We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Cloudsurfer77, I cannot take seriously any poster who takes extensive research and then somehow deduces that the contributor is a company employee. Especially when it would take approximately half a second to look up my multi-year and extensive posting history on LSE and conclude otherwise. Honestly, it's laughable!
CAPD's investment portfolio has performed incredibly well to date, but really simply acts as an extra confidence booster as regards asset backing of some 20% of the m/cap. The investment community doesn't seem to take much notice of it, as sharp moves upwards and then down in the portfolio haven't brought about any particular share price reaction. But it may be a different story if (a) the portfolio continues to rise, or in particular (b) if CAPD successfully liquidate the three prime portfolio investments and suddenly add £20m to cash.
In addition, there's always the likelihood that Allied Gold Corp, which represents around a £10m unlisted investment, may resurrect its previous IPO plans which were postponed due to poor markets - this would likely also crystallise a large gain for CAPD. The chances of this must be increasing given that gold is now above $2,000 and around all-time highs.
Rivaldo - thanks for the feed, I have to assume you're somehow on the payroll at CAPD? The problem at present as you seem to have identified is that the company is exposed to the performance of it's investments which had grown considerably but fell back substantially last year. As such it's as much a play on an investment fund on African mining stocks (of which I'd be very wary) which is detracting from the fundamentals of a solid business. Maybe feed this back to the powers that be.......
Leo Lithium's shares were up 5% overnight on "fantastic" results from drilling at Goulamina (CAPD's stake is worth around £3.5m or so).
And CAPD also get a specific mention in the announcement as the drilling contractor:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02653721-6A1144907?access_token=83ff96335c2d45a094df02a206a39ff4
The gold price has surged over $2,000 (now at $2,024).
CAPD are the contractor at Golden Rim's Kada project (and have a £1.5m or so shareholding), and overnight Golden Rim's shares bounced 10% from lows after excellent drill results with lots more drilling to come:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02651701-3A616133?access_token=83ff96335c2d45a094df02a206a39ff4
PDI's shares bounced 6% overnight after good drilling results at Bankan (CAPD are the contractor and of course have a major shareholding in PDI).
Lots more drilling to come:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02650995-6A1143820?access_token=83ff96335c2d45a094df02a206a39ff4
"“We continue to take great confidence from the quality of infill drilling results at NEB, which is testament to the orebody’s consistency.
“PDI is working diligently towards completion of a Scoping Study by the end of 2023 to facilitate permitting in the first half of 2024. Infill drilling to support further Mineral Resource upgrades in Q3 2023 is a crucial part of our strategy and will enable PDI to deliver a robust Scoping Study based on a significant proportion of Indicated Mineral Resources.
“Separately, we are excited to be ramping up exploration activity at the regional Argo targets, as well as at targets close to the NEB and BC deposits. We look forward to providing updates shortly.”
"Geological understanding has improved significantly, which will assist with future drilling targeting to upgrade the Mineral Resource from Inferred to Indicated and target extensions to the mineralisation. The next phase of drilling at BC will be planned following finalisation of the updated geological model and receipt all outstanding assay results."
Finally, got round to watching this too. I agree, I came away impressed. Their forecast sounds perfectly reasonable but excludes two large mining contracts that they have been shortlisted for. Each of these is perhaps the half the size of Sukari so maybe $125m over 4 years i.e. $30m per year. If one of them land they will fund it out of existing resources. In the pleasant situation where they win both then they will need to raise a little. If they miss these two, that would be a disappointment but there will be others.
I liked the idea they will be a £0.5bn revenue company in the next three years. So roughly 20% CAGR plus a dividend of 3%. All with a ROCE of 25%! What is not to like? I cannot see this staying under 100 for much longer so bought some more.
JL
Anyone else noticed share price doesn't appear to be working today 28th March on this page
Also annoying video pop up video frame to the left obstructing this frame view and just hanging and not loading properly ?
Same problem with pop up frame in frame on Cey.L page!
I using latest Firefox in windows 10
The admirably named HotStockRockets are very keen (subscription-only):
Https://*************.com/views/67486/capital-2022-full-year-results-a-growth-and-value-buy
"Capital – 2022 full-year results, a growth and value Buy
By HotStockRockets | Wednesday 22 March 2023
Mining services company Capital (CAPD) has announced results for the 2022 calendar year and that “tendering activity across all business units remains robust, with a number of opportunities progressing”."
Positive further comment on the presentation elsewhere from Kaizenkid FYI:
"Yes impressive presentation. Emphasised the fact they have spent years insulating themselves as much as possible from down-cycles by operating at the mine site at Tier 1 assets low on the cost curve. Seemed confident they will get an extension at Sukari and 2 mining contracts close to fruition. At least $10m of the capex is genuine growth capex related to MSA labs. Reiterating higher ROCE at MSA than the group. Clearly a strong possibility Revenues are decently higher than guidance as mining contracts come through."
I only caught the end, so will have to listen back.
CAPD are targeting impressive growth to $500m revenues in the next couple of years. Certainly achievable imo considering the rate of growth of each of Chrysos/MSALabs, mining services plus of course the steady growth of the drilling business.
