Capital Share Discussion Threads

[davebowler] 19/7/2023 09:50

TAmesis research -
This morning Capital Ltd released its Q2 2023 trading update for the quarter and six months ending 30 June. Overall the results (comprising operational data and revenue) is in line with our estimates and leaves the company on track to meet its guidance of $320-340m revenue; which will be the 4th yr in a row it has set a record. YoY growth in revenue, ARPOR and average fleet size was 12%, 9% and 11% respectively. The results also show the diversification in this growth – non-drilling revenue is now 36%. This comes from the company’s MSALABS business that now employs 10 Chrysos PhotonAssay™ across Africa & Canada growing to 21 by FY25. The third leg is the company’s mining services business where the company recently won a very competitive tender for Fortescue’s Ivindo iron ore project in Gabon. The company continues to deliver diversified revenue growth both technically and geographically thereby reducing cashflow at risk and ultimately its cost of capital. We maintain our PT of 160p.

[hpcg] 19/7/2023 09:48

I right there with you Adam. With small cap funds closing there is just less and less money going in companies of Capital's size. Worse, there is money being withdrawn. The only way around this for profitable companies that don't require funding is to reduce the share count from their own resources. Or potentially move to an alternative exchange, though I think that probably isn't an option for Capital.

[adamb1978] 19/7/2023 08:59

Agreed Rivaldo. Still looking very cheap. Question is how to change strong operating performance into strong share price performance. CNIC is a good example of how sometimes a board need to take action themselves to get things turned around. Might be that CAPD need to do the same before too long

[rivaldo] 19/7/2023 08:58

Tamesis retain their 160p price target, and note that the current share price is "a good buying opportunity".

In summary:

"On Track to Meet Full Year Guidance

This morning Capital Ltd released its Q2 2023 trading update for the quarter and six months ending 30 June. Overall the results (comprising operational data and revenue) is in line with our estimates and leaves the company on track to meet its guidance of $320-340m revenue; which will be the 4th yr in a row it has set a record. YoY growth in revenue, ARPOR and average fleet size was 12%, 9% and 11% respectively.

The results also show the diversification in this growth – non-drilling revenue is now 36%. This comes from the company’s MSALABS business that now employs 10 Chrysos PhotonAssay™ across Africa & Canada growing to 21 by FY25. The third leg is the
company’s mining services business where the company recently won a very competitive tender for Fortescue’s Ivindo iron ore project in Gabon.

The company continues to deliver diversified revenue growth both technically and geographically thereby reducing cashflow at risk and ultimately its cost of capital. We maintain our PT of 160p."

[rivaldo] 19/7/2023 07:36

The Q2/H1 update is out and shows CAPD trading nicely in line with expectations, and therefore on a P/E of just 6.0.

Notably, non-drilling revenue is now 36% of total revenues. MSALabs and Chrysos continue to thrive, with Chrysos revenues expected to reach over $80m in a couple of years.

One or two hiccups in terms of Sudan drilling, which is expected to resume soon anyway, and resulting lower fleet utilisation, but with such a spread of rigs including some riskier geographies that's more than reflected in the rating.

With more and more long-term drilling and mining services now secured, on top of the expanding Labs business, CAPD are still in extremely good shape imo.

[hpcg] 15/7/2023 12:10

Very few trades yesterday, and in general it is a low volume month. I can understand some selling for currency reasons as in the short term the pound has strength through interest rate differentials. In the medium term though currencies are supported by their economies and there is no contest on which is stronger.

The short term weakness in the dollar at this point in time is helping the dollar price of gold, and that should help Allied get away for a decent price. We know there is strong demand for gold from central banks which is supporting prices when in a conventional interest rate cycle it would have been hammered by now.

The Allied transaction is scheduled for approval this coming Monday (easily readable source: ). The shareholder meeting is at 09:00 Vancouver time on Monday, so after the close here. Per the AGM notice: "the Transaction is anticipated to close as soon as practicable after the Meeting, in Q3 of 2023."

The SEDAR homepage for Mondavi is here, though note SEDAR itself is appalling to use; you will need a browser session that allows pop-ups if you want to look at any documents. I don't think there is anything of interest, the AGM notice is predominantly legal and not of direct interest, and nor for that matter anything else they publish.

I guess CAPD will wait for the meeting to confirm the transaction before putting out its trading statement.

[adamb1978] 14/7/2023 19:20

I've mentioned the discount to NAV many times on here - its crazy where its trading. But its also why a buyback would make sense - buying 100p for 90p.

Last 3 years we've seen H1 TUs on 15th, 19th and 15th July so should be due one next week

[jeff h] 14/7/2023 11:13

CAPD not one of the usual suspects you expect to find as a TNAV play:-

"...It does not have to be freehold property backing, but hard assets in general. For example, mining and drilling equipment specialist Capital (CAPD) has approximately £200 million of plant and machinery on its balance sheet.

The enterprise value of the business is £205 million and net debt is low at £22 million. In other words, any acquirer would get the future profit stream from those assets almost for free. Historically, the profit and return on capital have been fairly good.

The business has generated an average 16% return on capital employed over the last five years and book value per share has grown at a compound annual growth rate of 18% a year.

