash through the aforementioned placings to give a pro-forma NAV of £38m. This means Litigation Capital is being valued on a price-to-book value of 2.2 times, a hefty discount to Burford, which is valued on a price-to-book value of 3.8 times Numis Securities end-2018 NAV estimate of 572¢, albeit Numis Securities expects Burford’s NAV to rise to 670¢ by the end of 2019, and to 828¢ by the end of 2020, highlighting a strong earnings profile and realisation of profits from investments.

Clearly, Litigation Capital has a long way to go to emulate Burford’s success and the higher rating investors ascribe to its shares. However, it is clearly moving in the right direction as an IRR of 83 per cent and an 88 per cent success rate on its completed litigation cases highlights. These bumper returns reflect a conservative accounting approach in valuing legal claims, which results in the release of hefty profits when cases are settled.

Bearing this in mind, eight of Litigation Capital’s litigation projects are forecast to complete by the end of the 2019 financial year, two of which have already completed, a further six projects are forecast to complete by June 2020, and seven in the 2021 financial year, thus offering prospects for both newsflow and realisation of healthy profits on Litigation Capital’s investments in these ongoing claims.

With a smart team of legal eagles behind it, not to mention some heavyweight UK institutional investors, Litigation Capital shares look a decent long-term buy.

[bigbadaussiebear] 02/2/2019 02:18

No I'm a shareholder from the ASX and my shares are not even tradable on the ASX as I'm still holding them on the Australian share registry.

Most of the IPO capital raise was issued to hedge funds.. Unless you were a very good client of cannacord you wouldn't have been able to get in on the IPO.

[bigbadaussiebear] 02/2/2019 02:16

This company is the real deal.. They have been around for over 20 years.

They moved from a 3rd party funding model to an on balance sheet model which started in 2014 with a seed round of funding at around 20p (40c in aud)

Then they did an IPO on asx

Then they raised more money when listing on AIM.

Their pipeline has grown significantly hence the need for more capital to fund more cases and scaling the business.

Send the ceo Patrick an email if you want to know anything. He usually calls you if you provide a mobile number and he is the largest non institutional shareholder in the company. He also put in another $500k aud in the last round of capital raisings

The board has also been strengthened considerably since listing on AIM and I think this might end up being a mini Burford capital if management execute growth well.

Does anyone have links to the articles or tips that have caused the recent buying?

[spob] 01/2/2019 05:44

interesting story i agree


ST drew my attention

but this is in no way, shape, or form, a Benjamin Graham deep value bargain stock


personally i have a few strict rules

One of which is NO Foreign Based AIM Stocks, no matter how good the story sounds

so not for me


i wish you well with your investment here

as you say, it could do a Burford

all the best

[blueeyes13] 01/2/2019 05:27

spob it's clear you know nothing about this company, the sound commercial reasons for transfer to Aim from ASX in Dec, and you obviously haven't read the Hotcopper ASX thread with historical postings. go and read the AIM IPO doc too, I recommend it.
Re foreign co listed in UK, there are a number of exceptions and therein lies the opportunity. You could say the same about Somero, US based, Uk listed, but that investment turned out very well too the last few years. DGOC i also hold, US based, UK listed, again performing really well. I'll personally avoid Israeli AIM stocks in future after a less than happy time in XLM. so lesson learnt is be selective and do a lot of research.
As a holder of Burford for 2.5 years, I know this industry well, rate Nick Rowles-Davies a lot, and should they execute well from here then I believe this company could multibag several times over a 3 to 5 year time horizon.
One thing ST has overlooked from the IPO doc, NRD will be given a 4% share of the company as part of him and his team joining LIT late last year, a small dilution for a potential massive income centre for the co over the next few years, time will tell.
For transparency, i have a large core holding in BUR and have an initial position in LIT which I'll average up as (if) the co executes their plan.
Best of luck all.
Regards

[spob] 01/2/2019 04:31

hmmm ... foreign based AIM stock ?

we know what usually happens with those LOL

[hiraniha] 31/1/2019 20:55

Tipped in the IC. Should move up tomorrow.

[bigbadaussiebear] 31/1/2019 02:31

still a decent seller around at current levels..

BUR + MANO also looking good recently

[nimbo1] 25/1/2019 11:10

Just bought all the stock at 77 - 80.

[bigbadaussiebear] 24/1/2019 08:21

well as expected, here are the aussie sellers showing up now..

[bigbadaussiebear] 23/1/2019 04:32

I guess so, the top 6 holders own 50% of the float and i doubt they will be selling.

The only reason i would say is there is decent liquidity on this thing, is because while we were still on the ASX there were some holders trying to exit their positions before we listed on AIM, but there wasnt enough liquidity for them to do so.

So i think much of the selling would be coming from guys that didnt want to hold overseas companies. Most Australian investors dont have a tolerance for investing overseas. And this was apparent when the stock got traded down to 45p despite raising at 50p before delisting. Once all these old holders are out i would think the float will be pretty tight again.

I own about 400k shares and i wont be selling even though i have doubled my money in 5 months

Looking forward to see management scale the business further and hopefully turn it into a mini Burford Capital.

[nimbo1] 22/1/2019 11:49

i think liquidity is very good for £80 mil mc aim stock. I've moved prices by 10% simply by getting out of a 30k position before on some of the smaller more illiquid stocks. Here you seem to be able to buy and sell with ease. May change of course.

[bigbadaussiebear] 22/1/2019 10:34

Its pretty thin, was thin on the ASX and the IPO stock for the AIM listing went to mostly funds... i would expect some liquidity to come out over the next few weeks as ASX holders are having their shares converted to be tradable on AIM.

For me this is a long term hold.. A1 management team + growing and evolving sector + profitability is uncorrelated to the economic cycle.

Patrick is a good operator, and he has done well for us ASX holders to finally unlock some of the value for shareholders

[nimbo1] 22/1/2019 08:38

I bought a small amount here yesterday - looks like I should have been more aggressive.

[jaws6] 18/1/2019 16:11

LIT been talked in IC

[bigbadaussiebear] 02/1/2019 10:18

Australian fund managers are absolutely useless.. lots of Australian companies get taken over by oveseas companies because these guys just dont know how to value businesses, especially ones in relatively unconventional sectors such as litigation funding.

This is the reason why the company decided to move to AIM, because it will be much easier to raise capital here, and investors here know how to appreciate a company in this sector, as seen by the stellar performance by Burford Capital.

LCA, has now expanded their team and raised enough capital to double their book value since i bought into the company. As long as they stay disciplined and keep hitting the sorts of returns they have been doing over the past few years, share holders will be very happy in the long term.

If you want look into the history of its life on the ASX, you can find the companies old announcements on this site using the stock code LCA

[jonwig] 02/1/2019 09:50

Thanks for posts, Aussie. Yes, I noticed the share price uplift once it went to AIM, but the price hadn't performed so well on ASX throughout its life.

[bigbadaussiebear] 02/1/2019 09:43

This is the old companies message board in Australia

hxxps://hotcopper.com.au/asx/lca/

It was an absolute steal under 52p equivalent

the company floated on the ASX in 2016, had a very good FY18 and has since raised more capital to fund their growing pipeline.

Ive spoken to Patrick a couple of times and he is a very good operator. He is also the largest individual shareholder in the company.

There are a number of cases that are due to settle in 2019 which should provide a catalyst for higher prices.

They are very picky with the cases they chose to fund and only fund around 4% of the applications the receive.