Capital Drilling Ltd CAPEX surged on 61.1% in 2016 and Revenue jumped on 18.7%

16 Mar 2017 • About Capital Drilling Ltd ($CAPD) • By InTwits

Capital Drilling Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Capital Drilling Ltd doesn't have a profitable business model yet: FY2016 ROIC is -1.8%
Capital Drilling Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.3%. At the same time it's a lot of higher than industry average of 2.8%.
CAPEX is quite volatile: 12.8 in FY2016, 7.9 in FY2015, 13.7 in FY2014, 5.7 in FY2013, 30.0 in FY2012
The company has unprofitable business model: ROIC is at -1.8%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Capital Drilling Ltd ($CAPD) key annual financial indicators

mln. $	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	158.9	116.3	98.8	78.7	93.3	18.7%
Gross Profit	53.0	30.6	33.0	22.4	26.3	17.6%
SG&A			12.5	12.5	13.3	6.2%
EBITDA	38.2	18.3	21.4	11.2	13.0	16.0%
Net Income	14.1	-1.9	-0.6	-10.2	-4.8	-52.3%
Balance Sheet
Cash	9.1	12.3	14.7	13.4	12.7	-4.8%
Short Term Debt	0.9	0.4	0.1	0.1	2.1	2,082.4%
Long Term Debt	0.0	0.0	0.0	5.0	10.0	100.0%
Cash flow
Capex	30.0	5.7	13.7	7.9	12.8	61.1%
Ratios
Revenue growth	21.8%	-26.8%	-15.0%	-20.4%	18.7%
EBITDA growth	11.2%	-52.2%	17.5%	-47.6%	16.0%
Gross Margin	33.3%	26.3%	33.4%	28.4%	28.2%	-0.3%
EBITDA Margin	24.1%	15.7%	21.7%	14.3%	14.0%	-0.3%
Net Income Margin	8.9%	-1.6%	-0.6%	-12.9%	-5.2%	7.7%
SG&A, % of revenue			12.7%	15.9%	14.2%	-1.7%
CAPEX, % of revenue	18.9%	4.9%	13.9%	10.1%	13.7%	3.6%
ROIC	23.6%	1.1%	5.5%	-3.9%	-1.8%	2.1%
ROE	16.4%	-2.0%	-0.6%	-12.1%	-6.8%	5.4%
Net Debt/EBITDA	-0.2x	-0.7x	-0.7x	-0.7x	-0.0x	0.7x

Revenue and profitability

Capital Drilling Ltd's Revenue jumped on 18.7% in FY2016. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.4 pp from 7.0% to 2.6% in FY2016.

Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue decreased slightly on 1.7 pp from 15.9% to 14.2% in FY2016.

Net Income marign increased on 7.7 pp from -12.9% to -5.2% in FY2016.

Capital expenditures (CAPEX) and working capital investments

In FY2016 the company had CAPEX/Revenue of 13.7%. The company showed CAPEX/Revenue growth of 8.8 pp from 4.9% in FY2013 to 13.7% in FY2016. Average CAPEX/Revenue for the last three years was 12.6%.The company invested a big chunk of EBITDA (97.9%) to CAPEX to secure its growth.

Return on investment

The company operates at negative ROIC (-1.81%) and ROE (-6.76%). ROIC increased on 2.1 pp from -3.9% to -1.8% in FY2016. ROE increased on 5.4 pp from -12.1% to -6.8% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.0x and Debt / EBITDA is 0.9x. Net Debt / EBITDA jumped on 0.7x from -0.7x to -0.049x in FY2016. Debt surged on 137% in FY2016 while cash decreased on 4.8% in FY2016.

Appendix 1: Peers in Support Services

Below we provide Capital Drilling Ltd benchmarking against other companies in Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Camco Clean Energy ($CCE)		88.0%	-54.7%	99.4%
Optimal Payments ($OPAY)		41.5%	44.0%	68.1%	63.1%
Inspired Energy ($INSE)	83.8%	44.8%	42.2%	40.2%
21St Century Technology ($C21)	0.1%	-22.8%	-16.6%	35.5%
Ibex Global Solutions ($IBEX)		35.7%	30.0%	29.8%	7.0%
Median (55 companies)	0.1%	8.0%	5.0%	6.9%	4.3%
Capital Drilling Ltd ($CAPD)		-26.8%	-15.0%	-20.4%	18.7%

