Member Info for rocket_science12

Could it be a part of it? If yes then on Friday we all will have an interesting day.

Stock is heavily undervalued and should go above £1 easily with any positive update. What is surprising to me is the fact that not even one director has leveraged the situation....

Investors overreact to LoopUp warning
¦ Higher churn and lower revenue in non-professional segments.
¦ Pipeline of live cloud telephony opportunities has potential contract value of £84m.
LoopUp (LOOP:84p), a London-based premium remote conference meetings company, downgraded revenue expectations on Friday while I was on leave. The market reaction was savage with the shares halving in value and slicing through my 138p entry point (‘Tap into the remote working boom with LoopUp’, 2 July 2020). Having seen the share price rally 80 per cent to 250p by late summer, passing through my initial 225p target price in the process, the holding is now 40 per cent underwater. Although any downgrade is disappointing, in this case I feel investors have massively overreacted.

Recovery 'buy' rating by ST

*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*