The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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the website has a twitter feed. they just organised an event in london. patrick our CEO was on one of the panels.
there were lots of other industry players quoted in the tweets. so this seems a legit site that attracts serious people to a conference.
if they have misstated lcm won, i would expect lcm to reach out and have the article corrected
it seems like a serious site. 995 usd a year to subscribe
i sent an email to lcm email to ask them to comment, because if this is true then there is material uncertainty from public information.
]1) if we are on a multiple we might make 18m aud x2 or 3 for the fund
2) if we are on 20pct * 740m gbp of profit so 150m gbp.
without any comment, people could assume 2) or 1) and if they get it wrong, the stock can be mispriced.
regardless it sounds good, even though i am sure poland will appeal. if they pay now, they have to fund it (borrow money). if they delay, they just pay some legal fees and then ultimately win/delay payment
I didn't know the judgement had already been reached?
Slide 19 tells us that we are waiting on 4 direct investment judgements and 2 fund investments.
A further 6 fund investments are due final hearings within 6 months.
And this presentation is from 20th September (so that's 3 months gone already)
27 months is the current average time to complete a case in 11 years or 24 months to maturity of investment (slide 14 in the latest presso).
We currently have 86 3rd party funded and 33 co invested cases in the 25-36 month stage.
The 3rd party funded represents a large part of our capital under management.
As a result we have A$72m pending result (25-36 month stage).
We still have A$54m of our co-funded in the 49+ month stage!
It was in the most recent presentation, like a cluster of circles, falling around now.
Hi Ant, I was referring capital structure not the business.
Your comment is interesting. How do you know "there is a large volume of outstanding claims all due within the next 6 months"? How can you be so sure that multiple judgments will be handed down in such a specific time frame ? If you are right this could be an interesting situation !
No, I don't dispute the business, it's the share price that's detached. There is a large volume of outstanding claims all due within the next 6 months.
I think the problem is too much expensive debt (they pay 13%) and large net cash outflows the past two years.
Gone from 75 to 62 in just two weeks??
Shows clear intent about what the strategy is.
"The options set out above have been granted under the LTIP in the form of nil cost options and are subject to performance conditions which require the growth of Funds under Management ('FuM') over a five year performance period. The performance conditions associated with the options are set out below:
(1) 50% vesting on reaching a minimum of FuM of US$750m; and
(2) 100% vesting on reaching FuM of US$1bn.
The vesting date of options granted is the later of:
(1) the third anniversary of the Grant Date;"
An interesting read. We have class action for water contamination. Thisnis becoming a really wide spread issue.One case covering 2 areas settled for 200m+ aud, from same lawyers running our case.https://fortune.com/2022/11/10/california-suing-dupont-3m-water-contamination/amp/
Gallmat, I'm with you, happy to use some degree of vision to fill in the valuation gap here.
The AUM approach is a big game changer too, not only is it undervalued based on outstanding litigation claims, there is nothing built in for the fund or future fund-backed litigation cases.
Thanks for the reply.
But the response was factual. They recognise earnings when cases are settled.
The others in sector like burford mark to market.
The cashflow is low because the cases are going through the court system.
Their past return on cases settled is disclosed at 15pct ish.
This is just a case of if you like cost accounting or mtm. And burford had issues of stating mtm gains and being called out by a short seller.
Thank you for all the hints and reasoning but I do prefer to make a decision on actual fundamental data
(aka fact-driven), plus some other criteria, but definitely not hopes/expectations,
furthermore shares should be available at safe discount from valuation (as per above).
there are not so many stocks available meeting this condition but these opportunities do exist time to time.
Unfortunately in my view LIT is priced like it's already has delivered
all future promises and without any risk considerations.
If I would have followed promise-driven "chasing the star" strategy - would have lost most of my capital
long time ago despite guessing right in some cases (even with diversification as AIM statistics shows),
so LIT is rather not my cup of coffee (have seen so many train-chasers burned on many tickers).
The only reason I'm keeping an eye on it - is to follow sector trends
(since LIT isn't the only player on this field, there are other tradable tickers).
This is not overvalued at all. You need to understand
A) they do cost accounting
B) historical cashflow is completely irrelevant given a).
The book value consists of investments held at cost. Typically investments made a profit of 150% when they settle.
1. In the next year we have 100m aud of investments made 3 to years ago and you should expect a profit of 150pct on these (ceo latest comment from last video). If you make up a future book value doing this it is above market cap!.
2. Looking at past cashflow is meaningless. These show the profit from realised cases. 4 to 5years ago we had very small capital. Small investments small realisations small cashflow.
3. Valuing this company based on book value alone is like valuing a stock with no future earnings!. They will get profits from existing cases. When the settle book value will increase. They will invest make earnings and book.value will increase again
This is explained in presentations.
I have mentioned this before.
I will contact thrm via their email.
Big issue is fund is in usd.
They report in aud. Told them to put usd$ and aud$. So simple.
I have followed these guys for 2 yrs so if you have questions i will answer what i can.
Why do they alternate between $ and A$ in the annual report? It's inconsistent and misleading if that's the case.
There was a conference (with BUR and other participants) discussing class action too (but more for a Europe market)
https://youtu.be/jQUQ_xsHTPs
Spot-on with A$, FY22 shows A$94m of equity,
today' m-cap sitting at £82.6m or A$150m in FX terms or 60% above NAV
It isn't good from CF perspective either if we take their net profit history (A$m: -2.21/-2.34/8.64/7.11/5.25/8.86/6.64) since 2016 (or even shorter/better period) at say 10% discount rate (but it is AIM market after all, therefore should be 15%).
Unfortunately everything points to overpriced range and no clear indication of net profit growth.
Nav is quoted in aud. I think incorrect conversion to gbp in your no.
But it id very undervalued.
This is being moved a long way on thin volume for whatever reason.
I believe it's £30-40m undervalued based on the assumption of positive resolutions and AUM approach/scale shift.
Sits at a NAV of £75-80m with essentially no goodwill attributed.
CONCLUSIONS
1. Class action risk is expected to increase in Australia as a result of the Federal Government's plan for deregulation of litigation funding and the addition of a further class action regime in Western Australia.
2. The reduction in regulatory requirements for litigation funding is likely to attract further resources for commencing class actions in Australia. This will probably generate more actions brought in relation to consumer, investor, product liability, employee, environmental and mass tort claims. The approach to shareholder claims remains less certain due to new additional restrictions on the main causes of action dealing with disclosure.
3. As the Western Australian economy is characterised by its resources (iron ore, gold, liquefied natural gas), agriculture and services sectors, corporations operating in those areas may be exposed to greater class action risk with the passage of this new State-based class action regime.
Is really underperforming price wise - any reason for the drop since Sep update? With the closing of a second fund and another about to open, plus lots of cases due to close, would have though the share price would be climbing?