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Nice 200,000 share buy at 95p just reported this morning, before the H1 results due on Thursday.
R&M UK Micro Cap Investment Trust's July factsheet is just out.
CAPD is the Trust's largest holding now at 5.6% of the portfolio, and R&M have now bought more after a "strong update":
Https://riverandmercantile.com/funds/rm-uk-micro-cap-investment-company/
CAPD's H1 results are out in just 9 days on 18th August. We already know they'll be excellent, so given the "strongest demand environment since the company's inception" hopefully the next stage of this upward trend over the last couple of years will hockey stick upwards again.
Thanks - that reminded me to top up at Shanta! :)
This is already one of my largest holdings. Does anyone know if they hold Shanta shares?
Excellent Q2 results just out today from sector comparator Geodrill. The outlook says it all:
Https://finance.yahoo.com/news/geodrill-reports-second-quarter-2022-110000739.html
"Outlook:
Exploration companies, intermediate and senior mining companies generating cash continues to drive demand for drilling;
Drilling activity levels in core geographic regions are increasing in 2022;
Extremely active bidding market, with particularly strong demand in exploration drilling in all geographic locations."
"High-grade" drilling results this morning from Shanta's West Kenya project, where CAPD are the contractor. And MSALabs are carrying out the lab analysis.
Plus lots more drilling to be carried out over the rest of 2022:
Https://www.investegate.co.uk/shanta-gold-limited--shg-/rns/high-grade-drilling-results---west-kenya-project/202208030700066905U/
"The latest phase of drilling at West Kenya has continued to deliver consistently high-grade results that are indicative of the vast potential West Kenya offers in the Shanta Gold growth story.
The 2022 drilling campaign is two-part, focused on upgrading existing resources to the Indicated category and resource expansion across our numerous targets. I am pleased to report that today's results highlight our progress with the former, and will be quantified with a year-end resource upgrade targeting hundreds of thousands of new ounces to the Indicated category.
We expect to have a further update in the next few months with our priority being to expand the resource base at targets including Kimingini and Ramula, where drilling is active and delivering highly encouraging results."
I note that Canaccord are forecasting at 93p a P/E of just 5.4 for next year.
Which provides encouraging back-up to Tamesis's similar forecast as previously posted.
They also see a 2.69c dividend this year rising to 2.76c next year.
Excellent news - and 140p is as usual with initiations probably a relatively conservative opening target which can easily be upgraded later:
Https://www.sharecast.com/news/broker-recommendations/canaccord-on-capital-ltd--10267229.html
"Canaccord Genuity initiates coverage on Capital Limited
Analysts at Canaccord Genuity initiated coverage on Africa-focussed full-scope mining services company Capital Limited on Monday with a 'buy' rating and a 140.0p target price.
Canaccord Genuity said it believes Capital shares were "significantly mispriced" based on the group's "strong" growth outlook and pointed to four key reasons why investors should own the stock.
Firstly, Canaccord said Capital was "a dominant player", generating premium margins, while it also noted that the group was operating in a growing market, it had a "positive outlook" for key segments, and also pointed to the company's balance sheet strength.
"Capital operates the largest drilling fleet in Africa, with approximately 116 rigs, and operates at higher margins than peers. Mining services activity is picking up significantly and is set to rise further as commodity prices incentivise exploration activity. Further, the company is using its established position to diversify into segments with positive outlooks, including contract mining and laboratory services which accounted for roughly 22% of group revenue in FY21," said Canaccord.
The Canadian bank also noted that Capital's management had positioned the company for "significant growth" and, importantly, it now expects that most growth spending can be funded from internal cash flows.
"We see Capital as a well-run, growth-focused company operating in a fragmented market which acts as a degree of protection over the company's margins. The company is trading at an EV/EBITDA of ~2.2x for FY23E and ~1.6x for FY24E, compared to a historical industry average of ~3-4x over the last few years," said the analysts."
Excellent increase in their gold resource at Bankan just announced by PDI:
Https://www2.asx.com.au/markets/company/pdi
I note they now have 9 drill rigs on site (CAPD's Q1 update stated their contract with PDI had expanded from 2 to 5 rigs).
And PDI state:
"Bankan is one of the most significant gold discoveries ever made in West Africa and may possibly become the region’s next tier-one gold mine."
"Over the following months and supported by our healthy A$57 million cash balance, we will continue to drill the current deposit to convert the Resource category from Inferred to Indicated, undertake further resource drilling at Bankan Creek and develop our regional targets with the goal of finding more NE Bankan-style deposits along our 35km-long structural corridor."
Another potential catalyst is the potential IPO of investee company Allied Gold, which was mooted last year and may well be resurrected, especially if the gold price remains around its current levels or falls back to say $1,400-$1,500, which would still be a decent level historically.
