Litigation Capital Manag... Share Discussion Threads

[gersemi] 28/3/2019 14:29

Today’s maiden results from newly listed Litigation Capital Management (LIT:75p), a Sydney-based provider of litigation financing to enable third parties to pursue and recover funds from legal claims, highlighted the eye-watering returns that can be made from this specialist activity.

Three of the company’s 24 litigation projects completed in the latest six-month trading period, of which a single case in Australia accounted for the lion’s share of the gains. That case alone produced revenue of A$9.7m (£5.2m) and a cash profit of A$4.1m, a healthy 88 per cent return on the capital LCM had invested and over a typical 27-month investment period. An international arbitration case settled in double quick time and produced an eye-catching cash profit of A$1.6m in just nine weeks, representing a 57-fold increase on capital invested. The returns from both cases helped the company deliver an interim pre-tax profit of A$2.7m.

LCM has $20.7m of litigation investments on its balance sheet, all of which are conservatively valued, and a net cash pile of A$52m to help fund the balance of the A$70m investment required in its committed portfolio. It also has a pipeline of 64 projects requiring an estimated investment of A$409m, of which eight are corporate portfolio investments, a segment of the market the company is actively targeting. Bearing this project pipeline in mind, LCM is in the process of raising a third-party fund which will be managed by the company in return for a management and performance fee. It shouldn’t have any problems given that LCM has generated a running internal rate of return of 78 per cent on settled cases and a return on invested capital of 117 per cent in the past 7.5 years. Expansion into the European market has been facilitated through the opening of London office, and its Asian presence has been stepped up with a Singapore office at the tail end of last year, thus enhancing its geographic reach.

Admittedly, forecasting the timing and the returns from litigation investments are notoriously difficult, but given the track record of LCM’s astute management team, it’s only reasonable to assume that LCM will continue to deliver a hefty return for shareholders in the coming years to warrant paying two times book value for the shares at this stage. Add to that upside from third-party funds to scale up the operation, the declaration of a maiden interim dividend of around 0.27p a share, and strong structural growth drivers underpinning demand for litigation funding, and I have no hesitation reiterating my earlier buy advice, having included LCM’s shares in my market beating 2019 Bargain Share Portfolio around the current offer price. Buy.

[cf456] 28/3/2019 14:26

Judging by all the buying there are plenty of buyers keen to pick up the stock.

[lomax99] 28/3/2019 13:55

Miton trimming.

[jockthescot] 28/3/2019 12:42

Solonic- that is moronic. Filtered.

[nimbo1] 28/3/2019 12:16

wish you hadn't bothered

[x54v] 28/3/2019 10:10

Some move at Manolete. Catch up time for LIT.

[cf456] 28/3/2019 09:33

Good to see that the directors are aligned with shareholders here.

12.62% of the company between them.



Pretty significant skin in the game. They'll certainly be keen to do everything they can to drive the share price higher.

[cf456] 27/3/2019 14:27

Yes, MANO has been very strong indeed and shows the potential upside to be had when the momentum gets going.

Once LIT gets moving properly then I expect a move of a similar magnitude. In the meantime, the seller is providing an opportunity to load up on the cheap.

Much easier to get a decent line of stock just now whilst things are quiet than having to chase the price when news is released. And the price here can move very quickly indeed as per the 75p to 96p move last week.

[nimbo1] 27/3/2019 14:04

Extraordinary rise in Manolete shares - I think these should follow them however I believe this story is relatively unknown in comparison. Numbers and case results should do the talking though. These have potential to double over the coming year imo.

[connor23] 27/3/2019 13:23

Saw this in the news the other day. Looks interesting. Law firm in question is Clyde & Co where I used to work. One I will have to keep an eye on.

[cf456] 27/3/2019 08:38

From ST the other day:

"This is the fourth litigation project that has completed since June 2018, and there are solid prospects for further positive news flow and realisation of healthy profits on Litigation Capital’s investments in other ongoing claims. Indeed, there are 24 projects in its current portfolio which have a total budget of A$91m."

[bigbadaussiebear] 27/3/2019 08:35

Yes you are right. And considering we haven't seen any more selling from the largest shareholder since earnings, my guess is all the selling is from Australian institutions and retail clients of Morgan's (the broker that raised $10m before the delisting from ASX)

The seed rounds were done at aud $0.40 in 2014 and 2015

The ASX ipo was done at aud $0.70c in 2016

The ASX capital raise and AIM IPO was done at aud $0.90c in 2018

We are now at around aud $1.65 in 2019

I expect profit taking

The share price will move higher when there are further case settlements

[nimbo1] 27/3/2019 08:20

Its weird how this always opens down a small amount with a large uncrossing trade - I assume we are still working though sales from any Australian holders still unloading.

[cf456] 26/3/2019 12:59

It's certainly a hot sector just now and understandable that instis want exposure when gains likes those in MANO are potentially on offer.

Simon Thompson clearly keen on these as per his update yesterday:

"These eye-watering returns highlight the quality of Litigation Capital’s approach to funding litigation projects."

"The shares have reacted positively to the news flow, up by 20 per cent on my buy-in price of 77.5p, and are priced on 2.4 times pro-forma net asset value, a multiple that is set to drop sharply if, as I strongly suspect, Litigation Capital continues to produce eye-catching returns on its portfolio. Buy."

[bigbadaussiebear] 26/3/2019 12:48

yep large cross trades have been taking place. yesterday there was 500k @ 92p crossed

today 2 x 300k @ 90p

before the recent rise there was 2 x 600k @ 76p

[greenknight1] 26/3/2019 11:58

Looks like the same that was happening a few weeks back before a nice rise. Large orders being filled and the price held.

[cf456] 26/3/2019 11:57

A couple of chunky trades there. 2 x 300k @ 90p.

Looks to be institutional.

[cf456] 25/3/2019 12:22

"Importantly, the agreement boosts the number of potential funding opportunities available to Litigation Capital. The shares have reacted positively to the news flow, up by 20 per cent on my buy-in price of 77.5p, and are priced on 2.4 times pro-forma net asset value, a multiple that is set to drop sharply if, as I strongly suspect, Litigation Capital continues to produce eye-catching returns on its portfolio. Buy."

[nimbo1] 25/3/2019 07:34

Agree - they seem to have all the building blocks, high roic, balance sheet to invest, decent management team, access to pipeline, will be able to raise capital when needed for their own managed fund and balance sheet - gives them every chance of building a really significant business. Also this market is opening up in Asia in places like Hong Kong where it hasn’t been accessible previously providing growth opportunities for them.

I’ve built a good holding - will be looking to add on dips.

[bigbadaussiebear] 25/3/2019 07:33

More ground work, excellent

Building the foundations of a company that will grow significantly over the next few years

[tallprawn] 25/3/2019 07:26

Excellent news this morning - LCM are clearly getting recognised in the market they operate within and well respected based on their initial cases.I can see this growing sharply - Could well be a sizeable return available here for a 1-2 year hold from the current share price levels.

[grannyboy] 24/3/2019 11:54

Well you should have a word with solonic, it started the betrayal of Brexit talk in its post 121..

Over the past near on 3 years, I have seen that when the remoaners don't like the truth spoke, they instead want to close down ALL opposition and different opinion to their own anti- democratic rhetoric...

[nimbo1] 24/3/2019 09:39

Please take your politics elsewhere - no one wants to read your political musings. This is supposed to be a place to discuss the investment merits and business progress of LIT. Another one for the filtered list.