Image Resources NL

IMA Details
 
Higher Ore Grades and New Production Records: Image Resources NL (ASX: IMA) is engaged in mining development and exploring. As on 13 February 2020, the market capitalization of the company stood at ~$206.01 million. The company has recently reported a record monthly production of heavy mineral concentrate in December 2019 at 31.4kt and again in January 2020 at a new high of 35.3kt. The company has also completed a monthly scheduled shipment of HMC in January 2020 and is working with its partners to expand the size and frequency of HMC shipments.

Update on Quarterly Production and Sales: Despite downtime associated with the relocation of mining operations, the company produced 68.6 kt at an AISC of $401/t HMC during the quarter ended 31 December 2019. In the same time span, the company sold 62.6 kt at a realized price of $661/t HMC. During the quarter, EBITDA of the company was $24.3 million, reflecting a quarter on quarter increase of 27%. IMA cash position as at 31 December 2019 was $49.9 million.  


Operational Highlights (Source: Company Reports)

Future Expectations and Guidance: In FY20, the company will priortise the addition of new Ore Reserves from existing and new Mineral Resources. It is also focused on the outcome of new Mineral Resources and Ore Reserves under project MORE. IMA has provided the guidance for FY20 and expects to process 3,000kt -3,300kt of ore. It also anticipates moderation in the average monthly production of HMC to achieve the production guidance of 300-330kt. The company also anticipates to sell 300-330 kt of HMC in FY21. The C1 cash costs for HMC sold are expected to be in between $290/t to $320/t. 

Stock Recommendation: As per ASX, the stock of IMA gave a return of 20% in the past one year and a negative return of 14.29% in the past six months. Therefore, the stock seems to be a little volatile. During 1H19, EBITDA margin of the company stood at 41.1%, higher than the industry median of 36.2%. In the same time span, ROE of the company was 11.3% as compared to the industry median of 5.6%. On 20 February 2020, the company is expected to attend Vertical Events Riu Explorers Conference. We advise our investors to closely track the stated event. Considering the volatility in returns, higher margins and the upcoming event, we have a watch stance on the stock at the current market price of $0.215, up by 2.381% on 13 February 2020, owing to its record production of HMC in January 2020. 

 
IMA Daily Technical Chart (Source: Thomson Reuters)
 

Mach7 Technologies Limited

M7T Details
 
Positive Cash Flow and Sales Momentum: Mach7 Technologies Limited (ASX: M7T) provides imaging data sharing, storage and interoperability for healthcare enterprises globally. As on 13 February 2020, the market capitalization of the company stood at ~$159.05 million. During 1H20, the company reported positive cash flows and sales receipt of $8.3 million. The company witnessed strong sales order from tenders and existing customers in FY19 and 1HFY20 which is expected to bring recurring revenue growth in FY20.  In the same time period, the company reported a stable balance sheet with no debt and was well-capitalised with cash at bank of $23.3 million.


Positive Cash Flows (Source: Company Reports)

Second Consecutive Quarter of Free Cash Flows: Despite outlays for Radiology Society of North America (RSNA) trade show, the company has recorded second consecutive positive quarter of free cash flow of $0.5 million. During the second quarter, the company signed contracts of $1.9 million and welcomed two new customers.

Growth Opportunities and Future Expectations: The company is targeting acquisition of complementary technologies to speed up the growth. It is expecting positive free cash flows and is focusing on accelerating revenue growth. The company also expects to improve its EBITDA margin.

Valuation Methodologies: EV/Sales Based Valuation

EV/Sales Multiple Approach (Source: Company Reports)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of M7T gave a return of 27.94% on the YTD basis and a return of 16% in the past one month. The stock is trading close to its 52-weeks high of $0.950. Over the span of 4 years, the company witnessed a substantial improvement in EBITDA and net margin. Considering the returns, trading levels, decent financial performance and modest outlook, we have valued the stock using EV/Sales valuation approach and have arrived at a downside of higher single-digit (in percentage terms). For the said purposes, we have considered Volpara Health Technologies Ltd (ASX: VHT), G Medical Innovations Holdings Ltd (ASX: GMV), etc., as peers.  Hence, considering the above-mentioned facts with valuation, we have a watch stance on the stock at the current market price of $0.850, down by 2.299% on 13 February 2020. 

 
M7T Daily Technical Chart (Source: Thomson Reuters)

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