‘It's often darkest before the dawn”. Yet for equities, the point of ‘maximum fear’ is usually a great to time to invest.
Wrt the UK insolvency industry, the first rays of sunlight began to appear early summer - & have since brightened further heading towards the withdrawal by the government of temporary Covid related creditor protections on 1st Oct’21.
In turn, potentially unleashing a significant backlog of creditor voluntary liquidations (CLVs) due the expected surge in corporate bankruptcies.
Fortunately Manolete Partners Plc (MANO ), the UK's largest third party 'Insolvency Litigation Funder', can help.
Buying c. 90% (& controlling) of the cases it handles from Insolvency Practitioners to fit its core USPs, strengths & fields of expertise. Not only generating attractive returns, but also providing an unrivalled scale & knowledge base, upon which #MANO is able to assess & price such risks better than anyone else.
Indeed RoIs are typically 160%+, and >95% of cases are settled out of court before ever reaching trial. Most disputes with the defendant are completed in year 1, with the agreed cash collected 18 months later.
Sure today’s ‘resilient’ H1’22 results (Peel Hunt Est FY22 revs £13.7m & PBT £7.0m) were artificially depressed by the pandemic.
But nonetheless, EBIT margins still came in at a healthy 31%, delivering H1 adjusted PBT of £2.6m (£6.4m LY) on sales of £10.2m (£19.0m). Plus, the challenging past year is more than reflected in the beaten-down stockprice (318p) - especially given the favourable backdrop, operating leverage (53%+ gross margins) and pickup in new enquiries/instructions over the past 2 months.
CEO & founder Steven Cooklin adding "KPIs in September & October are already showing a strong recovery in activity levels. We are therefore increasing the number of in-house lawyers [to expand] capacity [with] 2 new experienced insolvency litigators [set to join] in the new year."
Hence with ‘green shoots’ already blossoming, alongside a 0.39p interim dividend (Sept'21 net debt at £10.3m), I reckon #MANO should be able to deliver c. £15m of EBIT by FY24. Which on a 14x multiple, would equate to a theoretical price of 440p / diluted share.