Top companies by Gross margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Inspired Energy ($INSE)	94.6%	86.8%	78.7%	76.2%
Ienergizer Ltd ($IBPO)	56.2%	78.4%	76.8%	72.7%	71.3%
Grafenia ($GRA)	53.4%	54.3%	56.1%	70.8%	66.3%
Vianet Group ($VNET)	53.3%	51.3%	58.8%	69.2%	70.1%
Prime People ($PRP)	63.4%	58.3%	57.7%	61.4%	59.2%
Median (49 companies)	28.2%	28.8%	29.2%	28.7%	27.0%
Capital Drilling Ltd ($CAPD)	33.3%	26.3%	33.4%	28.4%	28.2%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	13.4%	-0.2%	36.0%	44.8%
Northgate ($67GX)	41.2%	40.4%	40.6%	39.4%	38.3%
Inspired Energy ($INSE)	46.2%	48.5%	1.5%	35.4%
Vianet Group ($VNET)	18.6%	17.3%	19.7%	27.1%	22.1%
Vp ($VP.)	23.9%	24.5%	24.2%	26.2%	28.4%
Median (55 companies)	6.7%	6.3%	6.8%	6.9%	7.2%
Capital Drilling Ltd ($CAPD)	24.1%	15.7%	21.7%	14.3%	14.0%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vp ($VP.)	21.4%	17.7%	21.6%	25.7%	24.1%
Sagentia Group ($SAG)	1.9%	1.4%	1.5%	25.2%	6.6%
Nature Group ($NGR)	14.3%	7.2%	5.6%	22.9%
Augean ($AUG)	9.8%	15.9%	12.3%	12.3%
Falkland Islands Hldgs ($FKL)	3.7%	6.8%	12.9%	11.9%	4.8%
Median (55 companies)	1.0%	1.1%	1.0%	1.0%	1.1%
Capital Drilling Ltd ($CAPD)	18.9%	4.9%	13.9%	10.1%	13.7%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	20.3%	-2.9%	45.6%	111.0%
Inspired Energy ($INSE)	63.9%	65.5%	-7.5%	28.0%
Petards Group ($PEG)	35.5%	-78.0%	24.7%	23.9%	22.7%
Servoca ($SVCA)	1.0%	7.8%	14.9%	22.3%	22.8%
Rtc Group ($RTC)	14.6%	17.6%	19.9%	22.2%	15.4%
Median (55 companies)	9.5%	7.9%	9.4%	10.4%	11.3%
Capital Drilling Ltd ($CAPD)	23.6%	1.1%	5.5%	-3.9%	-1.8%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Redhall Group ($RHL)	22.8x	5.8x	6.6x	16.8x	16.2x
Mitsubishi Corp ($MBC)	9.9x	15.9x	14.3x	12.5x	25.0x
Ienergizer Ltd ($IBPO)	6.3x	2.8x	3.0x	4.0x	2.4x
Ceps ($CEPS)		3.0x	6.6x	3.8x
Kellan Group(The ($KLN)			6.5x	3.6x
Median (51 companies)	0.8x	0.7x	0.6x	0.4x	0.6x
Capital Drilling Ltd ($CAPD)	-0.2x	-0.7x	-0.7x	-0.7x	-0.0x

Capital Drilling Ltd stock price chart

Capital Drilling Ltd financials

mln.	FY2010	FY2011	FY2012

Revenue	75.256	130.5	158.9
EBITDA	19.883	34.377	38.220
Net income	11.115	17.589	14.111
CAPEX	18.977	26.706	29.992
Debt	12.812	11.640	0.887
Cash	18.237	7.716	9.064

About Capital Drilling Ltd

Capital Drilling Limited and its subsidiaries provide exploration, development, grade control, blast hole, and energy drilling services to mineral exploration and mining companies. The company also offers drilling and related logistic, equipment rental, and IT support services. Its services include surface diamond core drilling, high air capacity reverse circulation drilling, underground exploration diamond drilling, reverse circulation grade control drilling, Heli-portable diamond drilling, deep directional core orientation drilling, air core drilling using medium to light weight rigs, geotechnical drilling, hole planning and design, water bores and mine dewatering, coal and coal bed methane drilling, blast hole drilling, gas drilling, and degasification services. In addition, the company offers data and voice solutions to the corporate and non-governmental organizations internationally. It operates a fleet of 95 drilling rigs. The company has operations in Tanzania, Zambia, Egypt, the Democratic Republic of Congo, Pakistan, Armenia, Serbia, Papua New Guinea, Mozambique, Hungary, Eritrea, Chile, the Solomon Islands, Mauritania, and Ethiopia. Capital Drilling Limited was founded in 2004 and is headquartered in Singapore.