Capital Share Discussion Threads

[concentrate] 07/7/2023 14:28

Thanks for that update.

"We don't know what the valuation or circunstances were"

On the contrary, as per my previous message, we can infer quite a lot based on the values. The uplift in equity suggests that the valuation was no higher than $45m, and potentially much lower.


A dividend in specie would be interesting. I hope the resulting distribution would still be ISA eligible.

[rivaldo] 07/7/2023 14:12

We don't know what the valuation or circunstances were - but we do know that CAPD are absolutely the people in the right place to assess whether spending a further block of cash on MSA Labs will be worthwhile. Given the apparent speedy growth I suspect it will be.

Mark Simpson has issued his weekly Small Caps Live blog summary, and has an interesting take on a potential spin-out of MSA:

"Capital Limited (CAPD.L) - MSALABS Trading Update

We are not sure we would call this a trading update given that there are no revenue or EBITDA figures given, more of an operational update. However, the update confirms that their significant growth trajectory is on track:

We look forward to many strong years ahead of us as we further grow and develop our global footprint, including the deployment of 21 Chrysos PhotonAssay™ units by 2025.

This is perhaps the key bit they really wanted to announce to the market:

Capital agreed to fund any shareholder not willing to participate and as a result Capital's shareholding in MSALABS has increased from 77.76% to 81.79%.

This is the result of an equity raise at the subsidiary level, with minority holders (mainly MSALABS management) not being able to put in their full share in, meaning Capital increases their stake in this significant growth business. Which is good news.

Reporting these separately also is perhaps continuing the precedent that may lead to MSALABS being distributed in specie or otherwise separately listed when it reaches sufficient scale."

[shanklin] 07/7/2023 07:41

It’s definitely not a TS as it provides no financials other than details of the placing. But otherwise good.

[rivaldo] 07/7/2023 07:24

Today's very positive update on Chrysos and MSA Labs confirms that the Chrysos rollout is on track and going rather well, with expanding global coverage.

And CAPD have raised their stake in MSA Labs to over 81% in a fundraising to enable further growth:

[rivaldo] 05/7/2023 07:30

Yep, good to see CEO buying a maiden stake and particularly the CFO spending almost £50k on CAPD shares.

Golden Rim's shares were up 13% overnight to 9 month highs on "encouraging" drilling results at Kada, where CAPD are the drilling contractor (and also own around £1.5m of shares):

[adamb1978] 28/6/2023 14:28

CEO following CFO's example and buying shares - 50k

[jonesj] 28/6/2023 13:54

Mr Boyton lives in Hong Kong, so I suspect he is paying closer to 0% tax than 50%. Which is fair enough.

[hpcg] 26/6/2023 19:04

I'm somewhat happy. I know there are investors that like companies where management have substantial stakes, but to me they are often an overhang waiting to happen. Much much worse happens to share prices at small companies when big stakes are sold down continuously. The institution(s) that took the shares will quite possibly have a longer time frame and even if only a year a desire for a decent profit at the end.

[allstar_07] 26/6/2023 16:52

I think the adage goes 'theres only one reason for buying, but lots for selling' - or something like that!They have both kept large stakes so no problem from me. We don't know their personal circumstances.

[concentrate] 26/6/2023 16:33

It raised an eyebrow with me; but ultimately, they've built something great. Boyton has taken a step back from CEO. They deserve to take something out and they remain with a large investment.

I appreciate rivaldo's excellent posts and analysis. I was just expressing that, unless I am missing something, I thought this particular post was a little bizarre.

[adamb1978] 26/6/2023 16:20

Personally I'm relaxed about founders selling *some* of their position.

£5m proceeds = £2.5m post-tax so £1.25m each.

Put that in the context of house prices in/around London and £300k-£400k to put a child through private school, and I dont think its unreasonable that someone who has had success wants to take some off the table.

Caveat is obviously that they retain a meaningful stake

[concentrate] 26/6/2023 16:16

I'm very positive about CAPD, and have been pleased by their progress. The CFO buying is also good news.

But I completely fail to see how the founders selling £5m is less meaningful than the CFO buying £50k.

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[rivaldo] 26/6/2023 15:25

Yep, great to see the CFO purchasing a meaty £50,000 of shares at 99p. Probably more meaningful than Boyton and Rudd selling a relatively small part of their holdings to institutional investors.

[adamb1978] 26/6/2023 14:14

Nice sized CFO purchase!

[chillpill] 25/6/2023 07:14

Thanks. I have good knowledge of the way the process works.

[hpcg] 23/6/2023 19:09

chillpill - It wasn't a placing in that sense, it is more like a very large trade where the bidder or bidders have already expressed a desire to increase their stake and Boyton and Rudd have decided to take some cash. It suits all parties. I note it is pretty limited, especially on Rudd's part so I would still expect to see a bid in the market.

[nk104] 23/6/2023 12:10

Thanks - I must learn to read.

[stemis] 23/6/2023 11:54

THey haven't issued more shares

[nk104] 23/6/2023 11:52

Would far rather we raised cash by selling some of the stakes we have rather than issue more shares.

[chillpill] 23/6/2023 07:15

I imagine the shares will get placed in a heartbeat.

[rivaldo] 20/6/2023 07:33

CAPD's investment in Leo Lithium was up another 4% overnight to new highs on a "Significant Resource Upgrade" at its Goulamina mine.

CAPD and MSA Labs also get mentions in the narrative for drilling and lab services provided:

[rivaldo] 19/6/2023 14:15

The Small Caps Live Weekly Summary sent out this weekend by ds2 included a useful summary of the new contract:



"Capital Limited (CAPD.L) - New Contract Award & Finance Update

…new mining services contract…Earth moving & crushing services for Ivindo Iron SA, majority owned by Fortescue Metals Group ("Fortescue"), at the Ivindo Iron Ore Project ("Ivindo") in Gabon…The contract has a term of up to 5 years and will generate approximately $30 million of revenue per annum once fully operational.

This is a nice contract to win. It is with an existing customer, and they have mobilised initial equipment already, which suggests they knew it was coming when they won the drilling side, and just had to agree on terms. But most importantly, the remaining $15m capex is funded from debt, not equity.

Perhaps the most interesting maths is the ROCE. The capex is $30m for $30m of revenue. Our guesstimate is that their mining contracts tend to have mid-30's GM, so let’s say $10m incremental GP. Some additional admin costs but not too many since they presumably already have facilities on site to support the drilling side. So say $8m incremental EBIT. 27% ROCE, well above their 10% incremental cost of capital (which is the cost of debt). The complicating factor is that this is only a 5yr contract, so although these tend to get extended, 5yrs of $8m EBIT = $40m doesn't compare particularly favourably to the $30m spent today. Although this looks a lot better if they are using $15m worth of existing equipment, and in reality, the equipment should last longer than 5 years in most cases. Plus, the synergies with the drilling side, getting in on the ground with a potential world-class mine, and the diversification of another mineral all make this a good contract win.

We don't think I'm going to suddenly fall in love with the mining side of the business, given how good the drilling and MSALABS businesses are. However, the economics of this contract are reasonable, with the potential to be very good if it allows them to add more fleet/rigs in future.

There were some small broker Price Target upgrades in response to this news. Berenberg from 166p to 170p, Canaccord to 150p and Stifel to 180p. Tamesis just re-iterate their old 160p Price Target but add $27m revenue, $11.6m to EBITDA & $12.4m to FCF in 2024. Here are the old figures (me - sorry, don't know how to post the tables!):

And now, post-contract win:

This is a decent upgrade, potentially making the 5% share price rise on the day an under-reaction to this news."