Capital Share Price (CAPD)

Hi Shareminator

If you go back to 2019 then yes there is growth. But what about the last three years...

2021 revenue $227m Net profit $37m EPS 15p

2022 revenue $290m Net profit $42m EPS 17p

2023 revenue $318m Net profit $36m EPS 14p

Now I get that some of this will be investment, ie Capex. But personally I am disappointed with the drop in profits and EPS in 2023. 50% increase in revenue with zero increase in net profit or EPS. So we are larger but no more profitable. And the dividend is also flat in 2023 after small increase in 2022. None of this is a good trend IMO.

I stick to my summary, they need to show better bottom line growth, to sustain an increasing dividend, or I am going to start selling.

JL

Fair point, you're right. What's your view on the persistent undervaluation and lack of institutional interest? I'm holder, and not bearish on the stock, but do appreicate open discussion. I don't think they can "spin-out" MSALabs as, as far as I know, they do not own the IP and are only acting as distributor/operator. Chrysos is also very overvalued to consider acquiring it. They pay a small dividend and have high ongoing capital requirements through maintenance and reinvestment.

One possible thought on what could be causing the undervaluation is the cyclical nature of mining. Although recent utilisation rates have been increasing and are high (I think), compare them to 2015/2016 when they were a lot lower. Perhaps insitutions worry about this playing out in future, with CAPD being left with lots of surplus underutilised costly equipment therefore reducing returns. Difficult to see if one subscribes to the "commodity supercycle" or "age of scarcity" theses, as well as the general need for increased macro capex at a global level.

Who are these jokers below trying to fool?

2019 FY results: Revenue $115m, EBITDA, $27m, Net Profit $10.4m

2023 FY results: Revenue $320m, EBITDA, $92m, Net Profit $38m

An almost three-fold increase in revenue, a three and half times increase in EBITDA and an almost four-fold increase in net profits does not indicate a "lack of growth in profits".

Great points. A lack of insitutional interest (assuming that them simply being unaware is not the sole reason) suggests unaddressed or unavoidable permanent weaknesses in CAPD's underlying business model or irresolvable risks. I think your second may speak to these underlying weaknesses; mining services must be highly commoditised resulting in the worsening margins, high amounts of capital will always be required for re-investment and maintenance (poor cash flows for investors for ever) and a high cost of capital now and in the future (although CAPD is using internally generated cash).

CAPDs high cost of maintenance in its fleet requires it to be a "price-taker" in a well supplied market otherwise it would face significant capital costs, and the larger this fleet - and competition's fleets - the more pressure to race-to-the-bottom on price. On the other hand, CAPD has high (I think although not sure of any benchmark) utilisation rates, suggesting there should be wrong for price increases and enhanced margins. The only reason that they can't do this, must be competition?

The contract tendering process, similar to all, also has similar flaws for companies that "win" contracts ( in this case being given contracts due to giving lower prices that cause problems further down the lines).

Hi Lesville

I agree with this. Something just doesn't sit right.

I am minded by two things: firstly, when this was pitched by a PI to institutional investors a couple of years back they were unimpressed, despite the healthy growth and blue chip clients. So clearly there is little appetite for the share with institutions as you say.

Secondly, the relative lack of growth in profits over the last few years despite revenue rising strongly. It shows their lack of pricing power and thin net margins. The issue appears to be in the large sustaining Capex required to keep their fleet up to date. I remember a comment below that basically said - impressive growth, but not a lot of cash left for shareholders to benefit from (I paraphrase). This, to me is their biggest challenge, and the reason they are still under £1.

Growing revenue is one thing, growing profits at a similar rate is what we need.

Having said that I am still holding on, with MSALabs potentially the jewel in the crown, there is still good upside from here.

JL