September 2022

Capital Limited (Ticker: CAPD) is a mining services company based in Africa that provides a range of drilling, mining, maintenance and geochemical laboratory solutions to customers within the minerals industry. 

They are listed on the LSE as part of the FTSE Fledgling Index (as their market cap is too small to be listed on the FTSE All-Share Index).

Capital Ltd was founded in 2004 and is headquartered in Ebene, Mauritius.

 RATIONALE

Why we invested in CAPD in May 2021:
  • Thriving in a post-Brexit environment
  • Largely unaffected by COVID-19
  • Record year in 2020 in terms of revenue, EBITDA and cash flow
  • Strongest quarterly revenue performance in Capital’s history in Q1 2021
  • Decent and well-covered dividend
Why we're re-investing in 2022:

As you can see from the financial comparison vs. this time last year, CAPD have built on brilliant years in 2020 and 2021, reporting a tremendous set of results in the first half of 2022. Furthermore, news of these positive results has also been boosted by contract news.

CAPD have been awarded a three-year contract with AngloGold Ashanti for its Geita gold mine in Tanzania. The deal is expected to generate around $150 million, making it the second largest award of new business in the company's history. 
They have also won their first contract with B2Gold Corporation at the Fekola gold mine, as well as a two-year extension to a laboratory services contract with Kinross at the Tasiast gold mine in Mauritania. Standing the company in very good stead for the next few years. 

Chairman Jamie Boyton said: "We continue to see very strong demand across the market and today's announcement is testament to that."

If you look closely at the results, Capital actually reported a decrease in interim profit, but remarked that conditions "remain buoyant" and so raised their full-year revenue outlook. Pretax profit in the six months to June 30 fell to $15.1 million from $24.3 million a year ago, despite revenue increasing 40% to $138.1 million from $98.7 million.

The company increased its revenue guidance for 2022 to between $280-290 million from $270-280 million previously - great news for investors. 

"Tendering activity across all business units remains robust, with a number of opportunities progressing," the Chair explained, "the underlying demand in the market continues to be encouraging, as is evident from the high utilisation rates the group delivered in the first half. While there will be some seasonal slowdown through the third quarter, the tender pipeline remains buoyant across drilling, mining and laboratories." 

On top of this, CAPD have also raised their dividend yield, now at 3.9%.

Conclusion

Despite an increase in CAPD's share price since we last bought in, the company continues to go from strength to strength. With another fantastic year on the cards in 2022 and a dip in share price in recent weeks, we now feel that CAPD are once again undervalued.  

We will be adding to our position in CAPD when the market opens tomorrow.