Capital Share Discussion Threads

[rivaldo] 26/3/2020 08:23

Mark Watson-Mitchell has compiled a list of his ten favourite post-Covid-19 recovery stocks - CAPD is one of them, with an 80p target price:

[mfhmfh] 24/3/2020 19:14

from CNBC.com

'Also propping up bullion markets was the closure of three of the world’s largest gold refineries in Switzerland due to the outbreak that has squeezed supply of the physical metal, Stephen Innes, chief market strategist at financial services firm AxiCorp, said in a note.'

[rivaldo] 24/3/2020 10:59

The gold price is now above $1,670....

[rivaldo] 24/3/2020 09:06

The gold price has zoomed up to $1,610 now - CAPD must be in line for a big re-rating at some point.

Incidentally, CAPD doesn't have a single operation in South Africa :o))

[otemple3] 24/3/2020 09:02

https://www.bloomberg.com/amp/news/articles/2020-03-23/south-africa-orders-mines-to-close-in-21-day-virus-lockdown?__twitter_impression=true

[otemple3] 24/3/2020 09:01

SA being on complete lockdown

[qs99] 24/3/2020 08:44

Miners should be making massive hay given gold price, filling coffers for post CoVID drilling IMO.....yet CAPD not moved....DYOR

[gleach23] 20/3/2020 11:14

Bit more like it today but still a long way back.

@ 34-36, one can currently sell at the Offer price, so even though we're already up 20% today there should be more in the tank.

[qs99] 20/3/2020 09:14

Thanks Riv, looks way oversold IMO....DYOR and gold price is moving North again

[rivaldo] 20/3/2020 08:57

New Buy tip from Master Investor:



"Capital Drilling: an excellent ‘gold play’
By Mark Watson-Mitchell 19 March 2020

The ongoing demand for gold just has to be a major driver for Capital Drilling and I remain convinced of the upside prospects for the company.

Just in case you had not noticed it is, perhaps, well worth telling you that the price of gold has risen significantly in the last year – moving from $1,270 an ounce to around $1,500 currently.

As a global benchmark of value, the metal cannot be beaten, it is in demand across the world, and especially so in virus times like these.

As countries and investors alike continue to build up their financial safety by acquiring more gold, it can be expected that demand will increase significantly. With Russia and China now amassing strong physical hoarding to back, perhaps, their own new global currency, the upward price movement will not rest.

Why am I telling you this? Because I really like a little £44m company called Capital Drilling (LON:CAPD). Some 90% plus of its business last year was gold sector based.

It provides a complete range of drilling and mine services to mineral exploration and mining companies, covering exploration, development, drill and blast and grade control drilling for surface and underground projects, together with load and haul services.

This Mauritius based company is fast becoming a leading mining services business, with a focus on the African markets. It operates in Botswana, Burkina Faso, the Cote d’Ivoire, Egypt, Mali, Mauritania, Namibia, Nigeria and Tanzania.

It already has a strong presence in East Africa and since early 2018 it has been building up its operations in West Africa. It is this latter area that today represents about 45% of the total exploration spend across the whole of Africa. Some 44 of its then fleet of 91 drilling rigs operate there.

At the end of 2019 it was up to 95 rigs and the group today is up to 99 rigs, supporting the growth potential in its long-term contracts.

With the gold price nearing a ten-year high, operators are securing higher margins and in turn are increasing their levels of mining and drilling activity. In addition to its well-established drilling and mineral analytical and maintenance services, it can now also offer operators specific load and haul services.

As the group can now offer a pan-African service to its customers its business is set to get a real boost. It is winning even more contracts, which are getting underway during 2020. And it is increasing its larger client base.

Clients include Kinross, Barrick, Resolute, AngloGold Ashanti, Centamin and Allied amongst many others.

Today’s results, which are in US$, for the year to end-December 2019 showed revenue at $114.8m and an impressive 34% increase to $10.4m. Despite heavy capital expenditure last year, at $19.8m ($11.9m), it still ended up with a good net cash balance of $4.4m. Earnings rose 35% to 7.7 cents per share.

The average rig utilisation rose from 51% to 54%, with the average revenue per rig coming in at $176,000 a month.

The group is expecting to see a big uplift in the second half of this current year, as its recently secured long-term contracts start to show up in its revenue.

Obviously, just how well it, and its customers, can escape the effects of Covid-19 is anyone’s guess. However, its shares are off 3p this morning, at just 29p reflecting, perhaps, a combination of the market melee and an investor ignorance of the potential of this little group.

The ongoing demand for gold just has to be a major driver for Capital Drilling and I remain convinced of the upside prospects for the company.

Brokers Peel Hunt have today issued a ‘buy’ note on the company, with a target price of 84p.

While Tamesis Partners are more bullish: “We value Capital Drilling at 99p/share, and maintain our target price of 100p. This represents 5x forecast 2020 EV/EBITDA of US$28.9 million and a 3.0x multiple on the current share price.”

