Shares in litigation finance provider Burford Capital (BUR:AIM) leapt 16% to 726p on Thursday, taking gains for the week to almost 23%, after the firm reported ‘significant realisations’ and cash receipts for the half-year to June.
Burford-only realisations rose 40% to $478 million, well above market expectations, while group-wide realisations rose 32% to $820 million.
Notably, there was no contribution from Burford’s biggest case, the Petersen claim against the controversial 2012 nationalisation of Argentinian oil company YPF, which shows the capacity of the firm’s broader portfolio to generate significant capital gains.
The results underline the company’s 'continuing ability to generate outsized returns', with one group of 10 related assets accounting for $266 million of firm-only recoveries, $172 million of realised gains, a return on invested capital (ROIC) of 182% and an internal rate of return (IRR) of 49%.
The Covid-induced lockdown did impact new business during the half, with group-wide commitments down 74% to $195 million, but the firm said the litigation environment had ‘stabilised’ and its pipeline was rebuilding.
Like other legal services firms such as Litigation Capital Management (LIT:AIM), Manolete (MANO:AIM) and RBG (RGBP:AIM), Burford said it sees ‘a significant volume of disputes arising from the pandemic in the years to come.’
The company’s cash pile was $262 million at the end of June, rising to $316 million by the middle of September as more receivables were converted to cash, putting it in a strong position to take advantage of new investment opportunities.
Analyst Julian Roberts at Jefferies retained his Buy recommendation and 950p price target, flagging the fact that ‘with no contribution from YPF-related assets, this result demonstrates again the strength and repeatability of Burford's investment process, with big contributions from related cases in the 2016, 17 and 19 vintages.’
Separately, the company confirmed that the process of registering its shares with US Securities and Exchange Commission (SEC) was complete and trading on the New York Stock Exchange was set to begin on or around 19 October, alongside trading on AIM.
DISCLAIMER: The author owns shares in Burford Capital
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