CAPD's investment in Allied Gold is currently valued at around $10.9m.
Good to see another rise today to the closing 91.8p mid-price after several large trades went through and a total of 3.72m shares traded.
The H1 results are out soon, on 18th August. We know they'll be good (at least prior to the short-term investment portfolio movements). The outlook will be equally bullish.
Then there's every chance of further mining service contract wins, plus the stellar growth of the Labs business and the likelihood of more drilling contracts.
The share price has gained 50% in the last two years. There's no reason imo why the share price shouldn't re-rate again by anywhere between an additional 50%-100% given the extremely cheap fundamentals.
Tamesis Partners released an update not summarised here yet after the excellent H1 trading update.
They have a 160p target price.
Their forecasts imply 10.74p EPS this year for a P/E at 90.2p of 8.4.
They then imply 20.45p EPS for next year given a P/E of just 4.4!
They also see a 4.7% dividend yield, and the huge free cash flow giving rise to a $50.4m net cash position at Dec'24.
And these forecasts are "conservative"....
Https://www.tamesispartners.com/research-portal#/portal/tamesis-partners
Extracts:
"• Contract awards remain strong. The company continues to win new contracts and extend existing ones throughout Africa. Notably the counterparties to these contracts are of increasing size and quality with B2Gold now a client following a RC drilling contract award. The $150m drilling services contract with Anglogold Ashanti at Geita has already been announced in Q2 and is the second largest award of a new business in the Company’s history. Rig count closed at 116 with the company pointing to further growth to c.120 in the second half.
• MSALABS relationship with Chrysos a major success. Also already announced but worth noting was the expansion of the global partnership with Chrysos. The company is now guiding to 21 PhotonAssay units by 2025 vs six by YE 2022 (which is on track). Each Chrysos unit is expected to generate annual revenues of US$3-5 million so we are looking at c$80m+ of revenue from MSALABS vs just $3m in 2019 . This revenue growth has come with minimal capital outlay.
• Fleet utilisation strongest on record. Just when we thought it couldn’t go higher fleet utilisation increased to 85% in Q2 fully 10% more than we are forecasting for the full year. This, along with a record 116 rig count, augurs well for the full year."
""Investment Case
As has been the case for nearly every trading announcement in the last three years these results are strong and point to further strength and growth. With activity in the mining sector still booming and long-term contracts locked in, we see safety in the medium term revenues and margins, particularly as there is some degree of protection in the long-term contracts. Meanwhile the shares are trading on EV/EBITDA multiples of 2.4x and 2.0x 2022 and 2023 respectively, PE ratios of 8.4x and 4.4x and a dividend yield rising to 4.7%. This implies next to no growth in the business, yet our forecasts show an 8% CAGR in EBITDA from 2022 to 2024 and a 46% CAGR in free cashflow taking net debt from $21.6m at the end of 2022 to a net cash position of $50.4m by December 2024. We believe that, if anything, these forecasts are conservative. We see the current share price as an attractive entry point and maintain our price target of 160p."
"Announcing these updates separately and the tone of the trading statement suggests that the management are getting increasingly frustrated at the lack of market reaction:
Capital Drilling: Strongest demand environment since the company's inception…
Capital Mining continues to perform strongly…
Q2 2022 has again seen extremely strong demand with the outlook remaining supportive;….
Tendering activity across all business units remains robust, with a number of opportunities progressing;…
We are currently seeing the strongest demand since the Company's inception, in contrast to the recent perception from global equity markets.
Our hope is they turn this weakness into an opportunity with a large buyback announcement to coincide with the results.
The guided revenue range is reiterated. However, the strength of trading in Q2 and the continued buoyancy of the end markets confirmed this week means that this looks even better value at 90p than it was a couple of weeks ago when it was trading in the mid-70s."
Small Caps Life have emailed out their latest weekly summary, including this on CAPD after the trading update:
"Capital Limited (CAPD.L) - Q2 2022 Trading Update
The number of rigs utilised is quite a bit higher than Mark expected at 97 vs 92. 85% utilisation is about the maximum they can achieve while still moving rigs between contracts and maintaining the fleet.
The average revenue per operating rig is a little bit lower again in Q2. The drop here in Q1 led some to question why, so seeing it drop further may worry some, particularly when we know the market is tight. However, there are some reasons why ARPOR is lower:
A higher proportion of underground rigs. About 20% of the fleet is now underground rigs, which command lower rates. However, the EBITDA margins are similar. Given that underground rigs are cheaper to purchase, the return on capital on the underground fleet may actually be higher.
Rates are not the biggest driver of ARPOR. Factors such as how long a contract has been operated (and therefore operations have been optimised) and whether they can operate double vs single shifts matter more. Rates themselves are being priced at around 15% higher than the same time last year.
