The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Major drilling has gone from $7.60 to $8.70 in the week since earnings. CAPD? pinned at 79 by a large seller!
Major drilling reports Thursday according to trading view too, although not entirely parallel businesses, one would expect good results there to follow here. A lot of stock for sale at these levels. Definitely profit taking time in the gold miners too at these levels, hopefully both are catalysts here anyway.
The gold price is up to around $2,070, which must be good for CAPD's client base.
Some of CAPD's smaller holdings have been rising somewhat and recovering losses, but in particular PDI's 200m shares in PDI have risen to A$0.24, their highest in a while, and are now worth over £25m.
Know what the margins are on US contract services? Obviously from the presentation, McMahon in Australia has 5% npat I think, so would hope us business will mainly focus on mslabs expansion, having a competitive advantage unlike contract mining or even drilling.
New senior management appointment, underlining the diversification and expansion into the Americas:
Https://www.linkedin.com/posts/capital-limited_capd-activity-7135086730570788865-354L/?utm_source=share&utm_medium=member_desktop
" Capital LimitedCapital Limited 54,097 followers54,097 followers
3d •
We are excited to welcome Aaron Austin as Chief Executive Officer – Americas. Aaron has more than 30 years’ experience with large multi-national companies, including Orica and BME, across all functions. Aaron will oversee our operations as we undergo expansion into the region and ramp up our new contract with Barrick at the Nevada Gold Mines complex. Welcome Aaron."
Momentum Investor magazine summarised the Q3 update in last weekend's issue. There's some useful info on Peel Hunt, who have a 153p target:
"Peel Hunt has left forecasts unchanged for pretax profit of US$36.1m and US$53.3m in FY'24 for eps of 12.8c and 19.9c (16.4p). Mining Services, which enjoys longer life contracts and the higher margin PhotonAssay business together make up over 30% of revenues, but this higher quality mix is not reflected in the FY24 PE multiple of 5.0.
The broker's price target is 153p. I am a strong holder."
Chrysos's share price has increased by 126% since the start of this year, and they've this week raised $75m to "support the deployment of PhotonAssayTM units and accelerate Chrysos’ growth trajectory".
The presentation supporting the fundraising is here:
Https://wcsecure.weblink.com.au/pdf/C79/02736691.pdf
Slide 8 is encouraging as regards "further adoption by global gold miners" - hopefully via MSALABS:
"■ Three initial PhotonAssayTM deployments at the Nevada Gold Mines (NGM) complex in the USA
■ Potential deployment of up to 10 more PhotonAssayTM units to other Barrick projects by the end of 2025, subject to finalising due diligence
■ New partnership is an extension of an already successful relationship between the three companies at Barrick’s Bulyanhulu mine in Tanzania and its Kibali operations in the Democratic Republic of the Congo
■ Partnership is a watershed in the global adoption of PhotonAssayTM technology and is anticipated to lead to further adoption by global gold miners"
Tamesis Partners have issued an update following yesterday's excellent news, reiterating their 160p target price and including the following - note the 115% growth in MSALabs revenues in just 2 years to $90m:
"This is a major announcement from Capital and a stamp of approval for MSLABS and the Chrysos PhotonAssay™ technology from a major mining company.
Although this update does not alter our forecasts, it provides us with a clear path and significant de-risking to the rollout of 21 Chrysos units by 2025, which we estimate to raise MSALABS revenues from $42m in FY2023 (13% of group revenues) to $90m in FY2025 (25% of group revenues). See revenue growth profile as illustrated in fig 1 below.
The partnership also raises the potential for further uptake across Barricks global operations, with Barrick having publicly highlighted the success and benefits of the technology. As referenced in the Capital’s announcement, Barrick’s Mineral Resource Management & Evaluations Executive Simon Bottoms, said: "PhotonAssay has already been delivering faster, safer, more accurate and environmentally-friendly analysis to our African operations, so we are more than pleased to broaden the partnership with Chrysos and MSALABS to take advantage of this innovative technology in our global operations."
"It is worth noting that Chrysos have started to test the applicability of the technology in the use of copper. This would be a provide a massive addressable market for the technology beyond gold. Barrick itself has a major copper project at Reko Diq, expected to double the size of the company’s copper production capacity when it is commissioned in 2028. Barrick’s current gold and copper attributable production guidance for FY2023 is 4.2-4.6moz Au and 420-470klbs Cu."
"Investment Case
This announcement de-risks Capital’s rollout of Chrysos PhotonAssayTM units. We currently maintain our forecast of 21 units being rolled out by FY2025. However, there is scope for an increase in this now for reasons as mentioned above.
