Capital Share Discussion Threads

[rivaldo] 23/3/2023 11:49

The admirably named HotStockRockets are very keen (subscription-only):



"Capital – 2022 full-year results, a growth and value Buy

By HotStockRockets | Wednesday 22 March 2023

Mining services company Capital (CAPD) has announced results for the 2022 calendar year and that “tendering activity across all business units remains robust, with a number of opportunities progressing”."

[rivaldo] 22/3/2023 12:28

Cheers kaizenkid.

I understand Canaccord have increased their target price to 145p (from 140p) and say Buy.

This compares with Berenberg's current Buy rec and 167p target, and Tamesis Partners' 160p target.

[kaizenkid] 22/3/2023 11:41

Yes impressive presentation. Emphasised the fact they have spent years insulating themselves as much as possible from down-cycles by operating at the mine site at Tier 1 assets low on the cost curve. Seemed confident they will get an extension at Sukari and 2 mining contracts close to fruition. At least $10m of the capex is genuine growth capex related to MSA labs. Reiterating higher ROCE at MSA than the group. Clearly a strong possibility Revenues are decently higher than guidance as mining contracts come through.

[rivaldo] 22/3/2023 11:08

I only caught the end, so will have to listen back.

CAPD are targeting impressive growth to $500m revenues in the next couple of years. Certainly achievable imo considering the rate of growth of each of Chrysos/MSALabs, mining services plus of course the steady growth of the drilling business.

Interesting too that strategic M&A is also a key part of the growth plan.

Plus sounds like there are two new major mining service contracts which could be signed in the coming months, which together would equate to another Sukari.

Will write more when I've listened to the full presentation.

[kaizenkid] 22/3/2023 08:56

Check out InvestorMeet presentation starting shortly

[adamb1978] 20/3/2023 13:08

Hi Shanklin

Looking at my Excel, I believe they had c.$6m investments in 2016 and have since invested $18m (net) getting to a $39m balance in 2022. A simple calculation suggests a 16% IRR. Suggests they're covering the cost of capital, you can argue whether given the locations of investee companies, we should be looking at a higher target return.

There's obviously the operational benefits too. As I've said before, hopefully given the upscaling of client base and MSALABS, the proportion of investments as proportion of the overall business should be falling

Adam

[shanklin] 20/3/2023 11:48

Yes, with debt costing CAPD 10% p.a., the company really needs to show its shareholdings are absolutely fantastic investments. Otherwise they should be monetised.

[adamb1978] 20/3/2023 11:43

Both would be helpful hpcg. Gets both of those shareholdings closer to cash

[hpcg] 20/3/2023 11:15

r.e the portfolio, very likely Allied lists this year, I would think. Secondly I wouldn't be surprised if Predictive is taken out.

[davebowler] 20/3/2023 08:58

According to Bullionvault vault.co.uk/chart-popup.do?metal=gold&timeScale=20y ....over the last few days Gold is hitting an all time high in £s,Aus$, Can $s and Euros and is only marginally below its US $ high. Don't see what motivates sellers here.

[adamb1978] 20/3/2023 08:48

Share price now sub 90p!

You'd think that CAPD was an investor in Credit Suisse....

[johnrxx99] 20/3/2023 08:24

Adam - that's what shareholders are for. Anyway, you know my opinion.

Looks like I'll be buying back soon.

[adamb1978] 20/3/2023 08:06

kaizenkid - understand the argument about the portfolio, and your theory is valid. However the company doesnt ever seem to get credit for it in the valuation

Hopefully it starts to take care of itself though - with greater work for tier 1s (where they wont take an investment position) and MSLABS growing, hopefully the invetment portfolio shrinks as a % of overall val'n

[chillpill] 20/3/2023 08:04

On share buybacks I agree with Warren Buffett in his recent newsletter. He likes them as long as the underlying shares are cheap which by almost every metric CAPD are.

Gold going through $2000 is great for CAPD. Ramelius Resources made a bid for Breaker Resources today.

[adamb1978] 20/3/2023 08:03

Johnrxx99

Share buybacks do add value if done at the right time i.e. when share prices are low. Company is trading below NAV now - how many shares trade below NAV?!?!? Just hoover up shares whilst the price is at the levels

[kaizenkid] 20/3/2023 07:31

I like the investment portfolio. Who better to invest in a sector than a group of operational experts with years of experience and access to information and mgt teams that most equity investors probably don’t have. Plus plenty of skin in the game.

[johnrxx99] 20/3/2023 04:50

The share buy back theory is made by brokers and bankers. A bit like the trickle down theory. Show me the companies who are now doing it and making money for shareholders?

[adamb1978] 18/3/2023 10:22

re buybacks: if the company is trading below NAV, as CAPD is currently, then in theory you're paying say 95 cents to buy $1.

The investment portfolio in my mind is a distraction. The market attributes zero value to it. Shanklin's suggest that they change the equity stake route to a royalty is a good one. Helpfully the growth in CAPD's core business is making the investment portfolio a smaller % of the overall value, and equally as they work with more tier 1 customers, they wont need to take equity stakes. However, its still a distraction IMO. If it didnt have any operational benefits, you'd want to see it divested asap

[johnrxx99] 18/3/2023 07:34

Well the market is a bit stressed but I sold 80% of CAPD on results day because of the investment portfolio weakness. It seems others agreed.

Share buy backs, in my view, are a scam. Value only increases if returns do: using shareholders money to try and create value is only good for brokers and the lunches they give to clients. Follow the herd, lol.

[adamb1978] 17/3/2023 21:09

Hi Shanklin

I wouldnt propose borrowing money to buy back shares but they could use their cash and cash generated to buy some back.

On the admin costs were roughly flat on a LFL basis. They were $20m in H1 and $25m in H2, but H2 included just under $4.5m for a bad debt and a provision - more details given on their investor call last week. I need to listne back to it but those two items sounded genuinely one-off. In which case, admin costs have been controlled well.

Adam

[shanklin] 17/3/2023 20:09

Don’t think CAPD should be borrowing money, apparently at 10% pa, to buy back shares.

They also need to get control of their administration expenses which have gone up considerably for no apparent reason

[adamb1978] 17/3/2023 19:03

Any views on today's fall? Volume was 160% of the average volume over the last 200 days so high, but not crazily high

CAPD are trading below NAV now so really would really like them to be buying back shares. Not huge volume - just hoover up shares when below NAV. They should have sufficient capital for that

[rivaldo] 17/3/2023 07:16

Golden Rim's shares were up 7% overnight after good results from CAPD's drilling at Kada:

[adamb1978] 16/3/2023 12:53

That's a good point Shanklin. Would also mean that its a value item which is less likely to be overlooked. When I'm valuing CAPD now, I ignore the investments as it seems pretty clear that the market attributes nothing to them

Separately, worth noting that CAPD are now only trading around NAV ($1.26 per share) - how many companies do you find like that?!

[shanklin] 16/3/2023 11:20

FWLIW, have just asked the following for the IMC presentation

You write that direct investment is a "strong business development tool with contracts from investee companies generating revenue of $51 million in 2022 (17.5% of Group revenue) and remains a core pillar of our business model."

Instead of direct investment, surely it is worth seeking production royalties in exchange for discounted drilling charges. If you think a mine is ultimately going to be successful, this might be a far more effective method for achieving upside from this.