Litigation Capital Manag... Share Discussion Threads

[djderry] 28/2/2019 22:03

Speaking of pedanticism,one could also quote the twenty-odd pages of risk factors from the AIM Admission documents.Bring it on!

[riverman77] 28/2/2019 17:41

They say that 30 investments is enough to build a sufficiently diversified portfolio - surely the same applies here? They should have well over 30 cases once they have invested some of their spare cash. As long as they are not too concentrated in a couple of big case they should be able to withstand a few losses.

[djderry] 28/2/2019 17:28

Their lack of scale,as with Jil ,is a concern.Without being pedantic,hold on,let's,it's to be expected that litigation companies will not win all their cases,or that the quantum of awards will fail to cover the initial investment and so on.In these situations the key is that the losses are but a small part of the portfolio.

[djderry] 28/2/2019 13:30

Buying a small few of these today,will add a few more tomorrow,not really convinced,more of a watching brief.

[jonwig] 27/2/2019 10:39

OK, thanks Aussie. I'd looked just at the numbers, not the history.

Dividends or re-invest? re-invest always in these situations.

[bigbadaussiebear] 27/2/2019 10:02

Also their accounting practices are conservative, they dont mark their investments to market prices like Burford does, So if they invest $10m into a project, you wont see the carrying value of this project marked up on their books to say $15m or $20m after a year or 2, you will only see the $10m moved into revenue when the case is resolved and the capital + profit share is returned to the company as revenue.

[bigbadaussiebear] 27/2/2019 09:58

They are not going to fund all the projects in that $365m pipe line

they will pick the best cases and fund them..

my guess is they will secure some debt soon to add some leverage.


The reason the company had losses in 2016 and 2017 was because they moved from a 3rd party funding model to an on balance sheet funding model.

Essentially the business used to manage capital for 3rd parties before they decided to go public and move to an on balance sheet funding model

over the 6 years prior to 2018 the company returned $48m on $18m worth of capital invested in cases.

The 2018 results show similar metrics.. so this is all about backing the investment managers to keep smashing it out of the park with these sorts of returns.

By expanding to the UK the company has started to diversify the types of cases in its portfolio + the geographic locations of cases, which are all positives in my view.

What i like about this company is that its book will continue to grow, as earnings will be reinvested into generating more returns

Why would a company that makes 80% IRR + 40% ROE in 2018 pay dividends when they can just reinvest and continue to leverage their success.

[jonwig] 27/2/2019 09:37

I've had a very quick look at some numbers in the prospectus.

Based on 2018 cash and cash raised, the MCap ex-cash is £51m and the 2018 PAT was £4.65m. So ex-cash PER is about 11x. I've seen no forecasts, and they made a bottom-line loss in 2016 and '17, so I'm not going to project anything for 2019. However, both gross profit and operating cash flows improved strongly in 2018.

The liquid side of their balance sheet is £25m (why are contracts shown as current assets?) and they've no borrowings. But how can their capital base support a pipeline of 49 projects with a value of A$365m (£197m)? That looks wrong!

Two ways in which their business differs from Burford: much bigger exposure to class actions, and geographical centre in Australia. I don't know whether these are positives or not.

If their 2019 figures show a similar improvement to 2018 as '18 did over '17 they will be very cheap. Personally I want to see them before making any commitment.

[bigbadaussiebear] 27/2/2019 03:46

Trading at 2 x book value here (LIT)

Yes they dont have the scale of BUR - but this means they can cherry pick the best cases to invest in

80% IRR also absolutely smashes BUR out of the park

They have a diverse portfolio of cases and this is becoming ever more so, This will help in managing risk

Lack of scale didnt blow JIL up, - lack of risk management did... having a diverse portfolio with no 1 case too large helps lower such risks

CEO has plenty of skin in the game and bought 666,666 shares in the raise just before delisting off the ASX

[riverman77] 26/2/2019 17:56

I need to look at this one properly as well. Obviously doesn't have scale of BUR, but on the other hand doesn't have such vast amounts to invest so can be a bit more picky in terms of choosing only the best opportunities. The team have very good track record and with around 20 cases (with more to follow) should offer sufficient diversification.

Looks to be a lot cheaper than BUR in terms of price to book (although I don't have an exact figure for this - would need to take the last results and add in the IPO proceeds less any costs).

[djderry] 26/2/2019 17:26

Of course,this thread is about LIT,so I won't list my reasons for investing in BUR.Unless and until there are compelling reasons I don't see any reason to get involved here.(Having seen what lack of scale can do,ie JIL)

[jonwig] 26/2/2019 17:18

Hi, djd - sorry, I've been lax and haven't looked at this one at all! I've been meaning to, before next Monday. (It's the weather, and the garden!)

[djderry] 26/2/2019 16:31

Jonwig,greetings!Any view on the merits of an investment here.I've read the IC articles but I'm always wary of ' the next' ...( in this case Burford). Obviously,one must do one's own research but I am interested in your take on this one.

[bigbadaussiebear] 26/2/2019 13:36

interesting piece i found in the AIM prospectus for LIT

"The increasingly litigious environment for global corporates is a key driver of the market opportunity for LCM. LCM believes that the size of the potential market for corporate portfolio transactions could potentially dwarf the entire current addressable market for litigation finance worldwide"

hopefully they build a world class business over the next few years

[bigbadaussiebear] 26/2/2019 10:44

Below figures are in Australian dollars

They have settled 2 cases in the first half of this financial year.

One was for around $4.5m EBITDA
The other was for around $1.5m EBITDA

My guess is NTA us around $70m

There would also be some costs associated with the IPO and setting up the new office in Asia.

Still some large seller around.. So the liquidity is there for anyone that wants a decent sized position

This is a bottom Draw stock,
Patrick and Nick and 2 of the most experienced men in the litigation funding space.

[hiraniha] 25/2/2019 17:28

I missed the boat completely with BUR despite reading about it over the years. My fault for not paying attention, I guess!Let's see what happens on Monday, when the half year results are released.

[onjohn] 20/2/2019 10:05

BUR + MANO looking good recently

[spob] 18/2/2019 09:58

aim is different to main market

[jonwig] 16/2/2019 06:18

Regarding the prospectus, it's an AIM requirement that it should be available on the company's website.

Up to now, I haven't bothered getting hold of one, but as a matter of principle, I will now try. Cannacord are the Nomad, and Hawthorn the PR firm. It will be next week before I can raise anyone.

EDIT: this should work -

[rjmahan] 15/2/2019 14:57

Could anyone who has it please link a copy of the prospectus - I have asked a couple of times but they have not got back to me.

Many Thanks,
Rob

[robsy2] 13/2/2019 08:18

I've bought in yesterday and this morning . This looks like it could do well.
R2

[bigbadaussiebear] 12/2/2019 13:08

that was a pretty decent buy that cleaned up that stack at 75/76

[nfs] 12/2/2019 11:18

Had some more today