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i.i.i have set up a momentum screen for small cap shares where:
The 50-day moving average price has risen above the 200-day moving average price
Price strength has been positive against the market over one year, three months and one month
Positive forecast earnings-per-share growth in the year ahead
CAPD are one of the top 10 shares highlighted in yesterday's article, with a P/E of 5.3:
Https://www.ii.co.uk/analysis-commentary/10-small-cap-shares-lead-recovery-2023-ii526472
Good news tweeted yesterday by CAPD:
Https://twitter.com/_capitallimited/status/1609833113894674432?s=46&t=NMLp7em5zYNgMfUDS8E-kg
"We have commenced operations for our client, Perseus Mining, at their newest project, Block 14, Sudan. They have a successful history of developing projects in new mining jurisdictions and Sudan’s potential makes this an exciting new frontier, as explained"
Https://www.miningreview.com/gold/perseus-mining-putting-sudan-formally-on-the-gold-mining-map/
"As mentioned, Perseus is looking to commence with a new 50-60 000 m drilling programme with the intention of materially increasing the reserve, while improving confidence in the ore body location which is required for determining the position of the waste dumps, camp site and other infrastructure."
And a happy new year to all here.
Encouraging to see the bid price up to 99p and a tiny spread at 99p-99.4p.
CAPD have been the drilling contractor for Golden Rim at their Kada mine in Guinea.
Golden Rim have overnight announced they've "commenced a 10,000m reverse circulation (RC) drilling program" there. Lots more to come:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02614096-3A609866?access_token=83ff96335c2d45a094df02a206a39ff4
"Extensive drill program expected to increase the gold inventory in the Mineral Resource area as well as targeting other prospects along the Kada Gold Corridor.
• Follow-up drilling will be conducted at the Bereko prospect, where initial exploration drilling discovered multiple high-grade zones of mineralisation, including previously reported shallow oxide intersections of 11m @ 6.3g/t gold and 10m @ 5.6g/t gold.
• Drilling will target potential resource extension at the Massan prospect, where Golden Rim has discovered zones of wide gold mineralisation up to 400m outside the maiden Inferred Mineral Resource with 930,000oz1 of contained gold.
• 3,500m of diamond drilling (DD) is scheduled to commence in January 2023.
• First results from the RC drilling program are expected late January 2023."
"19 December 2022
GOLDEN RIM RESOURCES ASX:GMR 2
Golden Rim’s Chief Executive Officer, Tim Strong, said:
“On the back of our recent successful capital raising, we are extremely excited to commence this next phase of exploration at our flagship Kada project in Guinea to test for additional ounces at both the Massan resource area and the newly discovered Bereko prospect. This next phase of drilling aims to increase the inventory of gold ounces across the property.
“If successful, we expect this 10,000m drill program will confirm and expand the Mineral Resource at Massan, prepare us for a maiden Mineral Resource at Bereko, and discover additional areas for exploration within the central portion of the mineralised belt.
“As we receive results during the coming field season, I am confident that Kada will be firmly on the radar of the international community as a major new gold discovery in West Africa.’
A brief mention in today's Shares Magazine from George Ensor, Portfolio Masnager at R&M UK Micro Cap - certainly is a "low valuation"!
"Our top performer in 2022 has been Capital (CAPD), a business that provides production and exploration drilling services for gold miners. High fleet utilisation has driven improving return on capital and cash generation and the shares remain on a low valuation despite the strong performance."
Also, good drilling results just out from Leo Lithium at Goulamina, where CAPD have a drilling contract. One drilling programme has been completed for 2022, and:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02612124-6A1128261?access_token=83ff96335c2d45a094df02a206a39ff4
"The resource drilling program for the rest of Goulamina as well as a sterilisation program is continuing with one RC and one Diamond rig on site. Results from the NE Domain drilling will be reported once they have been received and this is expected throughout Q1 2023. A restatement to the NE domain MRE would follow in early Q2 2023."
99p now being paid for shares this morning.
Excellent Q2 numbers from Major Drilling, the largest player in the sector - which bodes well for CAPD:
"Major Drilling Reports Strong Second Quarter,
Net Earnings up 65% as Industry Upcycle Continues"
Https://www.majordrilling.com/wp-content/uploads/2022/12/Press-Release-Financials-and-Notes-Q2-23-Market-Dec-8-Final.pdf
The gold price is now up to around $1,800. Good news for miners and therefore drillers like CAPD. And the oil price is ticking lower and lower, so two significant drivers of underlying demand for CAPD's services are looking extremely favourable.
PDI shares up 7% overnight on these promising drilling results from Bankan, where CAPD announced in April they'd expanded from 2 to 5 rigs.
Much more drilling coming imminently:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02605711-6A1125488?access_token=83ff96335c2d45a094df02a206a39ff4
"Strong correlation between near-surface drilling results and geophysical targeting, identifying seven priority target areas in the immediate NEB area for further drilling.
