Burford Capital (BUR:AIM) 782p

Gain to date: 6.5%

Original entry point: 734p, 9 March 2017

Our positive call on litigation finance provider Burford Capital (BUR:AIM) is off to a good start as the company reports an extremely strong set of 2016 results (14 Mar 2017).

Revenue is up nearly 60% to $162.9m and adjusted earnings per share gains 78% to 56c. The dividend is hiked 14% to 9.15c but this translates into a 38% increase in sterling terms.

Alongside the results themselves Burford announces a further sale of its interest in the Petersen V Argentina case – litigation involving Spanish investment group Petersen which faced insolvency after the Argentine government summarily renationalised oil company YPF.

The company has now sold 10% of its interest in the case for $40m, which implies a total market value for its investment of $400m or 20 times what it initially put in.

The transaction leads N+1 Singer to upgrade 2017 earnings per share expectations by 43% to 63.3 cents. This implies a forward price-to-earnings ratio of 15 times which does not seem overly expensive for such a unique business.

The big upgrade from Singer reflects the inherent unpredictability of earnings which is an ongoing risk investors need to consider.

We remain comfortable with our bullish stance. Keep buying at 782p. (TS)

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