Capital Share Discussion Threads

[smartmoney100] 16/8/2023 07:50

Yes very decent, lots to look forward to over the next few years

[rivaldo] 16/8/2023 07:41

The H1 headline figures make good reading, with EPS up almost 100% to 8.9c (from 4.7c)!

The EPS adjusted for investment gains is 8.8c, and the outlook confirms the revenue guidance, so given 7p EPS in H1 CAPD look on course to meet or beat Tamesis's forecast of around 14.8p EPS this year, or a P/E of just 5.8.

Net debt is up as guided due to the Ivindo contract win and consequent equipment purchasing, and the investment portfolio is now worth $42m against the £162m m/cap, and excludes any gains from the likely Allied Gold IPO.

Whatever the figures, the outlook and the general sense of the interims is full of confidence for both the drilling and services divisions.

And MSA Labs/Chrysos looks transformational and simply unrecognised by the market.

[davebowler] 14/8/2023 13:54

Video 16 Aug on results -

[adamb1978] 10/8/2023 12:46

Thanks Ben, PodgyTed. The other point about governance is that Boyton's comp is excessive - $2m last year, so around 1% of current market cap!! Results from the NEDs being puppets...though the NEDs will stay quiet as their fees are around $100k!!!

Disappointed that I missed the AGM this year but I'd encourage others to keep an eye out for it next year and vote against all the compensation resolutions, and also make the point on investor call

[benjonesinvestments] 10/8/2023 11:54

Hi Adam,

You make a good point that Capital have deliberately been targeting blue chip clients and it reduces the need to entice explorers as clients via drilling for equity. I think it comes down to return on capital and if management see significant upside from a drilling for equity deal, I'm not opposed.

However, I do agree that as projects develop, positions need to be sold down to ensure Capital maintain focus on their core operations and don't try to be a junior mining fund. You're right that shareholders in Capital could themselves invest in junior explorer / development companies or funds.

I agree that with rates on debt of 10%+, the bar for equity investments is very high and mature investments should be paying down debt.

[podgyted] 09/8/2023 23:23

Totally agree Adam.

They have loans which attract the normal high WA interest rates. Yet they have a over £12m in Predictive Discovery for example - not producing yet and won't for a long time. Surely there should have been some sensible top-slicing before now. (To be fair we don't even know if they might have done this to a minor extent as the detail they give on this massive part of the balance sheet is derisory.)

Value will never come out until they address this - you're right to use references to Private Equity and Venture Capital - this is what's holding this back.

[adamb1978] 09/8/2023 16:49

Hi Ben

I agree with you to an extent in that the investments were a means to an end a few years ago when the company was a lot smaller and working with smaller clients. I also think they've made a reasonable return on their investments - I calculated it as 16% IRR from 2016 onwards from memory. However, as an established company now they should be more trusted, and also now that they're increasingly working with larger customers, the need to take positions in its customers should reduce.

As a result, it should be natural to expect the balance of new investments vs realised positions to shift going forwards and more generally, once the customer has got to a decent size and their shares are liquid, CAPD should really be looking to sell down rather than game the shareholding.

The problem with them holding the positions when they could exit as well as their latest vanity project - the Capital Innovations thing which they mentioned at the FY22 results - is that it muddies the water in terms of what the CAPD equity story is as someone else said above. Do CAPD investors really want CAPD playing at being PE investors from the investment PF, or VC investors from the Innovation thing? There's probably specialist funds available if people want to invest in a mining PE/VC funds...

To me, part of this confusion stems from the weak board with the former CEO becoming Exec Chair, rather than having a proper Chair.

Adam

[hpcg] 09/8/2023 14:54

I don't think this has been posted here yet, and I've only just found it despite regularly looking. Go-public date for Allied is 17 August:

[benjonesinvestments] 09/8/2023 13:58

I don't think the distortion from investments on annual accounts really matters, that's easy to separate out. What matters is whether the investments are providing good return on capital.

$52m of revenue last year came from companies that Capital had previously invested in. Returns on portfolio over the last 3 years look good (looks to me around 100% total).

Don't want the investment tail to wag the core operations dog but value-add looks solid.

[deanowls] 08/8/2023 12:24

I’d agree with that aspect definitely Steven.

Capital allocation I wouldn’t, in order to diversify it has meant having to pay down capex, we are a much stronger business now but as I’ve also said before I was first in here at 18p and sat through the seemingly years waiting to get through 60p, I see this moving through 100 and onwards once we start to see cash incoming and the take off of the lab business.