• Additional IP and gravity surveys are set to commence at Bankan Creek (“BC”) (and surrounding areas) and NEB East in early 2023. Aircore drilling will recommence at the seven prospect areas in early 2023.
• Ground IP and gravity surveys also planned for the northern AG1, AG2 and BK2 prospects. Reconnaissance auger drilling is due to commence in early 2023."
"Exciting" drill results from Shanta's West Kenya project today. Good news for CAPD as the contractor is that additional drilling is to take place, and also that CAPD's subsidiary MSALABS is analysing the samples:
Https://www.investegate.co.uk/shanta-gold-limited--shg-/rns/west-kenya-drilling-results-at-ramula-camp/202211280700086996H/
Yes, it reads nicely alongside what you passed on about Geodrill.
Yep, great to see a non-exec buying $50,000 of CAPD shares relatively close to the year end. Which hopefully bodes well.
Announcing first thing today would have been preferable impact-wise as most wouldn't have even registered it coming so late last night.
Confidence at this level. Might they announce another end of year share buyback shortly like they did last year..
Excellent Q3 results just released for CAPD's sector comparator Geodrill:
“Geodrill experienced growth in each and every financial metric for what is our best third quarter ever; record revenue, EBITDA, and net income on the back of continued strong demand in all geographical locations for our drilling services,” said Greg Borsk, Chief Financial Officer of Geodrill. “With this continued momentum in the third quarter, we remain on track for an unmatched year in terms of Geodrill’s financial historical performance.”
Holdings RNS - looks like Fidelity International have been buying and are now major shareholders, with 5.15%, or 9.82m shares:
Https://uk.advfn.com/stock-market/london/capital-CAPD/share-news/Capital-Limited-Notification-of-Major-Holdings/89501337
FYI, whilst I was on hols Small Caps Life (Mark Simpson et al) sent out useful as ever commentary on the Q3 results. I like the comment that "their own shares remain a better capital investment than almost all the other possible capital investments they could make at this time"!
"Compared to Q2, the number of utilised rigs is down, but the average revenue per rig is up. The reasons given were as expected for this time of year:
"Fleet Utilisation of 77% in Q3 2022 was up 1.3% on Q3 2021 and down 9.4% on Q2 2022, due to typical seasonal weakness, particularly the wet season in West Africa, and also increased asset mobilisation as the group begun repositioning the contract portfolio as outlined at our H1 22 results. Repositioning of rigs is continuing in Q4 2022 along with some refurbishments on the newly acquired rigs at Fekola";
The overall effect is a small beat on drilling revenue and either a small beat on mining or MSALABS (they don’t break this out) versus Mark’s Q3 expectations. A similar story from Broker Tamesis, who say:
"Revenue remains high and on track to meet guidance. The company achieved Q3 revenues of US$73.1 million which is just above the previous quarter which is impressive given the usual seasonal weakness (wet season in West Africa). The company continues to edge up growth in non-drilling revenue contribution (29% of total vs 26% in Q3 2021) driven by strong quarter for mining services and continued growth of the MSALABS business. The average ARPOR of $182,000 was flat YoY but up 6.4% QoQ which is a positive surprise to our modelling. We expect this high ARPOR to come off slightly (we model $175,000 going forward) compensated by the increased fleet size. After this strong quarter the company remains on track to meet its US$280-290 million revenue guidance for 2022."
Given the closing size of the rig fleet, a Q4 performance of 80% utilisation and $175k ARPOR would give the upper end of that revenue range.
There is a couple of new contract announcements:
§ A multi-rig exploration drilling contract (including reverse circulation, diamond and air core drilling) with Perseus Mining at its Block 14 Gold Project in Sudan; and
§ A reverse circulation drilling contract with Evolution Energy Minerals at its Chilalo graphite project in Tanzania.
These, together with the B2Gold contract already announced and the continued growth of MSALABS, mean that 2023 should see further profitable growth.
Perhaps the biggest disappointment is the lack of any new share buyback announcement. With a forward EV/EBITDA of less than two versus peers who trade on approximately 4x, their own shares remain a better capital investment than almost all the other possible capital investments they could make at this time. Earlier in the year, they were buying back shares at 97p. Since then, brokers’ EPS forecasts have risen by around 40% in sterling terms, yet the share price is some 15% lower. Surely this makes a further buyback a no-
Encouraging drilling results announced this morning from CAPD's relatively new exploration contract with Shanta Gold. Drilling is being expanded - plus they use MSALabs to do their sample analysis:
Https://www.investegate.co.uk/shanta-gold-limited--shg-/rns/west-kenya-phase-2-high-grade-drilling-update/202211070700095038F/
Been away on family hols for nigh on three weeks, so happy to read the excellent Q3 results here.
