George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
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Yeah, if CAPD do well then they will do very well.
I've seen worse LTIPs recently (looking at you, SEE)
What do we all make of the rns? I don't understand all the legal accounting speak too much but it sounds like if they achieve a decent amount of double digit return then they will get a stack of cash.
Another director buy announced yesterday afternoon - this time CEO buying 50,000.
Capital ( CAPD LN Buy TP 150p) : CAPD read-across: ASX listed mining services provider Perenti (PRN-ASX) offers to acquire DDH1 (DDH-ASX). Multiple works out to be ~3.1x FY23 EV/EBITDA – which is lower than our assumption in setting our CAPD target price. Initial feedback from the market is the shareholders on either side are not particularly happy (indicating that the expectation for a higher multiple is closer to our figure of 3.7x). There are several reasons why we believe CAPD should command an even higher multiple in an M&A setting: 1) it would give the acquiror a dominant position in the African market, 2) the company offers a greater degree of margin protection (in our view) due to the fractured nature of competition in the region, 3) there are several growth drivers emerging outside of the drilling segment in labs and mining. Conversely, some may be put off by the higher risk jurisdictions in Africa, however we note that the company is diversified in its risk profile.
Time to follow them... etc...
Great to see the CFO purchasing a meaty £50,000 of shares at 99p. Probably more meaningful than Boyton and Rudd selling a relatively small part of their holdings to institutional investors.
So why would he be buying if he thought it was going down?
Https://www.lse.co.uk/rns/CAPD/results-of-placing-06tkwvct52yeac6.html
They did this 2 years ago on the 23rd June. What gets me, is that they also did a buy back in Jan / Feb 2022. Why couldn't they buy these shares and cancel them? Or at least a portion, to open it up to other +3% holders. Surly they must have enough cash to buy those shares. For all the great updates we get, and the increase in their investments etc, the share price is not really re-rating. Perhaps it is partly due to this offloading? Rud owns 6.4% and Boyton owns 12%
Looking for a silver lining here: selling a big chunk of privately held shares should improve liquidity.
And then the directors sell a big chunk. Never a good sign. That will put the upside on ice. :(
With the offer price now at 103p CAPD are at three month highs and hopefully breaking out upwards.
CAPD's investment in Leo Lithium was up another 4% overnight to new highs on a "Significant Resource Upgrade" at its Goulamina mine.
CAPD and MSA Labs also get mentions in the narrative for drilling and lab services provided:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02677562-6A1154672?access_token=83ff96335c2d45a094df02a206a39ff4
The Small Caps Live Weekly Summary sent out this weekend by ds2 included a useful summary of the new contract:
Https://smallcapslife.substack.com/p/small-caps-live-weekly-summary-1a6?utm_source=post-email-title&publication_id=302785&post_id=128709446&isFreemail=true&utm_medium=email
"Capital Limited (CAPD.L) - New Contract Award & Finance Update
…new mining services contract…Earth moving & crushing services for Ivindo Iron SA, majority owned by Fortescue Metals Group ("Fortescue"), at the Ivindo Iron Ore Project ("Ivindo") in Gabon…The contract has a term of up to 5 years and will generate approximately $30 million of revenue per annum once fully operational.
This is a nice contract to win. It is with an existing customer, and they have mobilised initial equipment already, which suggests they knew it was coming when they won the drilling side, and just had to agree on terms. But most importantly, the remaining $15m capex is funded from debt, not equity.
Perhaps the most interesting maths is the ROCE. The capex is $30m for $30m of revenue. Our guesstimate is that their mining contracts tend to have mid-30's GM, so let’s say $10m incremental GP. Some additional admin costs but not too many since they presumably already have facilities on site to support the drilling side. So say $8m incremental EBIT. 27% ROCE, well above their 10% incremental cost of capital (which is the cost of debt). The complicating factor is that this is only a 5yr contract, so although these tend to get extended, 5yrs of $8m EBIT = $40m doesn't compare particularly favourably to the $30m spent today. Although this looks a lot better if they are using $15m worth of existing equipment, and in reality, the equipment should last longer than 5 years in most cases. Plus, the synergies with the drilling side, getting in on the ground with a potential world-class mine, and the diversification of another mineral all make this a good contract win.
We don't think I'm going to suddenly fall in love with the mining side of the business, given how good the drilling and MSALABS businesses are. However, the economics of this contract are reasonable, with the potential to be very good if it allows them to add more fleet/rigs in future.