This year has seen continued positive updates, including:
• Delivering 2 new major material contracts this year, being Ivindo SA and Nevada Gold that contribute $40m and $65m in revenues in Fy24 and Fy25
• 4th year of consecutive revenue growth and record revenues of $324m per our forecast
• De-risking MSALABS Chrysos PhotonAssayTM units roll out to guided 21 units and see MSALABS revenues doubling from FY2023 – FY2025
The shares are YTD 18% down, and trading on EV/EBITDA of 2.5x and PE of 6.3x, with a dividend yield of 4.1%"
Great to see today's news of an expanded partnership with Chrysos and particularly the huge Barrick Gold "to deliver PhotonAssay(TM) technology to Barrick mine sites across four continents", starting in Nevada, USA.
This further diversifies CAPD's operations both geographically and in terms of operations:
Https://uk.advfn.com/stock-market/london/capital-CAPD/share-news/Capital-Limited-MSALABS-Chrysos-Barrick-Capital-Partnership/92406055
With the gold price at $2,000 now, PDI shares rose 6% overnight to A$0.245, which is its highest for almost 2 years and getting towards its highest ever level from around that time.
At current exchange rates that's worth £18m against the £148m m/cap:
Https://www.asx.com.au/markets/company/pdi
Allied Gold's shares have also bounced 14% to C$4.80, so this holding is worth another $10m or £6m.
More detail this morning from Berenberg on Citywire:
Https://citywire.com/investment-trust-insider/news/expert-view-aviva-moneysupermarket-gb-group-firstgroup-capital-ltd/a2428592?re=114049&refea=218441
"Don’t ignore Capital’s investment portfolio, advises Berenberg
Projects at Capital Ltd (CAPD), previously known as Capital Drilling, are on track but the market is giving no credit to its investment portfolio, says Berenberg.
Analyst Richard Hatch retained his ‘buy’ recommendation and increased the target price from 169p to 173p on the Citywire Elite Companies AA-rated mining services company, which closed unchanged at 77p last week but are down 20% this year.
A third-quarter update showed revenue slightly below Berenberg estimates, but it observed that ‘key mining and drilling projects are on track’ and the group ‘also provided an investment portfolio update, noting an increase in value by $5.7m to $47.8m’.
‘Capital’s holding of Allied Gold, which listed during the third quarter, with a market capitalisation of CAD1.3bn, was worth $10m as of 30 September,’ said Hatch.
‘Overall we view this as a steady update from Capital, but we highlight the positive investment portfolio update which is 25% of its market cap and given no credit in its valuation, in our view.’"
Berenberg increased their target price to 173p (from 169p) two days ago after the trading update:
Https://investing.thisismoney.co.uk/broker-views/
Yes, reasonably happy with that update. Pleased to see they are maintaining annual guidance, they need to hit at least $86m in Q4 to reach $320m. Given they have left the upper band unchanged, could that be a sign of confidence that they will smash that?
Obviously, conversion into profits and cash is still key here. The comment below about there being little cash left for shareholder returns is still a concern.
Also, I wonder why Tamesis are forecasting a higher p/e of 7 for next year. Lower earnings? Surely not - there should be more upside given recent contract wins and the MSALabs growth. I hope.
JL
Very happy with the msalabs creeping up.
Tamesis have retained their 160p target price and forecast of 18.5c EPS this year, giving rise to a P/E of just 5.1.
This despite Q3 being slightly behind forecasts due primarily to the Perseus Mail drilling project hiatus and Q3 weather seasonality. Tamesis expect a strong Q4 due to the ramp up of the drilling contracts at Ivindo and Reko Diq.
With Mining Sevices and MSALabs now comprising over 30% of revenues CAPD are "no longer just a drilling business".
In summary (extracts):
"Capital are clearly on track for another record year (4th consecutive year of revenue growth), and are well placed to continue with an active tendering pipeline, growing geographic footprint (having recently entered into America with their Nevada Gold mining contract – see note) and first-in class services."
"Capital’s holding in Allied Gold was worth ~$10 million as at 30th September 2023, at Allied Gold’s share price of C$4.74. The company’s investment portfolio stands at $47.8m valuation vs $42,1m as at 30 June 2023."
"The shares are trading on EV/EBITDA multiples of 2.2x and 2.4x 2023 and 2024 respectively, PE ratios of 5.1x and 7.0x and a dividend yield of 4.1%."
Q3 results look positive, with revenue guidance maintained despite the usual African hiccup such as in Sudan.
Drilling continues to thrive with new contract wins etc and revenues up 9% on last year, supported by mining revenues up 39% and MSA Labs up 36% year on year, with both these also up nicely quarter on quarter too.
