Burford Capital Limited Positive judgement from the secondary market

Hardman & Co ReportOn 3rd January Burford Capital Limited (LON:BUR) announced that on 30th December it had sold an interest in the Petersen claim to a third party investor at a price that implied a valuation of more than ten times Burford’s investment. The claim has been progressing well and, having passed a significant milestone in 2016, would have been expected to rise in value regardless of any transaction. This is the second secondary market transaction that Burford has completed, each demonstrating a gain over the existing valuation. In this report we discuss the implications for valuations, both for this specific case and for the portfolio as a whole.

 

 

Earnings: Although the multiple of investment is well ahead of Burford’s likely valuation of it, the statement suggests that the actual monetary gain will be small. We have upgraded our expected revenue by $4m to reflect this gain, giving a 5% upgrade to 2016E.

Balance sheet: Burford have invested a sum ‘of less than $18m’ into the Petersen claim. There may be an effect on the valuation, but this is very hard to quantify. The asset was likely to be revalued upwards anyway, and, as discussed in this report, this is unlikely to reflect the full transaction value.

Valuation: With the deal enhancing earnings and supported by helpful currency moves, Burford’s rating remains good value despite the strong share price performance. The prospective P/E for 2018E is only 15.0 times, while an 18% RoE with strong growth suggests excellent metrics all round.

Risks: The investment portfolio is fairly diversified, but retains some very large investments, which means revenue may be volatile. As the company matures we would expect that to decrease, but not to disappear. The Petersen case shows that this volatility is not simply a negative.

Investment summary: Burford Capital Limited has already demonstrated an impressive ability to deliver good returns in a growing market while investing its capital base. As the invested capital continues to grow, the litigation investment business will continue to produce strong earnings growth.

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Facebook
    Twitter
    LinkedIn
    Hardman & Co

    More articles like this

    Hardman & Co

    Burford Capital Putting fears to rest

    Burford Capital Limited (LON:BUR) has announced its results for 2019. As previously indicated, these were lower than in the previous year. Revenue fell 17% from $430m in 2018 to $357m. Profit after tax, on Burford’s basis,

    Hardman & Co

    Burford Capital Mixture of strong and weak activity in 2019

    Burford Capital Limited (LON:BUR) recently released its first-ever trading statement, covering cash activity in 2019. Group-wide commitments set a new record of $1.57bn, a 24% increase. Overall deployments were almost flat compared with 2018, at £1.07bn.

    Hardman & Co

    Burford Capital Results don’t need to be appealed

    Burford Capital (LON: BUR) has announced its interim results for 1H’19 and has produced another excellent set of figures. After stripping out third-party interests, revenue was up 40% to $287m and earnings grew 36% to $225m.

    Hardman & Co

    Burford Capital Petersen appeals to investors

    Burford has made a double announcement about the Petersen case. Argentina had appealed to the US Supreme Court over the decision about where the case will be heard. The Court has declined to hear the appeal,

    Hardman & Co

    Burford Capital Next $1.6bn of investments to boost returns

    Burford Capital (LON:BUR) has announced access to almost $1bn of new capital, which, combined with its balance sheet, gives a new and financially attractive structure for how the next $1.6bn of litigation finance investments will be

    Hardman & Co

    Burford Capital Equity issue ensures growth is not adjourned

    Burford Capital (LON:BUR) has placed 10.41m new shares with institutional investors through an accelerated bookbuild. The price per share was 1850p, making a total of £192.6m ($251.2m) raised before expenses. The funding will be applied to

    Burford Capital Limited

    Burford Capital sells Teinver investment for $107 million

    Burford Capital Limited (LON:BUR), a leading global finance and investment management firm focused on law, today announced that it has entered into a definitive agreement to sell its entire entitlement in the Teinver matter for $107

    Hardman & Co

    Burford Capital Limited Another positive verdict

    Burford Capital Limited (LON:BUR) results for 2016 produced another outstanding set of figures. Revenue grew by 60% to $163.4m with strong growth in the litigation finance business and an additional boost from a secondary sale in

    Hardman & Co

    New Burford Capital Limited Retail Bond Review

    ► New bond issue: In March Burford Capital Limited (LON:BUR) announced the issue of its second retail bond, with a 6.125% coupon and maturity in 2024. ► Bond analysis: In this review we include our original