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Just listened to the call. A lot to like. Really like the CEO's focus on being commercial and she is very clear and transparent. Convex should bounce back this year and the upside from Litigation Funding (£120m or close to 2x current market cap) is free upside on the current valuation. I'm a happy holder as the downside is underwritten by RBL, there is an attractive dividend and potential significant upside potential on litigation funding realisations.
Hi Scooby,
I agree. I think Convex will come back. Smart cost management in the short term but just a matter of time before it comes back. Just heard the presentation. Looks like Litigation Funding now aimed at smaller end of the Commercial Litigation market. So not competing with BUR on the mega cases, more against firms like Augusta on the smaller/medium end (think she said £3-5m++). So a pure funding (rather than acquisition) of cases. Insolvency no longer the focus (one case against MANO 90 cases I think they said). All sensible my only concern is cash resources - you need deep pockets because these cases take time of course. But i like a lot the idea of bringing in their High Net Worths to co-invest. Law firm seems to be going great and adding lateral hires in growth areas is spot on. SP has done v well recently but value looks reasonable as i think i'm right in saying it is still below IPO price (?) Much to like but dyor of course.
Forensic505 - based on their prior presentations - the purpose of acquiring Convex was to acquire a cash generating machine and use the CF for Litigation Finance.
In addition, Convex, if I recall rightly, has averaged 8 deals p.a. Thus 2020 was a dud.
Perhaps , once normality resumes, Nicole's strategy may get back on track.
Good to see much banter hear. No one gave this stock the time of the day when it was at 56p. I knew that it was going to do well. But did not foresee the investor sentiment that has followed.
Rosenblatt enjoys record year.
Earnings upgrades for 2020 and 2021.
RBG (RBGP: 75p), a professional services group that owns law firm Rosenblatt, a nascent litigation funding arm and specialist finance boutique Convex Capital, has posted a 5 per cent earnings’ beat and declared a final dividend of 3p a share. Closing net cash of £3.5m was materially better than analysts’ net debt estimate of £1.1m.
Rosenblatt enjoyed its best year ever, increasing underlying revenue by 14 per cent to £20.7m and earning a gross margin above 40 per cent. Both its corporate and employment legal divisions enjoyed robust trading, so much so that house broker N+1 Singer predicts corporate revenues more than doubled to £4.4m. The trading backdrop remains favourable for Rosenblatt’s legal eagles, who specialise in litigious/contentious work. Furthermore, one consequence of the economic fallout from the Covid-19 pandemic is increased white collar crime & fraud, another area of Rosenblatt’s expertise. Interestingly, although N+1 Singer have raised Rosenblatt’s 2021 revenue forecast by five per cent to £21.6m to acknowledge the momentum, analysts are “still keeping a level of conservatism in the numbers.”
RBG’s other two smaller divisions are starting to fire too. Convex completed three deals in 2020 which brought in fees of around £1.6m, but fee income could easily double in 2021. That’s because Convex is working on a pipeline of more than 20 corporate deals, and has already completed one in the past few weeks. RBG’s litigation finance arm LionFish concluded £3.2m of asset realisations and N+1 Singer expects a similar outcome this year.
On this basis, expect 2020 group cash profit of £7.1m (post a 5 per cent upgrade) to surge to £9.4m in 2021 on 10 per cent higher revenue of £28m to deliver a similar rise in pre-tax profit to £7.7m. Analysts also upgraded their 2021 EPS estimates by 7 per cent to 7.3p, up from 5.3p in 2020, and raised their 2021 pay-out forecast from 4.1p to 4.4p.
RBG’s shares are up 10 per cent on my 68p entry point (Alpha Report: ‘Back a winning legal team’, 2 June 2020), and still offer great value on a forward price/earnings (PE) ratio of 10. A prospective dividend yield of 5.9 per cent is attractive, too, and I maintain my 100p target price. Buy.
Hi Chris,
Yes it does seem to conflate two issues: pay and deferred consideration. I was impressed with the £525k fee and I think many of us are aware of the large amount of PE money looking to invest, so it would be very very good to see this element work of course becuase they did have a good track record it would appear. Just getting the motivation right will be crucial. Convex were independent before so they might like that structure if they dont feel loved. I have seen that in other people-buisnesses. Very hard to get it spot on. They have stuck together through a lot already it would be good to come out the otherside where there should be lots of opportunities. How long we are stuck in lockdown limbo though - who knows...Best of luck
No I dont work for the company but have had dealings with in the past . I read "The Convex Capital senior management team have agreed for 2021 to exchange their fixed base salary arrangements for a flexible commission structure" and "This new commission scheme replaces the deferred consideration arrangements under the sale and purchase agreement with the Convex Capital sellers". Many may be staff too but it doesn't say staff not being paid, does it?
