Capital Share Discussion Threads

[rivaldo] 21/12/2023 10:19

Glad to see Tamesis' research again davebowler, but I already posted it above only 54 minutes earlier, and distilled into a much more readable format :o))

[davebowler] 21/12/2023 09:57

Tamesis -
MSALABS Announces Largest Contract in its History This morning Capital announced the finalisation of a new major five-year comprehensive laboratory services contract by MSALABS (majority-owned subsidiary of Capital) and Nevada Gold Mines (NGM, USA). MSALABS will operate a state-of-the-art hybrid laboratory incorporating both Chrysos PhotonAssayTM technology and traditional fire assay methods as well as full multi-element assaying capabilities. This contract builds on the partnership announced in November between MSALABS, Barrick Gold, and Chrysos Corporation (see link for our note - link). Below we highlight the key points from the announcement: • Contract terms: the contract is anticipated to generate ~$140m over the five-year term, with annual revenues of ~$30m once fully operational. Budgeted Capex of ~$7m to be spent in FY 2024, and the contract has a phased ramp as follows: o Phase I: the project will commence towards the end of H1 2024 with the commissioning of two Chrysos PhotonAssayTM units and a capacity of 80,000 samples per month. o Phase 2 will commence at the end of 2024 with the third Chrysos PhotonAssayTM unit along with the full geochemical laboratory bringing capacity to 120,000 samples per month as well as associated multi-element testing. • MSALABS guidance looking well on track: Capital guided revenues to grow to an excess of $80m by FY2025 (FY2021 revenues $15m). We estimate ~$15m of $80m revenues to contribute from the addition of the laboratory component today, and essentially de-risks the guided revenues to FY2025. We believe the company is being typically conservative in their guidance, and we maintain our revenue estimates for FY2024 and FY2025 of $69m and $90m. • Strong Platform for growth in the US: Capital has been targeting the region this year. Three major contracts have been announced with NGM, namely: 1. Drilling contract, 2. Chrysos units via the partnership with Barrick and 3. Laboratories addition today. The combined contract revenues will add ~$65m in revenues by 2025, and they have all been added in the last 3 months. They have also appointed a new executive, Aaron Austin, who will act as the CEOAmericas and oversee the rollout of these operations and their expansion in the region. Investment Case Overall, this announcement de-risks Capital’s guided revenues for MSALABS to FY2025. It also cements their presence in the low risk region of North America. Both these factors should ultimately lead to a re-rating of the shares. So far though the shares are down 19% YTD, and trading on a PE multiple 5.8x and EV/EBITDA of 2.3x for FY2024, with a dividend yield of 3.9%. We continue to believe our target price of 160pps is justified.

[rivaldo] 21/12/2023 09:03

Tamesis have maintained their 160p target price and their forward forecasts.

They have CAPD on a P/E of only 5.8 and an EV/EBITDA of 2.3 for next year, with a 3.9% dividend yield.

In summary:

"Overall, this announcement de-risks Capital’s guided revenues for MSALABS to FY2025. It also cements their presence in the low risk region of North America. Both these factors should ultimately lead to a re-rating of the shares. So far though the shares are down 19% YTD, and trading on a PE multiple 5.8x and EV/EBITDA of 2.3x for FY2024, with a dividend yield of 3.9%. We continue to believe our target price of 160pps is justified".

Also:

"• MSALABS guidance looking well on track:

Capital guided revenues to grow to an excess of $80m by FY2025 (FY2021 revenues $15m). We estimate ~$15m of $80m revenues to contribute from the addition of the laboratory component today, and essentially de-risks the guided revenues to FY2025. We believe the company is being typically conservative in their guidance, and we maintain our revenue estimates for FY2024 and FY2025 of $69m and $90m.

• Strong Platform for growth in the US:

Capital has been targeting the region this year. Three major contracts have been announced with NGM, namely: 1. Drilling contract, 2. Chrysos units via the partnership with Barrick and 3. Laboratories addition today. The combined contract revenues will add ~$65m in revenues by 2025, and they have all been added in the last 3 months. They have also appointed a new executive, Aaron Austin, who will act as the CEOAmericas and oversee the rollout of these operations and their expansion in the region."

[tiswas] 21/12/2023 08:51

Have Tamesis commented?

