Capital Limited

Capital Limited (LSE: CAPD) is an FTSE All Share listed, United Kingdom-based mining services company. The Company provides a complete range of drilling, mining, maintenance, and geochemical laboratory solutions to customers within the minerals industry, focusing on the African markets. The Company’s businesses include Capital Drilling, Capital Mining, MSALABS, and Capital Investments. This Report covers the Investment Highlights, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 84.40

• Resistance near Current levels: CAPD’s stock price crossed the Resistance (R1) which was stated in the previous report on 19 February 2025 therefore, there can be a possibility of a decline in resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.

• Steep Decline in Mining Revenue: Mining revenue dropped to just $0.6 million, down 96.7% YoY and 93.8% QoQ, primarily due to the conclusion of contracts at Sukari and Belinga. The decline materially impacted total revenue and highlights a near absence of mining contribution in the quarter.

• Overall Revenue Weakness: Total Q1 2025 revenue declined to $71.8 million, reflecting a 10.5% YoY and 15.4% QoQ decrease. This was the lowest in at least four quarters, indicating a slow start to the year despite management framing it as in line with expectations.

• ARPOR Pressure Reflects Operational Lag: Average monthly revenue per operating rig (ARPOR) fell to $182,000, down 9.9% YoY and 7.6% QoQ, suggesting underutilization of new rigs or a slower-than-expected productivity ramp-up. The erosion in ARPOR signals pressure on drilling efficiency and margin dilution early in the year.

• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

CAPD may remain under valuation pressure amid persistent headwinds, including a significant contraction in mining revenue to $0.6 million (down 96.7% YoY and 93.8% QoQ). Total Q1 2025 revenue also declined to $71.8 million, representing a 10.5% YoY and 15.4% QoQ drop, while ARPOR weakened to $182,000, down 9.9% YoY, reflecting reduced operational efficiency and slower productivity ramp-up. For conducting the valuation, the following peers have been considered: Metals Exploration PLC (LSE: MTL), Kenmare Resources PLC (LSE: KMR), etc.

Given its current trading levels, the recent financial performance, strategic investments and partnerships, market expansion and cost optimization strategies, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Closing Market Price of GBX 84.40 as of 19 June 2025. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 19 June 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.