An acquirer would need to pay a premium for control of the business but even so, the shares look vulnerable to a takeover. Another benefit of real assets is they tend to keep pace with inflation which provides a natural hedge against a general rise in prices...."

(from Shares magazine 13th July 2023)

[swanvesta] 13/7/2023 21:49

Chariot have a JV with Total Eren:

[allstar_07] 13/7/2023 14:43

Meant to post this yesterday, have i dreamt it? but i thought Capd had already started a joint venture with a renewable energy provider many months ago?Is this the same or a different one...

[rivaldo] 13/7/2023 10:51

You can see the post, there's no further info so why bother making the cynical comment. It is what it is, i.e fairly obviously the announcement of an early stage new venture which will hopefully provide good reward in the fullness of time given the track record of CAPD's management.

If you wanted to contribute something useful you could have looked up some info about Enerwhere:



"Since the company was founded in 2012, we have helped our customers save a lot of money and reduce their CO2 emissions by a significant amount.

Today, we are one of the largest solar contractors under DEWA’ Shams Dubai programme, and have a large project pipeline in the UAE, Oman, Nigeria, and numerous countries in Africa."

[johnrxx99] 13/7/2023 08:56

Any figures mentioned or just hype?

[rivaldo] 13/7/2023 07:25

Posted by CAPD on Tuesday:



"Capital Limited
@_CapitalLimited

We are very pleased to announce the formation of Mine Power Solutions (MPS), a joint venture between Enerwhere, a leading provider of hybrid and renewable power solutions, and Capital Limited. MPS will provide holistic renewable hybrid power solutions to the mining and exploration sectors in Africa and the Middle East, delivering clients environmental and financial benefits. The JV is the first of its kind for both companies and combines Enerwhere’s expertise in hybrid and renewable power, and Capital’s established African and Middle Eastern presence and extensive experience in the mining and exploration sectors.

Pictured are Jeff Court, Capital Chief Executive Officer – Mining and Daniel Zywietz, Enerwhere Founder and Chairman following signing of the JV. Contact [e-mail] for more information on how we can assist your project with a renewable power solution."

[allstar_07] 12/7/2023 15:01

Agreed! sorry my post wasn't in response to yours.

[adamb1978] 12/7/2023 13:41

Very true...but I'd prefer not to have that opportunity!

[allstar_07] 12/7/2023 13:35

Well you can now buy at 8% less than the 99p the CEO and CFO paid for their 50k, and presumably where institutions paid 98.5p for the 5mill shares.

[adamb1978] 12/7/2023 13:08

Q2 results in a week or so. Would be nice if there was something in them which managed to stop the consistent falls in the share price over the last 6 months or so...however aside from some increased revenue forecasts, I'm not sure I see it.

I know I've said this more than once before but whilst the company continues to operate very well, I think the board level and governance of the company has been poor over the 3 years which I've been invested and that as a result, the share price performance hasn't been as strong as it could have been.

Crossing fingers for some nice surprises next week

[adamb1978] 12/7/2023 12:22

Thanks Concentrate. Thats helpful. CAPD have only $16m lease liabilities on their balance sheet so there must be break clauses or similar. Otherwise they'd need to capitalise the outstanding amounts for all the machines which they have access to

[concentrate] 12/7/2023 10:42

I should add that the A$560 is over 38 machines. Previously it was A$452 over 33 machines. So just short of US$10m per machine. Latest machines are much more expensive - perhaps they are using very different terms with their new customers.

[concentrate] 12/7/2023 10:36

Note that it is total contract value. The lease could be 20 years and include estimated usage fees.

[adamb1978] 12/7/2023 09:42

Hi Concentrate

Where did those A$108.6 and 559.8 figures come from? They seem massive and an order of magnitude higher than I would expect.
Thanks

Adam

[concentrate] 08/7/2023 12:23

Thank you for the comments. I’m not against investing in businesses, I’m just trying to understand the RNS and learn a little. MSALABS has been presented as the real growth story, and I totally agree that CAPD should seek to minimise the price they pay for equity.

“ •Five new PhotonAssay lease agreementssigned,increasingChrysos’; Total Contract Value (“TCV”)by A$108.6mto A$559.8m”

So we are talking a total contract value of A$20m per machine. MSA have around 20 of them. This suggests a huge ongoing capital outlay for these machines, so a relatively modest valuation (vs their ongoing future commitments) surprises me. My understanding was that the key drawback was the lack of availability of these machines.

I may try and research this a little better, because I don’t currently understand it.

I guess in any case if the profitability fails then CAPD can probably pull the plug pretty easily.

Also, it’s perhaps wrong of me to try value MSA higher in the context of the whole group having a relatively small valuation. I’m guessing the transaction wasn’t at the upper limit, but rather somewhere like $20-30m.

[stemis] 07/7/2023 15:37

The uplift in equity suggests that the valuation was no higher than $45m

I'd agree with that. However the 'valuation' is only that agreed between Capital and the minorities for the purpose of issuing new shares. If the minorities can't stump up the money but believe the value of their holdings will increase through the fund raise (or alternatively Capital just set the value as majority holder) then Capital held the whip hand.