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Sunday share tips: Capital Drilling, Boohoo

Sun 31 May 2020 17:01 | A A A

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(Sharecast News) - The difficult outlook in almost every sense has experts believing that conditions are set fair for the price of gold, which bodes well for gold miners as well as for those working for them, such as Capital Drilling, said the Mail on Sunday's Midas column.

One of the world's ten largest gold drillers, its list of clients includes the likes of Anglo Gold Ashanti, Barrick Gold and Centamin.

Focused on Africa, the outfit has splashed out on the best kit and highly-qualified staff.

Key to the company's own outlook was that it was centred on working with gold producers, as opposed to explorers, which combined with long-term contracts provided for a more stable revenue stream.

Nonetheless, a bullish outlook for the price of gold means increased budgets for both production and exploration, and from more clients - including junior explorers - all of which translate into heightened demand for drill specialists, the tipster added.

The company is also moving into new areas like earth-moving and the results of various tenders are anticipated later in 2020.

And on an estimated payout of 2.25cents (1.84p) per share forecast for the current year, the stock was sporting a dividend yield of greater than 3%.

"Capital Drilling is a well-run company with a strong culture, centred on professionalism and integrity. At 61p, the shares are a buy."

Boohoo's investors happily stumped up £200m this month to finance acquisitions, but investors would probably do best by adopting the same caution as chief executive officer Mahmud Kamani, who in December cashed in on 35m shares for about £100m, said the Sunday Times's Sam Chambers in his 'Inside the City' column.

True to style, during the past week, the fast fashion retailer snapped up the remaining 34% in its subsidiary, Pretty Little Thing, for a fraction of the price mooted by some analysts.

The stock is also changing hands at record prices and was easily the biggest firm on the lightly-regulated AIM market, said Chambers.

But that great run had also left Boohoo's stock "trading at a whopping 61 times this year's estimated earnings, investors should show similar caution."

Furthermore, the dubious sustainability of the company's business model would at some point sink in, he added.

"Boohoo's success in selling dresses for a fiver shows many young consumers are not preoccupied with sustainability, but as the effects of the climate crisis become more immediate that will change at some point.

"Hold."

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