[stevenlondon3] 08/8/2023 09:10

The investment holdings for me are a negative. The change in values flow through the profit and loss account and distorts P&L. Yes you can strip the unrealised gains/losses but the headline figure is still distorted.

[adamb1978] 08/8/2023 08:31

Podgyted

I agree with you that I think they'd be better of gradually liquidating the investment PF - have said so many times on here. I also dont think they should be investing more into it or need to be investing more into it given their clients are generally now more tier 1 miners, rather than cash-starved smaller ones.

Also agree that the management team are very good operationally, but very weak with capital allocation decisions; again, said so many times here.

I do think the share price can progress meaningfully though despite these two factors, as it has done before. I just think that you cant attribute much/any value to the PF given the market doesnt seem to do so and the multiple won't be a premium multiple til the board improves

Adam

[mtioc] 08/8/2023 07:03

I thought they acquired most of these stakes when utilization rates were low (50+%) and it was a way of getting something for unused capacity while building client relationships. This was obviously presented as being a bit more strategic. (I could be wrong on this.) As I understand it, currently, with higher utilization, they are not drilling for equity (or doing very little).

Like SM, I back the Board to get the capital allocation decision right, when they get a liquidity option re these investments. I suspect they will do so with long term value in mind rather than short term share price

[smartmoney100] 07/8/2023 23:52

Personally I rate the board highly and trust their judgement. That's why I'm heavily invested here. Time will tell as always, each to their own of course.

[deanowls] 07/8/2023 23:42

What was the rating before they had stakes in miners?

The shares have risen with this policy and as I’ve said before the board here know what they are doing.

Bwdik

[podgyted] 07/8/2023 23:00

If they don't liquidate the majority of their holding in Allied Gold on IPO this will be a pariah.

[podgyted] 07/8/2023 22:56

That's the second extension.

Don't know what other people think, but until they really reduce the investment portfolio I can't see this going anywhere. This is a very good, growing company with, dare I say it, exciting prospects. But this is totally hidden in the concern about their investment portfolio/ capital allocation.

Yes, also, I have the horrible inkling that they'll take over Firefinch's Mali mine to make this even more of a mess.

Liquidate sensibly the majority of the investment portfolio and put pure focus on the contracting, drilling and the lab businesses, then the value will come out.

Rivaldo: PDI is still worth a lot less than 18 months ago - that's the City's problem - it wants to invest in a picks and shovels mining contractor, without the gold mining development arm. CAPD have undoubtedly made money on their investments but the city will not be interested until they liquidate the vast majority.

BWDIK

[rivaldo] 07/8/2023 07:25

PDI's shares are up 4.4% overnight on the news of "outstanding" drilling results from Bankan, which increased the size of the gold resource by 29% and where CAPD are the drilling contractor.

Lots more continuing and additional/new target drilling to come too:

[podgyted] 03/8/2023 18:15

Under the Morila update they refer to a preferred bidder being a "substantive West African mining contractor" - any views on whether this might be Capital?

[stevenlondon3] 02/8/2023 09:52

It is times like now that a company needs a good corporate broker that has line up institutional investors to mop up stock.

[volsung] 01/8/2023 14:24

This is looking cheap
Bought a few

[adamb1978] 01/8/2023 10:50

Agreed Chillpill. They're good operators but need to be better with capital allocation decisions (despite their name). They can probably get away with it in the very short-term as you say, but after that I think more capital needs to go on deleveraging and shareholder returns as you say, especially when the price is below NAV

[chillpill] 01/8/2023 10:46

I think one thing management need to take into account is fund managers who invest in commodity stocks look for short term capital returns to shareholders via dividends or share buybacks.

Obviously with the recent contract they have $35m of CAPEX…so shareholder returns have been pushed back.

At some stage CAPD need to focus on being a cash cow and returning more to shareholders.

Also if they do more of that Messrs Boyton and Rudd shouldn’t need to sell down their shareholdings on a regular basis!

[otemple3] 01/8/2023 10:37

Usually loosely track Geodrill share price but marked under performance YTD ~30%, which further adds to the view we look very cheap down here

[otemple3] 01/8/2023 10:33

Perseus have since pushed that back and reported some vandalism to equipment on site, which may impact us, but that was not new yesterday so still not sure why we suffered a big drop - good to see a bit of a bounce back today