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Hardman & Co

Burford Capital Equity issue ensures growth is not adjourned

Hardman & Co Report Report DownloadsBurford Capital (LON:BUR) has placed 10.41m new shares with institutional investors through an
accelerated bookbuild. The price per share was 1850p, making a total of £192.6m
($251.2m) raised before expenses. The funding will be applied to business
expansion, with new geographies such as parts of the United States that have not
been fully addressed yet, Australia and Germany specifically mentioned as well as
adding to the team in existing locations. The announcement also mentions new
products, which have been the topic of recent press releases, and it is clear that
Burford has every intention of pushing its growth further.

Issue: The 10.41m shares represent approximately 5% of the share capital prior
to the issue. The issue was filled quickly and was oversubscribed. Burford priced
the offering at a 2.9% discount to the volume-weighted average share price
since the release of the interim results.

Future fundraisings: While a fundraising was well flagged at the time of the
interim results, Burford’s sustained growth means that it will continue to require
capital to fund investments. The statement indicates that further debt and
private funds will be raised in the near future.

Valuation: Hardman & Co has made minor adjustment to its earnings estimates,
with the most significant being the increased number of shares. The prospective
2019 P/E of 22.0x is not excessive for a growth company, with a 22.3% RoE
giving strong metrics all round.

Risks: The investment portfolio is still diversified, with exposure to more than
900 claims. However, it retains some very large investments, which means
revenue could be volatile. As the company matures, we would expect that to
decrease, but not to disappear. The Petersen case shows that this volatility is
not simply a negative.

Investment summary: Burford Capital has already demonstrated an impressive ability
to deliver good returns in a growing market while investing its capital base. As
the invested capital continues to grow, the litigation investment business will
continue to produce strong earnings growth.

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