Berenberg has increased its price target for drilling specialist Capital Limited (LON:CAPD)  to 93p from 78p on the prospect of strong second half revenues after a solid start to the year.

“We believe that the company is strongly positioned to benefit from rising drilling demand due to higher gold prices (eg an 80% utilisation rate, in line with previous cycles, can more than double FCF) and offers significant valuation upside through the contract mining business,” said the German broker.

Earlier, Capital had said its business continued to perform strongly in the first half of 2020 despite the coronavirus (COVID-19) pandemic.

The company’s business is focused on African markets and gold mining in particular so the rocketing price of gold has been a boon for the company.

 Strong demand for drilling services is anticipated once the West African wet season has passed.

Revenue in the first half of the year rose to US$65.09mln from US$54.83mln the year before. Profit before tax soared to US$19.13mln from US$7.59mln in the first half of 2019, thanks largely to a US$9.98mln “fair value” gain on investments.

Underlying earnings (EBITDA) rose to US$15.4mln from US$12.7mln the previous year while earnings before interest and tax (EBIT) improved to US$9.6mln from US$7.9mln.

Shares rose 3% to 75.5p.