[adamb1978] 21/12/2023 08:50

Fair point Shanklin. One challenge with working out the impact of new contracts and wheher forecasts should be increased is that some other contracts will be expiring that year. Therefore do you view the contract entirely on its own, or in the context of replacing some already? And how much of this contract was factored in, either explcitly or implicitly via an assumption that they will win some new business?

Either way, this is very cheap. I don't like the governance and I dont like some of their capital allocation decisions...but even in spite of that, its very very cheap. How many companies trade at a discount to NAV?

[chillpill] 21/12/2023 08:44

Good announcement. Happy holder for next 3-5 years as long as Rudd and JB stay equally committed.

If they sell more it will be more disconcerting.
The last thing we want them to do is focus away from this.

[shanklin] 21/12/2023 08:43

Does anybody find it strange there's no comment that this will be earnings enhancing?

[adamb1978] 21/12/2023 08:37

I think there were some previous comments a month or two ago that MSALABS was still loss making as it didnt have enough volume. Hopefully this will push things over the line of enough critical mass

[adamb1978] 21/12/2023 08:33

Hi Catsick

Problems with moving listing are (i) listing requirements in the US are more stringent than here, and I doubt CAPD would meet the requirements and (ii) even companies which have $1bn market cap are small cap these. CAPD would be invisible.

Balancing the business more to the US is helpful in that it shold in theory reduce the risk premium which investors want based on location of operations.

Adam

[catsick] 21/12/2023 07:20

Excellent new contract and major growth, now that the company will have a substantial presence in the US as well as already accounting in USD , they should look to move the listing to the US which will get a much higher valuation, especially given the cutting edge technology

[rivaldo] 21/12/2023 07:18

Wow - as described in the RNS today, a "major" contract win for MSALabs, securing $140m of revenues over 5 years, and extending to $30m per annum as it matures:



This is a "Significant beachhead" for CAPD into the American market, sitting alongside the additional $35m drilling contract also recently won with Nevada Gold.

And also:

"These three new PhotonAssay units mark the start of a broader partnership agreement with Barrick Gold, with trials underway for a possible ten further PhotonAssay units by the end of 2025 across multiple of Barrick's other operations."

CAPD is just ridiculously undervalued as they keep delivering the goods. Let's see a serious re-rating from here Mr Market....

[rivaldo] 19/12/2023 14:18

Encouraging sector commentary from Major Drilling (thx to kaizenkid)....



"Looking at calendar 2024, customer demand is expected to remain strong as the growing supply shortfall in most mineral commodities should continue to drive demand for our services for several years. The growing global demand for electrification will only increase the need for metals like copper, nickel and lithium. The enormous volume of copper, battery metals and likely uranium required will further increase pressure on the existing supply-demand dynamics.

We expect all of this to drive substantial additional investment in copper and other base metal exploration projects as we help our customers discover the metals that will allow the world to accelerate its efforts towards decarbonization, as well with gold prices recently reaching record highs, this could have a positive impact on funding for junior mining companies. In the short term, it's important to note that we are now in our third quarter, traditionally the weakest quarter of our fiscal year as mining and exploration companies pause their drilling programs often for extended periods over the holiday season"

Also, MSA Labs' new facility has just opened in Egypt, where:

"Canadian exploration company Lotus Gold Corporation, who will be one of the new laboratory’s first clients.....will utilise our services as they advance exploration on a number of interests in Egypt"

[tiswas] 19/12/2023 14:13

I can not believe that this is still about 1/3 off recent highs especially as most of my other small and mid sized caps have rallied recently.

Never really recovered from the chunky director sales. Is there a dominant player in this market who might be tempted to pounce at these levels?

[t1bbst3r] 18/12/2023 20:16

Any chance you could c&p the write-up kaizenkid? Does it say we are pinned at 78-80p while the seller is still here? Might be worth sitting on stink bids of 74p. Does it say that? Starting to think we won't rally until 1 Month prior to earnings like major drilling did.

[gleach23] 08/12/2023 11:52

kaizenkid - the link above is behind a paywall. If you google 'nine have it all shares' you will be able to find the link to read the whole article

[kaizenkid] 08/12/2023 11:31

Link please ?

[davebowler] 07/12/2023 17:03

Investors Chronicle pick CAPD -

[rivaldo] 04/12/2023 11:31

The gold price is up to around $2,070, which must be good for CAPD's client base.

Some of CAPD's smaller holdings have been rising somewhat and recovering losses, but in particular PDI's 200m shares in PDI have risen to A$0.24, their highest in a while, and are now worth over £25m.

