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Burford reaping the rewards of its investments

Burford Capital has established a secondary market for its investment portfolio and is crystallising gains.
March 15, 2017

Burford Capital (BUR) provides capital for people who want to pursue a civil litigation case, but have neither the funds nor the capacity to do so. Two factors helped to transform its performance in 2016. The first is that cases can take years to reach an outcome, and it is only last year that these potential gains were crystallised. Much of the rise in realisations is due, at least in part, to the level of investment in new cases, which jumped from $153m (£126m) in 2014 to $378m last year. Investors who took part in the 2009 flotation have seen an investment return of 754 per cent.

IC TIP: Buy at 752.5p

Late last year, Burford also spent $160m to buy Gerchen Keller Capital (GKC), the largest investment management firm in the litigation finance industry. And even before this Burford had investments in litigation of well over $1bn. The next game changer was Burford's decision to establish a secondary market in its investments. This was followed by the sale of 10 per cent of the Petersen Group claims for $40m. That implies a valuation of around 20 times Burford's investment cost, and since the year-end a further 9 per cent has been sold for $36m.

Analysts at N+1 Singer are forecasting adjusted pre-tax profits of $142.5m for the year to December 2017 and EPS of 63.3¢ (from $110.3m and 56¢ in 2016).

BURFORD CAPITAL (BUR)
ORD PRICE:752.5pMARKET VALUE:£1.57bn
TOUCH:745-760p12-MONTH HIGH:779pLOW: 220p
DIVIDEND YIELD:1.0%PE RATIO:17
PREMIUM TO NAV:219%NET CASH:$158m

Year to 31 DecNet asset value (¢)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201216216.99.64.76
20131722.11.35.23
201418747.322.27
2015(restated)208*67.931.58
201628610452.99.15
% change+38+53+68+14

Ex-div: 25 May

Payment: 16 Jun

*Based on the number of shares in issue at 31 Dec 2016

£1=$1.21