There were some small broker Price Target upgrades in response to this news. Berenberg from 166p to 170p, Canaccord to 150p and Stifel to 180p. Tamesis just re-iterate their old 160p Price Target but add $27m revenue, $11.6m to EBITDA & $12.4m to FCF in 2024. Here are the old figures (me - sorry, don't know how to post the tables!):
And now, post-contract win:
This is a decent upgrade, potentially making the 5% share price rise on the day an under-reaction to this news."
I understand that the writer of the Buy tip above has a 150p target.
The article is on "Share Prophets" web site (which is asterisked out!).
as an aside, leo lithium continued to rise last night, up another 10% to new highs of a$1.05. capd's holding in this alone is now worth almost £6m.
anyway, capd were tipped as a buy on ************* at some point yesterday fyi (but subscriber only):
https://*************.com/views/68881/capital-limited-new-contract-and-increased-bank-facility-buy
"capital limited – new contract and increased bank facility, buy
by hotstockrockets | thursday 15 june 2023"
News of MSALabs/Chrysos in Ghana:
Https://www.linkedin.com/posts/msalabs_msalabs-photonassay-gold-activity-7070283960043393026-9K1q/?utm_source=share&utm_medium=member_desktop
"MSALABS 3,902 followers
1w •
Our newest laboratory in Obuasi, Ghana is undergoing final preparations for opening, with commissioning of the PhotonAssay unit and training of operators underway. Operations are planned to commence on June 10 and will deliver PhotonAssay services to the Ghanian mining and exploration industries.
PhotonAssay is the groundbreaking technology providing faster, more accurate analysis results and supporting improved definition of reserves and resources and quicker decision making to improve operational efficiencies and profitability.
#MSALABS #PhotonAssay #gold #ghana"
And also gaining accreditation in Canada for PhotonAssay:
Https://www.linkedin.com/feed/update/urn:li:activity:7073946094526742528/
"It has been great to see all our friends and colleagues at the Canadian Mining Expo in Timmins, Canada. We have been celebrating our recent PhotonAssay ISO 17025 Testing and Calibration Laboratories accreditation at our Val d’Or laboratory. We are now providing this groundbreaking technology, that delivers faster, more accurate assay results, through our Prince George, Timmins and Val d’Or laboratories across Canada."
Nice plug on Citywire today regarding Berenberg's new Buy rec and target price, which thankfully hammers home the point that CAPD is becoming a "full services mining house". Perhaps the market is finally cottoning on here:
Https://citywire.com/funds-insider/news/expert-view-whitbread-croda-onesavings-bank-frasers-and-capital/a2419181
"Capital’s transition to full services miner, says Berenberg
Mineral drilling solutions group Capital (CAPD) is growing its contracts as it continues its transition into a full services mining house, says Berenberg.
Analyst Richard Hatch retained his ‘buy’ recommendation and increased the target price from 166p to 170p on the stock, which was trading up 7.3%, or 7p, at 103p.
It has won a contract from a subsidiary of tier-one Australian miner Fortescue Metals that builds on its existing three-year diamond drilling contract and ‘is a good example of how Capital can grow its presence on a site and add additional services by starting with its core business – drilling’, said Hatch.
‘When we initiated on Capital in 2020, it was predominantly a driller with ambitions to grow and diversify its business,’ he said. ‘Since that point, it has moved into, and now grown, its contract mining business, and also added additional growth through its [mining analysts] Msalabs business, which offers attractive continuing top-line growth.’
The award of the latest contract shows ‘further growth and diversification for Capital’s revenue streams’, added Hatch."
The Allied Gold IPO is going well, and is expected to close on or around July 17th with a $300m fundraise.
CAPD will therefore be able to discuss any upwards revaluation of their shareholding in the 30th June interims, although hopefully there'll be an RNS detailing this around the IPO date. The interims may even include the revaluation in the numbers since the process will be almost complete at that point and will have concluded prior to those numbers being issued:
Https://finance.yahoo.com/news/allied-gold-corp-limited-allied-145100716.html
"Allied Gold Corp Limited, Allied Merger Corporation and Mondavi Ventures Ltd. Announce Submission of Application for TSX Listing and Provide Update on Business Combination and Financing with Closing Date Set for July 17, 2023
etc"
Berenberg have today raised their target price to 170p:
Https://www.streetinsider.com/Analyst+Comments/Capital+Limited+%28CAPD%3ALN%29+PT+Raised+to+GBP1.70+at+Berenberg/21785751.html
And Stifel have also raised their target price to 180p:
Https://www.streetinsider.com/Analyst+Comments/Capital+Limited+%28CAPD%3ALN%29+PT+Raised+to+GBP1.80+at+Stifel/21785991.html
Yes, very pleasing indeed! They did talk about 2 potential services contracts in FY results so presumably this is one of them. Interesting to see if they get the second in due course too. I agree that they still look really, really cheap. I wonder why the market is not valuing them. Tier 1 customers, significant fast growing labs business, good rig utilisation, but still a cheap valuation. I can only assume that the market is cautious in what is a very cyclical market. But CAPD are in a very strong position for when the tide turns.
