Capital Share Discussion Threads

[dan_the_epic] 15/8/2024 07:07

It's classic air pocket Shanklin. You make the investments up front into some meaningful growth areas. And then it turns out to take a bit longer than you budgeted for, and so you end up with a weak result in the middle and minor strain on the balance sheet. But let's be real, it's well less than 1x EBITDA levered after Predictive and most of the investment is behind Capital not in front of it

Doesn't mean the strategy is wrong
Does mean they should've budgeted more cautiously
Doesn't mean the end goal isn't going to manifest or is any smaller

I don't want to see this taken out but this is nearing 50% upside just to get back to NTAV.... it reminds me of hunting plc

[boystown] 15/8/2024 07:06

The Exec Chair, CEO and Exec Director take combined salaries of over $1.3m - and no doubt other benefits and expenses etc.

Does this not seem a bit excessive? This is a genuine question - maybe it's just around par for the course?

The entire wage bill last year was over $94m, which comes out at an average $33k and seems more reasonable overall. I'm just wondering in whose interests the company is being run, but it is beginning to look good value.

[shanklin] 15/8/2024 07:06

My buys yesterday very badly timed. But there's a lot of value here if the management can get their act together... ...although they seem to think they are doing fine

[dan_the_epic] 15/8/2024 07:02

It's more of a clearing event IMO. £238m of net assets which are basically entirely tangibly backed, with the growth drivers all stick intact but just taking a bit longer to ramp up. That is 50% upside to tangible book value.

The value is clear to see. And now we have a better expectations bar in place

Again that first half had some dodgy one offs like the 40% tax rate, while as the business de-gears there should be some hefty benefits through the interest line

[phillis] 15/8/2024 06:56

Pretty shocking really
An ERP sh*t show on top
How difficult can that be in such a simple industry

[adamb1978] 15/8/2024 06:52

Yes, results read pretty poorly however with the PDI proceeds and equipment sales along with the low valuation and reiterated guidance, I'd hope the market impact is muted.

I don't think there much though that will tempt more investors in. A company which flags changing business composition and all the various other changes over the coming months doesnt make people jump onboard. Hopefully though not that many will go the other way.

Does anyone know the likely proceeds from the Sukari kit?

I wonder whether the flux of the business at the moment might make the board more open to seeking an acquiror...

[davebowler] 15/8/2024 06:47

htTPs://sparklive.lseg.com/CapitalDrillingLtd/events/a8c5b546-f500-4a77-b94d-7830465dd6ab/capital-limited-h1-2024-results

[dan_the_epic] 15/8/2024 06:46

Results are pretty uninspiring all things considered but those Predictive proceeds will help with reducing financing costs as will rate cuts

$25m of operating profit vs. $28m last year first half
Finance costs were $8.2m up from $5.8m. Retiring $30m of debt and selling the Sukari equipment could get us back $2m a half
Tax rate temporarily a whopping 41% compared to 25% in the first half of last year. This seems a one off

Net asset base reaches $277m or £238m compared to the £173m market valuation

Second half should be better than the first in any scenario. Revenue guidance unchanged at $355-375m (MSAlabs result may swing where in the range).

[dan_the_epic] 14/8/2024 21:31

CAPD actually foreshadowed the sale of Predictive back at the full year results presentation for those who remembered saying the timing was very logical

[shanklin] 14/8/2024 14:59

Thank you rivaldo, Now registered.

Where should I have found that?

[rivaldo] 14/8/2024 14:33

And a huge gain overall!

Shanklin, you can register here:

[phillis] 14/8/2024 13:57

Tx Riv
Missed it

[adamb1978] 14/8/2024 13:54

Does anyone know the tax impact of the sale? Do corporates pay CGT on this sort of investment? Trying to understand whether this is $31.2m benefit or say $20m. Thanks

[shanklin] 14/8/2024 13:38

Anybody any idea please as to how we can participate in tomorrow's 9 a.m. webcast? There is nothing showing on Investor Meet Company. TIA

[rivaldo] 14/8/2024 13:32

It's all in the RNS if you scroll down it:

"In comparing the price per Sale Share at which the Sale Shares are being sold to the value of the Sale Shares as at 30 June 2024, the Group anticipates recognising a realised gain on investment of approximately US$4.9 million in H2 2024 (based on proceeds of ~$31.2 million)"

[phillis] 14/8/2024 13:08

What was PDI valuation in last balance sheet
Any idea?

[rivaldo] 14/8/2024 13:00

Great news today - not only £25m in the bank, but also a 50% share of any upside from Perseus if they sell before Dec'25.

It should also be noted that PDI's current share price is $0.195, so CAPD achieved a decent premium (PDI's share price was last at $0.21 back in April).

The investment portfolio now consists primarily of the Allied Gold holding and WIA Gold. The former is stuck in a consolidation at present, but looks capable of much better at first sight, as does WIA, particularly with gold at near-record levels.

Hopefully the portfolio is now much less of a distraction (if it ever was) from CAPD's excellent core businesses - and its ridiculously cheap rating.

[spooky] 14/8/2024 09:19

hpcg - Agreed. These things are not an issue over the medium/long term, they do however impact how PIs trade in the short term.

[hpcg] 14/8/2024 09:15

spooky - yes, I do also think that debt will look like it needed some action, which has happened. Had Sukari not been extended they would have freed up capital by selling the trucks etc. Part of this though is the allergy a lot of London investors have to growth. I think many investors forget that in the eventuality of a down turn a drilling company can just stop capital investment more or less completely so the risks are quite different to businesses with ongoing needs.

[dan_the_epic] 14/8/2024 09:04

Also do not forget the NTAV here is £211m which is 20% more than the market cap of £176m and the FCF yield here is expected to be 23% next year

This is how you get the valuation to stack up as very cheap

Simples

[dan_the_epic] 14/8/2024 09:00

We already know debt is up this year as they've been investing in MSALABS in the US, so this $31m will help offset some of that increase on a forward looking basis but again you dont just announce this because you want to make a good announcement. You need a willing buyer (Persus) willing to pay the prevailing market price. That's not common

The leverage pro forma for this will still be under 1x ebitda

This stock is cheap whichever way you dice it IMO

[phillis] 14/8/2024 08:39

Barrack is a great customer
Let’s hope we are matching up to their expectations re labs installations

[spooky] 14/8/2024 08:39

Suspect this is announced today because debt numbers in the figures aren't going to look great.

[hpcg] 14/8/2024 08:34

Phillis - the next MSALABS are at the Nevada site and with Barrick in general. When they say slower adoption I take that to mean with other Tier 1 miners. These aren't in H2 but presumably are some grey ink in 2025 and beyond. It does and doesn't surprise me. Having had a career in oil services the largest players, specifically Exxon and Shell and the NOCs, were extremely slow technology adopters whilst below that was a smorgasbord of fast and slow. It can often take joint ventures to cross pollinate technology adoption from from company to another. The relationship with Barrick only goes back a few years, so it doesn't surprise me that other large miners are taking their time. Being a second phase adopter is not a bad strategy though, so long as one commits once the evidence is out in the wild that the technology works.

[dan_the_epic] 14/8/2024 08:15

After peak 2024 investment on Nevada Gold, Tamesis Partners are forecasting CAPD to be on a 23% FCF yield next year.

I'll let you all decide whether that is fair for a world-leading business in its space like CAPDs

Shanklin that's the way I'm understanding the Eco-Detection investment. Not the same scale, but the same potential to roll out a world class technology, this time with exclusivity for mining world distribution, at high margins. We can debate CAPD on certain levels but what the management under Boyton's past stewardship has been good at is building the service offering and forward thinking investments