That is good enough for me!"

[rivaldo] 20/3/2020 08:07

The gold price has rocketed back up to almost $1,520 this morning. Enough said :o))

[dangersimpson2] 19/3/2020 11:27

There is a non-zero chance that African countries stop all mining due to Covid19 but personally I think this is unlikely - a lot of countries have a young population, and although medical coverage can be weak and there is an issue with HIV making people more susceptible to viruses, I think that the economic impact of closing mines would cause a bigger loss of life than the virus itself. Sadly, social safety nets and the ability for governments in Africa to mitigate the economic impacts is much weaker than in Europe or North America.

On that basis, I am modelling 60% utilisation on 99 rigs with $180k ARPOR for 2020. I think CAPEX will be more subdued in 2020 than otherwise would be the case and will probably be in line with depreciation around $12 level. Which at 30p to buy gives:

EV/EBITDA 1.4P/E 3.8EV/FCF 3.4

On that basis, any short-term tail risk seems to be more than priced in.

Edit: Just seen Rivaldo's post, I am slightly more optimistic than Tamesis with $31m EBITDA vs their $28.9 but certainly same ballpark, as an independent view before I'd seen their note. Again there seems little reason that the market should be pricing in the worst-case armageddon scenario for CAPD based on the current outlook.

[rivaldo] 19/3/2020 11:13

Tamesis Partners have today retained their 100p target price - which would be an EV/EBITDA for 2020 of just 5 based on $28.9m EBITDA.

2019 $10.4m net income was 6% higher than forecast, and EBITDA was 2% ahead of forecast.

They've cautiously reduced their EBITDA forecast for this year to $28.9m (from $32.7m) - up from $27.3m in 2019.

That's 9c EPS, i.e around 7.8p EPS at current rates.

[thepopeofchillitown] 19/3/2020 11:05

20% spread!

[gleach23] 19/3/2020 09:59

Thanks ds2. Mid 60s rig utilisation guidance would have been very nice!

@ 26-32 the current market spread seems as ridiculous as the share price Clearly Africa not coping well with Covid19 being priced in too.

[dangersimpson2] 19/3/2020 09:17

Conf call was more positive IMO than the tone of the outlook in results commentary:

No Covid impact on business so far, areas of risk:

- supply chain, no impact so far, working with mines to put in place contingency plans in case of reduced air freight access etc.

- travel restrictions, no impact so far apart from management working from home, mainly related to expat staff, may ask staff to do longer shifts in-country if needed.

- likely to reduce explo opportunities due to capital market access, CAPD would still consider drill for equity options if they were compelling enough.

If we hadn't had Covid19 likely would have seen today an increase in the dividend, and guidance for rig utilisation moving into the mid-60s.

No commitment on making up dividends or buybacks when Covid19 impact clearer but the current price does seem a "compelling proposition".

[qs99] 19/3/2020 08:15

$27m EBITDA and market cap of c.$60m....net cash and likely to rise after a big opex/capex year IMO....NAV 63p and rising.....gold price helpful still....DYOR...

[gleach23] 19/3/2020 08:10

Yes - as reassuring an update as it could have been.

Obviously tricky to assign a valuation to most businesses at the moment, with the downbeat view prevailing.

[rivaldo] 19/3/2020 07:14

Excellent results, with 7.7c EPS, $27.3m EBITDA, $4.4m net cash and 63c per share of net assets.

Perhaps the key sentence for those seeking reassurance is:

"We also have high exposure to recurring revenue streams from mine-site based contracts in the gold sector, from which 90% of our 2019 revenue was derived."

There's the necessary forward caution in terms of the virus, resulting in a reduced final divi. But CAPD are still winning new contracts - note the new win with Barrick Gold which is now their third with the giant Barrick - and that huge recurring income and the high gold price make the current share price look ridiculously cheap.

[gleach23] 18/3/2020 19:35

Seems a ridiculous price currently...as with so many shares. Looking at the chart in the header I can't get my head around it going lower still given recent updates. Surely bad news/outlook has been well and truly baked in?

Anyway, not long to wait to find out :)

[mfhmfh] 18/3/2020 14:28

Fundraise by Cora Gold:

'will principally be used for further drilling and related exploration activities'

[rivaldo] 18/3/2020 14:18

Results tomorrow, and the gold price is back above $1,500 and remains at high levels.

[tole] 13/3/2020 10:19

Once the market volatility settles somewhat and the short term margin calls where those traders/investors in trouble have been tapping into and selling their gold security blanket I can only really see gold heading higher from here. Which obviously has a good knock effect here.Crazy with bitcoin price yesterday as no doubt a similar effect. Everybody cashing in anything to wind out their leveraged positions.Similar stuff happened in last financial crisis.. gold was sold off alongside most index's, yet when quantitative easing started the precious metal prices soared.