Manolete Partners – Shares soar on positive trading update

Well, Christmas came very early this year for Manolete investors!

Just over three weeks ago I met Steven Cooklin for the first time. It was then that he explained to me exactly what Manolete Partners (LON:MANO) did as a business. I have to say that I fell in love with its business model.

That is why I did some extra homework on this litigation funding company and a week later subsequently prepared my first article for Master Investor, featuring its shares at 230p, with a forecast of 300p in 2019.

The previous daily volume in the shares was around 38,000, the day of publication it rocketed away to 396,385 shares dealt. Subsequently another 1.6m shares plus have been traded and the price, as I write is up 43% to 330p.

The company has now put out a Trading Update which reads as follows:

“Since the announcement of the company’s unaudited interim results in December 2018, trading has continued to be strong, driven by increased business activity levels, robust levels of case realisations and significant progress on larger projects, leading to an increase in the fair value of Investments. As a consequence, results for the year ending 31 March 2019 are likely to be ahead of current market expectations, with operating profit growth of approximately 70%.

In the financial year to date, the company has invested in 55 new insolvency litigation cases (excluding two new Competition Cases) of which 48 have been purchased (87%) and 7 funded (13%). By way of comparison, Manolete invested in 29 insolvency litigation cases (excluding Competition Cases) for the whole of the financial year ended 31 March 2018.

In the financial year to date, 31 cases have been completed, generating Gross Proceeds of £9.2m.”

Steven Cooklin, Chief Executive Officer, commented:

“The strong performance we saw in the year ended 31 March 2018 has continued into the current trading period. Throughout the year we have seen accelerating levels of business activity and pleasing progress on larger projects. Since securing the £10m Revolving Credit Facility from HSBC in January 2018 (which was increased to £20m in December 2018), together with the £14.7m net proceeds from our IPO, we have steadily increased deployment of our financial resources to drive stand-out returns and continued profit generation. Our investment decisions are always underpinned by our core ability to source, analyse and price complex legal risk.”

Well I have to say that statement certainly underpins confident views of the company, with brokers suggesting £6m pre-tax is possible for the year to end March 2019, then up to £8.5m next year and a massive £11.3m in 2021, worth 21p per share in earnings.

Undoubtedly this company has growth written all over it, but I do suggest caution in trading the shares. If you wish to increase holdings then I would wait for ‘off days’ to do so, especially after such a good and quick 35% gain. There is no need to blindly chase them upwards.