Aggressive little JammyC again ! As I said below I am looking at buying back in. The lockdown is getting to you love !
Singer upgraded EPS to 5.3p/7.3p for 2020/2021.
Target upgraded from 100p to 120p
I suspect M&A activity will be strong this year, as can be seen now with takeovers happening every week.
2021 PER under 10 with a nice divi to come
Are you a paid deramper? You seem to have an agenda against the company and have history of attempting to miscomprehend and spin communications negatively. If I were you I'd concentrate on MANO and try not think too much about any losses. You appear bitter and deluded
Not how I read the RNS but maybe you know more. Do you work for the company ?
Not true to say Convex staff not being paid. Earn out arrangements for senior management have been changed to reflect the reality of covid impact on m&a, seems fair. We know the law firm is doing well, and the Lionfish business is developing.
Law firm performed well (as per quoted comparables) but Convex is clearly a dead duck. Staff not being paid. Have seen this before, they will all leave as soon as market improves. LionFish - RBGP have been saying they are doing litigation funding since the IPO in 2018, so 7 cases in a year is very weak. They obviously don’t have the capital base to play a role in that sector. If they just focused on being a law firm this might become attractive as sp still far below IPO price.
The Naked Trder avoids shares about to give trade updates - that's his way to play.
As mentioned - Rosenblatt 's biz should be flying - check out cross reads to GTLY , KEYS
Convex - entrepreneurs fretting over capital gain potential changes by Rishi this Spring, are selling off their biz asap - cross read to K3C
Lionfish - check out RBGP's previous RNS's
So far my SP prediction playing out - would have been even better had it not been last few days of risk-off / selling down
As expected Robbie Burns bought in:
"I bought some RBG Holdings (RBGP). A risky idea as it is due to report any day and the shares have been sitting unhappily down for some time after a lacklustre report last time, but, with a very low PE and a small debt I wonder if downside is now in the price? I was tempted in as the shares seemingly were rising off quite a firm bottom. It didn't like lockdown and it mentioned the "impact" of that on one of its businesses. Still, the market looks ahead and given it is near lows a steady as she goes statement could see the shares lift. I just hope the buyers know something rather than me who knows nothing. So risky but on this low rating could be rewarding. If there is a profit warning then you can have a good laugh at my expense. It is quite liquid for a smallcap but given the risk more of a toe in for me."
Buys this morning likely due to cross read to TU from KEYS -
KEYS CEO says, "Further to our Trading Update issued on 30 November 2020, the Board is pleased to report that trading throughout December and early January has been exceptionally strong. Unlike previous years, where the Christmas season normally experiences a slowdown in activity, performance levels continued to be high throughout and as a result, the Board now expects to report adjusted profit before tax for the period which will be materially ahead of current market expectations(1)."
Therefore Rosenblatt likely to have performed in a similar vein.
House broker Singer’s with a bullish note out today highlighting the short term catalysts and a 100 pence PT. Convex to generate 18mn revenues in 2021
Nice momentum
swimming under the radar here, I know Robbie Burns bought and sold here last year, wouldn't surprise me if he's bought again at the lows
Three businesses, legal, corporate finance and litigation funding. First should generate steady £2-3m net profit, second a more variable £3m-£4m and third is an open question with VC style bets. £5-7m net income is worth £50-70m market cap with litigation funding on top. The latter has a potential £25m (half of current market cap) payout on one case according to Simon Thompson’s piece from last summer. So you’re looking at a business that is realistically worth £70-100m in my opinion which is 60-100% more than the current market cap with the opportunity for special dividends from litigation funding.
Beaten, abandoned, forgotten - but it's come alive!!!!
Figueire - yes, extremely prudent accounting like LIT
P.S - touch wood - Mr S.Thompson might give this a further bang on the drum after results day.
Bought more..
I agree with you. One thing a lot of people don't get is that the company DOES NOT REVALUE CASES like Manolette and Burford on its litigation finance arm. They cash account. Prudent and source of upside
Looks like 25th Jan is show and tell time !
My predictions
- Rosenblatt - did excellently similar to GTLY and KEYS
- Lionfish - a few deals / sell-off of participation rights
- Convex - busier than what people think - due to expected CGT hike by Rishi - entrepreneurs trying to sell biz
Outlook 2021 - lockdown no.2 - not as tough as lockdown no.1 given now -
- brighter with vaccinations in place
- modus operandi / protocols set to WFH
- Brexit confirmed - Rosenblatt clients going ape with new agreements / contracts / procedural changes
- Convex - 3 more months before potential CGT hikes / changes - will be very very busy.
- Lionfish - ?
Overall SP 65-70p @ 27 /1/21. Right I'm ready to get shot down! GL
Bought some today...
Buys and Sells are all wrong. The whole sea of red is incorrect. Best to look at the trade price to determine which one is the ask price vs offer price