Interesting too that strategic M&A is also a key part of the growth plan.
Plus sounds like there are two new major mining service contracts which could be signed in the coming months, which together would equate to another Sukari.
Will write more when I've listened to the full presentation.
Capital getting rich out of a nice little earner cf clearing a decade of waste fro the Centamin Sukari open pit!
Centamin shareholders were stuffed by Andrew Pardey years of high grading in the Sukari open pit with no waste clear up which caused a crack in the pit wall!
All the risk and expense of this contact is bourne by Centamin shareholders, great for Capital though!
the_shareminator this is a ridiculous statement? Maybe change your username to the_shameless.
"Not thinking of depreciation as an expense is crazy. I can think of a few businesses where one could ignore depreciation charges, but not many. Even with our gas pipelines, depreciation is real — you have to maintain them and eventually they become worthless . It's reverse float — you lay out money before you get cash. Any management that doesn’t regard depreciation as an expense is living in a dream world" Warren Buffet
Depreciation is generally an accounting gimmick used to off-set profits. It is almost entirely non-cash, possibly cash losses from a previous year but has no operational effect nor does it have any bearing on the company's business health.
You could do far worse than holding CAPD, they are playing a straight flush quarter after quarter.
Oil & Mining Services
Capital Limited (CAPD-LSE | BUY, TP 145): Raising target price to 145p. Capital has released its FY22 results. Revenue of ~US$290m was released previously in the 4Q22 trading update. ~28% revenue growth on FY21, key driver continuing to be strength in the drilling segment. Adj-EBITDA of ~US$86m slightly below our estimates (CGe: ~US$87m), implying a margin of ~30% and representing a slight moderation from the FY21 high-water mark of 32%. NPAT of US$22.7m was in line (CGe: ~US$22.2m), and led to EPS of ~11 US$cps (CGe: 10.5 US $cps). Lower cash capex (vs our numbers) left the company with a net debt position of ~US$47m (CGe: ~US$51m). Leverage for the company remains slightly below industry peers (CAPD: ~0.5, peers: ~0.8x), providing us with confidence that the company should be able to continue its strong growth plans in the drilling and mining segments (the labs business is less capital intensive). Finally, the company announced a final dividend of 2.6 US$cps (FY22 total dividend of 3.9 US$cps), ahead of our expectations (CGe: 1.5 final, 2.8 total). Looking ahead, the company has guided for US$320-340m, in line with our prior FY23 estimate of ~US$328m (now ~US$326m). We have lowered our revenue assumption for MSALABS in FY23E to ~US$50m (top of segment guidance), partially offset by a higher assumption for rig additions to 12 (from 8) in FY23E (in line with the quality contract wins announced). The larger fleet has increased FY24E EBITDA by ~1% and we increase our target price slightly to 145p (from 140p).
What's the point quoting EBITDA when depreciation (of the equipment) is one of your greatest costs?
Tamesis's update today reiterates their Buy and 160p target:
Https://www.tamesispartners.com/research-portal
Extracts:
"it is impressive that this is the third consecutive year Capital has delivered material growth in revenue, with full year sales increasing 28%, following
68% YoY growth in 2021 and 18% YoY growth in 2020. Moreover the company is guiding to $320-340m for FY23 (140% higher than 2020) and we see no reason for this growth not to repeat in 2024. One day the market will accord the valuation metrics the
company deserves for this increasingly high quality growth. EBITDA has followed with a 19% growth to $86.4m and margins remain intact at 30% vs last year of 32%. The investment portfolio valuation fell but excluding that net income rose 16%. In recognition of this the company has awarded a dividend of 3.9cps (final div of 2.6cps) equivalent to a yield of 3% which will grow in 23/24. We remain very comfortable with our 160p Price Target."
"MSALABS segment growth coming through. The company is guiding to 21 PhotonAssay units by 2025 and has six units commissioned across Africa and Canada. Each Chrysos unit is expected to generate annual revenues of US$3-5 million so with full roll out there is the potential for more than $80m of annual revenues from MSALABS versus just $3m in 2019. As noted above we expect EBITDA margins to strengthen as this segment matures and utilisations of the units increases."
"Investment Case
As has been the case for nearly every announcement in the last three years these results are strong and point to further strength and growth. With activity in the mining sector still strong and long-term contracts locked in, we believe revenue growth is assured into the medium term (5yrs) and margins likely to remain firm. The Chrysos business in particular adds heightened impetus.
Meanwhile the shares are trading on EV/EBITDA and PER multiples for 2023 of 2.9x and 6.5x respectively and a dividend yield of 3.1%. We see the current share price as an attractive entry point and maintain our price target of 160p."
Thanks Rivaldo. Results look ok, MS Labs seems to be the growth story with other areas performing this coming year as expected and I'm picking up a higher than expected re-investment in the fleet so maybe a slight negative there. My take is that initial shock was influenced by the very investment performance we talked about - the change from $33.7M gain last year to $19.9M loss this year looks shocking and distorts those headline figures. Further down you can infer the underlying business is healthy.
Looks like the usual early traders on results have been skewered by the MMs once again in CAPD's usual results day scenario.
