Back in December 2020, I took a position in Capital (CAPD) and covered the business here in my piece titled “Digging For Returns”.
Since then, it has largely been a case of playing the waiting game, as the shares have traded in a narrow range with a background seller seemingly willing to offload at any given point.
As frustrating as that has been, it is usually the case that value will out at some point, which in turn will trigger a rerating of the shares.
Perhaps, that point has arrived today, as the company delivered its preliminary results which although for some inexplicit reason arrived late, they nevertheless made for excellent reading.
The shares as I write are up 4% to 64p on the back of decent volume with some chunky buys within that, arguably suggesting that the shares are now on the cusp of really breaking out.
Looking at the numbers, which came out well ahead of outlined forecasts the story looks every bit as attractive as it appeared when I bought in and indeed, looks even more tantalizing for the year ahead. The numbers announced for full the year to December 2020 saw revenue increase 18% to $135m with EBITDA up 24% to $33m with net profit of $24.8m recorded.
The basic EPS came out at 17.8c which represented a huge 131% jump on the corresponding period and at the current price of 64p the shares trade of a PER of 5 which looks ludicrously cheap.
Of course, the company did embark on a substantial fund raise which needs to be factored in for the year ahead, but even taking the additional shares into consideration the stock trades on a conservative looking forward PER of 8, based on 10c EPS.
The dividend is also a handy addition and with a final 1.3c payment the total for the year comes to 2.2c, representing a 57% increase on the prior period.
Looking ahead, the current guidance for full year 2021 is for revenue of $185m-$195m which may well prove conservative given the strength of existing contracts and the general tone.
Importantly and pleasingly within the mix of its operations, the company continues to see strong demand for its laboratory services with the MSLABS division working at near full capacity across all major laboratories.
MSLABS is a global provider of geochemical lab services serving the exploration and mining industries and would appear to be playing an increasing role within the business.
The company also noted, regarding prospects for the year ahead and beyond, a highly active tendering market across all its business activities with particularly strong demand in exploration and drilling satellite pit mining operations.
It should be interesting to see whether the seller has indeed been cleared here now and whether the shares can build on this morning’s positive start.
Either way, even if further patience is required, the shares should in this holders view realistically be trading north of 80p, particularly given these excellent numbers and the outlook ahead.
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