These remain my largest holding and a very happy holder.
JL
Good to see the share price break upwards over 100p and at new recent highs.
Tamesis have retained their 160p share price target.
They've added $7.5m additional revenues into their forecasts this year, which are now just in the upper range of $320m-$340m revenue guidance at $331m, so still relatively conservative.
They forecast 20.3c EPS this year, i.e 16.2p EPS.
They also see 39.4c operating cash flow per share this year.
They note:
"World Class Project and Operator. The Ivindo Project is one of the world’s largest undeveloped high grade hematite projects. FMG has an 80% interest in the Ivindo Iron JV and has been assessing the project since 2018. FMG note that the geology and iron ore potential is similar in scale as Simandou in its early stages of exploration, with its multi-billion tonne potential and high grades. This is great news for Capital who have effectively been asked by FMG to sort out the drilling, earth moving and crushing. This puts Capital in a key operational position which, in our view, will only become more valuable if Ivindo gets even bigger".
They summarise:
"Financial impact in 2024 and beyond. Our forecasts for 2024 do change clearly. Capital note in their press release that revenues of approximately $30m pa will be generated from the mining service contract once it is fully operational. We estimate at full run rate this could add c. $13.5m pa in gross profits – a material addition over five years given the relatively light $15m of capex required. We model revenues from the new contract starting in H2, ramping up in 2024 and being at full operational capacity in 2025."
The Investment Case
Today’s announcement is another demonstration of the ability for management to secure major contracts and a further diversification of the Company’s revenue stream being a mining services contract on an iron-ore project. At the current price the shares are trading on EV/EBITDA multiples of 2.5x and 2.6x 2023 and 2024, PE ratios of 5.7x and 6.9x. This continues to implies little growth in the business yet these sort of contract wins plus the trajectory of MSALABS with Chrysos (c. $80m+ of revenue by 2025 vs just $3m in 2019) show that the reality of the investment case is completely the opposite. We maintain our price target of 160p."
Excellent - a second large mining services contract win, this time for $30m per annum for 5 years:
Https://uk.advfn.com/stock-market/london/capital-CAPD/share-news/Capital-Limited-New-Contract-Award-Finance-Updat/91296142
Ivindo/Fortescue Metals must have been impressed with progress on the diamond drilling contract announced earlier this year.
This bodes well as Fortescue are the fourth biggest producer of iron ore in the world.
CAPD are just absurdly undervalued imho.
Awale Resourdes, where CAPD have been the drilling contractor, have commenced drilling at Odienne in the IC following linking up with Newmont Corp:
Https://money.tmx.com/en/quote/ARIC/news/7370937418551783/AwalxE9_Resources_Recommences_Drilling_at_the_OdiennxE9_Copper_Gold_Project
Also noticed this tweet from CAPD on May 24th about more drilling commencing for Fortescue Metals:
Https://twitter.com/_CapitalLimited/status/1661230690288177152
"Our Rig 85 has arrived in Gabon to commence the three-year contract with Fortescue Metals Group Ltd at their Belinga iron ore project. This is our first contract in the country and drilling has commenced this week."
More from Leo Lithium - they've raised A$106m from China's largest lithium producer at a 6.5% premium to their share price at the time:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02670299-6A1151864?access_token=83ff96335c2d45a094df02a206a39ff4
Leo's share price has rocketed up to A$0.935, so CAPD's 10.35m shares in LLL alone are now worth £5.1m and have almost doubled since the year end.
Leo Lithium's share price has risen 55% to AUD$0.745 since the year end, which with CAPD owning 10.35m shares in Leo is good news for this half year if maintained.
They've just announced "excellent" drilling results from their Goulamina Lithium Project, and CAPD are namechecked in the announcement as the driller, with drilling continuing:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02668908-6A1151351?access_token=83ff96335c2d45a094df02a206a39ff4