Fears of a slowdown in mining investment has seen shares in Capital Drilling slump by a third since its full-year results in March. But that looks overdone. While the company admitted that it had seen moderating demand so far this year, it still delivered a 20 per cent increase in operating profit thanks to a 28 per cent jump in monthly average rig revenues. And having strengthened its management team and balance sheet, the company looks well positioned to continue its expansion.
The drilling services company added another five rigs in the first half to take the total fleet to 90, and although average fleet utilisation rates dipped 6 percentage points to 75 per cent, that was more the result of equipment being moved around than any softening of demand. In fact, new contracts were secured with host of major miners including Antofagasta and Centamin Egypt, and chief executive Geoff Fardell remains confident that investment in new services such as underground drilling and geographic expansion would help it pick up further business. Mr Fardell also pointed out that although mining groups were scaling back capital expenditure, that would hit new projects rather than the mature producing assets that Capital is focused on.
Broker Liberum expects underlying full year pre-tax profits of $25.6m and EPS of 14.6¢ (from $21.7m and 13¢ in 2011).
CAPITAL DRILLING LTD (CAPD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 61p | MARKET VALUE: | £81.4m | |
| TOUCH: | 59-62p | 12-MONTH HIGH: | 96p | LOW: 56p |
| DIVIDEND YIELD: | nil | PE RATIO: | 7 | |
| NET ASSET VALUE: | 66¢ | NET DEBT: | 24% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 59.5 | 10.6 | 6.40 | nil |
| 2012 | 79.1 | 12.5 | 7.00 | nil |
| % change | +33 | +17 | +9 | - |
