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Indeed Lesville, a very encouraging performance today given both the usual trend on results day and especially going ex-div too.
Interesting little 8,776 buy at 95.4p reported late as well.
Thanks Rivaldo for posting Tamesis investment case guidance and how you see the appreciating gold price benefiting Capital Drilling. Let’s hope that the gold price remains strong for sometime yet.
Somewhat surprised at the strong share price today especially as the stock is now ex dividend, perhaps some are now beginning to realise the hidden value here.
Tamesis Partners reiterate their 160p target price and forecast 18.7c EPS this year, or exactly 15p EPS.
They summarise:
"Investments.
Total value of investments (listed and unlisted) was $51.7m as at 31 March 2024 up from ($47.2m) at as 31 December 2023). Strong growth in the investments over the quarter, driven by the gold rally as a majority of the investments are gold companies (namely Allied Gold, Predictive Discovery and WIA Gold). Predictive released their long awaited PFS this week, and WIA announced an updated MRE with a 63% increase in contained gold at their Kokoseb asset in Namibia
• Outlook.
Revenue guidance has been re-iterated at $355-375m. We expect strong improved performance across Drilling and MSALABs, while Mining is ticking along as expected. The Sukari kit has the ability to be redeployed and deliver step changes to the P&L, while the elevated commodity prices sets the scene for further potential drilling contracts. We maintain our current revenue estimate of $358m.
Investment Case
We remain positive on the outlook for a strong operational performance through 2024. Key growth projects in the Capital business are ramping well, projects continue to be won with high quality clients and rigs are being mobilised to higher quality contracts.
MSALABS is developing momentum, both at their NGM labs contract and their partnership with Barrick. The mining services business has the potential for another big contract. The company is trading on EV/EBITDA and PE multiples for FY24 of 2.4x and 6.2x, and for FY25 2.2x and 5.4x, while delivering a dividend yield of 3.4%. We remain comfortable with our 160p PT."
Agreed Lesville. Today's update shows a steady as she goes Q1, ready for the big contracts commencing this Q2 at Belinga, Reqo Diq and Nevada.
Good to see guidance for the year being reiterated, and ARPOR increased markedly to an impressive $202,000. Excellent year on year growth at MSALabs/Chrysos and at Mining offset a little Q1 weakness in Drilling.
The picture for this quarter onwards remains excellent, with Q1 generally being a weaker quarter, whilst traders who bought recently will no doubt consider this quarter's results weren't exciting enough for them.
Stifel state "1Q24 Sets Foundation for Strong 2024".
But subscription-only so no further detail:
Https://twitter.com/research_tree/status/1780851311400858091
In relation to the rising gold price, CAPD will benefit from not only the substantial additional revenues accruing to mining companies, which will benefit mining production expansion programmes and encourage drilling for new resources, but also the increased certainty as regards exploring in new geographies and regions.
Not too bad with reiterated yearly revenue. Also ex dividend today so market reaction not at present repeating the usual drop.
Hi Rivaldo,
I am just as keen as you to see the increase in share price but fail to see how it can be linked to an unrealised asset. The price of gold could possibly fall just as easily as it has increased.
There have of late been some sizeable sales/purchases quite often above the bid/ask price which does beg the question why. Hopefully we will continue to see some increase in the share price.
Hello - 50,000 shares just bought at 95.34p, well above the 94p offer. Very keen.
Hardly surprising with the gold price now at $2,387.
Hi Shareminator
If you go back to 2019 then yes there is growth. But what about the last three years...
2021 revenue $227m Net profit $37m EPS 15p
2022 revenue $290m Net profit $42m EPS 17p
2023 revenue $318m Net profit $36m EPS 14p
Now I get that some of this will be investment, ie Capex. But personally I am disappointed with the drop in profits and EPS in 2023. 50% increase in revenue with zero increase in net profit or EPS. So we are larger but no more profitable. And the dividend is also flat in 2023 after small increase in 2022. None of this is a good trend IMO.
I stick to my summary, they need to show better bottom line growth, to sustain an increasing dividend, or I am going to start selling.
