Capital Share Discussion Threads

[hpcg] 26/6/2023 18:04

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 15:52

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 15:33

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 15:20

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 15:16

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 14:25

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 13:14

Nice sized CFO purchase!

[chillpill] 25/6/2023 06:14

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

[hpcg] 23/6/2023 18:09

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 11:10

Thanks - I must learn to read.

[stemis] 23/6/2023 10:54

THey haven't issued more shares

[nk104] 23/6/2023 10:52

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

[chillpill] 23/6/2023 06:15

I imagine the shares will get placed in a heartbeat.

[rivaldo] 20/6/2023 06:33

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 13:15

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."

[rivaldo] 19/6/2023 08:58

I understand that the writer of the Buy tip above has a 150p target.

[rivaldo] 16/6/2023 06:15

As an aside, Leo Lithium continued to rise last night, up another 10% to new highs of A$1.05. CAPD's holding in this alone is now worth almost £6m.

Anyway, CAPD were tipped as a Buy on Shareprophets at some point yesterday FYI (but subscriber only):



"Capital Limited – new contract and increased bank facility, Buy

By HotStockRockets | Thursday 15 June 2023"

[rivaldo] 14/6/2023 08:08

Expansion news for MSALabs/Chrysos in Ghana:



"MSALABS 3,902 followers
1w •
Our newest laboratory in Obuasi, Ghana is undergoing final preparations for opening, with commissioning of the PhotonAssay unit and training of operators underway. Operations are planned to commence on June 10 and will deliver PhotonAssay services to the Ghanian mining and exploration industries.

PhotonAssay is the groundbreaking technology providing faster, more accurate analysis results and supporting improved definition of reserves and resources and quicker decision making to improve operational efficiencies and profitability.
#MSALABS #PhotonAssay #gold #ghana"

And also gaining accreditation in Canada for PhotonAssay:



"It has been great to see all our friends and colleagues at the Canadian Mining Expo in Timmins, Canada. We have been celebrating our recent PhotonAssay ISO 17025 Testing and Calibration Laboratories accreditation at our Val d’Or laboratory. We are now providing this groundbreaking technology, that delivers faster, more accurate assay results, through our Prince George, Timmins and Val d’Or laboratories across Canada."

[rivaldo] 13/6/2023 10:00

Nice plug on Citywire today, which thankfully hammers home the point that CAPD is becoming a "full services mining house". Perhaps the market is finally cottoning on here:



"Capital’s transition to full services miner, says Berenberg

Mineral drilling solutions group Capital (CAPD) is growing its contracts as it continues its transition into a full services mining house, says Berenberg.

Analyst Richard Hatch retained his ‘buy’ recommendation and increased the target price from 166p to 170p on the stock, which was trading up 7.3%, or 7p, at 103p.

It has won a contract from a subsidiary of tier-one Australian miner Fortescue Metals that builds on its existing three-year diamond drilling contract and ‘is a good example of how Capital can grow its presence on a site and add additional services by starting with its core business – drilling’, said Hatch.

‘When we initiated on Capital in 2020, it was predominantly a driller with ambitions to grow and diversify its business,’ he said. ‘Since that point, it has moved into, and now grown, its contract mining business, and also added additional growth through its [mining analysts] Msalabs business, which offers attractive continuing top-line growth.’

The award of the latest contract shows ‘further growth and diversification for Capital’s revenue streams’, added Hatch."

[hpcg] 13/6/2023 08:06

allstar - they are not in control of the timing for the Allied IPO. They are in control of how they sell it down. They should absolutely not be telling the market what they intend to do, just as none of us here would. IMO people speculating about what others think of portfolio is just finding reasons for observed behaviour and not from the horses mouth. I think there was one fund that did object, or complain it was too complicated so they sold out. The turnover of stock must leave it in the hands of investors who are happy about it. Anyone can do a sum of parts and rank the portfolio at zero if they wish.

In my opinion a lot of investors or potential investors are driven by the price of gold. Overlay a chart of the price of gold in dollars and one can see that rallies to highs in 2022 and at the start of this year follow rallies in gold. Gold is consolidating, CAPD share price is consolidating. I actually think there are investors who think we are a gold miner. This in turn because oil companies are routinely called oil drillers despite them having handed the task of drilling off to service companies decades ago (some oil cos do again own drill rigs, mainly onshore and or in unique environments).

One of the benefits of the Fortescue deal is that it will become apparent that we provide services across metals. If investors did their own due diligence they would see that neither the top nor bottom line of CAPD is correlated with the price of gold.

[rivaldo] 13/6/2023 06:29

Good news - the Allied Gold IPO is going smoothly, and is expected to close on or around July 17th with a $300m fundraise.

CAPD will therefore be able to discuss any upwards revaluation of their shareholding in the 30th June interims, although hopefully there'll be an RNS detailing this around the IPO date. The interims may even include the revaluation in the numbers since the process will be almost complete at that point and will have concluded prior to those numbers being issued:



"Allied Gold Corp Limited, Allied Merger Corporation and Mondavi Ventures Ltd. Announce Submission of Application for TSX Listing and Provide Update on Business Combination and Financing with Closing Date Set for July 17, 2023

etc"

[adamb1978] 12/6/2023 19:17

In theory the value of the investment PF should decrease as a proportion of market cap given that they're working with larger clients so taking an equity position will be immaterial. Its a strategy which has served them ok/well, but hopefully more in the past and some will get taken out or merge with others. Even 50% of the investment portfolio as cash I think would be better for the share price than 100% of the positions