Burford Capital Ltd

Burford Capital Ltd (LON: BUR) is the provider of funds and investment management services to the legal market.

Coronavirus Impact Update
On 12th March 2020, Burford Capital released an update on approach towards the outbreak of COVID-19. The company has closed its office in New York as Mayor and Governor of the city have asked businesses to work remotely. Despite the breakthrough, the company is open for business and had signed two new investments term sheets and is operating at full capacity as per Commitment Committee calendar. The group’s business is built to operate remotely as all its information systems are based out of the cloud. The company believes that these disruptions will not have any material impact on business performance and expect its business to grow. The group anticipate a delay in the release of its FY2019 results by 2-3 weeks as per the present scenario.

Trading Update
On 3rd February 2020, Burford Capital released an update for the trading for the full-year 2019. The group’s new commitment stood at USD 1.6 billion, reflecting an increase of 24 per cent. The commitments for core litigation finance increased by 30 per cent to USD 854 million. The cash proceeds surged by 23 per cent to USD 997 million for the period, with robust cash returns.

Share Price Performance

Daily Chart as of March 16th, 2020, before the market close (Source: Thomson Reuters)

Burford Capital Ltd shares were trading at GBX 317.40 at the time of writing before the market close (at 11:00 AM GMT) on 16^th March 2020 and down by 18.20% versus the previous day closing price. Stock's 52 weeks High is GBX 1,863.00 and Low is GBX 283.49.

Valuation Methodology
 

Conclusion
In the previous period, the company was exposed to heightened risk and volatility. The company does not anticipate any significant negative impact from the outbreak of COVID-19 and expect its business to grow. Three bond issuances are denominated in Sterling, and thus Burford is exposed to currency risk. The company also has a minority of its investments denominated in currencies other than US dollars. The company has shown decent financial performance in the financial year 2019. Burford Capital Ltd is continuously investing in growing its operations and is planning to expand its product offerings in the near future.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 303.85 (as on 16^th March 2020, before the market close at 12:50 PM GMT) with lower double-digit upside potential based 2.70x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

Metro Bank Plc

Metro Bank Plc (LON: MTRO) is a banking institution providing banking and related services to retail customers and SMEs.

Recent News
On 13^th March 2020, Metro Bank announced that its Non-Executive Director, Roger Farah has decided to step down from his role effective immediately.

Financial highlights - Financial year 2019 (31st December 2019, GBP, million)
In the fiscal year 2019, the Group’s total underlying revenue decreased by 1 per cent to GBP 400.1 million as compared to GBP 404.1 million in FY2018. Underlying loss before tax in FY2019 was 11.7 million as compared to a profit of GBP 50 million in FY2018 due to the challenging environment of UK markets. Statutory loss before tax stood at GBP 130.8 million as compared to a profit of GBP 40.6 million in FY2018 due to a £68 million write-down of intangible assets. Net interest margin declined by 30 bps to 1.51 per cent against 1.81 per cent in FY2018. Underlying basic loss per share was 10.8p versus earnings per share of 39.4p in FY2018.

Share Price Performance

Daily Chart as of March 16th, 2020, before the market close (Source: Thomson Reuters)

Metro Bank Plc shares were trading at GBX 72.55 at the time of writing before the market close (at 11:45 AM GMT) on 16^th March 2020 and down by 25.97% versus the previous day closing price. Stock's 52 weeks High is GBX 898.00 and Low is GBX 69.00.

Conclusion
The company has reported a decline in its financial performance in the fiscal year 2019. However, the company witnessed 21 per cent growth in retail and SME core deposits to £10.2 billion. The bank is awarded as the best bank for overall quality of service for personal current account customers. Net fee and other income were up by 43%, due to decent customer growth and the initiation of fee-earning services. It was awarded second for business current account customers in the latest Service Quality Survey. The bank is reducing costs, increasing fee income, and further strengthening its capital and liquidity position, which would help it to improve its performance. The company is focusing on its future growth plans to improve its growth, costs and capital efficiency, which would help the Group for the sustainable growth of its business. It can be an excellent opportunity for investors to invest in generating good returns in the long term.

Based on the above rationale, we have given a “SPECULATIVE BUY” recommendation at the current price of GBX 69.85 (as on 16^th March 2020, before the market close at 10:45 AM GMT).

*All forecasted figures and peer’s information have been taken from Thomson Reuters. 

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.