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ST clearly didnt watch the management presentation yesterday.
To their great credit they were very transparent: the lit funding business was to be financed by Convex fees. Those simply havent come through (no surprise - terrible timing to buy a corp finance business but they couldnt have know of course). They paid £15m for Convex (ouch !) and £6m was due to be paid yesterday but target missed. Convex salaries slashed. Re-setting deferred earnout to keep them interested. So the lit funding business doesnt work now. If they run up more capital commitments there, they are in serious danger of running out of cash as they are already well into their limited Revolving Credit Facility.
ST is smart but he is still working for a living for good reason....
I took my medicine and sold yesterday. I just wish they had stuck to be lawyers - they are very good at that. GLA.
*A professional services group that owns law firm Rosenblatt, a nascent litigation funding arm and specialist finance boutique Convex Capital, prompted a 15 per cent share price reversal back to slightly below my summer buy call and 10 per cent under my entry point. Investors have massively overreacted.For starters, business is booming at Rosenblatt. Revenue from legal services soared 42 per cent to £11.7m, excluding £900,000 of work in progress, buoyed by dispute resolution (up 13 per cent to £7.1m) and corporate work (quadrupling to £3.3m). It’s highly lucrative work, too, as Rosenblatt’s legal eagles specialise in litigious/contentious work that enables the firm to bill clients by the hour and control the level of fees it charges. Indeed, revenue per fee earner was almost £500,000, up from £350,000 in 2019. Importantly, the trading backdrop remains favourable given that economic crises increase the need for the specialist legal advice the firm offers, and downturns lead to an increase in instructions on white collar crime & fraud.Secondly, Convex completed over £1bn of transactions in the four year-period prior to RBG’s acquisition 12 months ago, earning an average fee of £700,000 on each transaction to generate annual revenue north of £8m. Deferral of almost all Convex’s transactions in the first half reduced cash profit by £1.1m and explains why group cash profits declined from £3.8m to £2.6m. But management “believe this is a timing issue, with deal completions expected in the second half”, and highlight a “strong pipeline”.Thirdly, the absence of sales of participation rights in contingent cases (£2m of gains in the first half of 2019) is also a timing issue as the directors are “planning for a significant return of litigation sales in the second half”. The cash inflow aside, there is scope for material gains as RBG conservatively holds its £3.8m litigation investment portfolio of eight cases at cost even though the law firm has won 86 per cent of the 22 contingent cases that have concluded since 2011.
The other reason for the lack of participation rights sales is that RBG’s management spent time setting up and launching a branded litigation finance arm, LionFish, to fund cases run by third-party solicitors. It was worth the effort as it has got off to a flying start – £2.4m total commitment made across six cases – and has just launched a new product for insolvency claims, a market with strong prospects.There are no earnings forecasts in the market, but I feel that a likely strong second half profit recovery is being underrated. RBG’s heavily oversold shares (14-day RSI below 20) are trading on a modest price-to-book value of 1.25 times, on a 12-month trailing price/earnings ratio of 10, and offer a near 5 per cent dividend yield. The board has a policy to pay out at least 60 per cent of earnings and a decision on the amount of the full-year dividend (3p a share in 2019) will be made at the financial year-end. Buy*
Irrelevant to post that.
Poor results. Gutted. Why have the board messed up a perfectly nice little law firm by buying cash hungry corporate finance and litigation funding businesses ? Eating into their bank facility fast. Will run out of cash. Time to take my medicine. Game over here. GLA.
Islero was a Miura bull famed for killing the celebrated bullfighter Manolete on August 28, 1947.
No need to speculate whose market they are targeting.
JammyC stop asking for IP. Subscribe if you want it.
Oh behave !
The summary you wanted was my second paragraph.
A summary wouldn't cause any issues. Your username is quite apt.
Just curious, but why don't you subscribe instead of asking
others to stick their necks out and post I/C Intellectual Property?
Then you too can wait for a 'knock on the door'
As it happens, if you read the previous tip released 04Jun,
you've already got the gist, all ST does is point out the 65p
close last Friday as a buying opportunity.
Do hope that's enough for you.
I believe we have received a further buy tip from IC again today, although I'm not a subscriber so can't see. If anyone can advise what has been said please post.
Think we must also be tipped here but dont have access to the article:
"Not only a leading law firm in dispute resolution, this group boasts market leading margins, testament to the pricing power of its rainmakers who have an enviable success rate in winning legal cases. The group has also diversified its revenue streams, having purchased a highly profitable corporate finance boutique, with a bumper pipeline, last autumn."
Definitely us. Can anyone summarise and cut and paste the article?
Should hopefully see a nice uptick in next few weeks. He says:
RBG Group (RBGP) looks lovely and cheap and I've bought quite a few.
as I keep mentioning I am looking for companies
with strong cash or low debt with good post virus prospects.
This one has nearly £2m in net cash and net
assets of £42m. It's a professional services group of which its main asset
is Rosenblatt one of the country's leading law firms.
It has launched a white collar fraud and financial crimes division
and with plenty of those sorts running around should not
be short of business.
It recently bought convex cap, a specialist
corporate finance boutique and it looks like it is willing to
buy up others to grow and it says since the virus it still has
plenty of business and its lawyers can work from home overall
looks like a nice slow grower and looking to stick it away.
Great set of results. Investor call was apparently very positive as well.
Can see this rising quite nicely over the next week or so. Pretty much nothing but buys today.
I particularly like..."To that end, we have won 19 out of 22 cases that have concluded to date."
and... While the current lockdown is slowing the progress of some cases, our teams remain busy, not only on existing casework but also on new instructions as clients look to handle the difficulties caused by COVID-19."
Hopefully once more is revealed with the final results we will see a more material improvement in the share price.
Some really strong buying today. Some good news re COVID19 over Easter and this could really perform well.
Video: Nicola Foulston on today's results, their strategy & name change etc:
Up I guess!.... and for anyone who believes in the MM’s signals (I don’t) there have been 5x 100 buys today....
Have only just revisited Ronenblatt after a year or so away, and watched that presentation, which was really impressive I thought. Had I seen it in May I'd have been tempted in then, but now (at 20% less) is this the bottom.?
Haven't seen any mention of the imminent settlements or senior appointments NF alluded to though.
Lots of talk today about how a No Deal Brexit is likely to increase the amount of dispute resolution litigation.
Keeping a very close eye on this. Seems like a company well placed regardless of the Brexit outcome.
This is actually a brilliant summary of the business and where we are and where we are potentially going.
Totally recommend taking the time to watch this
Video of the recent presentation at Mello
Unreliable. Only reports once profit has been made or unable to hide from loss.