Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Mining resurgence fires up Capital Drilling
Capital Drilling (CAPD) 58.55p
Gain to date: 17.3%
Original entry point: Buy at 49.9p, 22 December 2016
A large number of contract awards in the mining sector during the first quarter of 2017 has prompted stockbroker FinnCap to upgrade its earnings per share forecasts for [BOLD] Capital Drilling (CAPD). It lifts the 2017 estimate by 30% to 2.9c and 2018’s number by 15% to 5.5c.
The very positive trading update (2 May) puts some life back into the shares after a quiet few months. The average revenue per operating rig has increased by 15.3% in the first quarter versus the previous three months, now sitting at $196,000.
Capital Drilling has upgraded its revenue guidance for 2017 to $120m to $130m, having previous guided for $105m to $112m. It cites ongoing resurgence in exploration activity.
The flipside of being busy is that more money will have to be spent on additional drilling equipment. That will reduce the amount of money available to pay dividends near-term but should help to support improved revenue and earnings growth in the future.
Our prediction for increased mining activity has proved to be the correct call. Keep buying at 58.55p. (DC)