Recent Updates On Burford Capital Ltd And Hargreaves Lansdown Plc

Burford Capital Ltd (LSE: BUR)

Burford Capital Ltd (BUR) is the provider of funds and investment management services to the legal market. The company is a market leader with the world’s most experienced, transparent and a well-capitalized financial services provider focused on legal profession. The company has an employee base of 80 people working in the US, Europe and Asia-Pacific, who work with clients globally.

Short Attack on Burford’s stocks.

The United Kingdom-headquartered litigation financing specialist recently emerged as the biggest target of US short-seller Muddy Waters. The US-headquartered hedge fund revealed its views on Burford’s accounting practices, liquidity position and governance in its report released on August 07, 2019.

In response to Short Attack as of August 07, 2019, on Burford’s share, the company through an exchange filing dated August 08, 2019, said that the report released by Hedge Fund Muddy Waters is false and misleading. The group also said that the company is rapidly expanding and is solvent; it generates steady cash flow and has good access to capital required for expansion. It added that the company’s financial reporting and accounting practices are transparent, appropriate and has been consistent for the past many years.

The litigation finance group has a low debt level, a decent cash position and can borrow debt funds whenever they require. The company’s cash and cash equivalent position stands at approximately $400m and it actively manages its cash and is carrying strong ability to meet its deployment needs in order to grow its business.

In an exchange filing, the company also stated that it has robust corporate governance and serves its clients well. The company gives proper weightage to investors feedback. Following the release of this short attack, Christopher Bogart and Jonathan Molot, showed their intention to purchase a substantial number of shares from the market. Besides, the Board of the company is also considering buying back the company’s shares, given the potential capital return at its current market price.

In another exchange filing as on August 08, 2019, the group notified the stock exchange, that Christopher P. Bogart, Burford’s Chief Executive Officer, and Jonathan Molot, Burford’s Chief Investment Officer had bought 123,747 and 350,643 shares respectively at the market price of GBX 663.7 pence per share. As a result of this transaction, both Bogart and Molot’s stake has increased to 4.08% each in the company.

Stock Performance

Daily price chart (as on August 09, 2019), before the market close. (Source: Thomson Reuters)

On August 07, 2019, shares of the company plunged as much as to GBX 380.20 from the closing price of GBX 1,121.0 as on August 06, 2019. However, post company’s response to the allegations made by Muddy Waters on August 08, 2019, coupled with the Board’s stated intention to consider a Buyback, shares of the Burford capital ended the August 08 market session 25.62% higher at GBX 760 and during the session, registered a day’s high of GBX 858 and a day’s low of GBX 552 respectively. In the past five trading sessions, shares of the company plunged more than 47% and were down by approximately 54% on a year-to-date basis.

At the time of writing (as on August 09, 2019), shares of the BUR were quoting at GBX 808 and added 48 points or approximately 7.2% in day’s session. At the current trading level, shares of the company were quoting substantially below its 5-day, 50-day and 200-day simple moving average prices. In the year-ago period, shares of the company have registered a 52-week high price of GBX 2,075 on August 29, 2018, and a 52-week low price of 380.20 on August 07, 2019 respectively. However, post the company’s response and share purchases by the company’s key managerial personnel, its shares are again soaring and since the August 07, the stock has recovered more than 100% in the past two trading sessions. Volume Summary -the 5-day average daily trading volume of the stock was approximately 300 per cent above the 30-day average daily trading volume of the stock.

The current market capitalisation of the company stood at £1.61bn, with a dividend yield of 1.37%.

Hargreaves Lansdown Plc (HL)

Hargreaves Lansdown PLC is a United Kingdom-headquartered company engaged in providing investment management products and services to private investors. Hargreaves’s investment platform provides investors with the flexibility to decide from a wide range of investments opportunities and provides recommendations to retail clients regarding which fund managers to support. The company’s flagship service, Vantage, is a direct-to-private investor fund and wrap platform which enables clients to hold and manage their investments. In addition to offering externally managed investment products, it manages funds through its range of multi-manager funds and Portfolio Management Services.

In the recent development, the chief of Hargreaves Lansdown Chris Hill expressed his regrets to his investors, who got trapped into the deepening crisis of Neil Woodford’s flagship equity income fund.

Financial Results- FY19

On August 08, 2019, Hargreaves Lansdown reported its financial results for the year ended June 30, 2019. The company’s net new business in the FY19 declined by 4% to £7.3bn from £7.6bn recorded in the FY18. Total assets under management were up by 8% to £99.3bn from £91.6bn recorded in the previous financial year. The group’s revenue during the year under consideration increased by 7% to £480.5mn against £447.5mn recorded in the FY18. Before-tax profit stood at £305.8mn against £292.2mn recorded in the previous financial year. Diluted earnings per share was up by 5% to 33.7 pence per share on a YoY basis. During the year under consideration, the group’s client-base achieved a record high level of 1,224,000 with AUM of £100bn at the end of the FY19.

The Board of directors of the company declared an ordinary dividend of 33.7 pence per share, which was an increase of 5% on a YoY basis and also declared a special dividend of 8.3 pence per share against 7.8 pence declared in the previous financial year. Total dividend for the FY19 stood at 42.0 pence per share against the total dividend of 40.0 pence per share in FY18 and recorded an increase of 5% on a YoY basis. The dividend payout ratio of the company for FY 19 stood at 80.6% and remained in line with the payout ratio of FY18.

Stock Performance

Daily price chart (as on August 09, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 09:19 AM GMT), shares of the company stood at GBX 2,068, up by 17 points or 0.82% from the previous closing. In the year-ago period, shares of the company registered a 52-week high of GBX 2,447.33 and a 52-week low of GBX 1,622.0 respectively. At the current market price, the market capitalisation of the company stood at £9.7bn, which ranks it among the large-cap businesses listed on the London bourse. As current market price as quoted in the price chart, shares were quoting above the 30-day, 60-day and 200-day simple moving average prices, which is favourable technical measure. And, the 14-day and 9-day Relative Strength Index (RSI) was oscillating in neutral zone. On a six-month basis, the stock has delivered a price return of 26.5% and at the current trading level, the stock has declined more than 10% in the last three months. Volume Summary – the 5-day average volume in the stock traded on the LSE was substantially above the 30-day average daily volume traded on the LSE.

From the valuation standpoint, the LTM PE of the company stood at 40x, and in the year-ago period, its shares have registered a 52-week high PE of 47.82x and a 52-week low PE of 32.10. However, the industry average LTM PE stood at 22.94x, respectively.