Capital Share Discussion Threads

[gleach23] 21/8/2024 08:55

up just the 40% in the week since the CAPD announcement of its sale of shares!

[catsick] 21/8/2024 08:39

predictive moving higher, looks likely that there is going to be a takeover and some extra cash coming to capd

[hpcg] 20/8/2024 12:42

Finally had a chance to listen to the results conference call. Just doing what they say they are going to do now represents something of an upside surprise, especially on the labs and Nevada Gold. Given that they are well in to Q3 now I think it is likely they have a handle on at least the latter and are clearly comfortable on the former in absolute terms even if timing is outside of the company's control.

I was pleased to hear their commentary on the mining where they are not interested unless there is a strategic rational, specifically that they can offer multiple services on the same site. The increase in copper exposure is worth noting too. A pilot water monitoring project is also encouraging.

[davebowler] 19/8/2024 16:22

Just topped up. Gold has hit an all time high, and this could profit twice from the trend, by increasing both its trading and NAV.

[phillis] 19/8/2024 16:18

And then came

Silence ( and disappointment )

[shanklin] 16/8/2024 21:34

Given that CAPD are paying circa 11-12% on their debt, I would prefer they prioritise reducing the debt from the current $124m vs buybacks. The PDI $31m will be a good start, followed by the apparent $20m+ from the sale of equipment associated with the soon-to-end CEY contract.

Given the discount to TBV, IMHO share buybacks should be pursued as soon as the debt is (say) permanently under $30m.

[phillis] 15/8/2024 17:23

Lots of rose tinted glasses on show today

[dan_the_epic] 15/8/2024 10:39

FYI Boart Longyear was taken private last year at 4.5x EV/EBITDA which gives a bit of context to when CAPD is on 2.4x forward EV/Ebitda and much of the better quality names in the sector is on 3-4x EV/Ebitda

[dan_the_epic] 15/8/2024 09:48

They were also very confident on the technical advantages of Chrysos and it just sounds like it's getting through new customers doing their trials and then on boarding to the process change. The big miners are adopting and leading the way which is good. The second thing they talked about is that non minesite labs it's about getting those larger customers to provide the regular baseload and then the smaller miners provide the more fluctuating demand on top of that.

It's easy to forget that as a gold focused business, we should absolutely be in the foothills of an exploration cycle and while that impacts less the minesite mining revenues, in an exploration boom one of the main bottlenecks is the lab testing. And hey, here we are with an overall better product. So they are still confident that this ramps very nicely in H2

I agree on the buybacks. The management team must read this board. Why wouldn't you? You can literally buy back your own business at a 20% discount to its asset value, which makes no adjustment for the fact that you should be (when on a P/Fcf <10) generating 10% additional business value or shareholder value per year (partly buyback distributed).

Buying back your own stock is maybe the easiest way of all to grow shareholder value here. I can count on one hand how many stocks in the UK trade at a discount to their tangible NAV, and on one hand the number that trade at a 20%+ discount while also being profitable

It's a great problem to have if you harness it in the right way. They should absolutely do even if it's more token, a rolling $3m-5m buyback per year.

Stating the obvious, but a point of rate cuts would knock another $m off the interest cost here. And be a few percent accretive too. Looks like we will get those cuts in short ish order

[adamb1978] 15/8/2024 09:33

Thanks Dan. The equipment sale proceeds are decent.

The real game changer here though is a buyback. Hoovering up excess shares and buying £1 for 80p

[davebowler] 15/8/2024 09:26

Tamesis Case Capital's shares are down ~10% in the last month. We see any share price weakness at the moment as a great buying opportunity as management resets the business into lower risk jurisdictions and operation which should deliver higher multiples. While margin's are anticipated to be on the lower end of guidance for 2024 and 2025, we estimate Capital delivering an EBITDA of $92m and $101m and earnings of $24m and $30m. That equates to an EV/EBITDA of 2.6x and 2.4x, and PE of 8.8x and 7.1x. Compared to its peers, Capital continues to trade on an EV/EBITDA below average (see figure 2 below), while delivering a dividend yield of 3.6%. We maintain our target price of 160pps.