The investments are now worth almost $48m, up in the quarter from $42m after the Allied Gold IPO and backing up around 26% of the m/cap in themselves.
At the current valuation and low single-digit P/E CAPD still looks extremely cheap. And of course the gold price is now rising back up again for obvious reasons.
From Citywire today:
Https://citywire.com/funds-insider/news/expert-view-imperial-direct-line-capital-unite-and-ramsdens/a2427505
"Allianz manager Knight drills down into Capital prospects
Capital Ltd (CAPD), previously known as Capital Drilling, is an example of a small-cap stock being hit disproportionately hard by negative news, says Allianz Global Investors’ Richard Knight.
The Citywire Elite Companies A-rated mining services company has a focus on the gold mining industry in Africa and is a top 10 holding in Knight’s Allianz UK Listed Opportunities fund where it makes up 2.4% of the £197m portfolio.
‘The shares have performed poorly following a trading update in July, though the update was only slightly soft on revenues and led to very minor downgrades in profit expectations for the year, though management guidance was maintained,’ Knight said.
He added that the ‘more salient news’ was the ongoing longer-term contract wins in mining services in new metals and in new geographies that ‘significantly de-risk the business operations’. This, along with growth in materials testing means it ‘warrants a much higher valuation than the group average’."
I was looking over the financials again because I'm considering buying some more. They do pay themselves a lot
I am really not very qualified to comment on mining services companies so I sought the advice of an industry professional.
From the latest CAPD report CAPD looks well diversified and with solid financials.
Given its dividend yield and the prospects in the mining industry it should give a decent return, although not fireworks!
An EBITDA margin of more than 28% is impressive at face value, but does not give an indication of sustainable margin.
For instance when looking the financials for H1 2023 it appears that much is absorbed by Capex!
Cash from Ops os 38.2 and outflows for capital equipment is 36.2.
That would seem to leave very little for shareholders?
capd share price performance is completely dislocated to how the company is performing.
the main headwind is effectively the perception of african risk – particularly in west africa where there have been a series of coups (latest one in gabon, where they are now working for fortescue, a huge iron ore company and a big load & haul and drilling contract).
the reality is that they have a much larger non-african footprint than they are getting credit for – saudi arabia, north america and ****stan with barrick, a big chunk of their labs business is in canada, etc. and these are large contracts which will grow – look what happened at sukari! the drilling business is also the highest margin for the moment – msalabs will have significant margins once it gets to critical mass, but is growing very fast and that lowers the margin in the short term. but drilling is at 28% margin.
well we all know it, **** is starting to hit the fan. people are losing jobs, cost of living is getting crazy. markets can't ignore it
I agree, another great win. What a muted reaction to the news though.
On Tamesis report, I haven't read it, are they forecasting a reduction in earnings for 2024 as the ratios quoted seem to be rising. I had another rise in income and earnings pencilled in for 2024.
JL
This is such good news. What a great company to own a part of
Tamesis Partners retain their 160p valuation.
They have CAPD on a P/E of just 5.3 for this year, with a 4% dividend yield.
They've raised their forecasts for 2024 and 2025 EBITDA by 2% and then 13% to $85m and $87.5m. FCF falls in 2024 to $17.3m and then rises by 28% to $33.9m.
Incidentally, they state the capex "is likely to be OEM funded at the same coupon as for the rest of debt funding (i.e 10%)".
They conclude:
"Valuation Commentary
Whilst Capital have a growing presence in Canada with MSALABS this is their first drilling contract award in North America representing a landmark moment for the company. We would expect to see further success now they have a foothold in the world’s biggest gold producing region. The company is truly diverse both geographically and across the three businesses: mining services, drilling and laboratory testing. However there has been no rerating, quite the reverse, as the shares are back to where they were at the end 2021 despite continual and meaningful progress across all operations and through the P&L, cashflow and balance sheet.
After adjusting for todays announcement the shares are trading on a PER multiples for 2023 and 2024 of 5.3x and 7.1x and EV/EBITDA multiples of 2.3x and 2.5x. Free cashflow yields are 6% and 9% and the company remains in a strong position to deliver a dividend yielding 4%. We maintain our price target of 160p."
A big $35m per annum drilling contract win with Barrick - and in the USA too, increasing geographic diversity and security of revenues - commencing in 2025. Excellent news:
Https://uk.advfn.com/stock-market/london/capital-CAPD/share-news/Capital-Limited-New-Contracts-Updates/92081234
Plus Ivindo contract preparations are confirmed as going well.
Barrick's continual expansion of their relationship represents great validation of and kudos for CAPD.