BUR, page-21

My key takeaways from the BUR result for what it is worth are:

- Strong ROCI globally: An obviously sensational result on selling a 3rd party interest in Petersen and an illustration on how lucrative these assets (assets that make up most of balance sheet) can be. The post balance sheet win by Teinver SA is another example. Both of these probably re-enforce how conservative 2x litigation costs model is and how attractive the economics of this industry are;

- "Commitment" growth: As previously discussed their "commitment" growth has far surpassed IMF's but the table on page 6 shows how they are doing this. They aren't outcompeting us on single case finance but instead its:
1. Portfolio finance;
2. Recourse finance;
3. Legal risk mgt, where they are winning commitments.

However while these are still "commitments" this is starting to be less of an a"apples for apples" comparison with our commitments because as BUR management point out - the price (which also means returns) on these portfolios and secured commitments is not as high. As an aside I wonder how many cases IMF have missed (i.e. not taken on on account of pricing) vs due to the merits of the case. Given that we have the expensive infrastructure in place (offices, personnel, relationships) it only makes sense to be maximising these to get more positive IRR "commitments" on the books rather than selling a "one size fits all single litigation funding at our pricing or nothing" approach. Maybe if we introduced some "recourse" or portfolio finance levers we can ramp up our commitments;

- BUR treatment of revaluing cases on their balance sheet to "market value" is also more aggressive than IMF and makes it harder to directly compare from a valuation point of view. Having said that there is a glaringly obvious differences in valuation even before adjusting to the "market value" concept.

BUR $USD IMF $AUD
Net assets $705m $207m
Market Cap $3,228m* $328m

Price/Book 4.57x 1.586x


* BUR SP (6/8/17) £11.93 x 208.2m shares = £2,483.8m (GBP USD) of $1.30 = $USD3,228m.

So even with the more aggressive accounting treatment IMF is relatively undervalued by a multiple of 3x.

- As IMF investors we know we are going to have a bumper 2018 and 2019 (regardless of the ramp up in commitments) but the BUR result shows us that IMF are just scratching the surface in terms of extracting value from our network. This is where real shareholder value is to be made;