JL
Fair point, you're right. What's your view on the persistent undervaluation and lack of institutional interest? I'm holder, and not bearish on the stock, but do appreicate open discussion. I don't think they can "spin-out" MSALabs as, as far as I know, they do not own the IP and are only acting as distributor/operator. Chrysos is also very overvalued to consider acquiring it. They pay a small dividend and have high ongoing capital requirements through maintenance and reinvestment.
One possible thought on what could be causing the undervaluation is the cyclical nature of mining. Although recent utilisation rates have been increasing and are high (I think), compare them to 2015/2016 when they were a lot lower. Perhaps insitutions worry about this playing out in future, with CAPD being left with lots of surplus underutilised costly equipment therefore reducing returns. Difficult to see if one subscribes to the "commodity supercycle" or "age of scarcity" theses, as well as the general need for increased macro capex at a global level.
Who are these jokers below trying to fool?
2019 FY results: Revenue $115m, EBITDA, $27m, Net Profit $10.4m
2023 FY results: Revenue $320m, EBITDA, $92m, Net Profit $38m
An almost three-fold increase in revenue, a three and half times increase in EBITDA and an almost four-fold increase in net profits does not indicate a "lack of growth in profits".
Great points. A lack of insitutional interest (assuming that them simply being unaware is not the sole reason) suggests unaddressed or unavoidable permanent weaknesses in CAPD's underlying business model or irresolvable risks. I think your second may speak to these underlying weaknesses; mining services must be highly commoditised resulting in the worsening margins, high amounts of capital will always be required for re-investment and maintenance (poor cash flows for investors for ever) and a high cost of capital now and in the future (although CAPD is using internally generated cash).
CAPDs high cost of maintenance in its fleet requires it to be a "price-taker" in a well supplied market otherwise it would face significant capital costs, and the larger this fleet - and competition's fleets - the more pressure to race-to-the-bottom on price. On the other hand, CAPD has high (I think although not sure of any benchmark) utilisation rates, suggesting there should be wrong for price increases and enhanced margins. The only reason that they can't do this, must be competition?
The contract tendering process, similar to all, also has similar flaws for companies that "win" contracts ( in this case being given contracts due to giving lower prices that cause problems further down the lines).
Hi Lesville
I agree with this. Something just doesn't sit right.
I am minded by two things: firstly, when this was pitched by a PI to institutional investors a couple of years back they were unimpressed, despite the healthy growth and blue chip clients. So clearly there is little appetite for the share with institutions as you say.
Secondly, the relative lack of growth in profits over the last few years despite revenue rising strongly. It shows their lack of pricing power and thin net margins. The issue appears to be in the large sustaining Capex required to keep their fleet up to date. I remember a comment below that basically said - impressive growth, but not a lot of cash left for shareholders to benefit from (I paraphrase). This, to me is their biggest challenge, and the reason they are still under £1.
Growing revenue is one thing, growing profits at a similar rate is what we need.
Having said that I am still holding on, with MSALabs potentially the jewel in the crown, there is still good upside from here.
JL
This along with the other metrics are all very good news Rivaldo but unfortunately is never reflected in the share price. Its value maybe compelling, however, as I have said before the lack of institutional interest is just a drag on the share price. Hopefully one day I wil be able to exit with a profit, a 3.4% dividend yield is hardly enough compensation.
CAPD's investment portfolio is now worth $60m, up from $47.2m at the start of 2024, according to darlocst as posted elsewhere.
This backs up 27% of the current m/cap - even with the core drilling and labs businesses booming and on a P/E of just 6, an EV/EBITDA of a ridiculous 2.5 and a 3.4% dividend yield.
With the gold price now up to almost $2,350, three of CAPD's larger investees rose nicely yesterday.
PDI were up around 6.5% to new recent highs, Allied Gold up another 4% and WIA Gold up 6%.
A very rough calculation puts CAPD's overnight gain from these movements (allowing guesswork for the Allied Gold holding) at say £2m.