[adamb1978] 01/12/2023 16:19

Thanks Ben - very helpful. If they issued equity at current levels they should be fired! Its the opposite of what they should be doing! Share price is < NAV - they should be working out how soon and how aggressively they can buy shares back

[rivaldo] 01/12/2023 11:33

Cheers, appreciated.

New senior management appointment, underlining the diversification and expansion into the Americas:



" Capital LimitedCapital Limited 54,097 followers54,097 followers
3d •

We are excited to welcome Aaron Austin as Chief Executive Officer – Americas. Aaron has more than 30 years’ experience with large multi-national companies, including Orica and BME, across all functions. Aaron will oversee our operations as we undergo expansion into the region and ramp up our new contract with Barrick at the Nevada Gold Mines complex. Welcome Aaron."

[benjonesinvestments] 01/12/2023 11:02

I spoke with Capital at the mines & money conference in London this week - these were the points of note from the conversation.

I raised concerns over capital allocation and management targeting size over return. Capital say they have heard this before and see it as a frustration as they maintain they are very focused on return on capital and would not chase revenue if returns were poor. They maintain the mining contracts margins are in-line with drilling, and much better than the (poor) mining contract margins seen in Australia. The mining equipment typically lasts 10-12 years so can cover multiple contracts. Overall margins are likely to decline slightly but they're conscious of keeping EBITDA margins >25%

I asked management's views on debt levels and they believe there is little headroom left. They expect levels to remain broadly flat for now as some existing leases amortise and others begin (new rigs for Nevada). They were cautious on equity financing although I would like to see a stronger stance against it (or at least a very strong justification).

The labs business needs to run at approximately 50% capacity to break even. They're not running at capacity yet and I think it's something to watch. Roll outs are going as planned and demand is strong. They note that some clients are slow to move to a different technology but when they move to Chrysos, they don't go back to traditional assay.

I asked if utilisation rates can be pushed much above 75%. They say any higher than 80% is almost impossible to maintain given maintenance requirements and rigs in transit. Maintaining a level above 80% would put them behind on maintenance and force lower utilisations down the line.

They still like the investment portfolio but stress its purpose is effectively providing rigs for equity in projects that make sense. They don't aim to run risk in more developed projects.

These are just my takeaways that I thought would be useful to share. Make of it what you will!

[gleach23] 21/11/2023 13:06

Good to see Roland Head at Stocko picking Capital as one of his 5 UK shares at 52-week lows worth looking into this morning.

Capital is 10% of my portfolio but it feels like I've invested more patience than money here, although dividends and a story still intact help with that.

[rivaldo] 16/11/2023 09:52

Momentum Investor magazine summarised the Q3 update in last weekend's issue. There's some useful info on Peel Hunt, who have a 153p target:

"Peel Hunt has left forecasts unchanged for pretax profit of US$36.1m and US$53.3m in FY'24 for eps of 12.8c and 19.9c (16.4p). Mining Services, which enjoys longer life contracts and the higher margin PhotonAssay business together make up over 30% of revenues, but this higher quality mix is not reflected in the FY24 PE multiple of 5.0.

The broker's price target is 153p. I am a strong holder."

[adamb1978] 15/11/2023 08:29

The board needs strengthening but disappointing announcement this morning.

Board really needs strengthening in terms of capital allocation, cap structure and investor focussed experience.

This lady seems to bring some generic sector experience, which I would say that the current board and management have in abundance. Others can comment on the rationale for her appointment - I dont see what she brings which is additional.

Disappointing

[rivaldo] 08/11/2023 09:53

Chrysos's share price has increased by 126% since the start of this year, and they've this week raised $75m to "support the deployment of PhotonAssayTM units and accelerate Chrysos’ growth trajectory".

The presentation supporting the fundraising is here:



Slide 8 is encouraging as regards "further adoption by global gold miners" - hopefully via MSALABS:

"■ Three initial PhotonAssayTM deployments at the Nevada Gold Mines (NGM)
complex in the USA
■ Potential deployment of up to 10 more PhotonAssayTM units to other
Barrick projects by the end of 2025, subject to finalising due diligence
■ New partnership is an extension of an already successful relationship
between the three companies at Barrick’s Bulyanhulu mine in Tanzania and
its Kibali operations in the Democratic Republic of the Congo
■ Partnership is a watershed in the global adoption of PhotonAssayTM
technology and is anticipated to lead to further adoption by global gold
miners"