IMDEX LIMITED

IMD Details

H1FY21 Financial Performance: IMDEX LIMITED (ASX: IMD) operates in mining equipment, technology, and services for the minerals sector and primarily provide software, mining technology, drilling optimisation that serves drilling contractors and resource companies. The market capitalisation of the company stood at $808.76 million as of 03 June 2021. During the period, the company has reported a decline in revenue by 3% to $124.3 million, compared to $127.7 million in H1FY20. IMD has reported an increase in EBIDTA by 6% to $33.1 million. The company has posted a robust balance sheet with a cash position of ~$47million, increased by 84% in H1FY21 compared to the previous corresponding period. It declared an interim dividend of 1 cent per share during the period.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: There is a surge in demand for cloud-based technologies and software, which could positively impact a company's earning. The company is expected double-digit growth YOY, potentially in the range of 20% that could grow the company’s prospects.

Key Risks: Due to the COVID-19 pandemic, the company might face challenges in its operational activities due to a shortage of workforce, disruption in logistic, project continuity.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has commenced H2FY21 with an increase in an instrument on rent. The stock of IMD is trading close to its average 52-weeks’ high levels of $2.150. The stock of IMD gave a positive return of ~39.58% in the past six months and a positive return of ~73.27% in the past one year. On a technical analysis front, the stock of IMD has a support level of ~$1.973 and a resistance level of ~$2.149. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the improvement in the EBITDA, improvement in operating cash flow and increase in cash position. For this purpose, we have taken peers such as Perenti Global Ltd (ASX: PRN), Emeco Holdings Ltd (ASX: EHL), NRW Holdings Ltd (ASX: NWH), to name a few. Considering the current trading levels, recent rally in the stock price, government restrictions and the key risks associated with the business, we suggest investors to book profits and give a 'Sell' rating on the stock at the current market price of $2.010, down by ~1.471% as on 3 June 2021.

IMD Daily Technical Chart, Data Source: REFINITIV

Lepidico Limited

LPD Details 

Business Update: Lepidico Limited (ASX: LPD) operates in mineral exploration and technology that explore, develop, and produce lithium chemicals and serve its L-Max, S-Max technology to produce high purity lithium hydroxide from lithium sulphate. The market capitalisation of the company stood at $72.63 million as of 3 June 2021. As per a recent announcement, the company has issued an entitlement offer of 1 for every 7 shares to raise capital to $9.6 million at a price of $0.013 per share to fund growth and development.

Q3FY21 Quarterly Update: As per the company, LHGP, its financial adviser, will help to reduce the overall cost of funding by including strategic investors in the Phase 1 project. The cash position of the company stood at $1.5 million and pro-forma cash of $4.4 million with the utilisation of the Controlled Placement Agreement. It has no debt as of 31 March 2021 and is well-funded to start EPCM early services. In addition, the company has got environmental approval for Phase 1 Chemical Plant from EAD, in the Khalifa Industrial Zone Abu Dhabi (KIZAD).

Q3FY21 Cash Flow from Operating Activities (Source: Company Reports)

Outlook: The company looks forward to gaining patent rights for S-Max technology, and the national and regional phase applications are expected to continue into 2022. The company is further assessing strategic locations for a Phase 2 Chemical plant. 

Key Risks: Due to the ongoing COVID-19 pandemic, the company had to suspend all business travel, work from home, along with local restriction that hinders the operational activities.

Stock Recommendation: During the quarter, the company gained substantial patent rights for its L-Max technology in the US, Europe, Japan and Australia. The stock of LPD is trading below its average 52-weeks’ levels of $0.006-$0.037. The stock of LPD gave a positive return of ~75% in the past six months and a positive return of ~12% in the past one week. On a technical analysis front, the stock of LPD has a support level of ~$0.011 and a resistance level of ~$0.018. Considering the lower asset turnover ratio, absence of revenue visibility and the key risks associated with the business, we give an ‘Expensive’ rating on the stock at the current market price of $0.014, as on 3 June 2021.

LPD Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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