The other bad news was the value of the listed investments has suffered due to the weak equity markets:
The portfolio recorded investment losses (unrealised) of US$10.3 million. The total value of investments (listed and unlisted) was US$47.3 million as of 30 June 2021, versus US$60.2 million at the end of 2021;
However, this loss is lower than a simple mark-to-market would suggest, showing some outperformance from trading these. And they’ve taken cash out, which is good to see:
…the portfolio generating net sales after investments of US2.6million, with the proceeds directed toward group capital expenditures.
They also highlight some of the previously announced recent positive news that has been separately announced:
First contract with B2Gold Corporation at the Fekola Gold mine in Mali, one of largest gold mines in Africa: Capital has been awarded a reverse circulation drilling services contract.
They now have a toehold into the first and second largest gold mines in Africa and will be seeking to expand their presence in these.
MSALABS recently announced an expansion of its global partnership with Chrysos, now guiding to deploying 21 Chrysos PhotonAssay units by 2025;
The growth here is phenomenal, as are the potential margins and low-capex required to expand. Interestingly, they say MSALABS starting to drive work to the drilling side, not just the other way round. It shows that it is starting to be a strong business in its own right."
Berenberg have raised their target price to 168p (from 156p):
Https://www.sharecast.com/equity/Capital_Limited_DI/broker-views
That's the sixth time they've raised their target price this year :o))
Been on hols, so great to see (1) the excellent Q2 trading update and (2) the huge global expansion of the Chrysos partnership. I'm sure the market hasn't yet fully cottoned on to the full value of Chrysos, with over $80m of revenues per annum now anticipated from MSALABS in the relatively near future.
With $138m revenues in H1, CAPD are surely highly likely to beat the guidance of $270m-$280m for the year, given "the strongest demand since the Company's inception" as per the outlook statement.
It's worth ruminating on the outstanding investment portfolio figures posted elsewhere by darlocst taken from the CAP conference call post-results. These must beat the performance of almost any other investment manager anywhere:
- Net $11.5m invested since Jan 2019, total return 302%.
- Value at June 30 $47.3m.
- $26.4m revenue generated from investee companies in H2 2022.
I note that today's Sukari update from CEY has been well received by the markets.
Hopefully the current share price upturn will run up to and past the H1 results on 18th August since we know the numbers and outlook will be so rosy.
I agree. A better result than Q1. QoQ growth of 6.4% is really strong. YoY growth is less important because that relates to the Sukari ramp up last year. MSALabs must be providing much of the growth. $3m to $80m revenue in only five years! That is growth. And it is being completely ignored by the market as we are sooooo cheap. We have a nice yield to enjoy while we wait for the rerating.
So all good. Strong buy at anywhere near this level. I would be surprised if we don't hit 120 -130 this year.
JL
Wow numbers continue to outperform even crap market. Back to 100p plus
I am just looking forward to Monday results
Smart money will pile today
Really positive update on MSALabs today. The $50m revenue target has been superceded by an $80m target a year later. I'll take that. With that sort of growth, I wonder if they are thinking of a separate listing to ensure it gets valued properly. In the meantime, this just highlights the value here.
JL
They've today raised their target price slightly to 156p (from 154p) and say Buy:
Https://investing.thisismoney.co.uk/broker-views/CAPD
I agree. Two good contract wins here. This should secure our revenue stream for the coming couple of years. Still very hard to work out what their growth trajectory will be though. The B2Gold win is the more significant of the two IMO as it is new business. If that performs well then they are in prime position to expand that contract further. Not long to the H1 results - that will be key. I would like to see some growth on Q1 otherwise they are effectively treading water currently. I am particularly intrigued by what they say about MSALabs. That is the hidden gem in my view.
JL
very good contract win and only adds to value to business. Shocking current valuation.
Great news as regards (1) the statement about continued "very strong demand", (2) the securing of $150m of revenues from Anglogold and (3) the new customer and contract win from B2Gold plus the MSALabs extension.
The revenue visibility going forward for CAPD is now extremely large following the Anglogold contract win. The markets should respond well to this.
Judging from today's trades, with a hefty (in these markets) 388k shares traded already, it just looks like there was an early forced/desperate seller who had to get rid. Plenty of funds out there I'd guess having to sell due to redemptions or need for liquidity.
The gold price is still high and looks like remaining so for some time to come. CAPD's core business is thriving. I saw a post from kaizenkid elsewhere noting that the portfolio is still worth $43m - the weak pound is working in CAPD's favour in translation terms, so that's still a very nice £35m or so, i.e around 25% of the m/cap on its own.
It's worth reiterating that the core business is forecast to make $80.5m EBITDA and $53.5m EBIT this year (i.e before investment gains/losses), i.e around £44m - and $37.5m PAT against a now £146m m/cap.