CAPD merely need $72.6m revenues in this Q4 to meet expectations - that's less than they achieved in the much seasonally weaker Q3 just gone. So the likelihood is that the year end numbers should look pretty good compared to Tamesis's forecasts.
The core business EBIT (before investment portfolio gains/losses) is forecast to be up to $55.8m from $51.9m - this against a £163m m/cap, with $87.4m cash inflows from operations.
The share price is still very, very undervalued imho.
Yes, looking forward to that with interest. Mostly interested to see that MSALabs is on track with their aggressive roll out. Hopefully a few more small contracts have been signed this quarter. If they can get their 10 new rigs utilised quickly then there should be some fairly reasonable increase in drilling revenue too.
JL
The Q3 trading update has been on 13th October for each of the last two years, so not long to go.
Q3 is generally seasonally slower, but given this from the interims less than two months ago the year on year comparison should be pretty decent. CAPD's valuation looks extremely cheap imho:
"the tender pipeline remains buoyant across drilling, mining and laboratories and as a result of this strong demand, we are raising our revenue guidance for 2022 to $280-290 million".
Continued:
"All of these are in USD, and with the current GBP weakness, this mid-case valuation works out to be about £1.93/share for a 128% upside to fair value.
My downside valuation, implying that the various parts should trade at a discount to industry averages, gives a fair value of £1.24/share for a 46% upside.
If you believe that the business should trade at a premium to peers, (an argument that I have some sympathy for, given their pursuit of long-term contracts rather than high spot rates), then I get an upside valuation of £2.76/share for a 226% upside.
I've always thought that Capital was a good place to be invested because of the quality of management and where we are in the cycle, but that the returns would be good but not stellar. They would just be a lot more certain than other places to put your money, and this justified a reasonable holding. Of course, returns in a spreadsheet are not the same as an actual share price, and the areas of operation make the company higher on the risk spectrum than average. However, I am increasingly seeing that this could be a multi-bagger with a fair wind, not just a solid but unexceptional return."
Mark Simpson, a long-term investor in and (it's fair to say imo) expert on CAPD has just sent out his latest Small Caps Live weekly market round-up. Hope he doesn't mind me linking to his updated valuation of CAPD as follows:
Https://smallcapslife.substack.com/p/small-caps-live-weekly-summary-9ea?utm_source=post-email-title&publication_id=302785&post_id=75035111&isFreemail=true&utm_medium=email
"Capital Limited (CAPD.L)
We don’t normally comment on stocks without specific major news. However, with Capital there has been a number of small changes that have potentially added up to a big change in valuation. These are a new contract with B2Gold, a placing at Firefinch, but perhaps most importantly, a weakness in the pound. This still provides a tail wind even though the current spot rate has bounced strongly back to 1.12 on Friday.
On discord, Mark has tried to make sense of this with an updated valuation model. As usual, he calculates a mid-case valuation but also presents a low and high case for those who are particularly pessimistic or optimistic on how Capital should be valued versus its listed peers:
First up is the investment portfolio. Lots of moving parts, but I have updated holdings where we know about them and also marked Firefinch to the AUD6c placing price vs 20c suspension price. I reckon listed and unlisted are worth about $44m at the moment, and I take a 10% discount to reflect illiquidity, giving a $40m valuation.
MSALABS I value on a revenue multiple. The growth rate will be slowing from the 100% pa historical rate, plus market valuations have come in for growth stocks. So I reduce my revenue multiple to 4x. However, the TTM revenue is now around $21m making a $64m valuation for CAPD's c77% stake.
For Capital Mining & Capital Drilling, I used EBITDA multiples of 3.7 & 4.1, respectively, which is the competitor mean from the 22H1 results presentation. Splitting the admin costs pro-rata between the businesses and ignoring MSALABS (which is conservative since at least some of the admin costs will be due to this growing business), I get around $16m EBITDA for mining & $70m for drilling based on my estimates.
This gives a $59m valuation for mining and $288m for drilling.
Year-end debt will be higher due to purchasing the 10 rigs from Perenti. I am estimating this at $42m net debt since the guidance was for this to come down a bit from the $36m at H1, prior to this deal."
Back down again. As you were... :)
Up over 8%! Any ideas?
Thx to Kaizenkid elsewhere for this commentary from Canaccord on the recent new contract award:
"Today’s announcement demonstrates that the business continues to grow under the strong market conditions, despite global macro headwinds, which has seen the share price fall sharply over the last month. We see the stock trading on a 2023E EV/EBITDA of ~2.1x and a (pre-debt) 2023E FCF yield of ~22%, and we believe the stock is significantly mispriced. Maintain BUY rating and 140p target price."
I note that Leo Lithium is up to new highs after an overnight rise. I've updated the thread header post - I calculate CAPD's holding in Leo Lithium is worth almost £4m.