On MSLabs... while the growth in sales in fantastic, I understand CAPD's relationship with Chrysos (the actual owner of the IP and I think producer of the machine for MSALabs) to be that of a "distributor" and perhaps "operator". My main concern is the lasting strength of this arrangement. Could Chrysos partner with someone else in future? Could they push CAPD on margin? Could they remove MSALabs whilst benefiting from the scale, marketing and market created by MSLabs? Etc.
Good to see large investee Allied Gold up 9% overnight to $3.93, presumably on high gold prices, which is the highest since last December:
Article about MSALabs looking at global expansion not posted here before:
Https://www.northernminer.com/joint-venture-article/jv-article-msalabs-probes-global-expansion-after-swedish-mega-find/1003863780/
Cheers otemple. Yep, mea culpa time....coincidentally last night I was further researching CAPD's holding in Awale and came to a similar conclusion. Although at one point it appears that CAPD's holding actually increased further to 13.33m shares from the 8.33m I previously noted, in 2021 there was an 8 for 1 share consolidation. So, assuming CAPD even still owned their shares in Awale, the holding would likely be now worth less than £1m anyway. As you say, a shame.
I am however absolutely sure about CAPD's investment in WIA Gold, which keeps rising and is worth almost £8m.
Mark Simpson checked today and had it confirmed we no longer have a holding in Awale, which is a shame
Excellent news Rivaldo. Can’t help but thinking perhaps I should have invested in Awale but of course would not have known about it without Capital. Hopefully one day all this will be reflected in Capital’s share price. I suppose it reflects the problem with investing in small cap aim shares with little institutional interest. I remain positive though given recent market updates.
Wow - Awale surged again in last night's trading - up 100% to $0.8! So CAPD's investment is now worth the best part of £4m....
This was on stunning drilling news (also good for CAPD as the operator) - the CEO's commentary is worth a read!
https://money.tmx.com/quote/ARIC/news/7824050364831601/AwalxE9_Hits_457_gt_Gold_over_32m_at_the_OdiennxE9_Project
"This drill hole is absolutely spectacular. I have been looking at gold projects for the last 20 years and have never seen anything like this. Odienné has produced very high-grade mineralization since we started drilling, though we always felt that some special things would come as we continued our work. The harder we press at Odienné, the more it gives back, and we've only just scratched the surface."
Awale were up another 8% to CAS0.39 last night on yet more successful drilling news. CAPD's holding is now worth £1.9m:
Https://money.tmx.com/quote/ARIC/news/7272985030761629/Awale_Resources_reports_more_significant_assay_results_at_OdiennxC3xA9_project_in_CxC3xB4te_dIvoire
Awale also "now plans to pursue further drilling to explore the shear zone-hosted target's potential", which is more good news for CAPD as the drilling contractor.
And WIA Gold were up 8% to new highs of A$0.82 - this holding is worth a further £7.75m.
Awale and WIA are now worth almost £10m between them.
Plus Allied Gold rose 5% to $3.35.
Awale rose a further 17% on Tuesday and then another 20% overnight to CAD0.36, so CAPD are up another £500k since I last posted on this, and this investment alone is now worth £1.75m.
CAPD just look ridiculously cheap imo. They're on a P/E of 6.2 on conservative forecasts, with around a 3.5% divi, and a fast growth business in MSALabs on top of its other divisions which are growing nicely and diversifying into more risk-friendly geographies. Plus they have a long-term top-notch track record.
A few random points I picked up from today's presentation:
- 2024 is expected to be a "fantastic year"
- they expect to be realising some gains from the investment portfolio "this year"
- some of these may be returned to shareholders
- the Sukari mining fleet could either be redeployed or sold,a nd again it was noted this could involve a return of funds to shareholders
- Kaizenkid elsewhere has noted that the PDI and Sukari proceeds could total $60m
- ARPOR should imprive with the move to the USA
- guidance for MSALabs this year is $50m-$60m revenues, up another 40% at the midpoint
- CAPD are fully provided against any Morila debtors
- forecast growth is almost entirely from existing contracts
- all receivables from 31-60 days old have been received
And Awale's shares climbed another 17% last night to CAD$0.30, so that holding alone's now worth almost £1.5m.