Litigation Capital Manag... Share Discussion Threads

[74tom] 23/6/2021 08:56

You get the feeling that the signing of the second third party fund can't be far off... I think that's what the market is waiting for in order to push through the resistance at 115p.

Either way, this is the frequency of positive news flow that we need to achieve short term fair value. I still think £5-8 is readily achievable in the next few years as we continue to scale up, and the bigger our market cap gets the more attractive we will be to larger investors & funds.

[adamb1978] 23/6/2021 08:27

Nice to see another material case in quick succession!

[solarno lopez] 23/6/2021 08:24

Another good start

[someuwin] 23/6/2021 07:07

23 June 2021

Litigation Capital Management Limited

("LCM" or the "Company")

New Litigation Finance Agreement to fund Comet Group liquidation claim

Litigation Capital Management Limited (AIM:LIT), an alternative asset manager specialising in dispute financing solutions internationally, has entered into an agreement to provide a litigation finance facility to Geoffrey Carton-Kelly, a partner of FRP Advisory ("FRP"), additional liquidator of CGL Realisations Ltd (In Liquidation), which until 21 October 2019 was known as Comet Group Ltd ("Comet"). The litigation finance agreement will cover proceedings issued in the High Court against Darty Holdings SAS ("Darty") ("the Proceedings"). Mr Carton-Kelly was appointed as additional liquidator by the court to specifically investigate and pursue potential claims.

At the time of its insolvency, Comet was the UK's second largest electrical retailer with 239 stores and 6,900 employees.

Darty is a subsidiary of FNAC Darty, a multinational electrical retailer based in France, and listed on the Paris Stock Exchange (under ticker FNAC.PA).

The additional liquidator alleges in the Proceedings that a transaction that occurred prior to Comet entering into administration had the effect of a preference in Darty's favour, thus reducing the amounts that would otherwise have been available for Comet's creditors. The proceedings seek recovery of amounts exceeding GBP83m to be returned to Comet for distribution to creditors.

An important preliminary issue in this case is whether Comet was "connected" to Darty at the time of the alleged preference. This issue has been determined in favour of the additional liquidator at first instance and on appeal.

Patrick Moloney, CEO of LCM, commented: "LCM has been financing claims of this nature since its inception 23 years ago. We are very comfortable funding into the insolvency and restructuring sector. Over time, we expect to see increased applications from this part of the market."

Nick Rowles-Davies, Executive Vice Chairman of LCM, commented: " With liquidations of this scale, LCM is leading the way as the funder of choice amongst leading insolvency practitioners such as FRP. We are witnessing significant demand for disputes financing in insolvency matters and we expect this to continue as the awareness of its key benefits continue to be recognised."

[someuwin] 22/6/2021 18:51

Simon Thompson upgrades LIT target price to 140p...

[farnesbarnes] 22/6/2021 07:10

hpcg - yeah, I like it a lot.

[hpcg] 21/6/2021 18:29

Valuing is difficult not least because of the business interruption because of Covid. The trickiest part is assessing long term margins through competition. Returns (with incorporating losses) are so strong that it is very attractive for money. More money should mean a more demanding offer from the expert investor. On the other hand the presumably limited supply of legal people able to properly assess the merits of a case means that money does not have a free run. I count it more like an expert lender in pharma, CLOs or property mezzanine. The big difference is that it is able to compound at a rapid rate through reinvesting retained earnings. I would say under those circumstances price should be about a 5% forward twelve month cash profit return at spot. Like insurance I don't really see any terminal event for the business model. Duration is 0-3 years so interest rate risk is limited.

[makinbuks] 21/6/2021 14:51

At last news of an actual case! Interesting to see how they value this in the accounts. Pre trial they value at cost of work done, but what if you win pending appeal? Will we see the NAV rise or do they wait until the appeal is heard?

[adamb1978] 21/6/2021 14:35

Agreed 74tom. A couple things nearing my top-up price today...though sometimes its tempting to lower your top-up price when that happens! I do think we might get more weakness over the next 2-3 months...

LIT holding up well with that background context

[maddox] 21/6/2021 14:34

Thanks Adam,

Well their IRR is 78% and MOIC is 2.35x including losses. They have a 95% case win ratio. These metrics are based on a 9.5 year track record, and today's win (ofc subject to appeal) was on a 4x multiple return on invested capital - so further substantiation to those metrics.

But yes LitFin is a new investment asset class and it takes a while for the novelty to wear-off. IMHO a current fair value would be 2x invested capital and thus a share price of c.160p.

So, on that basis I've added today at 113p with short-term price target of 160p.

Regards Maddox

[74tom] 21/6/2021 14:13

Horrible market today in most AIM stocks, on a mid to long term time frame today's news was excellent, so interest will continue to flow from more sophisticated investors :)

[solarno lopez] 21/6/2021 14:05

Positive outcome in New Zealand

[adamb1978] 21/6/2021 14:01

Hi Maddox

That's a fair question. A company which can generate a 90% IRR or whatever it is and make a 2.35x turn on every $ invest should be rated extremely highly. They've historically traded on a P/NAV of around 2x, which isnt massively generous compared to those returns.

I dont think the market really knows how to value LIT. I think LIT will need to further prove that they can generate the returns which they state over a longer period of time and perhaps then as the NAV swells the share price will skew up appropriately. Maybe they'll even begin to pay out a very high, regular yield or ongoing special divis and that will bring in a new range of investors?

Either way I think as long as the business keeps performing, the value should gradually come through.

Adam

[someuwin] 21/6/2021 13:44

Amazed at the lack on interest here.

[maddox] 21/6/2021 11:18

Hi AdamB1978,

I tend to think that LIT should be valued on a multiple of it's invested capital. Question is, when you can generate a return of 2.35x (long-term track record) what value would you put on LIT?

Back of the envelope calc. LIT has c.£92m invested; LIT's current mkt cap of £127m, so LIT is currently valued at c. 1.35x its invested capital.

Regards Maddox

[bigbadaussiebear] 21/6/2021 10:24

Epic returns... Lots more to come..

[someuwin] 21/6/2021 08:54

Bought more on today's excellent news. Story getting better and better.

[adamb1978] 21/6/2021 08:50

I wouldnt be concerned about it Trotters. Main thing for an investor rather than speculator is perofrmance of the business - valuation uplift will come through in the end.

Given the comment in the RNS about a possible appeal, I'm guessing that they won't mark-up the value of this contract in the June 30th accounts

[trotterstrading] 21/6/2021 08:27

Delayed reaction to the RNS? Deserves much more than a few %

[sambessey] 21/6/2021 08:04

Excellent stuff :) should blow through ATH for starters!

[adamb1978] 21/6/2021 08:02

Thats a chunky deal! I wouldnt look at it as revenue as I dont think you value LIT based on its P&L - to me its a NAV based valuation co.

However the carrying value of their litigation contracts was A$71m at Dec-20 and this will add around A$18m to that...so a 25% increase!

Nice start to the week!

[greenknight1] 21/6/2021 07:43

Nearly a years worth of revenue in one case!!! Great news.

[74tom] 21/6/2021 07:26

Lovely £10m profit on a £3.4m investment! That should get us through the ATH resistance :)

[enronhubbard] 18/6/2021 21:47

Why is that the kiss of death?