[dan_the_epic] 15/8/2024 09:08

From the conference call

Sukari fleet sales expected to generate $20m (pessimistic case) to $30m (optimistic case), so between this and PDI it'll retire about $55m of debt and should save about $6m in run rate interest costs

The ramp up pains in the US are quite labour force driven and just hiring the right people. Now up to 100 of the 200 person target for Nevada

Will get to 15-20% ebitda margins for MSAlabs in the second half of 2025 is the target. Some of the established labs already running at 15%-20% on ebitda

After Sukari equipment sales will be in a position to consider shareholder returns through buybacks or higher dividends. Focusing on the debt reduction with PDI and Sukari fleet

The story has not changed too much. Still a lot to like and a lot of mining activity to ramp up through the cycle here. Timeline has shifted back a bit. Still buying $268m of net assets at a 20% discount with these upsides and future cash generation in for free.

[gilotron] 15/8/2024 08:59

I was happy with the webcast. Does sound like some growing pains moving to the states but has to be good long term.

[shanklin] 15/8/2024 08:31

Adam, You can access Tamesis notes for free

[phillis] 15/8/2024 08:19

Summary
A good business but the management team seems to be struggling to deliver
Just hope Barrick aren’t too unhappy with slow progress on rig/MSALABS rollout

[dan_the_epic] 15/8/2024 08:05

No company in the world sustainably pays a 41% tax rate. The historical tax rate is much closer to 25%.

EV/EBITDA is ~2.4x on Tamesis new figures which remains low. This is why the stock isn't really moving much today. Weak first half profitability was somewhat expected by the institutional investors. The growth opportunities are still there, just shoved back by 6 months

[adamb1978] 15/8/2024 07:59

Thanks Shanklin. Looking back at your post, those are net income figures rather than PBT surely...?

They're pretty darn low too

[shanklin] 15/8/2024 07:54

Adam

EPS is not provided. My earlier post gives the PBT forecasts Tamesis do provide

[adamb1978] 15/8/2024 07:31

Admin costs of $27m in H1, vs $23m in H2 2023. Even with the $1.65m exceptional ERP cost they're increasing too fast IMO

Gross margins coming down as guided. 44% in H1 vs 46% in H1 last year and 47.3% in H2 last year

[adamb1978] 15/8/2024 07:28

Hi Shanklin,

What are the new Tamesis EPS figures for 2024 and 2025 please.
Thanks

[adamb1978] 15/8/2024 07:27

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

I don't think its hugely excessive. My problem with the board is the non traditional set-up and challenge from weak NEDs.

If they had an independent Chair, CEO and CFO, plus then 2-4 NEDs from different backgrounds it would help across multiple areas IMO

[shanklin] 15/8/2024 07:24

Dan,

Why did you suggest the increased tax rate is a one-off please?

[shanklin] 15/8/2024 07:20

Dan

"Air pocket"... ...nice description.

Management need a lesson in under-promising and perhaps over-delivering, rather than what they have been doing recently.

[dan_the_epic] 15/8/2024 07:19

"Capital released its H1 2024 results this morning. Operational data and total revenue ($169.4m) had already been announced. Overall the financial figures were broadly in line with our expectations with EBITDA and EBIT bang on, operational cashflow ahead and NPAT an Net Profit below due to a higher tax charge than expected"

The only surprise today was a little bit higher interest cost and the one off 41% tax rate in the first half.

"H2 should be strong, driven by the ramp up of operations which we forecast to deliver a 13% higher revenue HoH to $191m. We estimate margins to remain at the lower-end and expect a lower interest charge rom debt being paid down from proceeds of the PDI shares. There is potential for further deleveraging as Capital are now actively marketing a sale of the Sukari mining fleet after the contract at Sukari has been concluded in Q3. "

The Tamesis adj EBITDA cut for 2025 is only 3% FWIW

[shanklin] 15/8/2024 07:14

Tamesis note this morning

"We note Capital are currently rolling out a new ERP (internal cost management) system that will add an annual cost of $3.2m and $3.0m for 2024 and 2025 respectfully "

"Investment Case

Capital’s shares are down ~10% in the last month. We see any share price weakness at the moment as a great buying opportunity as management resets the business into lower risk jurisdictions and operation which should deliver higher multiples. While margin’s are anticipated to be on the lower end of guidance for 2024 and 2025, we estimate Capital delivering an EBITDA of $92m and $101m and earnings of $24m and $30m. That equates to an EV/EBITDA of 2.6x and 2.4x, and PE of 8.8x and 7.1x.

Compared to its peers, Capital continues to trade on an EV/EBITDA below average (see figure 2 below), while delivering a dividend yield of 3.6%. We maintain our target price of 160pps"