The share price has quickly jumped back up now and is now almost breakeven - by rights it should be well up given the terrific forecast-beating results, bullish short and long-term outlook and extremely cheap P/E.
Also just noticed adjusted EBITDA is also well ahead of Tamesis' expectations.
Tamesis forecast $86.1m EBITDA, whereas CAPD achieved $90.1m EBITDA - a substantial beat.
The results are out and are as flagged, except the adjusted EPS, which we now know is 21.9c or 17.9p (before paper investment losses) - a P/E of 5.8.
Most importantly, guidance for this year is set at $320m-$340m revenues, which at midpoint is well ahead of Tamesis' current forecast of $319.4m.
Upgrades are in order methinks.
Net debt is also better than Tamesis' forecast at $47.2m.
Chyrsos revenues are surging ahead, expected to grow another 60%-70% ths year to $40m-$50m. Mining services as at Sukari has also been an outstanding initial success, overdelivering on performance. And the core drill business continues to thrive, with no major contracts due to renew this year, so continued security of long-term revenues.
With the gold price now above $1,900 mining budgets should remain generous for some time to come. CAPD really should be seriously re-rated from here.
Intriguing excerpt from Endeavour Mining's accounts release a few days ago.
It seems Endeavour sold a mine to Allied Gold (in which CAPD holds around a $10m stake) in 2021 for which it received part-consideration of $40m of Allied Gold Corp shares. These can be sold "back to Allied at the issue price which expires on 31 December 2022 or earlier if Allied conducts an IPO before then".
This option has now been "extended to 31st December 2023".
Which kinda suggests that Allied still have intentions of IPOing, and hopefully that IPO may well happen this year.
See note 4c on page 26:
Https://ml-eu.globenewswire.com/Resource/Download/11cd2408-3276-4f48-be08-f9eb26d5eef0
"c. DIVESTITURE OF THE AGBAOU CGU
On 1 March 2021, the Group completed the sale of its 85% interest in the Agbaou mine CGU to Allied Gold Corp Limited ("Allied"). The consideration upon sale of the Agbaou mine included (i) a cash payment of $16.4 million (net of working capital
adjustments of $3.6 million upon closing), of which $10.5 was received in the year ended 31 December 2021; (ii) $40.0 million in Allied shares of which Endeavour has the option to sell the shares back to Allied at the issue price which expires on 31 December 2022 or earlier if Allied conducts an IPO before then. The option was subsequently extended to 31 December 2023 (note 14)"
Gold is now above $1,900, which has to be good news for CAPD's customers.
And Golden Rim (CAPD are the driller) has announced overnight it's "commenced a 5,000m aircore drilling (AC) program at its flagship Kada Gold Project", together with ongoing diamond drilling, and "new multiple prospective target areas" have been discovered:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02643274-3A614805?access_token=83ff96335c2d45a094df02a206a39ff4
Cloudsurfer, CAPD's investements have increased from a cost of $12.5m to their current value of $38.7m in a matter of just a few years. I'd call that highly successful.
Not only that, the major investment in the privately held Allied Gold Corp may pay off handsomely as and when Allied decides to resurrect its IPO plans.
The gold price is volatile and therefore so are companies in that sector. CAPD were wise enough to spot an opportunity and invest at the bottom of the market when those companies were desperate for cash - they've aren't investing any more now and have reaped the rewards. The investee stakes may rise and fall, but since CAPD's m/cap barely reflects any value from this side of the business it's really a sideshow in terms of artificial/paper gains/losses.
The real benefit will come when CAPD realise a load of cash from selling these investments and the market is suddenly surprised at CAPD's asset base which they hadn't appreciated previously. In the meantime, there will be paper investment losses in the upcoming results, but these are an irrelevance compared to (1) the terrific performance of the core business and (2) the tripling of CAPD's investment portfolio to date, even to the current lower levels.
Further:
Predictive Discovery (ASX: PDI): At the end of Q3 2021 Predictive announced its maiden resource for its Bankan
Project of 72.8Mt @ 1.56 g/t for approximately 3.646million ounces of gold. Our last reported holding of Predictive Discovery was 10.44% as disclosed on 19 July 2021; This was in the last annual report.
The portfolio remains concentrated around a few key holdings with our holding in Predictive Discovery
accounting for ~50%; This was reported in the last operational update.
Clearly something has changed but it's not clear from any of the financials I can see to deduce net inflow/outflow from investments, merely that they have substantially reduced in value over this last year. It looks like the FY22 results are due next week so will be worth a good look. Any enlightenment appreciated.
rivaldo - when you say the other investments have been "highly successful to date", it was actually the fact that the investments had been deteriorating (quite markedly) over the last 2 years. Do you know the reasoning for these losses (appreciate they're unrealised)? The operation seems quite solid accepting the risk of African mining, but there doesn't seem any point investing in good active profits when the company is losing such significant amounts on the non core investments activities. From the last interim results:
"Net losses from equity investments of $10.3 million in H1 2022 (unrealised), decreasing the value of Group strategic investments to $47.3 million, net of cash proceeds, as of 30 June 2022 (31 December 2021: $60.2 million)"
Many thanks.