Claims investment firm with big dividend prospects Quoted on AIM since late2007, Juridica is a company that invests in litigation and arbitration claims. In broad terms, Juridica uses its capital to back a party that is going through proceedings, in exchange for a portion of any award. Juridica restricts itself to corporate disputes. It is not involved in claims for personal injury, class action etc. As business disputes can be complex, the frequency of wins and losses is difficult to predict. To date, however, Juridica claims a gross internal rate of return of 66.7% on completed cases.
more than $200m of assets under management Juridica has more than $200m of assets under management. It is the responsibility of its investment team to see that this is deployed in such a way that an acceptable rate of return is made for the risk being taken. Juridica’s positions are managed by Juridica Asset Management Limited. Here, a collection of expert litigators and risk managers examine the opportunities presented and decide if Juridica should be involved and at what scale. Juridica does not get involved in a case unless an amount greater than $25m is being argued over.
should be able to support a high dividend payout ratio According to the company website, its investment size in any case typically ranges from $2m to $10m. Time is one of the key issues that Juridica considers before supporting a case. For this reason, Juridica seeks to invest in claims that are likely to be resolved through settlement in a reasonable time frame. Unlike many quoted companies, Juridica does not have to worry about investing in stock, software or machinery. Therefore, the company should be able to support a high dividend payout ratio, depending on management views on how capital should be deployed.
at around that time. Since July 2013, the stock has traded between 120p and 160p. That is steadier than many. ‘Quality of earnings’ is a key plank of equity valuations. Just as there is risk that Juridica might back the wrong cases, some investors also fear that its business model could face regulatory threat. A small number of US states prohibit outside parties bankrolling litigation. Investors will have to decide whether the actions of a firm like Juridica could face curtailment in the longer term. In the meantime, the shares are an opportunity to grab a high yielding AIM share, whose earnings should be broadly uncorrelated with most AIM companies. Juridica Investments Limited (LON:JIL) FOR
its business model could face regulatory threat
Litigation more diverse than most asset classes Large dividend yield AGAINST
Since listing at around 110p, 58.6p of dividends have been paid out. This includes the 20p final dividend declared in November. Shares in Juridica fell from around 110p at the end of 2009 to a low of 75p in 2012. Many shares fared much worse
Possible regulatory threat to activities Key-person risk in case selection Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£139m 124p:126p 12.6 15.9% 111p:151p
Published on Mar 3, 2015