The specialist emerging markets driller has boosted capacity by 42 per cent in the past two years through the net addition of 25 new rigs. This underpinned a surge in full-year revenues and a 61 per cent uplift in operating profits to $22.8m (£14.5m), despite Capital booking an additional $5.4m in depreciation charges as the fleet was expanded and three older rigs were replaced.
Indeed, the company intends to keep the average age of its rigs well below the industry standard. This indirectly aids Capital in keeping its drilling fleet at, or near, peak levels of utilisation which, at an average of 82 per cent through 2011, was high by comparison to industry peers. Capital’s average revenue per rig has steadily increased since the first quarter of 2010, and averaged $158,000 per month last year. Of a slight concern are rising labour costs and a contract pipeline that could be vulnerable to any weakness in the gold price given that the metal accounts for 58 per cent of Capital’s underlying commodity exposure.
Liberum Capital anticipates adjusted 2012 EPS of 16.3¢ (2011: 13.4¢).
|CAPITAL DRILLING (CAPD)|
|ORD PRICE:||89.5p||MARKET VALUE:||£120m|
|TOUCH:||88-91p||12-MONTH HIGH:||109p||LOW: 78p|
|DIVIDEND YIELD:||nil||PE RATIO:||11|
|NET ASSET VALUE:||59¢||NET DEBT:||19%|
|Year to 31 Dec||Turnover ($m)||Pre-tax profit ($m)||Earnings per share (¢)||Dividend per share (¢)|
£1 = $1.58
Capital's shares are trading on under nine times forward earnings and present an inexpensive way of gaining broad-based exposure to the emerging markets mining sector. Buy.
Last IC view: Good value, 88p, 23 August 2011